“To study the Impact of Retail Malls on Grocery Shops with special Ph.D. reference to select FMCG Products in Nashik and Pune Cities” Thesis 2018
Chapter Recent Trends III in Retail Sector
Introduction Key challenges in Indian retail Retail Industry: Global Scenario industry Retail Industry: Indian Scenario Organised Retailing Retail Formats in India Unorganised Retailing Key drivers to the exponential Fast Moving Consumer Goods growth of the Indian retail industry (FMCG) Government initiatives for growth Role of E-Commerce in shopping of the retail sector Profile of Nashik City Merger & Acquisition in the Indian Profile of Pune City Retail sector Summary
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CHAPTER III: Recent Trends in Retail Sector
3.1 Introduction
Retail is the final stage of any economic activity. By virtue of this fact, retail occupies an important place in the world economy. There is no doubt that retail is becoming more vibrant and diverse globally and its turnover accounts to US $ 6.6 trillion1. Retail occupies an important place in the world economy as it is the final stage of any economic activity.
In an attempt to understand the scope of the term “retail” various definitions of the term have been examined. According to Phillip Kotler, “Retailing includes all activities involved in the selling of goods or services to the final consumers for personal non business use”2.
Any organization selling to final customers, whether it is a manufacture, wholesaler and retailer is doing retailing. It does not matter how the goods or services are sold (i.e. by person, mail, telephone, vending machine or internet or where they are sold in a store, on the street or in the consumer’s home) (Monarch Joshi, 2014)3.
3.2 Retail Industry: Global Scenario
The retail sector has played a phenomenal role throughout the world in increasing productivity of consumer goods and service. It is also the second largest industry in the US in terms of numbers of employees and establishments. It could not be denied that, most of the developed economies are very much relying on their retail sector as a locomotive of growth. Worldwide, the retail industry is one of the most attracting industries being controlled by a handful of powerful corporations based mainly in the U.S and Europe, namely, Wal-Mart, Tesco, Carrefour and Metro4. Beside these, there are many other MNC retailers, who have their business saturated in their home countries, are looking for penetrating emerging markets like India, China and Russia.
As these MNC retailers provide a world class shopping experience for the consumers, today's consumers are becoming more demanding in terms of world class products as well as experiential shopping. Thus the shift in consumer behaviour in these
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“To study the Impact of Retail Malls on Grocery Shops with special Ph.D. reference to select FMCG Products in Nashik and Pune Cities” Thesis 2018 emerging markets attracts world largest and the best players. The saturation in the US retail market and other existing markets in developed countries are forcing them to move into new markets like India and China. Retail has played a major role world over, in increasing their activity across a wide range of consumer goods and services. The impact can be seen in countries like U.S.A., U.K., Mexico, Thailand and more recently China. The economies of countries like Singapore, Malaysia, Hong Kong, Sri Lanka and Dubai are also heavily assisted by the retail sector.
3.2.1 Phases of Growth in Retail Markets
Alike other industries, retail sector too pass through a life cycle and distinct phases of growth as observed in many economies. The development of organized retail sector started in the western markets much before they did in the rest of the world. These markets are characterized by the existence of definite formats. Usually retailers don't only have a national presence, but many a times, an international presence5.
The following data shows the markets of the world and the status of stages of growth.
Inception (10 years) Characteristics Evolving diffused formats Regional presence Conjectural presence in each market Lower market share per market Lack of availability of retail real estate High degree of competition from space at reasonable cost unorganized players Investment stage with high Mainly promoter and angel incremental investments investor financing Presence in few merchandise Lack of scientific merchandise categories planning process High bargaining power of vendors High logistics and merchandise High degree of resistance from acquisition costs consumers towards organized formats Risk Availability of finance Low fixed cost coverage leading High individual property risk to high operational leverage
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Market risk in terms of acceptability Format risk due to stability of format by customers Example: African Markets
Growth (15-25 years) Characteristics Established format characteristics Development of specialty formats Movement towards national Rapid expansion phase presence Growth in internal and external Availability of retail space at competition reasonable costs Accelerated investments in new Larger penetration into individual projects with lower incremental markets investments Private equity, venture capital, Introduction of scientific debt and equity market financing merchandise planning process accessible Bargaining power with vendor Increase in breadth and depth increases of merchandise categories Consumers start accepting new formats. Risk Highly geared financial structure Private label investment IT integration Example: Indian Markets
Maturity (5-10 years) Characteristics Increasing specialization in National and international presence formats Oversupply of retail space New store expansion tapers Increasing focus on differentiation Significant competition from strategies other organized players and Market share stagnates overlapping formats Low incremental investments required
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Peak penetration into individual Cost of financing declines markets Customer acquisition cost increases Investment funded through Private labels assume strategic internal accruals significance for improving Substantially large breadth and profitability depth of merchandise categories Increasing collaboration with Vendors enjoy low bargaining vendors to derive supply chain power efficiencies Consumers demand higher service levels as awareness increases Risk Market risk due to increase in Consumer retention risk competition Example: South Asian Markets
Stagnation (5-10 years) Characteristics Consolidation of formats New store National and international presence expansion stagnates or falls Retail supply space tappers, leading Over penetration into individual to higher acquisition costs/ lease markets rentals High cost of financing Dependence to external finance to Consolidation of merchandise fund investment increases categories Customer retention cost increases Low bargaining power of vendors- Revamp in private label strategy vendors start losing out as Consumers demand higher service competitive pressures lead to levels as awareness increases squeezing of vendors Market share of individual players Consumers shift to alternate decline formats
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Risk Business risk increases and payback Increasing finance risk periods from new projects increases Competition from alternative New project risks in international formats markets Consumer retention risks Example: Developed Markets
3.2.2 Current Trends in Global Retail Sector
Turner & Townsend (2014)6, puts forth the region wise, current trends in the global retail sector which can be outlined as follows:
North America: In revenue terms, North America is the leading region in the global retail industry, with a 37 percent share of the largest 250 retailers. Generally, the sector has grown over the last few years, showing a direct link to economic recovery and a return to retailer expansion. There has been increased activity in Canada recently, driven by US brands such as Saks, Target and Nordstrom establishing bases there. Though around 90 percent of sales are currently made in store, technology is playing a greater supporting role. Retailers are creating digitally enhanced spaces to showcase their products and providing more information through hand-held technology both pre and post-sale.
Latin America: There has been sustained economic growth between two and seven percent across Latin America in recent years, driven primarily by rising prosperity in the middle classes. Higher disposable incomes in the upper middle class and the lack of a culture of saving implies that spending is beating inflation. The growing lower middle class has a growing demand for automotive, household goods and clothing’s. Young, fashion-conscious consumers dominate, with strong brand awareness and an appetite for the latest high tech products. Brazil is the strongest retail market, with numerous new shopping and automotive retail facilities in planning and construction. Mexico, Chile, Colombia and Peru are also growing, driven in part by US and European investment. Retail banks are also undertaking modernisation programmes across major cities.
UK: 2014 has seen an upswing of growth in the UK’s retail sector, driven by an improving economy and resurgent housing market. While still volatile to wider
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“To study the Impact of Retail Malls on Grocery Shops with special Ph.D. reference to select FMCG Products in Nashik and Pune Cities” Thesis 2018 economic shocks, increasing corporate investment is encouraging a slow and steady build for this sector. Food retail still accounts for over 70 percent of core retail spending and it is expected that convenience shopping would grow over the next 12 months. Innovative new convenience stores are expected to appear, following key acquisitions by a number of food retailers. Though over 90 percent of retail spending is through physical stores, retailers enjoying the maximum success are ones which have combined brick and mortar with an online presence. Looking further ahead, more changes are expected on the UK’s high streets, and greater scrutiny around investment decisions, particularly for retail banking.
Europe: Retail markets across Europe vary widely, depending on their level of maturity and the local economic situation. Investment and development in Eastern Europe are constant and growing. Poland is entering its third decade of dynamic growth with new overseas retailers and luxury brands entering the market. Thirty new global brands set up operations in the country last year. In Russia, a retail boom is just beginning with 63 new complexes in 40 Russian cities completed in 2013. In long-established markets, such as the Netherlands, certain retailers have had a slow year, although growth continues in the food sector. A trend in Western Europe sees investment in outdated shopping centres to allow retailers to expand locally.
Africa: Africa’s middle classes are predicted to reach 1.1 billion by 2030, making it the world’s fastest growing continent. The retail market in sub-Saharan Africa continues to grow as African economies stabilise, with maturing markets demanding more advances and readily available consumer goods. The past 12 months has seen retailers expanding aggressively into secondary markets outside of South Africa and Nigeria. The majority of these companies are headquartered in South Africa. Looking ahead, a significant expansion in retail opportunities across the region is awaited. Ghana, Zambia, Mozambique, Botswana, Kenya, Tanzania and Uganda will be the main hotspots.
Middle East: Increasing populations, local and expatriate wealth, strong household consumption and a thriving luxury tourism industry have been the drivers for a growing retail sector in the Middle East. As one of the fastest growing industries, and the second largest behind oil, retail is a major contributor to the ongoing economic growth in the region. The most dynamic markets, and those with the highest potential for growth, are the United Arab Emirates, Qatar, Saudi Arabia and Kuwait. With many substantial
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“To study the Impact of Retail Malls on Grocery Shops with special Ph.D. reference to select FMCG Products in Nashik and Pune Cities” Thesis 2018 developments in the pipeline, international retailers continue to enter the market, competing with established global brands. Middle East will remain an exciting player on the global retail stage.
Asia: Asia remains a hospitable environment for retailers, who are continuing to deliver innovative brand showcases and make large investments to secure prime locations. We have seen a drastic shift from a ‘build it and they will come’ approach to more strategic decision making when it comes to retail facilities. Developed markets such as Hong Kong, Singapore, Malaysia and Japan continue to benefit from both strong domestic demand and an influx of tourist dollars from China, India and the West. There is also growth in India and China, although recent spikes in Chinese consumer confidence have been driven by demand in tier four, and not major, cities. Automotive retailers are anticipating huge growth opportunities in China, where 22 million vehicles were sold last year. Vietnam and Indonesia are still largely based on independent retailers, and are seen as long term prospects.
Australia: Though the Australian retail sector previously sustained a downturn, domestic retailers have emerged in better shape than other developed economies. Retail property in particular is performing well, with revenues growing at 3.6 percent on average over the past five years – mirrored by increased investment from foreign retailers extending or establishing operations in Australia. This is expected to continue for the next five years. The retail market is divided into two sectors – consumer goods and fast-moving consumer goods (FMCG). FMCG has enjoyed a steady average annual growth of 2.4 percent, forecast to continue at 2.3 percent up to 2019. Consumer goods has seen negative growth of nine percent on average, however is expected to return to two percent growth per year for the next five years.
Worldwide growth of retail sales valued currently at $450 billion dollars, Indian retail is pegged to grow by 6.6 percent in 2018 at about the same rate as Thailand, and next only to China (7.9 percent) and Vietnam (6.5 percent).
