Organized Retailing And Kirana Shops Marketing Essay

3750 words (15 pages) Essay

1st Jan 1970 Marketing Reference this


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India’s retail sector is going to transform and with a three-year compounded annual growth rate of 46.64 per cent, retail sector is the fastest growing sector in the Indian economy. Traditional markets are transforming themselves in new formats such as departmental stores, hypermarkets, supermarkets and specialty stores. Western-style malls have begun appearing in metros and near metro cities, introducing the Indian consumer to a new shopping experience.

KSA-Technopak, a retail consulting and research agency, predicts that by 2010, organized retailing in India will cross the US$ 21.5-billion mark from the current size of US$ 7.5 billion. 

The Indian retail market is of enormous size about US$ 350 billion. But organized retail is not so huge and it is at only US$ 8 billion. However, the opportunity for growth is huge-by 2010, organized retail is expected to grow to US$ 22 billion. With the growth of organized retailing estimated at 40 per cent over the next few years, Indian retailing is clearly at a tipping point. 

This article is an attempt to analyse the areas where retail sector is growing and will grow, what will be the target market segment for the retailers and how will they try to serve this segment. 


India is witnessing an unprecedented consumption boom. The economy is growing between 8 to 10 percent and the resulting improvements in income dynamics along with factors like favorable demographics and spending patterns are driving the consumption demand. Indian Retail Industry is ranked among the ten largest retail markets in the world. The attitudinal shift of the Indian consumer in terms of “Choice Preference”, “Value for Money” and the emergence of organized retail formats have transformed the face ofRetailing in India. The Indian retail industry is currently estimated to be a US$ 200 billion industry and organized Retailing comprises of 3 per cent (or) US$6.4 Billion of the retail industry. With a growth over 20 percent per annum over the last 5 years, organized retailingis projected to reach US$ 23 Billion by 2010.

The Indian retail industry though predominantly fragmented through the owner -run ” Mom and Pop outlets” has been witnessing the emergence of a few medium sized Indian Retail chains, namely Pantaloon Retail, RPG Retail, Shoppers Stop, Westside (Tata Group) and Lifestyle International. In the last few years, Indians have gone through a dramatic transformation in lifestyle by moving from traditional spending on food, groceries and clothing to lifestyle categories that deliver better quality and taste. Modern retailing satisfies rising demand for such goods and services with many players entering the bandwagon in an attempt to tap greater opportunities.

According to the report of American Management Consulting Firm A. T. Kearney’s 2006 Global Retail Development Index (GRDI), India is on the first position , continuing for two years (2005 and 2006), among 30 countries as the world’s most attractive market for mass merchant and food retailers seeking overseas growth. On the other hand, China is loosing its attractiveness and making the way to India GRDI helps retailers to prioritize their global development strategies by ranking emerging countries based on a set of 25 variables including economic and political risk, retail market alternatives, retail saturation level, and the difference between gross domestic product growth and retail growth. The study quotes: “The Indian retail market is gradually but surely opening up, while China’s market becomes increasingly saturated.”

The Growth Drivers 

The Indian Retail growth can be attributed to the several factors including 

* Demography Dynamics: Approximately 60 per cent of Indian population below 30 years of age. 

* Double Incomes: Increasing instances of Double Incomes in most families coupled with the rise in spending power.

* Plastic Revolution: Increasing use of credit cards for categories relating to Apparel, Consumer Durable Goods, Food and Grocery etc.

* Urbanization: increased urbanization has led to higher customer density areas thus enabling retailers to use lesser number of stores to target the same number of customers. Aggregation of demand that occurs due to urbanization helps a retailer in reaping the economies of scale.

Investment Opportunities 

* Potential for Investment: The total estimated Investment Opportunity in the retail sector is around US$ 5-6 Billion in the Next five years. 

* Location: with modern retail formats having made their foray into the top cities namely Hyderabad, Coimbatore, Ahmedabad, Mumbai, Pune, Chennai, Bangalore, Delhi, Nagpur there exists tremendous potential in two tier towns over the next 5 years. 

* Sectors with High Growth Potential: Certain segments that promise a high growth are 

o Food and Grocery (91 per cent)

o Clothing (55 per cent)

o Furniture and Fixtures (27 per cent)

o Pharmacy (27 per cent)

o Durables, Footwear & Leather, Watch & Jewellery (18 per cent). 

* Fastest Growing Formats: Some of the formats that offer good growth potential are: 

o Specialty and Super Market (45 per cent)

o Hyper Market (36 per cent)

o Discount stores (27 per cent)

o Department Stores (18 per cent)

o Convenience Stores and E-Retailing (9 per cent) 

* Supply Chain Infrastructure: Supply chain infrastructure in terms of cold chain and Logistics. 

