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March 12, 2017

Essay - Organised vs Unorganised Retail

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Organised vs Unorganised Retail

Overview
  • Introduction of retail sector. 
  • Division of retailers. 
  • Scenario in Indian retail market.
  • The evolution of Indian retail sector. 
  • Famous retailers of Indian market.
  • New organised retail in India.
Retail can be defined as the process of selling goods from a set location. In the process, the retailer functions as a facilitator between manufacturer and consumers. Therefore, a retailer can be termed as
a middleman or reseller acting as a bridge between consumer and manufacturer. Organised retailers or traders are those who are licensed by government for carrying out their business. They are bound by law to pay sales tax, income tax etc. The various forms of organised retails are hyper markets, super markets, departmental stores, speciality chains, malls etc.

Hyper markets store products of multiple brands comprising food items and non-food items. Super markets are self-service stores selling food and personal care products, e.g. Sabka Bazaar Departmental stores retails branded goods in non-food categories, e.g. Shoppers Stop. Speciality chains focus on branded product or product category, e.g. BATA, Addidas. Malls are huge enclosure which have different retail formats, e.g. Select City Mall in New Delhi.


On the other hand, unorganised retail refers to traditional low capital retailing viz local grocery shops, small convenience stores, small pavement side vendors owner-manned general stores, chemists, footwear shops, pan and beedi shops, hand-cart, hawkers etc. The concept of retailing is considered only as a contemporary phenomena. The government only recognises organised retail as the licenses are being given to them.

The Indian retail market is one of the fastest growing retail market in the world. With over 12 million retail outlets, India has one of the highest density of retailers in the world at one retail for every 90 people. The Indian retail market is estimated to be US $ 600 billion and one of the top five retail markets in the world by economic value. Retailing in India is one of the pillars of its economy and accounts for about 10 per cent of its GDP. India is one of the fastest growing retail markets in the world. The evolution of retail sector in India can be traced to super markets being set up in the neighbourhood. Government also encouraged Khadi and Village Industries Commission to set up shops. Some Indian brands which started retail chains in India were Raymond, Titan Bombay Dyeing etc. The rapidly growing retail sector grew as a result of better supply chain management, inventory management, distribution networks, back-end operators etc. The organised retail sector is although at a very nascent stage but has a very wide scope of growth due to Foreign Direct Investment and availability of market. The growth of consumerism of the middle class has given fillip to the retail industry and organised in particular. The retail segment of India can be analysed on the basis of speciality that the stores offer.

Food and grocery segment is the largest sector with over 60% contribution to retail sector in unorganised retail and 11% in organised retail. Some organised retailers in the segment are 'Food Bazar' (Future Group), 'More' by Tata etc. In the fashion segment, organised retail contributes 38%. This sector is responsible for organised retail revolution in India.

Some famous fashion retailers in India are, Pantaloon, Westside, Lifestyle, Falo India, Shoppers Stop, Reebok, Adidas, Khadims etc. Other segment is of office and home improvement retailers which has a market share of 6%. Some leading names in this sector are, Home Saaj, @Home, Home Shop 18 etc. In the electronics retail sector some notable names are, Croma, Reliance Electronics Store, Ezone etc. This segment has a market share of 9% in retailing. Similarly, other major sectors are, pharmaceuticals, beauty and wellness, jewellery, book and music store, catering service retailers etc.

Popular formats of retailing in India are local kirana shops. These are the most popular one set-up in neighbourhood. Other popular category picking pace in India is online retail sites viz Flipkart, Amazon, Bigbasket etc. Other format of retailing is by franchise. In this format the mother company provides the umbrella of brand but the operation is carried out by owner. Catalogue retailer is another popular format. Here, the consumer has different choices.

The organised retail is a new phenomenon in India. The economic growth brings more of India's people into the consuming classes and organised retail lures more and more shoppers into its open door. The growing middle class is an important factor contributing to the growth of retail in India. By 2030, it is estimated that 91 million households will be middle class. Consumer markets in India are growing rapidly owing to robust economic growth. Online retail business is another format which has high potential for growth in the near future. It is grooming at an annual rate of 35%.

In the recent times there has been debate of FDI in multibrand retail. The government has some how resisted the proposition of allowing 100% FDI in retail. The government has allowed 51% FDI in multibrand retail and cf) 100 per cent FDI in single brand retail. While the phrase 'Single brand' has not been defined, it implies that foreign companies would be allowed (n`11 W to sell goods that are sold internationally under a 'Single brand', viz Reebok, Nokia, Adidas. For example, if Adidas were to obtain permission to to retails its flagship brand in India, those retail outlets could only sell products under the Adiclqs brand and not the Reebok brand, for which ets „IN separate permission is required.

Those supporting 100% FDI say, it will allow for better supply chains and will reduce wastage in the perishable category. It will bring choices to the consumer at an economical rate. It will encourage contract farming thereby reducing middlemen between farmers and retailers. As the competition will be tough so it will calm prices and inflation.

Those who oppose 100% FDI say, it will lead to closure of thousands of kirana shops thereby leading to loss of income and unemployment. MNCs with predatory pricing will wipe out business of grocery stores.

It has also been suggested that farmers may get remunerative prices initially but later on they will be at the mercy of MNCs. It has also been said that MNCs may dump their cheaper products in these markets. Therefore, these concerns outweighed the advantages and only 51% FDI in multibrand retail has been allowed for the time being.

The growth in the Indian organised retail market is mainly due to the change in the consumer's behaviour. This change has come in the consumer due to increased income, changing life style, patterns of demography etc. Now, the consumer wants to shop at a place where he can get food, entertainment and shopping all under one roof.

This has given Indian retail market a major boost. While on the other hand, traditional stores are the shops where the various products available are the range of products really required by the customers. They cautiously take care of the choice of the customers and bring the product which is demanded by them. They try to satisfy them with the wide range and at the same time maintain a good relationship to retain them and convert them into their loyal customer.

But the retail shops lacking the interaction with the customers have miserably failed in building good relationship or loyalty with their customers. Thus, in India it is quite doubtful that the organised sector will be able to overcome the unorganised retail completely.

The values, belief and cultures of the customer prompt them to go the same retail shop where they can find the product, at low price and with least waiting time for billing. No matter how lucrative is the organised sector and how beautiful is the market, the organised sector in retail has to go a long way to understand the customer requirement.

Difficult Words with Meanings :
  • Facilitator one that helps to bring about an outcome (as learning, productivity etc) by providing indirect guidance or supervision.
  • Nascent beginning to exist, not yet fully developed
  • Fillip a thing or person that causes something to improve suddenly
  • Inflation a general rise in the price of services and goods in a particular country, resulting in a fall in the value of money
  • Dump to get rid of something which somebody do not want
  • Demography the changing number of births, deaths, diseases, etc in a community over a period of time; the scientific study of these changes
  • Prompt done without delay; 8. Lucrative making a large profit.
shared by Nisheeta Mirchandani
 
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