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Table No 3.1: Worldwide Growth of Retail Sale
Asia: Retail sales growth by volume (Percent per annum) Territory 2011 2012 2013 2014 2015 2016 2017 2018 Australia -0.5 0.9 1.5 1.3 2.6 2.3 2.0 2.2 China 9.1 8.7 9.3 8.8 8.7 8.6 8.0 7.9 Hong Kong 18.6 5.5 6.6 3.1 2.0 -1.0 0.4 1.3 India 5.7 2.7 1.7 4.0 5.6 6.2 6.2 6.6 Indonesia 6.0 5.3 4.3 3.8 5.1 5.4 5.0 5.5 Japan 0.1 1.5 0.7 0.2 0.0 0.3 0.4 0.6 Malaysia 4.6 4.7 6.4 5.4 5.3 4.6 4.6 4.8 New Zealand -1.9 2.4 6.3 3.2 2.9 2.2 2.7 2.5 Pakistan 9.2 -0.8 5.1 3.9 4.1 3.8 4.3 4.3 Philippines 3.2 5.4 4.4 4.2 5.3 5.4 5.4 5.5 Singapore 1.7 1.1 1.2 4.6 1.5 2.2 3.0 3.5 South Korea 2.1 1.3 -0.1 1.6 2.9 3.1 2.8 2.9 Taiwan 3.6 0.6 2.5 2.9 2.5 2.4 2.7 2.3 Thailand 1.4 4.9 -2.4 -0.6 0.7 3.6 3.4 4.3 Vietnam 6.7 3.9 3.8 9.5 8.4 7.8 6.0 6.5 Source: Economist Actual Estimate Forecasts Intelligence unit (Source: Outlook for the retail and consumer products sector in Asia (PWC)-2015)
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3.3 Retail Industry: Indian Scenario Retailing is one of the largest industries in India and second largest employer after agriculture. The retailing industry provides employment to over 18 million people. One out of every 25 families in India is engaged in the business of retailing. India has highest shop density in the world. India has around 12.5 million retail outlets thus providing second highest employment after agriculture. It employs 7 percent of total workforce and contribute to more than 10 percent of India’s GDP. The retail market in India is estimated at US $ 830 billion in 2015 of this the unorganized market is worth around US $ 980 billion in 2016 and the organized market is worth around US $ 110 billion in 2016 constituting 10 percent of the total retail market in India7.
The real GDP of Indian economy is expected to grow at 8 to 10 per cent per annum by 2020. As a result, the consuming class of population with annual household incomes above Rs. 90,000 is expected to rise from about 620 million in 2010-11 to 1140 million in 2015-168. Consequently, The estimation’s that are being projected on the Indian Retail market is estimated to grow from the current US$ 530 billion in 2011 to US $ 940 billion by 20169.
The Secretary General of Assocham, India D. S. Rawat, also glanced a phenomenal growth of the Indian retail sector and said that “favourable demographics increasing urbanisation, an increase in the number of nuclear families, increasing affluence amid buyers, increasing attraction and preference for branded products and greater aspirations are the factors that will enhance the Indian retail consumption” (The Economic Times, 2014).
The consumer market in India is getting a robust growth and the consumption level in India is assumed to be double in the 2022 financial year from 750 billion USD to 1.5 trillion USD. According to panel members of 7th Food and Grocery Forum of India, the food and grocery retail market of India has ample growth opportunities and that segment of the retail market constitutes about 60 percent of the total retail market10 (Phulia and Sharma, 2014).
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The $500 billion retail sector 60% 60%
50%
40%
30%
20% 11% 8% 6% 5% 10% 4% 3% 3%
0%
Figure No 3.1: Breakup of USD 500 billion retail sector of India (Source: Moriarty et al., 2013, Deloitte, Jan 2013)
The growing number of middle-class households is also a contributing factor to the growth of the Indian retail sector. It has been estimated that 91 million households will be in the category of the middle-class from its 21 million by 2030. It has also been estimated that 570 million people will prefer to live in the cities in 203011 (Gupta, 2013; FICCI, 2011). The growing middle class is redefining the luxury market with their changing buying habits. The growth of retailing sector can also be glanced from the fact that about 40 percent of the luxury goods sales in India occurs from the non-metros customers (Rai and Gopal, 2014)12. The huge population, especially the young population, higher domestic consumption and the favourable macro trends are other contributing factors to the exponential growth of the Indian retail sector.
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“To study the Impact of Retail Malls on Grocery Shops with special Ph.D. reference to select FMCG Products in Nashik and Pune Cities” Thesis 2018
3.4 Retail Formats in India13 Indian retailing has been divided into various categories each evolving from one another. With the immense diversity that is represented in this country, the retail formats help the customers to get information about the variety in the products available. It helps in achieving long term profitability, provides the customer with an immense shopping opportunity and maximum customer satisfaction. The Indian retail sector is changing and various models are being adopted, these are explained in figure 3.2
Indian Retail Formats
A) Traditional B) Established C) Emerging
1) Itinerant salesman 1) Kiosks 1) Departmental Stores 2) Haats 2) Kirana Shops 2) Speciality stores
3) Melas 3) Co-operative store 3) Discounts Stores
4) Supermarkets 5) Supercentres 6) Hypermarkets Figure No 3.2: Indian Retail Formats
(Source: Sajal Gupta and Gurpreet Randhawa (2008), “Retail Management”)
A) Traditional Formats
Itinerant Salesman: This is one of the oldest types of direct selling that started hundreds of years ago. It is a door to door service or marketing. The famous examples of this category are the morning milkman and sabziwala. The format is very popular in India as this directly helps in fulfilling the daily and basic needs.
Mandis: These are also known as regulated markets or secondary markets. These are regular wholesale markets and offer a permanent place for day to day transactions. These markets are located in major production centres and these markets can be categorised into grain mandis, cotton mandis and so on. Mandis displays the latest commodity prices collected from market sources.
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“To study the Impact of Retail Malls on Grocery Shops with special Ph.D. reference to select FMCG Products in Nashik and Pune Cities” Thesis 2018
Haats: Haats are known as periodic rural supermarkets. These are unregulated markets and are generally held once or twice a week. The days of the functioning of haats are fixed in order to enable the trader to visit the area. Buyers and sellers gather at an appointed/customary place at regular intervals for buying and selling the commodities they need for their daily requirements. The rural people prefer haats because of the availability of variety in terms of products and bargains, all at one place. In most villages, haats are the nerve centre of the economic, social and cultural life. It is estimated that a haat on an average, covers between 20-50 villages, the numbers of sales outlets per haat are in excess of 300 and average sale per day at a haat is around Rs. 2.25 lakh
Melas: The people assemble in melas or fairs at a particular time with a view to getting entertainment besides making the sale and purchase of goods and services. The place of their gathering is away from their residences. Melas can be classified according to their nature, into commodity fairs and religious fairs, and on the basis of periodicity, into one day fairs, less than a week and weekly fairs. Typically, mela has on an average 800-850 outlets and average sales per mela is Rs. 143 lakh.
B) Established Formats
Kiosks: They are the small open shops that sell low value item. They do not have a wall like a normal shop, but a small dedicated area in a mall or market place. There is a variety of merchandise for which a kiosk can be opened like a flower, balloon, newspapers or food, beverages, etc.
Kirana shops: These stores have low structural cost and are mainly owner operated. They are located close to residential area. They sell merchandise seven days a week and have long hours of operation. Location and convenience are main factors for their success. These provide facilities like credit, home delivery, packaging, etc. They maintain direct relation with the customers. They sell limited type of products which are high turnover convenient products. They are also called mom and pop stores located in neighbourhood market.
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Co-operative Stores: A consumer co-operative is a retail business which is owned by the consumers themselves. Their basic objective is to eliminate middlemen. The consumers join together and manage the business and the profit thus earned is retained among themselves in the proportion of their contribution.
C) Emerging Formats
Department Store: A Department store as a retail format, which specializes in selling a broad variety and deep assortment of product categories. It is organized into different departments such as apparel, housewares, cosmetics, sport goods, footwear, furniture, appliances, jewelry, and toys etc. It tends to differentiate from other formats in terms of shopping experience and store atmospherics like visual displays, lighting, etc. Department store relies on suggestive selling by its sales team and provides a variety of services like alteration of apparel and home delivery, for example Raheja group, Trent (Tata Group), Lifestyle, Future Group, Piramal Group etc.
Specialty Store: Specialty store is the retail format that specializes in a specific range of merchandise and complimentary items. It usually carries a narrow but deep assortment in the chosen category. It allows comparison between brands in a category. Its main competition is with Department stores. They provide high levels of service and expertise. ITC’s Wills Lifestyle is an example of exclusive or lifestyle specialty stores. It offers Wills Classic formal wear, Wills Club life evening wear, and trendy range of designer accessories.
Discount Store: These stores offer merchandise at a price lower than the conventional price. These offer a wide assortment of goods like toys, gift items, electronic appliances, home furnishing, stationery, etc. These are not variety stores which sell goods at a single price point. Largely discount retail has been dominated by apparel focused stores and factory outlets. The main feature of these stores is self-service, which helps in cost cutting. Most customers are from low or middle class society, for example, Megamart, Sankalp Retail Value Store, My Dollar Store, etc.
Supermarket: A Supermarket is a self-service store offering a wide variety of food and household merchandise. Supermarkets usually are a part of a corporate chain. They usually follow centralized purchasing system and are supplied by distribution centers of the parent organization. The Supermarket typically comprises fresh fruits and
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“To study the Impact of Retail Malls on Grocery Shops with special Ph.D. reference to select FMCG Products in Nashik and Pune Cities” Thesis 2018 vegetables, dairy products, baked food products, canned and packaged food, and a variety of household goods. Both varieties and assortment of merchandise are average. Supermarkets are larger in size and offer a wider selection than a traditional convenience store. They are smaller than a Hypermarket or Supercentre, for example, Spencer’s, Reliance Fresh, More, Easy Day, Food World.
Supercentre: Supercentre is a combination store uniting an economy supermarket with a discount store. The general merchandise contributes to 60-70 percent of total revenue. A Supercentre typically stocks 100000 to 150000 stock keeping units (SKU). The largest Supercentre chains in the USA are Wal-Mart, Meijer, Kmart, and Target. In India, the concept of Supercentre is on evolving stage with Reliance Retail having a Supercentre in Ahmadabad.
Hypermarket: The concept of Hypermarket is to provide everything under the same roof. A Hypermarket is a large retail facility, combining certain features of Supermarket and Department Store as well. In the Indian context, a Hypermarket has a large floor space of above 10,000 sq. ft., so that it can have the widest assortment of products. Setting up Hypermarket requires careful allocation of total space into sections and sparing a lot of area for parking vehicles. It is associated with a large parking lot. It aims to sell products at a discount in comparison to market prices and thus offers low price points. The prominent hypermarket includes Big Bazaar, Pantaloon Retail, Hyper City (K. Raheja Group), Star India Bazaar, etc.
Table No 3.2: No. of outlets in various modes of stores in food and grocery retail Type No. of Outlets Overall Organized Retailers 5689 Convenience Stores 933 Hypermarkets 419 Traditional Retailers 12360327 (Source: India Retail Report 2016, KPMG analysis, CRISIL Report, November 2016)
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The table no 3.3 reveals that more than 12 million outlets are running as traditional retailers. It clearly shows that the traditional retail outlets are spread throughout the length and breadth of the country. Table No 3.3: Growth rates in various modes of Stores in grocery retail Type Growth rate in percentage Overall Organized Retailers 3.30 Convenience Stores 19.10 Hypermarkets 28.00 Traditional Retailers 0.70 (Source: India Retail Report 2016, KPMG analysis, CRISIL Report, November 2016) The data presented in table no 3.3 depicts the growth in various modes of stores. It clearly shows that the growth of traditional retailing is only 0.7 percent, leaving 49.1 percent to convenience stores. The changing economic conditions during the last two decades provided the right kind of foundation for the development of organized retailing. Some of the leading players in India in the retail sector are detailed in the table no 3.4 below.
