ARTICLES ON SCOPE OF RETAILING

 1) Retailing in Kerala By Thomas Cris Sarasam
 2) Imminent retail boom will usher in major changes By R. Ramabhadran Pillai
 3) Retail sector will create 50,000 jobs a year: Study (News Paper Report)

1) Retailing in Kerala By Thomas Cris Sarasam                             back to top

Introducton

   Retailing is considered the world's largest industry with US $ 6.6 trillion sales annually. In India, retailing is considered the largest employer after agriculture employing  over 8% of the population. India has the highest outlet population in the world with over 12 million outlets. The Indian Retail  Industry is still  evolving  as an 'Industry', and it  has a  long  way to go.  The evolution of  the Indian  Retail market is quite  interesting to be studied. It  has its origins in the village weekly  markets and melas, the convenience stores, the Khadi stores and the Co-operative stores before graduating to the present day forms of retailing. The retail sector in India can be broadly classified into the formal and the informal retail sectors. The informal retail sector  typically  consists of  small-time  retailers with  tax evasions  and non-conformance to labour laws. The formal retail sector, which typically consists of large retailers, ensures greater measures of tax enforcements and also a high level of labour usage monitoring. The retail market size in India is estimated to be around $180 billion. Retailing provides jobs to almost 15 percent of  employable Indian  adults  and it  is perhaps  the  largest contributor to India's GDP.  But  the flip side is that the average  size  of  each of  the  retail outlets  in  India is only 50 square feet  and though a large employer, the industry is very unorganized, fragmented and with a rural bias. India's status as a good IT hub for outsourcing by U.S. companies has led to young  Indians  between  20 to 24 years old  taking  up call center jobs straight out of college. This is a consumer base that typically lives at home, with the family. They have disposable income that is totally discretionary and about 20 to 30 percent higher than prevailing wages.
     "We have tripled our  sales  in Bangalore city in the last three years," says Shumone Chatterjee, marketing director, Levi Strauss India. And  he  believes this is largely due to the effect of disposable income coming into the hands of the 18-22 age group employed in BPO jobs.
      The important thing is that most of the income earned is basically 'pocket money'. Many of the people in this segment live at home, so rent and food is taken care of. BPO is just one example. From retail to insurance entry level jobs are aplenty. IT firms added 55,000 mostly engineering graduates. Infosys alone recruited 10,000. This segment is very brand-conscious.

Retailing in Kerala

       Retailing  in  Kerala is a subject  too subtle and relevant; as  Kerala  is  know of more as a consumer state rather than a producer state. The introduction of Margin Free Markets have turned out to be grand success resulting in it becoming one of the largest retail chains in the country.

Margin Free Markets

       Margin Free Markets is the largest retail chain in the state of Kerala and one of the leading retail chains in India. The first outlet of  this chain started  functioning on 26th  January 1994  at  Thiruvananthapuram.  There  are  currently  more than 275 franchisees of Margin Free Markets spread all over south India. The outlets  are franchises and are not actually owned by the chain.  The Consumer  Protection & Guidance  Society currently control margin free markets, which is a registered charitable institution that started functioning in 1993.  The consumers are assured of quality, quantity and the fair price of the goods sold through the Margin Free Markets. Any  retailer can  upgrade his shop into a Margin Free outlet,  by sending in an application to this society. If his application is accepted, he has to make the necessary investment required. These shops deal in the entire gamut of  goods required by a home for its monthly consumption, viz., grocery,  food and non-food  FMCG  items, fruits and vegetables, consumer  goods & household articles.  Margin Free outlets  are  typical  discount stores, offering one-stop-shop convenience and self-service facility at significant discount to its customers. Most of these customers, in time turn out to be its permanent customers, by  taking discount cards, which permit them to obtain larger discounts than the non-card holders. The necessity  to offer  protection  against  the  rising  prices  gave  birth  to  the  idea  of  'Margin Free Markets'.  An enthusiastic entrepreneur named Mr. N. Ravikumar conceived the idea. The idea turned out to be an instant success in Kerala  especially because Kerala is more of 'consumer' state than a 'producing' state.

