Indian Retail industry - An Overview | MBA in Data Analytics in Bangalore

Posted by Dr. G. N. Nagaraja On 18/10/2022 09:41:55

Retail in India has always been a lucrative business. Traditionally, the Vaishya’s were the trader class and their businesses were passed on from father to son. Even now, small family-run stores, also called Kiranas, offer consumers low prices, convenient locations, longer store hours, and home delivery at no extra charge. Not surprising that they have traditionally dominated the Indian retail sector. These stores have low operating costs as they employ household labour and usually pay no taxes. According to a Research and Markets study, in 2003 there were over 12 million retail stores in India, of which about 78 percent were small family-run enterprises using family labour. Contemporary India is breaking this age-old norm and basing success only on modern marketing principles. Retail in India is at a transient stage at present, somewhere between the traditional and modern. India’s retail industry has traditionally followed no recognizable format but has grown organically, attuned to local needs. This has made it hard for traditional retailers to adapt to new ways of doing business and competing with international retailers. MBA in data analytics in Bangalore

India is the fifth-largest and preferred retail destination globally. The country is among the highest in the world in terms of per capita retail store availability. India’s retail sector is experiencing exponential growth with retail development taking place not just in major cities and metros, but also in tier II and III cities. Online penetration of retail is expected to reach 10.7 percent by 2024 versus 4.7 percent in 2019. According to India Ratings and Research, domestic organised food and grocery retailers are expected to increase by 10 percent in 2022. By 2024, India's e-commerce industry is expected to increase by 84 percent to US$ 111 billion, driven by mobile shopping, which is projected to grow at 21 percent annually over the next four years.

Types of Retail chains operating in India

The Indian retail sector can be broadly classified into:

1. Food and Beverage Based: There are large numbers and a variety of retailers in the food-retailing sector. Traditional types of retailers, who operate small single-outlet businesses mainly using family labour, dominate this sector. According to the McKinsey FAIDA report, India produces 146 million tonnes of fruit and 84 Journal of Asian Business Management vegetables, second only to China. Modern format retail stores are growing at over 30 percent per year currently and the trend will continue for the next few years as the number of these outlets increases due to consumer demand. This is due to an increasing number of Indians who prefer to shop at these stores due to higher levels of hygiene, comfortable ambiance, and convenient locations.

2. Clothing and footwear based: Numerous clothing and footwear shops in shopping centers and markets operate all over India. Traditional outlets stock a limited range of cheap and popular items and have little or no space for visual merchandising and in-store aesthetics. In contrast, modern clothing and footwear stores have modern products and attractive displays with spacious interiors to lure customers. MBA in data science in Bangalore

3. Health and Beauty based: Health and beauty stores are a new phenomenon in the retail industry in India and are usually single-outlet stores. These stores are gaining in popularity as a one-stop shop for all health and beauty products. With the growth in income levels, Indians have started spending more on health and beauty products . Here also small, single-outlet retailers dominate the market.

4. Home Furniture and Household Goods: Small retailers dominate this sector although the potential for growth is enormous. This is the most underdeveloped sector in the Retail Industry. The furniture industry in India is estimated to be USD10 billion, employing approximately 3, 00,000 workers. The handicraft industry accounts for 85 percent of furniture production in the country. While the bulk of the industry is highly fragmented and dominated by small manufacturers and retailers, the organized sector is estimated to grow by 20 percent a year, according to a World Bank study. online MBA colleges in Bangalore

5. Consumer Durables Based: The Indian durable goods sector has seen the entry of a large number of foreign companies during the post-liberalization period. There is strong competition among companies to increase their sales. The total increase in the demand for Air Conditioners is 20 percent while the demand for color TVs segment has been recorded and increased by 10-15 percent.

6. Personal and Leisure goods Based: Increasing household incomes due to better economic opportunities have encouraged consumer expenditure on leisure and personal goods in the country. 

Functions of Retailing

Retailers are crucial players in the emerging market scenario. Large brands are running first to get into the desired retail formats to cater to the growing middle class of India. Retailers perform various functions like providing assortments, sorting, breaking the bulk, rendering services, bearing risk, serving as a channel of communication, transportation, advertising, and holding inventory. They significantly contribute towards increasing the product value and satisfying the consumers. MBA colleges in Bangalore list

The following are the functions of a retailer/retailing:

l. Providing assortments: Offering an assortment enables customers to choose from a wide selection of brands, designs, sizes, colors, and prices in one location. Manufacturers specialize in producing specific types of products. Example: Kellogg makes breakfast cereals Knorr makes soups.

2. Sorting: Manufacturers make one single line or multiple product lines and will always prefer to sell their entire output to a few buyers to reduce their costs. Final consumers will prefer to choose from a large variety of goods and services and then usually buy in smaller quantities.

3. Breaking Bulk: Retailers offer products in smaller quantities tailored to individual consumers and household consumption patterns. This reduces transportation costs warehouse costs and inventory costs. This is called breaking bulk.

4. Rendering Services: Retailers render services that make it easier for customers to buy and use products. They provide credit facilities to the customers. They display products, which attract customers. Retailers keep ready information on hand to answer the queries of the customers. They provide services by which the owner can be transferred from the manufacturer to the end consumers with convenience.

5. Risk Bearing: Retailers bear a different kind of risk to the manufacturers and wholesalers. Even the customers can come back to the retail point and return the product. In that case, the risk of product ownership many times rests with the retailers. Many companies have to buy back schemes and return schemes whereby the retailers can always return the unsold items to the manufacturer.

6. Holding Inventory: A major function of retailers is to keep inventory so that products will be available for consumers. Thus, consumers can keep a much smaller inventory of products at home because they can easily access more from nearby retailers. Retailers' inventory allows customers instant availability of products and services. MBA colleges in Bangalore

7. Channel of Communication: Retailers are the bridge between the manufacturer or his representative and the end customers. They serve as a two-way channel of communication. The manufacturer collects customer choice and preference data and provides information about existing and new products through retailers. The point-of-purchase displays provide serve as advertisements that provide information about new products and many times retailers inform the consumers about the likely date of availability of a product or entry of variants into the market.

8. Transportation: Retailers also help in transport and advertising function. The larger assortments are transported from the wholesaler’s point to the retailer's point by the retailer’s own arrangements and many times, the retailer delivers the goods to the final consumer.

Conclusion:

Retailing business in India is undergoing rapid transformation. The emergence of new retail formats in the retailing sector has attracted the attention of many like the government, large corporations, economists, and the general public in recent years. The environment of retailing business in India is witnessing several changes on the demand side due to increased income and changes in Indian consumers’ preferences. India is expected to become the world's third-largest consumer economy, reaching Rs. 27.95 lakh crore (US$ 400 billion) in consumption by 2025. Healthy economic growth, changing demographic profile, increasing disposable income, urbanisation, and changing consumer tastes and preferences are some of the factors driving growth in the organised retail market in India.

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