Table No 3.4: Major Player in Indian Organized Retailing Corporate Group Retail Shops Landmark (Books and music), Croma (Multi Brand Electronics), World of titan (Watches), Tanishq (Jewellery), Tata Group Titan Eye+ (eye wear), Westside (life style retail store), Star Bazaar (hyper market chain), Fashion Yatra (family fashion store) Central (shopping mall), Big Bazaar (Hyper Market), Pantaloons (fashion outlet), Blue Sky (Sun glasses0, Brand Factory (Multi Brand ready-made Garments), KB’s Fair Price (Essential Products), Navaras (Jewellery), Planet Stores (Multi Future Groups brand sports and lifestyle specialty retail), All (fashion garments), Ethnicity (Indian ethnic wear) Home town (Home needs), E Zone (Electronics), Furniture Bazaar (Home furniture), Electronics Bazaar (under Big Bazaar Electronics
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“To study the Impact of Retail Malls on Grocery Shops with special Ph.D. reference to select FMCG Products in Nashik and Pune Cities” Thesis 2018
Stores), Home Bazaar (satellite version of home town), collection I (Lifestyle furniture), Gen M & One Mobile Reliance Fresh (neighborhood store), Reliance Mart (super market), Reliance super (mini mart), Reliance digital (Consumer durables and information technology), Reliance Trends (Apparel and accessories), Reliance wellness (health, Reliance Group wellness and beauty), I store (apple products), Reliance footprint (footwear), Reliance Jewels (Jewellery), Reliance Timeout (Books, Music and Entertainment), Reliance auto zone (Auto Mobile Products and services), Reliance Living (home wear, furniture, modular kitchen) Spencer’s (multi-format retail store), Music World (music and RPG Group home video store) and Books & Beyond (Book Store) Shoppers Stop (Clothing, accessories, fragrances, cosmetics, K Raheja Group footwear and home Crossword (book store), In orbit Mall (Fashion, lifestyle, food and entertainment) and Hyper City
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“To study the Impact of Retail Malls on Grocery Shops with special Ph.D. reference to select FMCG Products in Nashik and Pune Cities” Thesis 2018
3.5 Key drivers to the exponential growth of the Indian retail industry14 1) The huge population, especially the younger population: India is considered as one amongst the largest emerging markets of the world due to its population, which is over 1.2 billion (Rahman, 2012). India is also considered as one of the largest economies in terms of purchasing power of the population. 50 percent of the total Indian population is below the age of 30 years and about 1/3 of the Indian population resides in cities.
Table No 3.5: Percentage of population below the age of 25 years in different Countries. Country Percentage of Population India 53 China 42 Indonesia 30 USA 30 Japan 27 Germany 26 (Source : K.V.S. Madaan (2014), “Fundamental of Retailing”, Tata McGraw- Hill)
2) Changing lifestyle and consumer behaviour: Due to increasing working population comfortable life style, more travel and leisure are the preferences of Indian customers. These factors are the drivers for the growth of retailing in India; whether it is Appliances, Cosmetics & Toiletries, and Electronics etc. 3) Demographic changes and improvements in the standard of living: The growing middle class is redefining the luxury market with their changing buying habits. The growth of retailing sector can also be glanced from the fact that about 40 percent of the luxury goods sales in India occurs from the non-metros customers (Rai and Gopal, 2014). 4) Changing consumer preferences and shopping habits: Shopping behaviour of consumers has totally changed due to the change in taste and preferences of consumers. Due to online retailing, consumers are well aware of new brands and stores and they buy according to their needs and occasions. Consumers are driving the growth of organised retail. Therefore, the organised retailing is not only growing its market, but also compelling the retailers to offer a wider range of brands as well as a variety.
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5) The increase in a working population: India is the second largest country in the world in terms of population after China. And, it is the largest consumer market in the world due to its favourable demographics (D&B, 2014). An increase in the number of working women has increased in the growth of discretionary items. There has been a 20 percent increase in the number of working women population in the last decade. 6) The emergence of nuclear families: With the passage of time there is a shift from joint families to nuclear families. The income level of nuclear families has been increased because both the members have started to earn; which results in an increase in purchasing power and lack of time. Thereby nuclear families are expecting everything under one roof. This led to the development of organised retailing. 7) Increasing urbanisation: The preference shift of population towards the urban livings is also a good sign of the growth of the Indian organised retail sector. It is estimated that 570 million people will prefer to live in the cities in 2030.
CITY WISE SHARE IN UPCOMING MALL Mumbai Ahmedabad Kolkata 5% 1% 6% Pune 7%
Hyderbad 8% NCR 49%
Chennai 10%
Bengaluru 14% Figure No 3.3: City wise share in upcoming mall (2015-2018) (Source: Technopak Advisors Pvt Ltd, Knightfrank, Cushman & Wakefield Research)
8) Increasing use of plastic money: Among the Indian consumers, the use of plastic money has increased, due to this the consumers prefer to buy the merchandise in the category of Apparel, Consumer Durable Goods, Food, and Grocery etc.
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“To study the Impact of Retail Malls on Grocery Shops with special Ph.D. reference to select FMCG Products in Nashik and Pune Cities” Thesis 2018
9) Easy credit availability: Ease in getting credit cards and ease of use of credit cards for shopping has also boosted the growth of the organised retail sector. According to the RBI, as of the financial year 2014, the total number of outstanding credit and debit cards in India was 24.7 million and 137.4 million respectively (D&B, 2014). 10) Organised retail concentration in tier II and III cities: Retail revolution started with the tier I cities in India, which thereby has been saturated (D&B, 2014). Now retailers are focusing on tier II and tier III cities as depicted in table no 3.6. Due to the changing landscape of Indian retail segment and the increase in competition, has forced the retailers to find out the growth opportunities in tier II and III cities.
Table No 3.6: Potential growth of Retail in tier II and tier III cities
Tier II (High-Growth Cities)
Pune Ahemdabad Chandigrah Ludiana Kochi Vadodara
Jaipur Lucknow Aurangabad
Tier III (Emerging Cities)
Indore Amritsar Jalandar Managalore Nashik Bhubaneshwar
Agra Viskhapatnam Coimbatore Kanpur Nagpur Goa
Surat Mysore Jamshedpur Trivandrum
Nascent Cities
Jodhpur Patana Varanasi Meerut Rajkot Guwahati
Bhopal Sonepat Vijaywada Madurai Ranchi Allahabad
Jamnagar Srinagar
(Source: http://www.indiaretailing.com)
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3.6 Government initiatives for growth of the retail sector The Union Minister of Commerce and Industry, Government of India, stated that the ministry is stressing to build a branding and marketing culture of the Indian products to the world. It was stated further that the ministry is willing to start a Free Trade Agreement with the European Union. The Indian Government has taken various initiatives to improve the retail industry in the country. Some of the initiatives are as follows: IKEA has entered into a Memorandum of Understanding with the government of Telangana state to set up its first store in Hyderabad (India). IKEA retail outlets adopt a set of standard design and their each location requires an investment around Rs.500- 600 crore (US$ 80.38 - 96.46 million).
The Foreign Investment Promotion Board has approved five different proposals of worth Rs. 420 crores (USD 67.53 million) from Puma SA, Flemingo and Bestseller for retailing in India (IBEF, 2015). Furthermore, the board cleared three 100 percent single-brand retail proposals worth Rs.222.5 crores (USD 35.77 million) 15. The Indian Government implements Goods & Services Tax Bill. This Bill is seen as a key in improving the business climate of our country and to facilitate industrial growth. The strong efforts of the Indian government lead to the investors’ confidence for FDI in India. Figure no 3.4 depicts the competitive position of India in the FDI Confidence Index 2014 in comparison to other countries of the world.
FDI Confidence Index 2014
United State 2.16 China 1.95 Canada 1.93 United Kingdom 1.91 Brazil 1.91 Germany 1.84 India 1.81 Australia 1.76 Singapore 1.75 France 1.74
0 0.5 1 1.5 2 2.5
Figure No 3.4: FDI Confidence Index 2014 (Source: AT Kearney 2014 FDI Confidence Index, Aranca analysis Adopted from (IBEF, 2015))
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3.7 Merger & Acquisition in the Indian Retail sector In the recent times, Merger & Acquisition (M&A) in the Indian retail sector are also indicating the growth potential of this sector. The synergies of any business are tapped through mergers and acquisitions. The table no 3.7 below details out some of them.
Table No 3.7: Merger and Acquisition in the Indian Retail sector Acquirer Name Target Name Year Deal Type Idein Ventures. Infurnia Jan 2016 Joint Venture Paytm Near.in Dec 2015 Acquisition Morgan Stanley Flipkart June 2015 Private Equity Sportsbiz Private InnoVen Capital July 2015 Private Equity Limited Snapdeal Exclusively.in Feb 2015 Acquisition Kalyan Jewellers Warburg Pincus Oct 2014 Private Equity India Pvt. Ltd. Future Lifestyle Celio Oct 2014 Private Equity Fashions Ltd. Soft Bank Snapdeal Oct 2014 Private Equity Flipkart Myntra.com May 2014 Acquisition Warburg Pincus Biba Apparels Dec 2013 Private Equity Bush foods Overseas Hassan Food Co Apr 2013 Acquisition Pvt. Ltd. Trent Ltd. Landmark Ltd. Feb 2013 Acquisition Future Venture India Big Apple (convenience Sep 2012 Acquisition Ltd. store) Pantaloons Retail India Peter England Ltd. Sep 2012 Acquisition Ltd. Pantaloons Retail R & R salons May 2012 Private Equity India Ltd. Classic Housing Phoenix Mills Ltd. Mar 2012 Acquisition Projects Pvt. Ltd.