         Kerala depends on her neighbouring states for her consumer needs. Due to the large number of intermediaries involved and  the  transportation costs,  the  prices  are high and there is a wide fluctuation in prices of groceries, fruits and vegetables. Groceries and FMCG goods are brought directly from the production units of the neighboring states. In the process of direct purchase from  farmers and  manufactures,  the  intermediaries  are  removed  and  a  part of  the margin or 'profits' earned is disbursed among the consumers.  The distribution to the different outlets under the chain is taken as a collective responsibility and is done with the objective  to reduce the total  transportation costs.  The baseline of the chain of supermarkets run by the society is `making consumer the king'.  " The wide  acceptance  gained by this concept over a very short span of time speaks for itself," says R. Gopakumar, the founder-president and one of the key members of the Society. And when one juxtaposes the fact that the people of Kerala are one of the most price and quality conscious consumers in the country, the larger impact of  this movement dawns upon us.  From a solitary shop in downtown Thiruvananthapuram, the society has grown into a full-fledged retail supermarket chain with a presence all over Kerala. "While thousands of  retailers and stockists slug it out in the market place to lure the consumer back through lower prices, one thing is clear for the moment in Kerala. The consumer will definitely have the last laugh! "  – www.indiainfoline.com  June 30, 2000.  Though  the  landscape of  Retailing  in Kerala has changed to a very large extend it still holds true, to a large extend even today.

Food World

            Food World is one of the biggest retail chains in India. The RPG group opened the first Food World outlet on May 9 1996 at  Chennai, which  was a  2400  square feet store. It is the only national chain, having Foreign Direct Investment to the extent of  49%  that is permitted in India.  Now Food World, operates as a 51:49 joint venture with Dairy Farm International of  the  Jardine  Matheson Group,  a US $ 4.5 billion  retail  giant operating  in  the  Asia-Pacific  markets  with  the  requisite experience.
           Food World has decided to concentrate more on Food World has decided to concentrate more on local areas rather than to go for a nationwide presence in its expansion plans at the beginning. South India was chosen, with focus on Bangalore and Chennai and  later  in Hyderabad.  They  identified areas within the city with more than 4000 households in a 2-kilometer radius with an average monthly income more than Rs. 4000. The important variables considered while setting up an outlet are choosing the right location,  sourcing  the  merchandise and  recruiting a  trained workforce. A typical store is between 3000-3500 sq. ft. in size and  carries  about  5500  items. Food world handles on average 600 customers per day per store, which translates to 1.5 million transactions per month. It is estimated that the chain serves more than three lakh families.

       Ms. Mala Morris, Manager-Marketing of Food World says that as on 1st November 2003, Food World has 89 outlets spread  across  Tamil  Nadu,  Karnataka,  Andhra  Pradesh,  Kerala  and  Maharashtra (Pune).   Speaking  on  the  product portfolio,  she said  that,  "Our strategy  is  to  provide all  the  monthly  household requirements under one roof. Our product Portfolio  includes  grocery  of  all  kinds, fresh  foods viz., fruits and vegetables in  fresh/chilled/frozen form, food that can be directly consumed,  food and non-food  FMCG products, general merchandise required in homes like buckets, cups, shelves etc. Indian Made Foreign.Liquor is also sold at certain outlets. " Speaking on the  pricing  strategy  followed, she said,  " We follow the strategy to sell around 100-120 items at any point of time at below Maximum Retail Price (MRP) rates. These are generally  the key  necessary  items or the items for which the customer attaches more value. In addition there are also lots of schemes  and  offers to attract and   retain  customers".  "For procurement  we  follow  a  strategy of  'Hub and Spoke".  The purchasing for each state is done collectively to reduce costs. The distribution to each outlet is done by Food World in such a way as to reduce the total handling costs."

             To source its daily requirement of fruits and vegetables, Food World participates in the early morning auctions at the major  wholesale  markets  and  has a set  of  suppliers  who then grade, clean, pack and  label the products in time for early morning dispatch to the stores. At peak season, the Fruit & Vegetable shelf in a Food World store stocks around 125 items; making it the widest range available under one roof in this category.  Food World's share of the organized retail market in the cities in which it operates is 62%, clearly a dominant share. The firm expects the number of Food World stores to increase to 125 by the end of 2005. A smaller version, Food World Express is also planned to be launched in future.

