Organized Retail Industry In India

In India, the retail industry is broadly divided into the organised and unorganised sectors. Organised retailing in India started picking up in South India in cities like Chennai and Hyderabad, where real estate at prime location was available at cheaper rates than in cities like Mumbai and Delhi. In the early 1990s, leading Indian business houses started taking a keen interest in retailing sector. Several business houses like Tatas, Piramals, RPG Group and Rahejas forayed into this sector.   

Organised retailing in India can be classified on the products or services offered. There include (but not limited to)

 Apparel retailing

 Food retailing

 Health and beauty products retailing

 Footwear retailing

 Music and entertainment retailing

 Book retailing

 Watches and jewelry retailing

 Petrol and diesel retailing

 Home furniture

 Luggage

Let’s have a look at what kind of strategies these pioneers in organised retail industry in India formulated to enter and capture the market that was dominated by the unorganised retailers. 

Future Group (then Pantaloons Retail India Limited)

The group had started in 1987 as Manz wear Private Limited under leadership of Kishore Biyani. The retail business generates low margins, thus, they introduced in-house labels where the gross margin were in range of 25-30%, compared with the 5-15% industry average. Another advantage was that the company had better control over the product. 

The analysts attribute their success to the cheaper sourcing of products and lower distribution cost.

RPG (Ram Prasad Goenka) Group

They were one of the early entrants in the organised retail sector in India. They launched the ‘FoodWorld’ chain of grocery stores in 1999. The in-house products were sold under ‘FoodWorld’ brand name. The products were priced 10-15% lower than the branded products with same quality. This provided the consumers value for their money. The products were also backed by 100% ‘No Questions Asked Replacement’ Guarantee, the first of its kind in India. In 2001, it became the first retailer to use reverse auction mechanism in association with Sify. The first auction was held for plastic carry bags and this initiative saved over one million INR over a period of one year. Selling of products below market price was possible due to economies of scale. 

TATA Group

The group started its retail business in 1998 with the purchase of Littlewoods retail stores, in Bengaluru. The company was named Trent limited and the Littlewoods store was called Westside. Westside offered customers international shopping experience with value for money. Before embarking on their retail journey, they did extensive research in domestic as well as global market and found that major retailers pushed in-house products to achieve better margins. So, they decided to sell in-house brands. 

In addition to Westside, Trent launched a hypermarket ‘Star India Bazar’ in Ahmedabad in October 2004. Also, in 2005, they brought 76% stake in Landmark, a leading books and music retailer in India. 

Besides Trent, Titan is another Tata company which is in the watches, clocks, and jewelry retailing business. To differentiate itself from the local players in watch, clock retailing Titan projected the watch as fashion accessory, while also concentrating on technological leadership. Titan entered into the jewelry segment under the brand name ‘Tanishq’ in 1995. 

Raheja Group

The K. Raheja group launched Shopper’s Stop in October 1991. This was the first mega apparel retail outlet to be established in India. Shopper’s Stop initiated India’s first retail loyalty program called ‘The First Citizen’. This program offered exclusive privileges, benefits, and rewards to regular customers. Crossword Bookstores was also a subsidiary of Shopper’s Stop.