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Flipkart online eTree Marketing Pvt. Feb 2012 Acquisition services Pvt. Ltd Ltd. Gitanjali Gems Ltd. Crown Aim, China Dec 2011 Acquisition Gateway Multichannel Shoppers Stop Ltd. Jun 2011 Acquisition Retail India Ltd. Triveni Bialetti Pvt. TTK Prestige Ltd. Sep 2011 Acquisition Ltd. ( Source: Company websites, Bloomberg, TechSci Research)
Value of mergers and acquisitions of Indian companies 4 3.5 3 3.39 2.5 2 2.42 1.5 1 0.5
0.64 Valuebillion in US dollars 0 2014 2015 2016 Year
Figure No 3.4: Value of mergers and acquisitions of Indian companies in the retail and consumer products sector from 2014 to 2016 (in billion U.S. dollars)16 (Source: C.P. Jain (2014), "Indian retail: Complete Analysis", The Financial Times)
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Analysing the strong growth potential, high foreign investment is getting attracted to this sector. Table No 3.8: Strong growth potential attracting high foreign investment Corporate Name Foreign Investment Reliance 1) Partnership arrangement with Marks & Spencer to open 50 stores Industries 2) Reliance would open 2000 exclusive outlets to sell telecom Limited Products 1) Partnership with Clarks International UK to sell premium Footwear label Future Group 2) Future Group is planning to take the southern supermarket chain Nilgiris. Metro Metro AG plans to have 50 wholesale stores in India by 2020 Walmart It has planned to open 50 wholesale stores in India over 4-5 years It has plans to open six to eight outlets in Maharashtra and Tesco Karnataka under Star Bazaar, Star Market and Star Daily formats in FY14 Columbia US based outdoor and adventure wear retailer Columbia Sportswear Sportswear Company will open 25 stores by April 2015 in India Tesco signed a deal worth USD 115 million with the retail arm of Tata Group Tata Group, where in the former would supply products, services and expertise to the letter’s hypermarket business Star Bazaar (Source: India Brand Equity Foundation (IBEF), 2015)
According to the Department of Industrial Policies and Promotion, the retail industry in India has received FDI equity inflows USD 275.38 million in the single brand segment from April 2000- January 2015 (IBEF, 2015). Due to the rising need of Indian consumers in different sectors including home appliances and consumer electronics, many companies have invested in India in the past few months (IBEF, 2015)17. Some of them are as follows: 1) Amazon and Future Group have made an agreement for selling goods online and both the companies have introduced new lines of products that will be offered only at Future Group retail stores as well as Amazon. The future Group introduced selling more than 45 private labels of apparel, electronics, home, and food category products, while Amazon was responsible for order fulfillment as well as customer
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service for the merchandise on its portal. The Japanese firm Soft Bank has invested approximate US $ 627 million in Snapdeal, which made them largest shareholder in the e-commerce. Snapdeal has planned to utilise this investment for expansion and growth of its chain of fulfilment centres. Myntra.com expanded their business by launching a wedding store in November, 2014.
2) To boost sales various schemes like free charge plans to launch a service that will promote online shopping through its mobile platforms and Website by giving cash back offers to shoppers who use the service to buy products on eCommerce sites. Burger King a well-known American fast food chain store started 12 outlets in India within next three months. 3) A logistic service provider, i.e. Gojavas has introduced a ‘try-before-you-buy’ experience in the eCommerce space. In this model, the delivery person waits at the place of the customers until the customer uses the product before accepting or returning it. Paytm is planning to set up 30,000 to 50,000 retail outlets where the customers can load the cash in their digital wallets. It’s searching retailers mostly Kirana stores to enroll them as merchants for accepting digital payments (IBEF, 2015). Mobikwik a mobile wallet company has made a partnership with Jabong.com to give mobile payment services to Jabong.com customers. Fashion And You has opened three distribution hubs for faster deliveries. 4) Amazon Inc. and Flipkart India will invest approximately Rs.2, 300 crores in the near future in order to acquire more customers in the fast-growing online retail market. Abu Dhabi based Lulu Group is planning to invest Rs. 25,00 crore in an integrated meat processing unit, a fruit and vegetable processing unit and a modern shopping mall in Hyderabad, Telangana. Datawind has made a partnership with Homeshop18 to jointly launch special sales programs for broadcast, mobile and internet media to provide greater access.
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3.8 Key challenges in Indian retail industry18 1) Shortage of skilled/trained manpower: 75 to 80 percent of the total manpower is required for store operations in the organised retail industry and front/end line assistant profiles are major positions for employment opportunities in the sector (FICCI, 2011). Unfortunately, in India, very few retail operations specific courses are offered at graduate and post graduate level. Moreover, there is also a shortage of niche retail operations specific courses in the area of store merchandising, supply chain management in retailing, CRM in retailing, stock management, customer service management etc.
2) Policy-induced barriers: There is an urgent need for the Indian government to establish an apex body for governing all the retail operations as the organised retail sector is administrated by two different ministries of the government of India. The Ministries of Commerce formulates policies pertained to retail operations in India, while the Ministry of Consumer Affairs takes care of licensing and other legislation related to retailing. A single apex body can govern retail operations and address the grievances of retailers more effectively. 3) Government regulations: Government regulations, especially the Urban Land Ceiling Act) for the development of real estate is hindering the growth of the retail sector. The existing labour laws are restricting the retailers for offering a 24/7 shopping experience to their customers. Moreover, the multistage taxation system and other taxation laws are hindering the growth of this sector. 4) Technology: Technology is a major challenge faced by organised retailers for effective management of retail operations. First of all, the technology available in India in this sector is out-dated. A strong need of latest technology (digital merchandising, online inventory monitoring system, mobile payment, etc.) is required to cope up with the customer aspirations. 5) Lack of efficient supply-chain management and distribution channel: Distribution channels are an integral part of the retail industry. The main role of the distribution channels is to deliver the right kind of goods at the right place at the right time. The improper infrastructure and distribution channels are the reasons for inefficient distribution processes in India. Moreover, supply chains are expensive in India. Therefore, the stakeholders in the retail industry are required to
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improvise distribution channels as well as supply chain systems, so that they can meet the desired quality and service level by their customers. 6) Understanding customers: Understanding customer behaviour is not an easy business. However, converting your customers into loyal customers is a more critical task in the retail industry. Retailers are required to have the implementation of effective CRM as well as a loyalty programme. 7) Competition from unorganised sector: Competition from the unorganised sector is also a challenge confronted by organised retailers in India, as unorganised retailers caters niche and more personalised service to their customers. 8) Online retailing: Moriarty et al. (2014)19 estimated that e-commerce markets in India will grow more than 50 percent in the coming five years. This may be a big challenge to store based organised retailers. Figure no 3.5 presents a comparison of total retail sales and e-commerce sales. The applications of internet among the young population of India are increasing day by day and speed of the internet as well. Cash on the delivery option by online retailers is a key factor for the growth. However, the inventory management, resource availability and logistic planning are important challenges for the growth of online retailing in India.
Retail and e-Retail Sales 2013-2018 1400 1244.58 1200 1082.24 1000 941.08 818.33 800 717.83 635.25 600
400
200 3.59 5.3 7.69 10.68 14.18 17.52 0 2013 2014 2015 2016 2017E 2018E
Total Retail Sales Retail eCommerce Sales
Figure No 3.5: Comparison of total retail & retail e-commerce sale in India (Source: www.ibef.org/industry/retail-india.aspx, accessed on 20 Apr 2016.)
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3.9 Organised Retailing
The retail sector of India, especially organised retailing is passing through the transformation since last one decade and despite several slumps, the organised retail market is growing exponentially. The organised retail segment is shifting towards the adoption of modern retailing concepts. In 2011-12, the Indian retail market was taped at USD 500 billion in which the organised retail market has been just 7 percent. The Indian retail market is anticipated to reach USD 738.71 billion by 2017-18 with a compounded growth rate of 15 percent per annum. While, the organised retail is anticipated to attain the 10.2percent share of the total retail market with a growth rate of 24 percent (Catalyst India 2012)20.
3.10 Unorganised Retailing The unorganized retail is the outlet by the owner without any technical or accounting standardization. It mostly caters local needs of the people. Unorganised retailing does not have many outlets and if have then it’s up to one or two outlets. It lacks supply chain management. But it is strong enough within the sphere of catering the need of the people involved in it. Their livelihood depends upon it. There are more than 12 million unorganised retail outlets accounting more than 95 percent of the retail trade in India. It includes Kirana shops run individually, footwear shops, Paan Bidi Shops, hawkers, pavement vendors, etc. Among the most of the retail types, Kirana Shops are well known for self-employment and is a traditional business carried by so called sole traders. Since long individual families have been running the kiranas shops catering needs of the local people and the vicinity.
3.10.1 Categories of Unorganised Retail Sector
The Indian retail industry has traditionally been dominated by small retailers consisting of the local kirana shops, owner-manned general shops, chemists, footwear shops, apparel shops, paan and beedi (local betel leaf and tobacco) shops, hand-cart hawkers, pavement vendors, etc. for the past several years. These players have been highly unorganised and competing with each other for the share of the consumer’s pie. There are many different kinds of products sold by unorganized retailers such as fruit and vegetable, non-vegetable (chicken and mutton), dairy and processed food, home and personal care products, cereals, pulses, spices and edible oils, apparel and
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3.10.2 SWOC Analysis of Unorganised Retailing There are over 14 million retail shops in India, and as such it is one of the largest user of labors in the country. In the post liberalization scenario, retailing is becoming more complex. With the emergence and active involvement of today’s consumers who are young, educated with high purchasing power, tech and mobile savvy, with exposure to global lifestyle, changing consumer behaviour etc., the retailing industry is getting very popular and more organized as well. The sector is expected to grow at a CAGR of 13 percent and according to the Investment Commission of India, it is likely to grow three fold from its current size to $960 billion by 201921. The traditional retailers are using SWOC Analysis to assess their functionality to meet the need of the competition. A SWOC analysis is the detail of their strength, weaknesses, opportunities and challenges which can be helpful them to be build their competencies to compete in the retail market. The retailer has their control on the strengths and weaknesses as its considered internal factors but the opportunities and challenges are not in the hands of retailers, the retailers have to adjust themselves with these opportunities and challenges.
Strength Strong and long establishment Location of shop history Lower income group are larger Know consumer buying habits Trust and loyalty amongst the Low cost of land or rental rates customers towards grocery shop Generate mutual advantage keepers Weakness Less variety in the grocery Non availability of skilled shops workforce Non availability and feasibility Supply chain and logistic problem of technology Very less number of new Lack of infrastructure customers Operation cost is high
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Opportunities Growing population and Large number of working demand population Large number of middle income Supply chain and logistic problem households Very less number of new Lack of infrastructure customers Employment opportunities Operation cost is high Increase in trends of desire buying Challenges Consumers shifting towards Low bargaining power organised retail market Customized service by organised Restricted branding of goods retail malls Low accessible space Stiff competition from organised retail sector
3.11 Fast Moving Consumer Goods (FMCG) The Indian FMCG sector is the fourth largest sector in the economy with an estimated size of Rs. 1,300 Billion. The sector has shown an average annual growth of about 11percent per annum over the last decade. Unlike the developed markets, it is highly splintered and a considerable past of the market encompass of unorganized players selling unbranded and unpackaged products. There are approximately 12-13 million retail stores in India, out of which a million are FMCG kirana stores22.
Commodities, which have a prompt turnover and relatively low cost are known as Fast Moving Consumer Goods (FMCG). FMCG items are those which commonly get substituted within a year. Examples of FMCG generally include a huge range of repeatedly purchased consumer materials such as toiletries, Soap, Cosmetics, oral care products, shaving products and detergents, as well as other non-perishables such as glassware, bulbs, batteries, paper products, and plastic goods. FMCG may also include pharmaceuticals, consumer electronics, packaged food items etc.
Transfixing level and per capita consumption in many product categories is very low compared to world average standards representing the unexploited market potential, proliferating Indian population, especially the middle class and the rural
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Our country has different agro-climate condition which enables to offer extended raw material which is suitable for many FMCG sub sections like food processing industries, etc. India is the one of the major producers of livestock, milk, sugarcane, coconut, spices and cashew and is the second largest producers of rice, wheat and fruits and vegetables. Equally, India has a plentiful supply of caustic soda and soda ash, the chief raw materials required in the production of detergents and soaps, which enables the household section of the industry to excel and grow. The receptiveness of their raw material gives India the locational advantage.