* Rural Retail: Retail sector offers opportunities for exploration and investment in rural areas, with Corporates and Entrepreneurs having made a foray in the past. India’s largely rural population has caught the eye of retailers looking for new areas of growth . ITC launched the country’s first rural mall ‘Chaupal Sagar’, offering a diverse product ranges from FMCG to electronics appliance to automobiles, attempting to provide farmers a one-stop destination for all of their needs. There has been yet another initiative by the DCM Sriram Group called the ‘Hariyali Bazaar’, that has initially started off by providing farm related inputs and services but plans to introduce the complete shopping basket in due course. Other corporate bodies include Escorts and Tata Chemicals (with Tata Kisan Sansar) setting up agri-stores to provide products/services targeted at the farmer in order to tap the vast rural market. 

* Wholesale Trading: wholesale trading also holds huge potential for growth. German giant Metro AG and South African Shoprite Holdings have already made headway in this segment by setting up stores selling merchandise on a wholesale basis in Bangalore and Mumbai respectively. These new-format cash-and-carry stores attract large volumes from a sizeable number of retailers who do not have to maintain relationships with multiple suppliers for all their needs. 

* Cheap Consumer Credit

Major Formats of In-Store Retailing



The Value Proposition 

Branded Stores

Exclusive showrooms either owned or franchised out by a manufacturer.

Complete range available for a given brand, certified product quality 

Specialty Stores 

Focus on a specific consumer need, carry most of the brands available

Greater choice to the consumer, comparison between brands is possible

Department Stores

Large stores having a wide variety of products, organized into different departments such as clothing, house wares, furniture, appliances, toys, etc.

One stop shop catering to varied/ consumer needs. 


Extremely large self-service retail outlets

One stop shop catering to varied consumer needs

Discount Stores

Stores offering discounts on the retail price through selling high volumes and reaping economies of scale

Low Prices

Hyper- mart

Larger than a supermarket, sometimes with a warehouse appearance, generally located in quieter parts of the city

Low prices, vast choice available including services such as cafeterias.

Convenience stores

Small self-service formats located in crowded urban areas.

Convenient location and extended operating hours.

Shopping Malls

An enclosure having different formats of in-store retailers, all under one roof. 

Variety of shops available to each other. 

Indian Retail- expanding the number of formats

In modern retailing, a key strategic choice is the format. Innovation in formats can provide an edge to retailers. Organized retailers in India are trying a variety of formats, ranging from discount stores to supermarkets to hypermarkets to specialty chains. 

Formats Adopted by Key Players in India


Original formats

Later Formats

RPG Retail 

Supermarket (Foodworld) 

Hypermarket (Spencer’s)Specialty Store (Health and Glow) 


Department Store (Piramyd Megastore) 

Discount Store (TruMart)

Pantaloon Retail

Small format outlets (Shoppe) 

Department Store (Pantaloon) 

Supermarket (Food Bazaar) 

Hypermarket (Big Bazaar) Mall (Central) 

K Raheja Group 

Department Store (shopper’s stop)

Specialty Store (Crossword) 

Supermarket (TBA) 

Hypermarket (TBA) 

Tata/ Trent 

Department Store (Westside) 

Hypermarket (Star India Bazaar) 

Landmark Group

Department Store (Lifestyle) 

Hypermarket (TBA) 


Discount Store (Subhiksha, Margin Free, Apna Bazaar), Supermarket (Nilgiri’s), Specialty Electronics 

Road Ahead; Plans of Large Retailers 

* Reliance Retail: investing Rs. 30,000 crore ($6.67 billion) in setting up multiple retail formats with expected sales of Rs. 90,000 crore plus ($20 billion) by 2009-10. 

* Pantaloon Retail: Will occupy 10 mn sq.ft retail space and achieve Rs.9,000 crore-plus ($2 bn) sales by 2008.

* RPG: Planning IPO will have 450-plus Music World, 50-plus Spencer’s Hyper covering 4 mn sq.ft by 2010. 

* LIFESTYLE: Investing Rs.400 crore-plus ($90 mn) in next five years on Max Hypermarkets & value retail stores, home and lifestyle centres.

* Raheja’s: Operates Shoppers’ Stop, Crossword, Inorbit Mall, and ‘Home Stop’ formats. Will operate 55 “Hypercity” hypermarkets with US$100 million sales across India by 2015.

