An Overview of Unorganized Retail Sector in India

Introduction: India started its Retail Journey since ancient time. In ancient India there was a concept of weekly HAAT, where all the buyers & sellers gather in a big market for bartering. It takes a pretty long times to & step to shape the modern retail. In between these two concepts (i.e. between ancient retail concept & the modern one there exist modern kirana/ mom and pop shops or Baniya ki Dukan. Still it is predominating in India, so the Indian retail industry is divided into two sectorsorganized and unorganized. Retailing is one of the pillars of Indian economy and accounts for 14 to 15 percent of its GDP. The Indian retail market is estimated to be US$ 450 billion and one of the top five retail markets in the world by economic value. India is one of the fastest growing retail markets in the world, with 1.2 billion people. India's retailing industry is essentially owner manned small shops. In 2010, larger format convenience stores and supermarkets accounted for about 4 percent of the industry, and these were present only in large urban centers. India's retail and logistics industry employs about 40 million Indians (3.3% of Indian population). The retail industry in India is highly fragmented and unorganized. Earlier on retailing in India was mostly done through family-owned small stores with limited merchandise, popularly known as kirana or mom-and-pop stores. In those times, food and grocery were shopped from clusters of open kiosks and stalls called mandis. There were also occasional fairs and festivals where people went to shop. In the twentieth century, infusion of western concepts brought about changes in the structure of retailing. There were some traditional retail chains like Nilgiri and Akbarallys that were set up on the lines of western retail concepts of supermarkets. The government set up the public distribution system (PDS) outlets to sell subsidised food and started the Khadi Gram Udyog to sell clothes made of cotton fabric. During this time, high streets like Linking Road and Fashion Street emerged in Mumbai. Some manufacturers like Bombay Dyeing started forward integrating to sell their own merchandise. Shopping centres or complex came into existence, which was a primitive form of today’s malls. Since liberalisation in early 1990s, many Indian players like Shoppers Stop, Pantaloon Retail India Ltd (PRIL), Spencer Retail ventured into the organised retail sector and have grown by many folds since then. These were the pioneers of the organised Indian retail formats. With the opening up of foreign direct investment in single-brand retail and cash–and-carry formats, a new chapter unfolded in the retail space. Many single-brand retailers like Louis Vuitton and Tommy Hilfiger took advantage of this opportunity. The cashand-carry format has proved to be an entry route for global multichannel retailing giants like Metro, Wal-Mart and Tesco. Retailing in India is predominantly unorganized. According to a survey by AT Kearney, an overwhelming proportion of the Rs. 400,000 crore retail markets are unorganized in India. In fact, only a Rs. 20,000 crore segment of the market is organized. The sector is highly fragmented with 97% of its business being run by the unorganized retailers like the traditional family run stores and corner stores. The sector is the largest source of employment after agriculture, and has deep penetration into rural India generating more than 10% of India’s GDP. Indian retail is dominated by a large number of unorganized retailers consisting of the local kirana stores, chemists, footwear shops, apparel shops, paan and beedi shops, hand-cart hawkers, pavement vendors, etc. Retailing in unorganized sector is thus not a profit oriented vocation but a mere source of livelihood. Naturally, the capital investment is very low and the infrastructure is rudimentary. It is estimated that less than 4% of Indian retailers have shops larger than 500 square feet. There has been considerable This paper provides detailed information about the role of unorganized retailing industry in India. It examines the why unorganized retail sector dominating in India and what are the reasons for its dominance in India. It also provides with in depth study about the importance, opportunities and challenges of unorganized retail sector with comparison to organized retail sector in India. Finally concludes with the mark of Indian consumers’ change of attitude towards organized retail sector. growth in organized retailing business in recent years Concerns have been raised that the growth of organized retailing may have an adverse impact on retailers in the unorganized sector. Unorganized retail sector it is defined as an outlet run locally by the owner or caretaker of a shop that lacks technical and accounting standardization. The supply chain and sourcing are also done locally to meet the local needs. Unorganised retailing, refers to the traditional formats of low-cost retailing, for example, the local Kirana shops, owner manned general stores, paan/beedi shops, convenience stores, hand cart and pavement vendors, etc. The Indian retail sector is highly fragmented with 97 per cent of its business being run by the unorganized retailers. The organized retail however is at a very nascent stage. The sector is the largest source of employment after agriculture, and has deep penetration into rural India generating more than 10 per cent of India’s GDP. Review of literature: M.Joseph, S.Nirupama, M.Gupta and S. Sahu (2008) attempted to rigorously analyze the impact of organized retailing on different segments of the economy. The findings of this study are based on the largest ever survey of unorganized retailers (the so-called “mom and pop stores”), consumers, farmers, intermediaries, manufacturers, and organized retailers in addition they reviewed international experience, particularly of emerging countries of relevance to India, has also been carried out as part of the study. S. P. Thenmozhi and D. Dhanapal (2011) identified the Retail service quality factors and explores the impact of Retail Service Quality on Customer satisfaction and loyalty in unorganized retail outlets and sample of 463 customers at selected kirana stores (unorganized retail format) of Tamilnadu in India were selected for the study on the basis of non-probability convenience sampling. The study also analyzed the association between demographic profile of the customers and their perception on retail service quality Tazyn Rahman (2012) study revolved around the opportunities and challenges faced by organized retail players in India. It was found that organized retailers see competition from the unorganized sector as their biggest challenge, followed by competition between organized retailers and the inefficiency of distribution channels, internal logistical problem and retail shrinkage. H. Gupta, N. Dubey and P. Pawan (2012) the broad objective of the study was to understand consumer behavior towards organized and unorganized retail stores and to find out the consumers satisfaction level from organized retail stores as well as unorganized retail stores. The perception of the traditional retailers about the modern retailing. The study uses primary data collected through in depth qualitative analysis to represent organized and unorganized retails sectors respectively. Prof. Prem Vrat et al: study attempted to present an in-depth study of retail sector of India, organized and unorganized, and identifies parameters for defining competitiveness in the context of Indian Retail. Integrating Quality Function Deployment (QFD) analysis with the Kano model the paper highlighted major technical issues related to Kirana and Apparel Shops. A model for optimizing product assortment in a small unorganized store has been presented, with the introduction of the concept of linear cross elasticity. It highlights the managerial insights gained through the study. Most of the earlier studies were related to the analysis of impact of unorganized retail sector and comparison between organized retail sector and unorganized retail sector in India. Hence based on the research gap, the present study attempts to understand importance of unorganized retail sector and their reasons of existence also with opportunities and challenges in India.