Table No 3.9: Indian FMCG Retail Segmentation Segments Retailers Footwear Adidas, Bata, Woodland, Reebok Peter England, Bombay Dying, V-Mart, Prinkit, Vishal Mega Mart, Raymond, Killer Jeans, Richlook, Cantabile Clothing & Appeals Retail India Pvt. Ltd. Allen Cooper, Signature, Levie’s, Flying Machine, Koutons Family Store, Ginni & Jony, The Loot, Barcelona, van Heusen, Provogue Studio, Wrangler V-Mart, Vishal Mega Mart, Reliance Fresh, Big Bazar, Food & Grocery More, D-Mart, Maharashtra Bhandar. Easy Day Watch & Jewellery World of Titan, Tanishq Durables Next Retail, Sony World, LG etc. (Source: Nelson retail and shopper trends Asia pacific, (2013))
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3.11.1 Growth Opportunities in the Indian FMCG Industry Indian consumers are highly adaptable to new & innovative products. For instance, there has been an easy acceptance of men’s fairness creams, flavoured yoghurt, cuppa mania noodles, gel based facial bleach, drinking yogurt, sugar free Chyawanprash. Leading players of consumer products have a strong distribution network in rural India, they also stand to gain from the contribution of technological advances like internet & e-commerce to better logistics. Godrej is focusing on rural market for household insecticides segment. At present, Godrej accounts for 25 per cent of the household insecticides sales from rural areas. With the rise in disposable incomes mid & high-income consumers in urban areas have shifted their purchase trend from essential to premium products. Premium brands are manufacturing smaller packs of premium products. For example, Dove soap is available in 50g packaging. Indian & multinational FMCG players can leverage India as a strategic sourcing hub for cost-competitive product development & manufacturing to cater to international markets. ITC partnered with farmers of MP to improve the living conditions in the villages. It aims at improving watershed development programmes where ITC has factory or agro operations. Penetration of many product categories is still low. Even among those where the penetration is higher, per capita consumption is comparatively low, thereby offering scope for high growth in future. Penetration of products such as hair oil and talcum powder is high in the country, however, some major products including Ayurveda oils, deodorants and men’s fairness creams recorded penetration of just 8 per cent, 8 percent 4 percent, in FY16, respectively.
Category penetration in India (FY16)
89%
41% 35% 25% 16% 11% 8% 8% 4%
Figure No 3.6: FMCG Category penetration in India (Source: Emami Investor Presentation June 16, TechSci Research)
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Table No 3.10: Market share of companies in a FMCG Category
Market Leader Other Leading Players
Hair Oil 30% 19%
Shampoo 47% 27%
54.9 Oral Care 30% 14% %
Skin Care 54% 12% 3%
Fruit Juice 60% 30%
(Source: Emami Investor Presentation June 16, TechSci Research)
Some of the leading key retail formats with their product profiles and value proposition are outlined in the table no 3.11 below. Table No 3.11: Summary of Key Retail Formats in India Value Product Pricing Retailer Format Proposition Strategy Strategy Big Is se sasta aur accha Hypermarket Food & labels Discount Bazaar kahin nahin Food Ab ghar chlana Food & grocery, Supermarket Discount Bazaar kitna asaan private labels Fashion Specialty Affordable fashion Apparel & lifestyle Discount Station Store for the masses products Brand Discount Best brands. Smart Apparel & Discount Factory Store price Accessories Star & Discount Beauty services at Beauty services Discount Sitara Store affordable prices
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Home Specialty Ab ghar banana Products & services Regular Town Store kitna asan for the home Chamosa Specialty A taste of India Tea & Snacks Regular Store Store Future Lowest prices Apparel, books, toys e-store Discount Bazaar Everyday etc Department National brands & Pantaloons Fresh fashion Regular Store private labels Specialty Books, Music gifts, Books, music, gifts Depot Regular Store freedom. freedom Specialty Accessories like International brands Blue Sky Regular Store never before & private labels Apparel, National & Shopper’s Department Feel the experience International brands Regular Stop Store while you shop & private labels All home needs Make your house, furniture, home & Home Specialty into a beautiful health equipment. Regular Stop Store home designed by National & you! International brands Food & Non-food. National & Hyper city Hypermarket N.A. Discount International brands & private labels Apparel & Mother Specialty accessories Apparel & Regular care Store for the new born & accessories children Specialty Brio N.A. Coffee & Snacks Regular Store Specialty Desi Café N.A. Indian Snacks Regular Store Cross Specialty N.A. Books, music, toys Regular Word Store Apparel, Department accessories, Westside N.A. Regular Store cosmetics private labels Star India Chota Budget. Hypermarket Food & Non Food Discount Bazaar Lambi Shopping
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3.12 Role of E-Commerce in Shopping
Over the last two decades, rising the internet and mobile phone penetration has changed the way we communicate and do business. E-commerce is a relatively novel concept. It is, at present, heavily leaning on the internet and mobile phone revolution, to fundamentally alter the way businesses reach their customers. This growth is expected to be led by increased consumer-led purchases in durables and electronics, apparels and accessories, besides traditional products such as books and audio-visuals. Recent years have seen a remarkable transformation in the way India shops and trades. E-commerce has taken the world of retail by storm and captivated the imagination of an entire generation of entrepreneurs, with e-commerce ventures with various business and commercial models. The explosive growth in the last few years has already catapulted the biggest firms among these ventures past the billion-dollar territory. The sector has grown three times in four years to nearly 12.6 trillion USD in 201923. Online retail, while today represents a small fraction of the e-commerce space, is one of the fastest growing segments. Logistics and infrastructure in e-retailing becomes the very backbone of the fulfilment network and the basis on which stringent service level expectations are set and met, and customer mind-space among competing alternatives is one. When it comes to retail products and services purchased on the internet, e-Commerce share accounts for 5.9 percent of the total retail market worldwide in 2014, or $1.316 trillion. By 2018, that share is expected to increase significantly to 8.8 percent, yet retail e-Commerce will still account for just a fraction of in-store purchases even as it nears $2.5 trillion by the end of our forecast. China and the US are by far the world’s leading e-Commerce markets, combining for more than 55 percent of global internet retail sales in 2017. China’s growth over the next five years will widen the gap between the two countries, and China will exceed $1 trillion in retail e-commerce sales by 2018, accounting for more than 40 percent of the total worldwide.
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Retail Ecommerce Sales Worldwide, 2013-2018 3 $2.489 2.5 $2.197 2 $1.888 $1.592 1.5 $1.316 $1.077 1
0.5
0 2013 2014 2015 2016 2017 2018E
Figure No 3.7: Retail E-commerce Sales (Source: eMarketer, Dec 2014 (www.emarketer.com))
US would maintain its position as the second-largest retail e-commerce market in 2018, totalling nearly $500 billion that year, while UK would account for about one- quarter of that figure. E commerce share of total retail sales can mean different things in different markets. Table No 3.12: Worldwide top 10 Countries by Retail E commerce Sales in billions and percent change (2013-2018) Year Country 2013 2014 2015 2016 2017 2018 China $315.75 $426.26 $562.66 $714.58 $871.79 $1,011.28 % change 47.0% 35.0% 32.0% 27.0% 22.0% 16.0% US $264.28 $305.65 $349.06 $394.43 $442.55 $493.89 % change 16.5% 15.7% 14.2% 13.0% 12.2% 11.6% UK $70.39 $82.00 $93.89 $104.22 $114.64 $124.96 % change 17.0% 16.5% 14.5% 11.0% 10.0% 9.0% Japan $62.13 $70.83 $79.33 $88.06 $96.87 $106.07 % change 17.9% 14.0% 12.0% 11.0% 10.0% 9.5% Germany $51.91 $63.38 $73.46 $82.93 $91.97 $99.33 % change 21.7% 22.1% 15.9% 12.9% 10.9% 8.0% France $34.21 $38.36 $42.62 $46.13 $49.71 $53.26 % change 13.2% 12.1% 11.1% 8.2% 7.8% 7.1%
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South Korea $29.30 $33.11 $36.76 $40.43 $44.07 $47.82 % change 12.6% 13.0% 11.0% 10.0% 9.0% 8.5% Canada $20.98 $24.63 $28.77 $33.05 $37.61 $42.67 % change 17.7% 17.4% 16.8% 14.9% 13.8% 13.5% Russia $15.06 $17.47 $20.30 $23.40 $26.88 $30.91 % change 27.4% 16.0% 16.2% 15.3% 14.9% 15.0% Brazil $13.34 $16.28 $18.80 $21.34 $23.79 $26.17 % change 28.0% 22.0% 15.5% 13.5% 11.5% 10.0% (Source: eMarketer, Dec 2014) The two largest e-commerce markets, China and UK, have much higher proportions of online-to-total retail sales than the US, and e-commerce trends in each market are unique. For example, digital buyer’s consumers who purchase online at least once during the year will represent only 27.5 percent of China’s population in 2014, while more than 10 percent of all retail purchases occur via the internet. This points to the fact that consumers in China who buy online do so often. Though India does not fare at all in the table given above yet, owing to the rapid expansion of e-commerce, the Indian online retail market is expected to grow more than 4-fold to reach USD 14.5 billion by 2019.
3.12.1 India’s e-grocery market (Changing phase of Grocery shopping)
India‘s grocery market is worth 300 billion USD and is one of the largest in the world. In recent times the market has been experiencing a revolution. India has long been a nation obsessed with home delivery and these new online grocery portals allow customers the convenience to shop for groceries online, the flexibility of a huge product range and the ability to compare discounts on goods all through one platform. Table no 3.13 reveals the growth drivers for e-grocery markets in India from the demand and supply side.
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Table No 3.13: Growth Drivers for e-Grocery Market in India Demand Side Supply Side Growing younger population Multiple channel distribution Growing internet usage and Flexible delivery options online shopping Presence of major players Rising disposable income Convenience Increasing affluence levels Increasing supply of packaged Quality / organic products grains and food products Customer driven and not Multiple mode of payments like investment driven credit card, debit card, net banking, Growing e-Commerce market mobile payments like Airtel in India money, Mosambee (swipe credit and debit card on mobile)
Table no 3.14 shows the key Indian e-grocery players focused on metro markets and their product portfolio
Table No 3.14: Key Indian e-Grocery Players focused on Metro Markets
Name of the e- Location Product Portfolio Grocery Players Grocery, Fruits & Vegetables, Confectionery, All over Dairy products, Eggs, Beverages and Snacks, Aaramshop.com India Home care, Personal Care, Toiletries, Organic Food, Non Vegetarian, Pet Food
Farm2kitchen.com Delhi Organic Food
Grocery, Fruits & Vegetables, Confectionery, Delhi Dairy products, Eggs, Beverages and Snacks, MyGrahak.com NCR Home care, Personal Care, Toiletries, Organic Food, Pet Food.
Callandordr.com Grocery, Fruits & Vegetables, Confectionery, FreshnDaily.com Mumbai Dairy products, Eggs, Beverages and Snacks, Shopveg.in Home care, Personal Care, Toiletries
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Atmdoorsteps.com Grocery, Fruits & Vegetables, Confectionery, Bigbasket.com Bangalore Dairy products, Eggs, Beverages and Snacks, Zopnow.com Organic Food.
