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Retail Business Environment

Notes retailers like Louis Vuitton, Chanel, Cartier, Fendi, Bulgari and Dolce & Gabbana already have
outlets in India, and others like Gucci and Valentino are following their example. Western
luxury retailers are more welcome in the country now that the Indian government has amended
certain legislation pertaining to foreign ownership of a single- brand. The government allowed
single-brand retailers to own up to 51% of an outlet in India. Christian Dior, however, had
already chosen for a franchise before the changes were put into play.
E-retailing for luxury products is yet to take off, even in developed countries. There is a sense of
insecurity about high-end online purchases. Furthermore, prices of high-end items must be
lowered to sell online. This is because consumers think ‘If I can get everything else online at a
discount, why shouldn’t I get a discount on fine art online too?’ Online luxury retailers often
have a hard time translating their brands and the look and feel of their luxury shops that connote
exclusivity, extravagance, excessive wealth, and entertainment into a web-site that the masses
will see.

2.7 Key Segments in Retailing

This section covers the growth engines of retail in India created by the Indian consumer. The key
drivers of retail activity are food and apparel segments.

Food

Food retail is a rapidly growing sector in India’s organised retail. A research conducted by the
Economic Times Intelligence Group revealed that this category of retail represents just 10 percent
of the total opportunity in organised retail in India. This works out to a present market size of
over US $ 391 million and a projected size of US $ 1.6 billion over the next five years, a compounded
aggregate growth rate of 33 percent. Food retail is more of essential commodities comprising of
grains, pulses, etc.
South India has been witnessing frenetic activity in food retail especially the organised grocery
segment. Stores built on the format of FoodWorld and Nilgiris in the south have started to
expand their boundaries of grocery markets that have so far been extremely localised. The west
and north of India are also expected to provide good growth opportunities for retail. The
supermarkets and hypermarkets/discount stores and fresh produce store formats complementing
each other is going to be the way of the future.
Looking at the trends in the last 2-3 years, discounting appears to be the direction where food
retail seems to be heading. Industry experts believe that a successful national chain will be a
discounter. While a discounter needs to keep store overheads low its winning edge comes from
sourcing – how best it can leverage its scale to drive merchandise costs down, increase stock
turns and get better credit terms from its vendors.
The study mentioned earlier reveals that the chain stores will account for the biggest share of the
surge in food retail – no less than 95 percent of the total size, and growing at 33 percent, much
faster than the 20 percent growth of the single stores. Chain stores are touching US $ 32 million
sales, while single stores are at around US $ 1.3 million. Coffee house chains are the primary
drivers in the F & B (food and beverage) sector. The leaders in this business are Barista and Café‘
Coffee Day who have a total of 223 outlets in India. This is expected to grow to 464 by mid-2004.
Apparel

The organised apparel segment worth US $ 1.8 billion is expected to grow at a steady 9.5 percent
per annum. Multi-brand outlets are becoming the popular destination for customers and will
outrank manufacturer retailers in size.

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