Page 40 - DMGT551_RETAIL_BUSINESS_ENVIRONMENT

Unit 2: Structural Change in Retail Environment

has attracted attention of many like government, large corporations, economists and general Notes
public in recent years. The environment of retailing business in India is witnessing several
changes on the demand side due to increased income and changes in Indian consumers’
preferences. The driving forces in Indian retail sector are: rapid economic development in recent
years, changes in consumers’ preferences, improvements in civic situation, liberalization policy
and globalisation.
To satisfy the needs of global consumers, retailers have to meet these through the products they
offer, whether these are principally food, fashion or multiple retailers. Consumers experience
different cultures when they travel for work or pleasure and they have access to the Internet,
television magazines, etc. and they demand products, which reflect these tastes. Retailers are
sourcing globally for the fashion or cosmetic or electronic gadget that is new and exciting for
their challenging consumer base.
The origins of retailing in India can be traced back to the emergence of Kirana stores and mom-
and-pop stores. These stores used to cater to the local people. Eventually the government
supported the rural retail and many indigenous franchise stores came up with the help of Khadi
& Village Industries Commission. The economy began to open up in the 1980s resulting in the
change of retailing. The first few companies to come up with retail chains were in textile sector.

Example: Bombay Dyeing, S Kumar’s, Raymonds, etc.
Later Titan launched retail showrooms in the organized retail sector. With the passage of time
new entrants moved on from manufacturing to pure retailing.
Much of the retail business in India is in the unorganized sector, with over 5 million retail
outlets of various sizes and formats. According to an estimate by KSA Technopak (I) Pvt. Ltd.,
India’s per capita retailing space is the lowest in the world.
Today the number of smaller retailers with a business less than ` 40000 per annum has grown to
a greater percentage, whereas the number of large stores with a turnover of ` 150,000 has
increased from 2.8% to 6.5%. So, the smaller outlets are growing faster than large retailers.
However, changing shopping attitudes of an average customer will make future growth
increasingly difficult for the unorganized retail sector.
Organized retailing accounts for 6% of the industry turnover, comprising value-added foods
worth ` 770 billion, music and entertainment worth ` 40 billion and color cosmetics worth ` 12
billion. Big business houses today are in a position to provide Indian masses with shopping
satisfaction, entertainment, quality products, polite salespersons, product information and
discounts. Though current margins are low due to high property cost and poor infrastructure,
this scenario is going to change. Retailing is the only business where one buys in credit and sells
for cash. Further, there are 30 million houses with an annual income of more than ` 150,000 and
this is expected to grow to 80 million by 2008. Financial institutions are encouraging such
ventures, as there is permission for opening up of branded foreign retail outlets in India.

That organized retail is booming in India is evident from the figures. What was a ` 5,000 crore
industry in 1999 was estimated at ` 30,000 crore in 2004 – making it one of India’s fastest-
growing sectors.
With malls, multiplexes and hypermarkets springing up all over the country, the consumer is
exposed to a new shopping atmosphere and service ethic, and this has upped his expectations
from shopping. Retail ambiences are getting upgraded and neighborhood kirana shops are fast
becoming a thing of the past. The consumer is demanding (and getting) better aesthetics in his
shopping environment. Nice looking retail environment is no longer perceived as expensive
but as de rigueur.

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