Grocery, Fruits & Vegetables, Confectionery, VeggiBazaar.com Chennai Dairy products, Eggs, Beverages and Snacks
Grocery, Fruits & Vegetables, Confectionery, LocalBanya.com Dairy products, Eggs, Beverages and Snacks, EkStop.com Mumbai Home care, Organic Food, Non Vegetarian, Pet Eemli.com Food.
(Source: www.dessenceconsulting.com & Perzen Darukhanawalla) Both the sides of the coin are to be observed when resorting to online grocery shopping. The advantages of purchasing groceries online are that it avoid crowds or traffic, offers a wide range of products, is easy to shop, offers special promos and deals, save on fuel cost, better selection of products, take less time, less work to do, avoids bad weather, useful information on the web available, sticks to budget and is an easy way to stock up. The disadvantages of purchasing groceries online are increased cost of shipping, waiting for delivery, problem of security and privacy, no benefit of coupons like Sodexho passes etc., more expensive, confusing, no touch and feel aspect, lacks adaptability and fear of damaged products.
3.12.2 Closing of Organised Retail Malls24
Though shopping malls are mushrooming across the length and breadth of India, only a handful of them are running successfully, while others are losing their glory and are on the verge of winding up. The alarming rate at which shopping malls in India are closing down predicts a gloomy picture for some malls that are in crisis and struggling hard to survive. Industry experts assert that 60 percent of shopping malls in the major cities across the country are performing disappointingly and facing a bleak future owing to their failure to keep up with the competition from new shopping malls offering sophisticated retail experience to their customers.
According to Jones Lang LaSale (JLL), an international property consultant (IPC), the Indian national capital Delhi and National Capital Region has between 75 and 83 malls that are performing either average or below average while that number for
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Some of the major factors that have been preventing malls from sustaining like disappointing performance of shopping malls, lack of creativity and improper management, unattractive ambiance, poor planning, poor design and layout, bad zoning, incorrect brand mix, accessibility issues; and smaller catchment area25. There are other important factors which affect the sale performance of retail malls are listed below.
E-commerce: As consumers continue to shift spending online, the square footage of physical stores for many retailers is starting to become bloated. In other words, if people are not going into stores and buying items because they are going online, the company incurs the fixed cost of the physical space without much benefit. A lot of store closures that you might be seeing, many of them located in malls, is a function of retailers right sizing their physical footprint to adjust to the shift in being where their customers are (online) and adapting to how they are buying products.
Change in Consumer Preferences: There is also the other issue of change in consumer preference. For millennial and teens especially, emphasis on wearing the most branded clothing is not as important as it used to be. Fast fashion retailers such as H&M and Zara have filled a gap of being able to provide the newest trend at more affordable prices. Instead, young consumers are more interested in having the latest technology (i.e. iPhone) or “experience” (i.e. being able to regularly get lattes at Starbucks and eat out with friends at a restaurant). This means that retailers that are in the middle, especially from a price point, are getting squeezed because the value proposition offered is no longer appealing to the young consumer.
Owing to the factors mentioned above, shopping malls in India are facing tough times as customer footfalls and sales are going down with each passing day. In addition to this, weak sales and ever-increasing costs are also compelling retailers to exit shopping malls. This lurking fear has been compelling a number of big shopping
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3.12.3 Underperforming Malls can Regain Their Lost Glory In order to operate a mall productively, it is extremely important to analyse consumer behaviour. Failure to understand consumer behaviour and reluctance to adapt to the demands of Millennial can prove disastrous for underperforming malls. Thus, struggling malls should focus on critical success factors to bounce back from all sorts of adversity. By introducing novelty and adding new attractions, underperforming shopping malls can certainly make a comeback in the retail space, thereby regaining their lost lustre.
3.12.4 Walmart and Flipkart Deal Walmart, the Bentonville, US-based retail behemoth, on Wednesday, May 9 2018 acquired a 77 per cent stake in the Indian e-commerce giant Flipkart for $16 billion. The acquisition values Flipkart at over $20 billion. Flipkart acquisition allows Walmart to benefit from large Indian e-commerce opportunity, where growth rates are likely to be 36% CAGR over next five years. Currently, Walmart has 21 cash and carry stores and has planned to open 5 new stores in FY19E. Company will continue to run these stores independently in the near term and it is expected to consider omni- channel operations in the coming years.
Effect on the e-commerce sector26 The combined Walmart-Flipkart company will have a whopping 90 per cent share of the e-commerce market in India. And that raises fears of loss of business among traders, sellers and retailers since Walmart could bring multiple private labels to India and flood the e-commerce platform with its own products. These small retailers had even approached the Competition Commission of India with the plea that foreign direct investment FDI norms were being violated by this deal.
Walmart's biggest rival and one of the market leaders in India, Amazon sees the merger as a threat and had even offered a rival deal to Flipkart. Walmart is foraying in to e-commerce right now since Amazon has already started building an offline retail presence through partnerships under its Udaan project. Shoppers Stop retail chain is the
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latest with whom Amazon has struck a deal. They have the infrastructure to offer an omni channel i.e, a unified experience across online and offline channels to consumers.
Effect on the Indian Economy27
There is a real risk of Walmart-Flipkart and Amazon dividing up the Indian e- commerce market between themselves leaving no space for local competition. Together, Flipkart and Amazon control a majority of India's $30-billion e-commerce market that is forecast to grow to $200 billion by 2026, according to Morgan Stanley. This could be a setback to Prime Minister Narendra Modi's 'Make in India' push as the competition will now be between two American giants resulting in the smaller players being completely wiped off.
Positive Impact of Acquisition on Indian Economy:
1) Low prices, more variety: With the e-commerce giants competing for the top spot, product differentiation and localization will bring more variety and create a diverse product basket at low prices, this shall benefit the Indian consumers. 2) R&D: For greater market penetration across the country, efficiency is the key which comes with more R&D. Walmart is known for its culture of innovation and service. This can help in scaling up Walmart’s business scale in India which can generate more revenue and create technological spill overs and learning effect for domestic firms as well. The improved sophisticated nature of the products will create external demand for Indian goods. 3) Collateral Benefits: As the world’s largest retail giant pours funds, it will lead to more such investments in e-commerce. The Indian e-commerce market space was drying up as funding ebbed following liquidity issues due to Demonetization and GST bottlenecks. Walmart’s entry will usher fresh funds and rejuvenate e-commerce ecosystem as more foreign firms and venture capitalists enter India .With e- commerce giants revamping their business models, Indian e-commerce market is expected to see broad based growth with better productivity. 4) Economic Growth: Walmart will expand across their verticals which will boost output growth and increase employment opportunities. With positive business sentiments, it will be an impetus to economic growth and capitalism. The deal will be subject to tax in India so revenue gains shall add to domestic revenue receipts
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5) Efficient Supply Chain: Expansion of e-commerce requires efficient supply chain and logistics which require infrastructural development. This will give a fillip to Indian agriculture and infrastructure and benefit farmers as they would be able to cater to more demand as Walmart shares its extensive experience in retailing, logistics and inventory and supply chain management. This can especially help the perishable goods industry which is Walmart’s forte. 6) Job Creation: With more investment flowing in Indian economy especially in retail space, capacity utilization shall improve. Output and productivity growth can create new employment opportunities for both skilled and unskilled labor. 7) Mom and Pop stores: Walmart is looking to extend its supply chain arm through partnerships with around 60 lakhs kiranas. This can increase the market presence of small stores.
Deal against the Interests of Indian Economy
1) Brick and Mortar Stores may shut down: Walmart is known for scrapping small businesses which are selling at ultra-low prices through Flipkart. Walmart may bring in its own labels with hyper-competitive prices and replace the domestic MSMEs which can be a threat to brick and mortar stores as they fear shut down due to competitive pressures. 2) Small Players (Mom and Pop stores) will be hurt by this as market spaces shrink due to cut throat competition which force small firms to exit. In an attempt to survive in the market, firms practice excessive price cutting at the cost of viability and profitability which leads to inefficiency. 3) Threat of Pan India Protests: Tamil Nadu Vanigar Sangankalin Peramaippu federation of traders has already warned the government of pan India protests. Many more trade unions may call for such protests which can hurt our economy, create social chaos and cause infrastructural damages. 4) Backdoor entry for Walmart: FDI in India allows 100 percent FDI in single brand retail. Walmart is a multi-brand retail chain where 100 percent FDI is not allowed, so it focused only on cash and carry business. Flipkart has already circumvented such restrictions in direct selling which will be used by Walmart.
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3.13 Profile of Nashik City 3.13.1 History Nashik is a city in Maharashtra, India. Nashik is located in the northwest of Maharashtra, 180 km away from Mumbai and 202 km away from Pune. Nashik is the administrative headquarters of Nashik district and Nashik Division. Nashik, which has been referred to as the "Wine Capital of India", or as India’s Napa Valley, is located in the Western Ghats, on the western edge of the Deccan peninsula on the banks of the river Godavari. The pious Godavari river flows through Nashik from its source, which lies to the southwest of the city, in Trimbakeshwar. Nashik Urban Agglomeration (Nashik UA) has a population of 1,620,000 and a total area of 264.23 km which makes it the fourth largest urban area in Maharashtra in terms of population. Nashik is the third most industrialized cities in Maharashtra after Mumbai and Pune. Nashik is one of the world's holiest Hindu cities and also the fastest growing 23rd city of Northern Maharashtra (Among 24 cities). Kumbh Mela is held here once in 12 years along with four other cities in India. Lord Rama along with Lakshmana and Sita spent 14 years of their exile at Tapovan near Nashik28.
3.13.2 Geography Nashik is located in northern Maharashtra at 600m (1968 ft) from the mean sea level. The river Godavari originates from Trimbakeshwar (24 km from Nashik) and flows through various parts of the city. The river forms the northern boundary of the city in some areas and then flows through the old residential settlement in the city. Nashik lies on western edge of the Deccan Plateau which is a volcanic formation. The soil here is primarily black which is favourable for agriculture. Prashant Koli, India's renowned Agricultural Scientist said;" It's the best in North Maharashtra Region due to its icon elasticity" The total land area of the city (Municipal Limits) is about 259.13 km which makes it the third largest urban area of Maharashtra after Mumbai Metropolitan Region and the Pune and Pimpri Chinchwad Urban Region (together as Second)29.
3.13.3 Demographics According to the Census of India, 2011, Nashik had a population of 1,480,769. Males constitute 54 percent of the population and females 46 percent. Nashik had an average literacy rate of 74 percent, higher than the national average of 64 percent; male literacy was 80 percent, and female literacy was 66 percent. In Nashik, 14 percent of
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“To study the Impact of Retail Malls on Grocery Shops with special Ph.D. reference to select FMCG Products in Nashik and Pune Cities” Thesis 2018 the population is under 6 years of age. In the same year (census year 2001) the Nashik Urban Agglomeration had a population of 1,152,326 and thus it was the fourth largest urban area of Maharashtra State after Mumbai, Pune and Nagpur. The projected population of Nashik urban agglomeration (which includes abutting urban areas like Deolali) as on 11 November 2012 is 1,562,76930.
