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The Indian retail industry is the fifth largest in the world. Comprising of organized and unorganized sectors, India retail industry is one of the fastest growing industries in India, especially over the last few years. Though initially, the retail industry in India was mostly unorganized, however with the change of tastes and preferences of the consumers, the industry is getting more popular these days and getting organized as well. With growing market demand, the industry is expected to grow at a pace of 25-30% annually. The India retail industry is expected to grow from Rs. 35,000 crore in 2004-05 to Rs. 109,000 crore by the year 2010.
The tax structure in India favours small retail business Lack of adequate infrastructure facilities High cost of real estate Dissimilarity in consumer groups Restrictions in Foreign Direct Investment Shortage of retail study options Shortage of trained manpower Low retail management skill
Organized retailers, for their part, worry about losing out to their micro, unorganized competitors. In India, unlike in the industrialized countries, labour is typically not the critical cost factor in establishing a business, and this may make a business model based on replacing labour with technology vulnerable. While we may take it as a boon for small (unorganised) retailers, it shouldnt be mistaken that the country would be benefitting from retail revolution only if the sector gets organised. The benefits would range from better tax collection, employment generation, development of other sectors of economy etc. Real estate prices in Indias urban areas are skyrocketing. One of Delhis local shopping districts, Khan Market, is ranked the 24th most expensive street in the world, up by 17 spots from last year. The efficiency gains of organized retail may not be sufficient to counteract these costs. In addition, large retail franchises depend on reliable and integrated infrastructure. Telecommunications modernization has been a success story in India. The other critical sectors, notably roads, ports, air cargo facilities, and electric power, are seeing increased investment but are still well below international standards. Organized retailers, like other businesses, face the constraints of red tape and intrusive government regulations. A 2003 study estimated that new retail stores require an average of 15 different licenses from different national and state governing bodies. Also, environmental regulations, generally not very stringent in India, have fallen more heavily on the retail sector. All these challenges gets compounded when retailers have to deal with various tax regimes of states and extreme disparity of customer preferences and shopping behaviour across various geographies in the same country.
Success breeds success, and thats what the mantra seems to be in offing for us , as far as overcoming few challenges are concerned. Bringing more modern and organized retail operators into India will spur the modernization of the economy as a whole. This will significantly modernized retail sector and will be an additional incentive for, both government and business, to accelerate improvements in infrastructure. It will provide an opportunity to upgrade the skills of workers in businesses in the retail sector. And even if the foreign retail presence is largely confined to the cities, one should not underestimate its psychological impact on the way Indians look at the progress of their own economy. New retail initiatives will not only bring new concepts of retailing but, will also help in capacity creation for future growth. One of the few initiatives that have spurred growth in US and European market are Private Labels. Retailers have augmented their businesses by working hard on developing their own labels, this in-turn has helped in generating more demand, reaching out to larger customer base by offering desired products, and it has also resulted in more manufacturing and other marketing capacity enhancements. Retailers will have to invest in generating HR skills as retail industry requires various professionals, especially trained for retail industry. This will lead to growth in education and training sector. Taking cue from the West, companies may entered in partnerships with various B- Schools and other educational/training institute so as fulfil their Human Resource needs. This will lessen the cost of hiring and training of the professionals and at the same time will help in creating an edge over other retailers. Retailers cannot afford to lose sight of various marketing initiatives needed to be undertaken so as to enhance retail buying. Retail is an industry wherein, a customer is almost, seduced to the store by using various category management and visual merchandise techniques. He is helped in taking buying decisions in the store with the help of various marketing and selling initiatives. All these techniques require great deal of marketing skills and trained marketing and communication professionals. Retailers will have to develop these skills very fast so as to make organised retail an attractive option for the customers to flock into. Retailer will have to create newer retail formats keeping in view the customer needs, supply chain issues, real estate issues. Though, there seems to be no perfect answer to this but, it definitely calls for some experimentation, research and risk taking on retailers part, so as to create value for the customers. Real estate, which seems to be a hindrance in retail growth, also needs some innovative solutions. Retailer might have to get in long term partnerships, on profit sharing basis, so as to off-set the cost, especially in initial days. One good example is of DLF who has entered in a long term understanding with many a retailer to create a win win partnership.
Conclusion
Above mentioned argument clearly states that the opportunities in retail sector outnumber the number of challenges it faces. Retailers with long term, commitment, vision, openness towards innovation, zeal to constantly deliver value to the customer and above all, faith in Indian economy will succeed. The message to the current and prospective retailer is quiet clear Keep Walking
References 1) KSA- Technopak, India Infoline Sector Report. 2) CII McKinsey Survey, India Infoline Sector Report 3) ET- Knowledge Series Times Intelligence Group. 5)The Strategist , Business Standard, September2, 2003 6)Milestones, An ORG- Marg Publication 7)Praxis Business Line , Searching For Space , Jan 2002 8)Indian Retail Report -2007 Changing Gears: Retail In India, The 4)Economics
10) Chetan Bajaj, Rajnish Tuli, Nidhi V Srivastava, Retail Management, Oxford
University Press, 2005, New Delhi 11) Center for Strategic and International Studies , July 2007 , Washington D.C 12) Indian Insight ; Indian Retail Industry , Cygnus , 2008 , Hyderabad , India 13) www.cpasind.com 14)www.atimes.com