* Piramyd Retail: Aiming to occupy 1.75 million sq.ft retail space through 150 stores in next five years.

* TATA (Trent Ltd.): Trent to open 27 more stores across its retail formats adding 1 mn sq.ft of space in the next 12 DLF malls. Titan industries to add 50-plus Titan and Tanishq stores in 2006. 

Small is big for Indian retail

It’s raining malls in small-town India. Whether it’s Kanpur, Ahmedabad, Indore, Agra, Baroda or Surat, the mall and multiplex culture has caught on in the country’s smaller cities, powered by the burgeoning purchasing power of India’s middle-class. From a handful of malls in the mid ’90s, India today has nearly 200 malls spread across large and small cities. And 700 new malls are coming up all over India-40% of them concentrated in the smaller cities. 

Small-town India is the next big thing in the retail business. Consider these numbers: in 2005, the contribution of smaller cities to total organized retailing sales was 15%. By the end of this year, that proportion is expected to grow to 25%. Organized retailing in small-town India is growing at a staggering 50-60% a year compared to 35%-40% in the large cities. The striking point is that it is the big names in the organized retail business that are eyeing these new opportunities. 

The Kishore Biyani-owned Future Group, India’s largest retailer, plans to invest Rs 3,600 crore in 100 stores in 30 cities, increasing its retail space from 3.5 million square feet to 30 million sq feet. The RPG group plans to open malls in all cities with a population of over 8 lakh. 

Similarly, Wills Lifestyle, the garments and accessories retailing division of ITC Ltd, plans to increase its footprint by doubling the number of stores from 50 to around 100 in the next two to three years, mostly in smaller cities. Even Sunil Mittal’s Bharti group has announced plans to get into food and farm products retailing. All these plans, however, are dwarfed by Mukesh Ambani’s ambitions to do a Wal-Mart in India by investing $5.60 billion (Rs 25,000 crore) and covering 1,500 cities and towns. 

The small-town retail boom could be considered a show-case of India’s free-market prosperity. It is being powered by healthy economic growth that is making more Indians more prosperous. Organised retailers have understood this and are hoping to ride the wave, exploit the first-mover advantage and establish strong brand loyalties in these relatively under-served markets. 

Indeed, this is probably the most compelling example of the trickle-down impact of liberalisation in India. Looking ahead, retail analysts suggest that the sustained success of the IT and ITeS industries in small towns is expected to create more jobs and enhance spending power. 

Typically, small cities offer a 15% to 30% cost advantage over larger cities, not just in terms of employee costs but real estate costs as well, not to speak of the gains that accrue from reduced staff attrition rates. This gap is expected to widen over the next few years, creating a pull for smaller towns that will, in turn, power the small-town retail revolution. 

At present, real estate costs present a major incentive for India’s organized retailers. Average rental values for ground-floor space are Rs 50-60 per square foot a month, against Rs 100-120 per sq foot a month in the bigger cities. However, a strong demand for retail space has more than doubled rentals in cities like Jaipur, Chandigarh, Surat and Lucknow. While in the metros, retailers are filling gaps by increasing more stores, in small towns, these malls are way beyond the expectations of the consumers. These cities are untapped markets and retailers find it important to establish their brands there. 

Most smaller cities are seeing plenty of action. For instance, Ludhiana can already boast worldwide restaurant chains like KFC, McDonald’s, Pizza Hut, Domino’s Pizza, Ruby Tuesday and Subway. A new world-class, 25-acre commercial centre and some seven new shopping malls-cum-entertainment centres are under construction. 

The Indian retail market is estimated at $350 billion. But organized retail is estimated at only $8 billion. However, the opportunity is huge-by 2010, organized retail is expected to grow to $22 billion. With the growth of organized retailing estimated at 40% (CAGR) over the next few years, Indian retailing is clearly at a tipping point. India is currently the ninth largest retail market in the world. It is names like Dehradun, Vijayawada, Lucknow and Nasik that will power India up the rankings soon. 

Small Local Stores / Kiranas

The small local stores have dominated Indian retailing over the decades and are present in every village and local community, addressing the needs of the population in the area and being the point of contact with the consumer. The distribution networks of brands extend right upto this point to stay in touch with customer needs and preferences.

India like most other countries has a very large network of local stores. The retail industry in rural India has typically two forms: “Haats” and “Melas”. You will find these in almost every village and locality. A lot of them function as paan and cigarette outlets with tea and coffee sometimes also offered. Besides this these stores stock and offer small eats and soft drinks including biscuits, soft drinks, chocolate, sweets, bread and baked products. Many of them also sell fruits like bananas and a range of toiletries and cosmetics like soaps, shampoos, toothpastes and some creams. These small stores cater to the needs of their own local population and travelers who stop by for a smoke or a snack. A little larger format is the neighborhood grocery store that focuses on grains, foods, snacks and toiletries besides other home essentials.