3.13.4 Industrial Overview Basically an agro based religious city, Nashik today is one of the fastest growing cities of India and has even been identified as a tier-2 metro. The city's economy is driven chiefly by the engineering and manufacturing industry (which has been around since the 1970s). Auto majors such as Mahindra & Mahindra, BOSCH and Original Equipment Manufacturers (OEMs) such as VIP, Samsonite, CEAT etc. have their plants here and have spawned a huge network of auto component suppliers and engineering ancillary services. It is also a pharmaceutical hub with presence GlaxoSmithKline and Fem. In recent years, Nashik has also carved a niche for itself as India's "Napa Valley" and locally established wine 131 brands such as "Sula" and "Zampa" have attained international acclaim. Modern efforts are on to promote the growth of an export-oriented rose farming and wine industry in the district. It is home to an important thermal power plant (Eklahare) and a National Treasury Printing Press (India Security Press at Nashik Road). There are five "Industrial Zones" in the Nashik area and its outskirts (Satpur, Ambad, Sinnar, Igatpuri and Dindori). Nashik has a number of sugar mills. It is also a chief exporter of white onions and pomegranates31.
3.13.5 Major Industry The Hindustan Aeronautics Limited plant is an aircraft manufacturing plant located 10 miles (16 km) from Nashik employing about 7000 people. Other Government undertakings in Nashik are; Currency Note Press & Indian Security Press, in Nashik Road. Cantonment Board, Deolali Camp, Artillery Centre, Deolali Camp. Manufacturers who have set up plants in the Nashik MIDC area include: Bosch India - previously MICO Bosch, Mahindra and Mahindra, CEAT, Thyssen Krupp, Samsonite, Atlas Copco, Crompton Greaves, ABB, GlaxoSmithKline, Cipla, Glenmark pharmaceuticals L&T, Schneider Electric, Jindal Steel, Garware, Gabriel India, Lear Corporation, Excello India, Kirloskar, IBP, Coca Cola, Siemens, Epcos, EATON, Shalimar Paints, Hindustan National Glass Ltd.
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Recently the government has endeavoured to set up an IT park in the city of Nashik. Nashik is also emerging as a BPO/IT destination and is in a list of the selected Tier II cities for BPO/IT companies. India Bulls are setting up a Multipurpose SEZ at Sinnar near Nashik named Neocity SEZ over an area of 2500 hectares. It is first and largest multipurpose SEZ in Maharashtra. In remote areas like Surgana Block, many tribal are engaged in Carpet weaving. Export quality carpets are prepared in and around Umbarthan (Tal. Surgana). NABARD has selected Yeola Block for Development of Paithani Cluster. Nashik has also witnessed electronic development in the recent times. An electronic component testing laboratory has been proposed to be set up in Nashik, which will further boost the proliferation of related industry in the district. A software Technology Park (STP) is established in Nashik. The city has already registered many websites32.
3.13.6 Educational Heritage33 Nashik is one of the rising name in the proliferation of the education sector. As various quality institutes of learning are taking place in Nashik. There are various institutions caterings to various fields of education, like Management, Engineering, Medical, Media, Journalism, Architecture, Pharmacy, Polytechnic, Information Technology, Art, etc. Government and private run Industrial training institutes (ITIs) are also set up in Nashik to promote and encourage industrial education. There is also a Nashik Engineering Cluster (NEC) which is PPP (Public Private Partnership) venture to create more technical experts and provide them with on-the-job training in various fields. Nashik is one of the city having industrial, economical scope, there are eyes on Nashik from across the country. Nashik is a favorite destination of all quality education seekers after expensive options like Pune and Mumbai. Quality educational institutes in Nashik are attracting these seekers on the map. All educational societies have hugely contributed to the development of Nashik.
3.13.7 Organised Retailing in Nashik Nashik city has always demanded the latest in Shopping, Food, Fashion, and Entertainment and has embraced these with as much fervour as consumers in other Metro Cities. Nashik is a home to major retail player both national and international. Indian major organised retail chains viz. Big Bazaar, Pantaloons, Cotton King, Westside, etc. have their presence in Nashik along with International Retail Giants like,
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Walmart (in collaboration with Bharti Retail), Reebok, Adidas, Spencer, etc. The presence of these retailers has revolutionized the businesses and the consumer buying habit in Nashik. Nashik has one of the largest hypermarket in India. City Centre Mall (CCM), as it is named, is built over 9 lac sq ft area including Nashik’s largest covered parking. CCM has been built to the size of what is internationally known as a Regional centre. CCM has been a shopping destination for all types of shoppers. Here we find all the major national as well as international brands. CCM also includes 3 screen multiplex. The development of CCM in Nashik has given impetus to the organised retail shopping in Nashik and its adjoining districts. The organised retail stores are spread over the city and not clustered in a single zone. Nashik city can be divided into 4 zones based on the Legislative Constituencies structured by the Election Commission. The zones are East, Central, West and Deolali. Organised retail are more or less evenly present in all these zones. For e.g. 1. Nashik East has Big Bazaar, Reliance Fresh, Mega Mart, Mahavir Supermarket, BMS Super Market and Cotton King. 2. Nashik Central has Spinach, Big Bazaar, Adidas, The Loot, Cotton King, Mega Mart, Das Electronics, Reliance Digital and Reliance Trends. 3. Nashik West has City Centre Mall (CCM) with over 120 small and big organised retail outlets viz. Pantaloons, Central, Reliance Trends. Reliance Digital, Big Bazaar, Westside, Lee, Wrangler, Levis, Nike Nandini Textiles, Reliance Footprints, Woodland, Peter England, etc. 4. Nashik Deolali has Spinach, Reliance Fresh, Mega Mart, Aditya Birla’s More, Bata, Reebok, etc.
This shows that the shopping activities in Nashik are not concentrated at one or two areas, but evenly poised through the city. Nashik has a wide variety of shopping destinations. These destinations are attracting customers from and around Nashik. The flow of customers to these organised stores has been increasing, adding to the number of organised retail customers. According to an article in the Times of India, “Nashik is a Role Model for all the Cities in India”34.
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3.14 Profile of Pune City 3.14.1 History Pune District is famous from the historical days due to the Great Maratha King Chh. Shivaji Maharaj, Peshwas and other great leaders and reformers of India of the pre independence period. Pune District has always remained on the forefront being a major source of reformative thoughts and concepts in industrial, agricultural, social, economic and political fields. Pune is well known as the ‘Queen of Deccan’ due to its scenic beauty and rich natural resources. Besides, it is famous for its religious and historical places. Pune City is known on the world map because of its educational, research and development institutions. The district has importance as an important military base. Pune District is one of the most industrialized districts in Western Maharashtra 35. In 1730, Pune became an important political centre as the seat of the Maratha Peshwa, the prime minister of the Maratha Empire. After the town was annexed to British India in 1817, it served as a cantonment town and as the "monsoon capital" of the Bombay Presidency until the independence of India. Pune is known for its high educational facilities and industrial area including manufacturing, automobile and information technology. Pune is the cultural capital of Maharashtra. The city is known for cultural activities like classical music, spirituality, theatre, sports, and literature. These activities and job opportunities attract migrants and students from all over India and abroad, which makes for a city of many communities and cultures36.
3.14.2 Geography Pune is 560 m (1,840 ft) above sea level on the western margin of the Deccan plateau. It is on the leeward side of the Sahyadri mountain range, which forms a barrier from the Arabian Sea. It is a hilly city, with its highest hill, Vetal Hill, rising to 800 m (2,600 ft) above sea level. Just outside the city, the Sinhagad fort is at an altitude of 1,300 metres (4,300 feet). It lies between 18° 32" North latitude and 73° 51" East longitude. Pune is 1,533 kilometers (953 mi) south of Delhi, 844 kilometers (524 mi) north of Bangalore, and 149 kilometers (93 mi) southeast of Mumbai by road. Central Pune is at the confluence of the Mula and Mutha Rivers. The Pavana and Indrayani Rivers, tributaries of the Bhima River, traverse the north- western outskirts of metropolitan Pune.
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3.14.3 Demographics The population of the Pune city is 3,124,458 and Pune Urban Agglomeration (Pune Metropolitan Area) is 5,057,709 as of the 2011 census. The same was about 4,485,000 in 2005. The migrating population rose from 43,900 in 2001 to 88,200 in 2005. The estimated population in 2016 for the Pune metro region is 6,226,959. According to the Pune Municipal Corporation, 40 percent of the population lived in slums in 2001. The sharp increase in censorial decade of 1991–2001 can be attributed to the absorption of 38 fringe villages into the city. The average literacy rate of Pune was 86.15 in 2017 compared to 80.45 in 2001. Marathi is the official and most widely spoken language, while English and Hindi are understood by a significant part of the population. Since Pune is a major industrial metropolis, it has attracted migrants from all parts of India to come and settle here. The top five areas of migration are Karnataka, Uttar Pradesh, Andhra Pradesh, Gujarat, and Rajasthan. The Sindhis in the city are mostly refugees and their descendants, who came to the area after the partition of India in 194737. Pune is said to be the cultural capital of the state of Maharashtra. It epitomises Marathi culture, which places emphasis on education, arts and crafts, music, and theatre. Pune culture reflects a blend of traditions with modernity, along with hosting classical shows auditoriums like the Balgandharva Ranga Mandir, Tilak Smarak Mandir and the Yashwantrao Chavan Natyagruha have been at the service of Punekars and are famous for playing host to many commercial theatre acts. Smaller auditoriums like the Sudarshan Rangamanch and Bharat Natya Sanshodhan Mandir are the favourite places for many intercollegiate competitions and also are the focal point of the city's experimental and amateur theatre movement.
3.14.4 Industrial Overview Pune is also known for its industrial hub housing huge numbers of industries from large to micro SME’s. During the early twentieth century, some industries started, the first of which was ‘Kirloskar Oils Engines Ltd in 1946. Several Pune based industrialists such as ‘Kirloskar’, ‘Garware’, ‘Bajaj’, ‘Tata’ etc. have spread their industrial empires throughout the world from this city. The process of industrialisation continued at a fast pace up to the 1980s. Most of the industries established during this period were manufacturing industries, with a concentration of engineering industry. Pune has now become a major industrial centre, with a number of heavy engineering
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“To study the Impact of Retail Malls on Grocery Shops with special Ph.D. reference to select FMCG Products in Nashik and Pune Cities” Thesis 2018 industries such as the motor vehicle manufacturing plants for buses, cars and two- wheelers located in and around the city. Industries have located mainly in the direction of the Pune- Mumbai highway. Since the 1990s, there was a fast growth of the Information Technology industry, which is largely non-polluting. The setting up of the IT Park at Hinjewadi in 1999 gave a fillip to the growth of the IT sector in Pune. At present, the industry in Pune is dominated by IT companies and the services sector which includes large numbers of doctors, lawyers, chartered accountants, tax consultants, etc. The IT and BT (Biotechnology) industries have emerged as the new driving force of the economy and have significantly. The IT sector from Pune contributes to about 10 percent of national software exports. With over 600 IT companies and about 50 medium and 50 big BPO centres, besides many smaller ones, the IT sector, which is labour intensive like the SME sector, has generated a large number of new jobs, attracting people from all over the country, thus contributing to growth of population. Most of the industries within Pune City limits fall in the category of engineering and allied activities. There were 22 large/medium industrial units and 1076 small units in the PMC area in 2015. The city of Pune is an important a trading centre because of good communication, banking and other necessary facilities. The city has good road and rail links to the rest of the country which has facilitated the growth of trading activities. The Maharashtra Industrial Development Corporation (MIDC) has a strong presence in the district with large industrial estates at Bhosari, Pimpri Chinchwad, Baramati, Jejuri, Ranjangaon and Kurkumbh. Pune's proximity to Mumbai, good climate, and availability of talent made it a destination for large firms like Tata Motors (TELCO then), Thermax, ThyssenKrupp, Kirloskar Group, KSB Pumps, Cummins, Hindustan Antibiotics, and several others. Serum Institute of India, the world's fifth largest vaccine producer by volume has a manufacturing plant located in Pune. Pune is the largest hub in India for German companies. According to the Indo-German Chamber of Commerce, Pune has been the single largest hub for German companies for the last 60 years38. Over 225 German companies have set up their businesses here.
