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Retail sector in India is one of the sunrise sectors. The article gives an insight to the growth of retailing in India post liberalization, the various sub segments within retailing, the challenges facing the industry and the future trends.


Retailing is the transaction between the seller and consumer for personal consumption .It does not include transaction between the manufacturer, corporate purchase, government purchase and other wholesale purchase. A retailer stocks the goods from the manufacturer and then sells the same to the end user for a marginal profit. In the supply chain that also consists of manufacturing and distribution, retailing is the last link before the product reaches the consumer.

Retail Sector in India
Post liberalization the Retail sector in India is heralded as one of the sunrise industries. It has never been better for the retail sector in India. Today within the booming service sector, retailing is the single biggest contributor in terms of GDP to the National Income. Retailing itself can be further divided into organized and unorganized sector.

Organized Sector
Organized retailing came into its own in tandem with the retail boom. Indian corporate like Reliance, ITC and Pantaloon have made foray into this segment along with several foreign brands changing the landscape of retailing in India. It coincided with the high growth in the Indian economy, resulting in greater purchasing power amongst the middle class, which in turn went on a purchasing spree. Other factors like consumer awareness, investments by venture capitalists and private equity firms have also contributed to the growth of organized retail. The growth in the organized retailing has resulted in the establishment of departmental stores, supermarkets, rural retailing, e-retailing and luxury retailing. Each one of these formats has a unique advantage and the scale of operation depends upon factors like average footfalls, sales per sq ft etc. However the process of acquiring license is still a bottleneck for the development of Indian retailing.

Unorganized sector
The unorganized sector is still dominant in India, since it has the advantage of low investment need. Since retailing is the process of connecting the supplier and consumer, pricing of products is very important in a price conscious market like India. Unorganized retailers play an important role in this regard and are a vital part of the supply chain. If unorganized retail segment positions itself correctly, it can carve a niche for itself in India's booming retail sector.

Rural Retailing
India's huge rural market has also attracted retail investments and is seen as a viable opportunity for growth by corporate India.ITC launched the countries first rural mall "Chaupal Sagar" with diverse products being offered ranging from FMCG to electronics appliance to automobiles, with a view to provide farmers a one stop center for all their consumption requirements. Many more new trends could possibly be tried in rural markets to unearth the huge potential.

Challenges Faced By The Industry
  • Even though India has well over 5 million retail outlets of different sizes and styles, it still has a long way to go before it can truly have a retail industry at par with International standards. This is where Indian companies and International brands have a huge role to play.
  • Indian retailing is still dominated by the unorganized sector and there is still a lack of efficient supply chain management. India must concentrate on improving the supply chain management, which in turn would bring down inventory cost, which can then be passed on to the consumer in the form of low pricing.
  • Most of the retail outlets in India have outlets that are less than 500 square feet in area. This is very small by International Standards.
  • India's huge size and socio economic and cultural diversity means there is no established model or consumption pattern throughout the country. Manufacturers and retailers will have to devise strategies for different sectors and segments which by itself would be challenging.
  • The drawbacks provide a huge opportunity for the retail industry. The entry of foreign majors like Benetton, Dairy Farm and Levis underline the opportunity for the industry in India.
Future trends
  • Organized retailing is dominated by large conglomerates like TATA's, ITC, RPG group, Piramals and Rahejas apart from the various MNC's. This trend is expected to continue in future.
  • Textile and Garment companies like Raymond, Madura Garments and Arvind Denims have achieved forward integration by opening their own retail outlets for their branded garments. This gives them a huge advantage by reducing the role of intermediaries, increase profit margin and enables them to be close to the end user.
  • Inflation and the global meltdown have had an effect on the growth of retailing in India. Experts believe the retail industry should focus on distinction, branding, after sales service, exploring commoditization, share of purchasing power and innovation to tide over the crisis.
  • The year 2009 is seen as a year of consolidation for Indian retail sector. By ushering in best practices and restructuring business models, the retail industry in India is expected to adjust to the changing market conditions and ensure new opportunities for growth.
  • The retail sector is expected to grow at 8 to 12 per cent in 2009-2010.

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