Retail industry in India is gradually edging its way towards becoming the next boom industry with contributing more than 10% to Country’s GDP and around 8% employment. Several Indian and global players are developing strategies to enter such a fast paced and growing market. Also the whole retail industry is taking new shape, the traditional market giving way for the more organized market in the form of departmental stores, hypermarkets, supermarkets and specialty stores.
What makes Indian retail industry a most growing business? Answer is growing middle class, double income households, and large working young population. All these have significantly increased the country’s total disposable income. Changing demographics and life styles also favor the shopping tendency.
Entering in to retail chain on a national level requires huge amount of money and management too. Indian giant, Reliance- the country’s most valuable company is planning to open about 1500 outlets spread approximately a third of towns and cities across India by March 2007 with its new company, Reliance Retail Ltd. (RRL) having 100 per cent stake in the company. The reliance group about $5.6 billion retail venture will definitely shake the existing market and creating hurdles in the way of global giants Wal-Mart, Carrefour and Tesco Plc who are about to enter the Indian market.
In the beginning of 2006, the government of India announced that it would allow foreign companies to own up to 51% of a single-brand retail company, such as Nike. As a result, companies including Zara, Gap, Timex and United Colors of Benetton have announced plans to enter the market. But for the companies that sell a variety of brands, such as Wal-Mart and Tesco such relaxation is not yet extended.
Wal-Mart is eager to hence investigating into various options. One way is to open a Sam’s Club wholesale business through a joint venture and sell to retailers. This option evades the issue of not being able to sell directly to consumers and still establishes a presence in the local market. Similarly, Tesco is finding other way by engaging in partnership with Home Care Retail Mart Pvt. Ltd and expects to open nearly 50 stores by 2010.
So being aware of governments intention of relaxing rules for retail global giants like Wal-Mart, Reliance is planning proactively. Reliance Retail first studied the potential of all possible categories of products and services retailing. Reliance is keen on capturing market leadership in every possible retail category, once it has consolidated its retail operations. Company is evaluating each category on the basis of market size as well as growth rate and potential.
Reliance is launching its first retail store in Hyderabad on 18th October 2006. Nearly 28 other outlets are also expected to open in Andhra Pradesh on the same day. After Andhra Pradesh, probably Punjab is the next destination to serve.
Reliance Retail has plans to launch outlets in two different formats, ‘Feel Fresh’ and ‘Feel Fresh Plus’. ‘Feel Fresh’ stores will stock fresh fruits, vegetables and staples and expected to spread over 3,000 to 5,000 square feet area. On the other hand, ‘Feel Fresh Plus’ stores will be spread over about 10,000 to15,000 square feet area, and stock fruit and vegetables as well as apparel, FMCG items, consumer electronics, and even medicines. Both these formats will be wholly company owned and managed.
After the launch in AP and Punjab, Reliance Retail is planning to spread out to other big cities such as Mumbai and Delhi, for that Reliance has identified up to 80 locations for each city. With its aim to expand its retail business and satellite township plan, Reliance seems to become the world’s biggest real estate owner in next few years.
As a result of Indian retailers gearing up for competition from overseas and local rivals by acquiring retail space in India’s capital New Delhi, financial center Mumbai and technology city Bangalore, and the next set of big cities Kolkata, Chennai, Pune, Ahmedabad and Chandigarh. It is pushing up rents, getting almost doubled. Intensifying competition is also likely to affect staff costs.
The company has already signed agreements with Punjab and West Bengal governments to tie up for procurements and roll out retail outlets. Company had been looking at strategic alliances with other co-operatives too.
Though Reliance being the top name talked in Indian retail Industry, it is not the only player. Other Indian business groups likes Bharti Group and Aditya Birla group are planning to start retail chains soon. Tata Group, which already runs the Westside chain of lifestyle stores, is stepping in to electronics retailing. RPG Enterprises which already has a total of 80 stores, plans to add a store every two days in October.
As all these groups expand their retail network, they will have to offer more choices to differentiate themselves and need to workout in each of the following areas:
1. The best resources for product procurement
2. Good inventory systems at both, retail stores and warehouses
3. Sales variation across different regions in the country
4. Seasonal sales variation
5. Wastage of products and percentage of returns thereon
6. The number of Stock Keeping Unit (SKU) across categories and brands
7. The credit policies that retailers normally get from their suppliers
8. The average gross margin on each product category
9. Brand preferences of consumers
The strategies and magnitudes of retail forays by the Indian retailers assure of attaining far reach to economic implications by directly affecting the lifestyle of millions of consumers, besides indirectly influencing livelihood of other millions.
Business analysts feel that Reliance has benefit of its massive financial strength along with past achievements of implementing gigantic projects in record time, at reasonable investments worldwide.
Quite clearly, Indian retail players are now all set and ready to get triumph over the organized retail sectors. The Indian retail industry is now on a verge to experience rocket speed actions and competitions, allowing the consumers to get the best deals out of it.
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