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3.14.5 Organised Retailing in Pune The retail revolution has also picked up speed in the city of Pune. In the past few years, Pune has seen changes not only in its geographical landscape, but also in the tastes and style of living. This has come in handy with the development of organized retail outlets and the choice of choosing quality products at a reasonable price that too under one roof. Similar to the rest of the country, Pune is also in the cycle of retail boom with companies like Shopper's stop, Pantaloons, Zodiac, Westside, Lifestyle and Globus eyeing a piece of the retail action39. With the mall culture hitting the great Indian middle class, city retailers now sense the inescapable fact that merely stocking big brands doesn't make up for sales. The advent of malls has merged the thin line between the hotels, multiplexes, and food courts and intends to enhance the consumer's shopping experience.
Table No 3.15: Organised Retail Mall in Pune
Sr. No. Mall Area
1 Phoenix Market City Viman Nagar Road
2 Amanora Town Centre Hadapsar- Kharadi Bypass
3 Seasons Mall Magarpatta City, Hadapsa
4 SGS Mall Moledina Road
5 Inorbit Mall Vadgoan Sheri, Pune,
6 Pune Central Mall Bund Garden Road, Pune
7 Ishanya Mall Airport Road, Yerawada
9 Ashoka Mall Near Pune Railway Station
10 Kumar Pacific Mall Shankar Sheth Road
(Source: https://www.indianretailer.com)
The Indian consumers are mostly interested in Food-Retailing sector, Health and Beauty care Products, Clothing and footwear, Durable & Household goods, entertainment and personal goods etc., all this available to Indian consumers under one roof called, “Shopping Mall”. New variety shopping malls have mushroomed with Entertainment, Retail and Fun all over India. Pune and Nashik are no exception to it.
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Table No 3.16: List of India’s Largest Shopping Mall Year of Name of Retail Mall City Area in Sq. Ft. Establishment Spencer Plaza Chennai 1895 5,25,000 sq. ft. South City Mall Kolkata 2008 6,00,000 sq. ft. Metro Junction Mall Kalyan 2008 17,50,000 sq.ft. R City Mumbai 2009 6,55,000 sq. ft. Prozone Mall Aurangabad 2010 6,80,000 sq. ft. Phoenix Market City Bangalore 2010 7,00,000 sq. ft. Mantri Square Bangalore 2010 9,25,000 sq. ft. Express Avenue Chennai 2010 9,00,000 sq. ft. Empress City Mall Nagpur 2010 6,00,000 sq. ft. Phoenix Market City Mumbai Mumbai 2011 11.25,000 sq. ft. Phoenix Market City Pune 2011 8,00,000 sq. ft. Neptune Magnet Mall Mumbai 2011 9,00,000 sq, ft. Orion Mall Bangalore 2012 8,45,000 sq. ft. The Forum Vijaya Chennai 2013 6,35,000 sq. ft. Phoenix Market City Chennai 2013 10,00,000 sq. ft. North Country Mall Mohali 2013 7,50,000 sq. ft. LuLu International Shopping Kochi, Kerala 2013 17,00,000 sq. ft. Mall Lotus Mall Mangalore 2015 9,00,000 sq. ft. Sobha City Mall Thrissur 2015 600,000 sq ft Mall De Goa Porvorim, Goa 2016 360,000 sq ft DLF Mall of India Noida 2016 2,000,000 sq ft VR Bengaluru Bangalore 2016 600,000 sq ft P&M Hi-Tech City Centre Jamshedpur 2017 550,000 sq ft Mall Esplanade One Bhubaneswar 2018 1,000,000 sq ft Forum Centre City Mall Mysore 2018 3,47,000 sq ft (Source: http://www.wikiwand.com/en/List_of_shopping_malls_in_India)
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3.15 Summary
The concept of shopping has transformed India. A number of international brands are entering the Indian retail sector accounting for over 10 percent of India’s gross domestic product. Modern retailing is penetrating the Indian Retail market and Online Retail Market is poised to boom in the country. Customers would be at the advantage seeking end. Hence, every retail house would strategies in order to retain and gain customers. The future of the retail sector in India seems to be exciting as both organized and unorganized retail businesses along with the government while keeping the interests of the customers in mind are working collectively to revolutionize the retail industry.
In this chapter an attempt has been made to give a conceptual framework of organised and unorganised retailing in India. The Indian retail market is primarily unorganized and the penetration of modern retail is very minimal. The entire sector is dominated by small retailers consisting of local kirana shops, general stores, footwear and apparel shops, hand-cart hawkers and pavement vendors. This is in contrast to the trend in developed economies of USA, UK, France and Germany, where organized retail is in the range of 75-80 per cent. The corporate retail formats generally consist of supermarkets/convenience stores, hypermarkets, discount stores, specialty stores and departmental stores. The existence of these corporate retail outlets is generally found in malls and prominent high streets across various cities.
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3.16 References: Chapter III
1) Shelton (2011) “Global Retail Industry Fact Sheets", Wal-Mart. November. 2) Philip Kotlar (2009), “Marketing Management”, New Delhi, Dorling Kindersley (India) Pvt. Ltd., Pearson Education in South Africa. Third Edition. pp 239-242 3) Monarch Joshi, (2014), “A comparative study on consumers’ attitude towards private lables: A focus on Gujrat”, IUP Journal of Marketing Management, 2011 4) Vikram Nambiar (2011), “Global Powers of Retailing 2011". Deloitte. 5) Sinha, P.K., and Uniyal, D.P. (2007). Managing Retailing. Oxford, New Delhi. 6) Turner & Townsend (2014), “Global Retail Market Insight”, May 2014 7) Vijay Anand (2011), “Indian Retail Industry: A Report". CARE Research. March. 8) Subrajit Roy (2011), "The Bird of Gold - The Rise of India's Consumer Market". McKinsey and Company. May. 9) Rajagopalan (2012) „Industry Outlook, Retail industry in India, vol. 168 (18) 10) Anita Bindal Phulia, Monika Sharma, Pooja Rani (2014) “ Future Prospects of Online vs Traditional Media in Marketing Communication”, International Journal of Research, Vol 1, No 8 (2014) 11) Bharti Gupta, Ramola Rohit Bhasin (2013) - Winning in India’s retail sector: Factors for success - www.pwc.com/india 12) Rai and Gopal, (2014), “Industry Outlook, Retail industry in India”, vol. 168 (18) 13) Sajal Gupta and Gurpreet Randhawa (2008), “Retail Management”, Atlantic Publishers & Distributors (P) Limited, ISBN, 812690982X. 14) Ms. Vidushi Handa and Mr. Navneet Grover (2012), “Retail Sector in India: Issues & Challenges”, International Journal of Multidisciplinary Research Vol.2 Issue 5, May 2012, ISSN 2231 5780 15) A.T. Kearney, 2014, Consumer Products & Retail, The Global Retail Development Index 2014. 16) C.P. Jain (2014), "Indian retail: Complete Analysis", The Financial Times. 17) https://www.ibef.org/ 18) Preeta Vyas (2007), Sales Promotion Practices in Apparel Retail Sector and Challenges Ahead, Indian Institute of Management Ahmedabad, Research & Publication, W.P. No.2007-11-02, pp.11. 19) Moriarty M., Brown M., & Mendonza-Pena A., (2014). On Solid Ground: Brick and Mortar is the Foundation for Omni Channel Retailing. ATKearney, Pg 2.
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Retrieved from :http://www.atkearney.com/documents/10192/4683364/On+ Solid+ Ground.pdf/f96d82ce-e 40c450d-97bb-884b017f4cd7 20) Corporate Catalyst India (2012), Retail Industry in India: A report on Indian Retail Industry, retrieved from http://rasci.in/downloads/2012/Retail_Industry_ India_2012. Pdf 21) Riddhi Ambavale, “A study on factors influencing failure of malls in major cities of Gujrat state.” IJMSSR, Vol. 2, no. 5, May 2013, pp 46- 54 22) Gate Peter (2013), "The latest FMCG and shopper retailing trends", Nelson retail and shopper trends Asia pacific, 2013: 10-17 23) Anand Vijayshree (2012), Adaptability and flexibility – the way ahead for the kiranas amidst globalization, Effect of globalization on India’s Services Sector : Opportunities and Challenges, ISBN – 978-93-5023-618-5 PP.47 24) Anuj Puri (2018), “Unsuccessful malls on the verge of closure”, The Hindustan Newspaper. 25) Abhishek Bansal, Pacific Mall (2018), “Why are Some Shopping Malls Dying in India?” Indianretailer.com. 26) Shreya Das (2018), “Walmart-Flipkart merger: All you need to know”, India Today 27) S Raghunath (2018), “Walmart's looming acquisition of Flipkart will be a game changer for e-commerce in India, merger to boost job creation”, The Financial Times. 28) Pravin Rayate (2013), A study of Lean manufacturing techniques in improving organizational development with special reference to private sectors industries in Nashik industrial area, A Ph.D. Thesis submitted to University of Pune, pp. 129- 130 29) http://www.wikipedia.org/wiki/Nashik_district, accessed on 16 Aug 2016 30) http://indiapopulation2017.in/population-of-nashik-2017.html, accessed on 14 Aug 2016 31) Mahendra Dhondge (2011), Development of Indian accounting standards and its impact on financial reporting in certain large scale companies in Nashik a comparative study, A Ph.D. thesis submitted to University of Pune, pp.195. 32) Shalmali Gadge (2013), A Study of Organization Culture in Medium Scale Units in Nashik, A Ph.D. Thesis submitted to Shivaji Universtiy, Kolhapur, pp. 120-122 33) https://justnashik.com/nashik-nashik-culture/education, accessed on 25 Aug 2016
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34) http://timesofindia.indiatimes.com/city/nashik/Nashik-will-be-a-role-model-for- cities/articleshow /12682105.cms, accessed on 25 Aug 2016 35) Mangudkar, M.P. (1960): Pune Nagarsanstha Shatabdi Grantha, Pune Municipal Corporation, Pune, pp.23-24 36) “Sandharbh Maharashtra State & Districts at a glance”, set in 2 Vol, Intellectual Book Bureau, P. 417. 37) “District Census Handbook” (1995), The Maharashtra Census Directorate 38) “Gazetted of the Bombay Presidency”, Poona, (1992) The Government Photozincographic Press, Volume XVIII, Part III 39) https://retail.economictimes.indiatimes.com/re-tales/pune-retail-current- scenario/249
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