Retail Sector Opportunity and Threats
Indian retail industry is dividing into organized and unorganized sectors. Organized retailing refers to trading activities undertaken by licensed retailers, that is, those who are registered for sale tax, income tax, etc. these include the corporate-backed hypermarket and retail chains, and also the privately owned large retail businesses. Unorganized retailing, on the other hand, refers to the traditional formats of low-cost retailing for example, the local kirana shops, owner manned general stores, paan shops, convenience shop, hand cart and pavement vendors, etc.
Opportunity: * India is among 10 largest retail markets in the world. * Urbanization * Location advantage. * Falling real estate cost * E-retailing * Changing consumer habits and lifestyles. * The retail sector in India is worth USD 394 billion and is growing at the rate of 30% annually. * India is the least competitive as well as least saturated of all major global market. This implies that there are significantly low entry barriers for players trying to setup base in India in term of the competitive landscape. A good talent pool, unlimited opportunities, huge markets, and availability of quality raw materials at cheaper cost is expected to make India overtake the world’s best retail economies by 2040, according to industry players. * Currently, the market share of organized modern retail is just over 4 percent of the total retail industry, thereby leaving a huge untapped opportunity. * The composition of the Indian population is shifting towards the age group of 20-49 i. e. the working population with purchasing power. As per a Mckinsey report, of the current 204 million households in India, about 13 million households have the income to prop up growth of organized retail and this consumer segment is expected to grow at over 20% annually in the next eight years. * Rising disposable income: The second fastest growing economy has provided new employment avenues and the same have resulted in increase in number of people in the earners category. Increasing instances of double incomes in most families coupled with the rise in spending power is further fuelling growth in consumption and in turn growth of the retail sector. Shopping convenience: Apart from the population that has desire and ability to spend, the other factors that have patronized modern retail or organized retail is the convenience of shopping and wide variety. Threats * Inflation. * Lack of differentiation among the malls that are coming. * The industry is facing a severe shortage of talented professionals, especially at the middle-management level. * Most Indian retail players are under serious pressure to make their supply chains more efficient in order to deliver the level of quality and service that consumers are demanding.
Long intermediation chain would increase the costs by 15 percent. * Lack of adequate infrastructure with respect to roads, electricity has further led to the impediment of a pan-India network of suppliers. Due to these constraints, retail chains have to restore to multiple vendors for their requirements, thereby, raising costs and prices. * Retailing is yet to become a preferred career option for most of India’s educated class that has chosen sector like IT, BPO and financial services. * Policy related issues Lack of industry status for retail. * Numerous license, permits and registration requirement. * Farmer and retailer unfriendly APMC act. * Limited consumer insight * Lack of detailed region specific customer data. * Less data on spending pattern. * Inadequate human resources * Lack of trained personnel at all level. * Stringent employment and industry laws. * Fragment approach to human resources. * Taxation hurdle * Inconsistent octopi and entry tax structure. * Vat and multiple taxation issues. * Large grey market presence.