• Retail in india

    The word ‘retail’ comes with two terms:1. Organized retail and unorganized retail,  Both organized and unorganized retailing is found in most countries throughout the world. India and China are strong examples of countries in which unorganized retailing dominated their markets. Today these countries have a growing economy because of the influx of organized retailers into their markets.
    In any country, particularly in developing & underdeveloped countries, we can fine 3 types of retail like
    1.Organized Retail- this is getting much popularity , Owned by a private or Govt. sector based on certain systematic principles. Examples- Big bazaar, Wal-Mart etc. They have license to sell the products and abide by the rules and regulation of govt.
    2.Unorganized Retail- This is similar to local market which is in unorganized format, They are owned by a private individual & based on the principles, but not owned by any private company.
    3.Grey Marketers- These are unauthorized small stores which are owned by any private individual. They do not have a particular shop. These stores are a biggest threat to both organized & unorganized retailers. Exa-roadside small sellers.
    In the developed economies, organized retail is in the range of 75-80 per cent of total retail, whereas in developing economies, the unorganized sector dominates the retail business. The share of organized retail varies widely from just one per cent in Pakistan and 4 per cent in India to 36 per cent in Brazil and 55 per cent in Malaysia (Table 2.2). Modern retail formats, such as hypermarkets, superstores, supermarkets, discount and convenience stores are widely present in the developed world, whereas such forms of retail outlets have only just begun to spread to developing countries in recent years. In developing countries, the retailing business continues to be dominated by family-run neighborhood shops and open markets. As a consequence, wholesalers and distributors who carry products from industrial suppliers and agricultural producers to the independent family-owned shops and open markets remain a critical part of the supply chain in these countries.

    The origin of retailing in India can be traced back to the emergence of kirana stores &mom & pop stores. These stores used to cater local people. Eventually the Govt. of India supported the rural retail & many retail shops come with the help of KHADI & VILLAGE INDUSTRIES COMMISSION. The first few companies come up with retail chains were in textile sector in the year 1980.The companies are Bombay Dyeing Kumar’s, Raymonds etc. Later Titan launched retail show rooms in organized sector.
    If you will follow the above examples, there are great changes occurring in retail sector. The retail industry is moving from an unorganized one to a organized one.
    The growth of the retail trade in India is associated with the growth in the Indian Economy. Gross domestic product (GDP) grew by an annual rate of 8 per cent. The international consulting firm, A.T. Kearney, annually ranks emerging market economies based on more than 25 macroeconomic and retail-specific variables through their Global Retail Development Index (GRDI). For the last three years (2005, 2006, and 2007) India has been ranked as number one indicating that the Country is the most attractive market for global retailers to enter. The high economic growth during the last few years raising disposable incomes rapidly, favorable younger population with less dependency, and demographics placing incomes on urbanization are some of the major factors fueling the Indian retail market.

    A.Advantages of Organized Retail in India-
    1.Enhanced Welfare Gains for Consumers- The emergence of organized retail undoubtedly gives consumers a wider choice of goods, more convenience, and a better shopping environment, among other benefits. This is feasible because organized retail can take several formats, from small neighborhood stores in densely populated cities with high real estate prices to large air-conditioned malls in the periphery where real estate is cheaper. Organized retail can appear small but spread in all local markets, providing the convenience of a neighborhood kirana store but with procurement on a mass scale that keeps prices low and provides greater variety.
    2.Gains for Farmers- Organized retail will result in a complete revamp of the agricultural supply chain in the country. A recent study by CRISIL has estimated a current annual total loss of about Rs. 1,000 billion in the agricultural supply chain, 57 per cent of which is due to avoidable wastage and the rest due to avoidable costs of storage and commissions (CRISIL Research, June 2007). Organized retailers have already started procuring fruit and vegetables from farmers directly bypassing the various intermediaries who add more costs than value to the food chain. They are investing heavily on logistics in the form of centralized warehousing and distribution centers, transport and cold storage, either directly or through engaging third party logistics companies. They are also employing a large number of unskilled workers for sorting, grading, packaging and labeling. All these will enhance farmer’s realizations, improve quality of products at the shop and reduce the ultimate consumer price.
    3.Link with Manufacturing-The Planning Commission has identified four sectors as the major employment generating sectors for the Eleventh Plan period, 2007-12. They are: (i) food processing industry; (ii) textiles and clothing; (iii) tourism; and (iv) construction. Of these sectors, all except tourism are getting a fillip with the growth of organized retail. Again, the small and medium industry (SMI) sector is getting advantages with the emergence of organized retailers by becoming their suppliers. Modern retail will catalyze the development of the SMI sector in the country.
    4.Boost to Exports- Organized retail’s link with exports comes through foreign players. International retailers look for sources around the world and a country in which they operate
    becomes a source for their global sales. Some of the international retailers that have plans for India in the future have already developed suppliers in the country and have started exporting from India. For example, Wal-Mart exported an equivalent of US$ 600 million, and IKEA about euros from India in 2006-07.
    5.Impact on Growth and Productivity- Organized retail will enhance the growth and productivity of India by helping the farmers, consumers and other sectors by providing high quality products.
    organized retailing will remove various inefficiencies that characterize the present Indian distribution system, which in turn will provide better price for the farmers and suppliers on the one hand, and lower prices for consumers, on the other.
    6.Improvement of Government Revenues- Another significant advantage of organized retailing is its contribution to government revenues. Unorganized retailers normally do not pay taxes and most of them are not even registered for sales tax, VAT, or income tax. Organized retailers, by contrast, are corporate entities and hence file tax returns regularly. The growth of organized retail business will be associated with a steady rise in tax receipts for the central, state, and local governments.
    7.Impact on Employment and Prices- The growth of organized retail will enhance the employment potential of the Indian economy. While providing direct employment in retail, it will drive the growth of a number of activities in the economy which in turn will open up employment opportunities to several people. It may adversely affect employment in unorganized retail and the trade intermediaries associated with the traditional supply channels but the additional jobs created will be much higher than those that are lost. An important point to be noted is that while the jobs that organized retail displaces are the low-end, low-quality, underproductive ones, the new jobs created are the high quality, productive ones. It also generates a number of jobs for unskilled labour for the tasks of sorting, grading, labeling, etc.

    B.Advantages of unorganized retail –

    1.Employment Impact- According to ECR report, unorganized retail outlets employ more family labour than hired labour; on an average they employ 1.5 persons per shop from the family, and hired employees of 1.1 persons in India. It is a way of livelihood for Indian people.
    2.Location Advantage for the Unorganized Retailers- Location is a comparative advantage for unorganized retailers as the mean distance to the residence for consumers at unorganized outlets is 1.1 km compared to 2.6 km for consumers at organized outlets. A majority of consumers walk to traditional retailers because it is convenience to reach.
    3.Credit Facilities- Consumers get credit facilities in small unorganized retail stores and can make a deferred payment which is not possible in organized retail stores.
    4.Purchase of small quantities- It’s a typical attitude of Indians to purchase in small quantities of various goods which they can purchase from small shops than organized retail stores.

    l. However, the following measures can be taken to solve the paradigm of organized and unorganized retail.

    1.Liberalization policy for domestic retailers to become organized retail.
    2. More credit facilities for rural unorganized stores to develop their stores.
    3. Proper regulatory body for unorganized retailers for establishing retail shops.
    4. Ceiling on prices by the govt. to control price level of different organized retailers against predatory pricing.
    5. Educating rural people and improving their standard of living.

    So, Indian retail requires a balanced strategy for organized and unorganized retail stores that may be called as REORGANIZATION OF RETAIL SECTOR.

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