Supply Co

       The Kerala State Civil Supplies Corporation (Supplyco), is a statutory body established in 1974. It procures rice, wheat products, sugar, pulses, vegetables and a range of consumer goods independently from the open market and distributes them through a  network of  663 retail outlets called Maveli Stores, 11 supermarkets in district headquarters and 21 mobile Maveli vans operating on designated routes.
       The Government decides  the price of articles sold by Supplyco through these shops, and has used it as a highly effective mechanism, cutting out middlemen and controlling prices in the open market. Its effects on the market are most evident during the festival  seasons.  It  is a  festival  that  remembers  the  golden  reign of  the legendary King Mahabali, during whose reign Kerala is believed to have prospered.  Significantly,  the  Kerala  State  Civil  Supplies  Corporation (Supplyco),  through  its Maveli chain of retail  stores,  has contributed to bringing back  those golden days by assuring fair price, quality products and insulation  against  evil  trade  practices. Maveli offered a new experience to Keralites, which helped it and Supplyco become household  names  in  no  time. Quality  products and subsidised pricing are the twin advantages that Supplyco extends to the consumer. E  tendering,  introduced  by  the  Corporation, enables participation of more tenders from anywhere in the world, thereby increasing competition. This ensures the entry of  genuine suppliers  from  the production centres of other States. The introduction of  a  payment  system at  the  receiving depot itself also enables spot payment to suppliers. The supplier will get ready  payment  on  the same day  as delivery of goods through a demand draft couriered to them. This reduces unnecessary delay and complexity in payment procedure, which again results in the reduction of purchase cost.
          The  Kerala  State  Civil  Supplies  Corporation  ( Supplyco )  has  introduced  the  privilege card  facility  in Supplyco supermarkets and Labham fair-price shops from the first week of April 2005.
         An official spokesman said  the card would be given free of cost to those who make purchases for Rs. 500 and above. Others would have to pay Rs 5 for the card. The cardholders will get a discount of 2 per cent for every purchase made.

Jewellry

         Jewellery  retail is another major part of the retailing  business in  Kerala. The  leaders in this business include, Allappat Jewellers, Allukas Jewellers, Josco Fashion  Jewellers, and  Thrissur  Jewellers  among many others. Each of these Jewellers can be considered as retail chains as they have outlets in different parts of the State, the neighbouring states and some even in the Middle East.

Automobiles

        In the automobile segment, the first real retailer could be thought of as Benz automobiles who started off in 1978, Now the state can boast of a host of retailers specialising in automobiles including big names like Indus Motors, Maraikar Motors, and Kulathungal Motors among others.

Conclusion

      The future of  Retailing  in Kerala  looks bright, with the proposed entry of majors like Hasbro Clothing Pvt Ltd (Genesis and Basics) and many others. The government of  India  is  already  thinking of allowing FDI of upto 76% in the grocery and food segment of  the retail  chains. According to governmental Estimates, retailing is growing at a rate of 5.7% at the national level, even though the organised retail sector is just 3% of the total industry.
        This would intern generate good revenues for the companies and is likely to affect the lifestyle of the people as Kerala is know as a consumer state rather than a producer state.

References

1. www.thehindubusinessline.com
2. www.indianinfoline.com
3. www.blonnet.com
4. www.frontlineonnet.com
5. www.rediff.com
6. www.hindustanstudies.com/files/indianewsbrief204.pdf
7. www.manage.gov.in/PGPABM/spice/Nov2k3.PDF
8. www.indiainfoline.com/bisc/ari/bure.pdf

Imminent retail boom will usher in major changes R. Ramabhadran Pillai                back to top

The sector offers employment opportunity to educated youth

      KOCHI: After a silent revolution that ushered in multifarious changes in telecom, it is apparently the retail sector that may witness a transformation. The wind is already blowing and the entire scenario is set for a rapid change in the months ahead.

     While the  local  traders are afraid of  being  wiped out  in the huge retail  wave  set to lash the Indian shores, international giants such as Wal-Mart  are said to be eying  the large consumer market  in  India.  Indian companies too have realised their strengths  and  have  launched  initiatives  before  the  foreign giants start exerting their influence on the internal retail segment.

