Page 41 - DMGT550_RETAIL_MANAGEMENT

Retail Management

Notes

Notes Government of India allows FDI to the extent of 51% in single brand retail. It
also allows 100% automatic approval for FDI in wholesale cash and carry trading.

3.3 Food Retail in India

Though with a population of a billion and a middle class population of over 300 millions
organized retailing (in the form of food retail chains) is still in its infancy in the Country. India
has been rather slow in joining the Organized Retail Revolution that was rapidly transforming
the economies in the other Asian Tigers. This was largely due to the excellent food retailing
system that was established by the kirana (mom-and-pop) stores that continue meet with all the
requirements of retail requirements albeit without the convenience of the shopping as provided
by the retail chains; and also due to the highly fragmented food supply chain that is cloaked with
several intermediaries (from farm-processor-distributor-retailer) resulting in huge value loss
and high costs. This supplemented with lack of developed food processing industry kept the
organized chains out of the market place. The correction process is underway and the systems
are being established for effective Business-to-Business (farmer-processor, processor-retailer)
solutions thereby leveraging the core competence of each player in the supply chain.

Figure 3.1: Spread of Organized Retailing in India

Organized retailing is spreading and making its presence felt in different parts of the country.
The trend in grocery retailing, however, has been slightly different with a growth concentration
in the South. Though there were traditional family owned retail chains in South India such as
Nilgiri’s as early as 1904, the retail revolution happened with various major business houses
foraying into the starting of chains of food retail outlets in South India with focus on Chennai,
Hyderabad and Bangalore markets, preliminarily. In the Indian context, a countrywide chain in
food retailing is yet to be established as lots of Supply Chain issues need to be answered due to
the vast expanse of the country and also diverse cultures that are present.

36 LOVELY PROFESSIONAL UNIVERSITY