Fruits and vegetables that are perishable are usually maintained and offered by exclusive vegetable stores and not by the normal groceries. Every fair sized village is likely to have at least one grocery store, a fruit and vegetable shop and a paan and cigarette shop. The new addition of the past decade is to have a telephone booth that lets locals and travelers make national and international telephone calls.

This network is very large and spread all across India. It is not really a network since each store is individual or family owned and has no connection with the other. It does however represent a network since large consumer product companies like Unilever, Procter & Gamble, Colgate-Palmolive, Cadbury, Coca Cola, Pepsi and ITC uses them as their final point of retail to the consumer.

While it is commonly believed that the new retail chains will drive these small stores out of business, reality points the other way and it is likely that these stores will continue even in the next two decades of growth.

These small stores are very personal and have strong relationships with the local population. They are points of news and connection. They offer credit to the local population and help out in times of crisis. They also have a very good understanding of requirements of the local population and have very low overheads enabling them to offer the best price for their products.

Shopping Malls

The new shopping malls that have been expanding their footprint across Indian cities are well designed, built on international formats of retailing and integrated with entertainment and restaurants to provide a complete family experience. Over 300 malls are expected to be built over the next two years and most Indian cities with over a million population will be exposed to this modern method of retailing.

Shopping malls have existed in India since several decades but were designed and built to house several shops in a single facility. These malls also known as Shopping Arcades offered only rows of shops, most of which were small stores that promised bargains for their various wares. These Shopping Arcades tried to maximize on their store space and did not offer any areas for recreation and entertainment.

The present day malls are a creation of the past few years post 2000. They are designed professionally using a lot of international experience and combine shopping with a lot of brand building, recreation, food and entertainment. Malls also have a large format store that serves as their anchor for shopping and a prominent restaurant that anchors the food needs of visitors. Most malls also feature a multiplex cinema that offers entertainment to the visitors of the mall. Finally the mall has large atria and open spaces to allow visitors and families to hang-out.

These new format malls are coming up in all the major cities of India. The cities that are seeing the first rush of malls are New Delhi, Noida, Gurgaon, Chandigarh, Mumbai, Pune, Bangalore, Ahmedabad, Chennai, Kochi, Hyderabad, Kolkata

The next run-up of the malls will be the second level cities of India that includesVisakhapatnam, Coimbatore, Trivandrum, Raipur, Bhopal, Surat, Jaipur, Kanpur, Lucknow, Ranchi, Cuttack, Dehra Dun.

The new malls are air-conditioned and have spacious areas and accesses which make them a true breath of fresh-air from the earlier arcades and shop line streets that used to be the available options for Indian customers.

Malls: The new face of retail market

Robust GDP growth, stronger currency reserves and ever-improving market and operating environments are propelling the Indian market through a period of stellar growth – and the retail community is responding with newer formats and innovative products. The economy of India has shown a remarkable increase driven by overall political and social stability. 

The decade-old economic reforms have engendered a new, shop-till-you-drop breed of middle class Indians who, having tasted the shopping experience of big cities overseas, have fuelled a demand that was inevitable — the rise of the shopping malls. Centrally air-conditioned malls with piped music, high-speed lifts and escalators, underground parking space, a multiplex movie theater, multi-cuisine restaurants and a host of national and international brands, these malls generates approximately 25,000 footfalls each, per day, with figures doubling on weekends. 

Sobha Group has set its eyes on launching the largest retail mall in the country. Retail Biz tracks this unprecedented move that is ready to add a new chapter in the history of Indian retailing.It is estimated that there are 450 malls in various stages of development across India, 60 in the greater Delhi area alone. This trend has attracted several major global retail players to India. International style shopping has finally come to India – and with a splash.


After analyzing the retail industry, we can conclude that the organized retail has opportunities to grow in India in spite of the kirana stores because these kirana shops will also get benefit of the growing economy. The argument that the kirana shops will be affected by these malls is only myth. The organized retail is attracting more and more Indian as well as foreign players of the retail industry. As our study shows that a major portion of the organized retail will be developed in small cities and towns, this opportunity has not been encashed by kirana stores and they are unable to meet the requirements of the customers. Therefore both the malls and kirana stores can play simultaneously in India so no need get afraid due to the malls.

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