     Reliance  has already  launched  a  chain of  retail outlets  in Andhra Pradesh and is planning to extend the activity to other States.  The company  will open  its  outlets  in Kerala in January, according to Anil Kumar, Head of Reliance Retail, Kerala. Mr. Kumar said  good opportunity  awaited  the people of  Kerala  in the opening  up of  the retail  segment.  Neither  heavy industries that polluted the environment nor projects that needed large tracts of land were suitable for Kerala. A well-spread retail chain would go hand in hand with Kerala's economy, he said.

      The  State's  strength  lies  in its  human resources.  The  growth of  retail sector would provide an opportunity to employ hundreds of youngsters. "The employability of those who have passed 10th class and 12th class will increase. Children of low income groups will be beneficiaries", he said. Reliance  Retail  was planning  to recruit 8,000 people in one year in Kerala, he said.

     Quoting  surveys conducted  in Kerala,  he said  there had been 100 per cent increase in the number of students who had completed  secondary  education  in  the  last  five  years.  Thus, offering  employment  to  this category would serve a social purpose, he said.

      The  company  started  the  recruitment  drive,  but was finding it difficult to get experienced candidates for higher cadres. Once this sunrise sector achieved  the  projected  growth,  it would effectively   reduce  unemployment  by  5  per cent in the country, he said. The company would recruit more than 8 lakh all over India by 2010.

     Trinetra  Super Retail  Limited, a food and retail  chain  which  started  operations  in  Kochi,  was  keen on expanding its activity to various other locations in the State. The group is planning to become the largest retail chain in Kerala, according to a top executive of the group. The group, established in 1986, bought over Fabmall India Private Limited, a Bangalore-based retail chain in 2004.  Starting with  a  modest  turnover of  Rs.158 lakh,  the group moved up to a level of Rs.17,000 lakh by March, 2006, according to company sources. This perhaps indicated the potential of the retail sector.

     The growth of the retail sector would spur development in allied sectors like logistics and cold storage. It was pointed out that the retailers were keen to ensure an efficient food supply chain and it would result in tie-ups with transporters. A chain of suppliers  would  support  the retail  giant and this  situation  was expected  to  provide a  splendid  opportunity  for  the local suppliers.

        Not withstanding the winds of change in the sector, many among the established traders are apprehensive of their future. The traders  under  the  banner of  Kerala  Samsthana Vyapari Vyavasayi Samithy chalked out a path of agitation against the opening  up of  the sector.  About  5 crore retailers  presently earn  a  living  out of  the  trade and  they have  a  bleak  future according to the Samithy.

Retail sector will create 50,000 jobs a year: Study (News Paper Report)                back to top

  THE  size of the retail market in the country is projected to more than double by 2008 growing at around 36 per cent every  year till  2008.  Thus  the overall  size  would  be Rs 14,79,000 crore by 2008  from  its  current  size of Rs 5,88,000 crore, according  to a  Study  conducted  by  The Associated Chambers  of  Commerce  and  Industry  of  India ( Assocham ).
 The  size of  the organised  sector retailing  will  witness about  three-fold growth  which will  balloon to Rs 15,000 crore by end of 2008 from its present estimated size of Rs 5,000 crore, says the study.

  According to the Chamber, unorganised retailing would continue to have its edge over organised retailing till the time foreign direct  investment  is  allowed  in  the  sector.   Initiatives of   the Central  and  State Governments  like allocation  of  land  at concessional  rates,  grants of  loans at  liberalised interest rates to promoters of shopping malls as also rationalisation of state levies are prime factors  that  will  aggressively   inspire entry of organised sector  into retailing  in the next few years, says the study.

 According to Chamber estimates, the retail sector will create 50,000 jobs a year in the coming five years. The retail sector is the second largest source of employment  and the job market is hugely receptive to this with more and more business schools focusing on the sector and large retailers setting up retail academies.

  The study  points out  that  franchising  will also emerge as a popular mode of retailing in the coming years and will lead to a proliferation of  brands  with foreign and Indian companies acquiring a strong brand equity for their products. Franchising has been growing at the rate of 14-16 per cent since 1999. In 2003-04, there were over 6,000 franchised outlets.

  The other major retailing organisation format `chain stores' in India will also multiply in future. In 2003-04, there were about 2,500 chain  stores. Among  the various organisational  formats, sales  of  chain  stores  grew at  the fastest  pace, with  sales growth during 1999-2003-04 averaging 28 per cent per year.