A FIELD STUDY ON OPPORTUNITIES AND CHALLENGES FACED BY ORGANIZED RETAILERS IN TRI-CITY

Retailing involves understanding the customers, their needs and expectations. Satisfying customer's expectations while maintaining wafer-thin margins is a heroic task for most of the retailers. Indian retail is still in the infancy stage, with the retail revolution and there are a number of challenge factors which need to be overcome and a number of opportunity factors which need to be leveraged upon, if organized retailing is to flourish the way it ideally should. According to Knight Frank research report, Tri-city is an emerging market for organised retail. Good connectivity at domestic and global level, lower operational cost and easy availability of skilled labor, higher disposable incomes and lavish lifestyle has put organised retail on an upswing in the region. However, with little scope left for further development within the region, skyrocketing property prices and diluted peripheral control act placed on the outskirts, there are numerous challenges in the development or organised retail. This field study is done for identifying the opportunities and challenges faced by organized retailers in the tri-city (Chandigarh - Panchkula - Mohali) region. 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, while unorganized retailers see organized retailing as their major challenge, followed by cost of operation, logistical problem, competition with other kirana retailers and inefficient distribution channels. It was also found that organized retailers see growing middle class as their greatest opportunity followed by large number of earning youth customers. The tri- city region has people from all over India having proportionate increase in spending with earnings and India's booming economy. Thus, the study found that the major challenges as well as opportunities of organized and unorganized retail are almost the same. This means that mitigating the challenges and leveraging on the opportunities could benefit both sectors.


INTRODUCTION
The retail realty players are looking to tap the potentials of tier II and III cities in India by coming up with new commercial and retail properties. A survey conducted by global management consultancy AT Kearney, has identified 50 Indian cities which have the potential of being a part of organised retail boom.
• Maturing-Delhi, NCR, Mumbai belong in this and these markets are seeing saturation. However there is a demand for large one-stop malls with retail, entertainment, food and hospitality, along with hypermarkets.
• Transitional-Cities such as Bengaluru, Kolkata, Hyderabad, Pune and Chennai. Large corporate sector, high level of economic activity, above-average income and large middle-class make them ideal.
• High-Growth-The boom is now moving to destinations such as Chandigarh, Mohali, Jaipur, Ludhiana, Lucknow, Kochi, Surat and Vadodara.
• Nascent-These offer the first-mover advantage as the income levels and corporate activities are limited. The cities are Patna, Bhopal, Meerut, Asansol, Varanasi, Kolhapur and Sonepat'.
The Tri-city region is amongst the high-growth and emerging market for organised retail. Chandigarh is the capital of the two most prosperous states Punjab & Haryana, India designed by French architect Le Corbusier. High quality of life and high disposable income is witnessed in this area along with adjoining areas in Punjab (Mohali) & Haryana (Panchkula). Collectively this region is called Chandigarh tricity region. A lot of projects are coming up in retail and real estate sectors.

Organized retail real estate across Tri-city:
The organized retail real estate scenario across tri-city is as follows:

Chandigarh:
Chandigarh is the state capital of two states-Punjab and Haryana. The goverrunent offices mainly dominate the property market in the city. It has a well developed market. It primarily houses all the government offices of both Punjab and Haryana. Apart from government offices, the city has branches of all banks, fashion stores, eating joints and many more. Chandigarh, the 'City Beautiful' is the emerging destination in India for the Knowledge Industry or ITES / BPO companies. With its population of9,00,000 and location the confluence point of three prosperous states ' AT Kearney 2000 ' Report on "Chandigarh, Mohali & Panchkula Tricity region projects of Northern India, it boasts of a large qualified pool of workforce. It stands first in the country in terms of Human Development Index and Literacy rate of 82 percent. A strong presence of research and educational institutes, a number of engineering colleges and universities offers attractive catchments for retail business.
The main commercial areas are sectors 8, 9 and 34. Other sectors that have commercial spaces are sector 22,35 and Manimajra. The study shows that the major occupancy levels are in sector 22 and 35, the reason being the well -developed retail in these markets. In case of Chandigarh, the average commercial space price ranges from Rs 5000-15,000 per sq. ft.

Mohali
Mohali can be termed as the planned extension of Chandigarh and residents of this town are used to shopping from Chandigarh markets. The shops here are mixed with private offices and banks while spaces designated for offices in the upper floor of SCOs (shop cum commercial office) are largely vacant. The main markets of Mohali have been developed at sector markets and are located on straight road from sector 58 to 65.
The main markets are in sector 65, 64.63.62, 61, 60 and 59. PUDA is developing the sector 70 market to attract the residents for shopping. Mohali has grabbed the attention of major national and intemational level developers. They have started occupying land parcels in the area for development of their projects. Quark City is developing in a 51 acre special economic zone(SEZ) in the Mohali Industrial area. This will accommodate retail space along with large commercial and residential space.
The Government of Pimjab has given the green signal to a few projects under the mega project policy for Ae development of shopping and multiplex arenas. Developers like DLF, Unitech, TDI, MGF, Janta Prtomotors, Renaissance and Country Colonizers have acquired large land parcels for various developments in Mohali.

Panchkula
Panchkula houses major government offices. Apart from that there are branches of various banks. The prime real estate developments are in sector 7 and 11. Commercial space in sector 7 market show good signs of demand as compared to markets in other sectors.
Since Panchkula is still not a commercial destination, the rentals of spaces here are not very lucrative. The capital value of these spaces vary from Rs 1,000-6,000 per sq-ft. almost all the retail space in different markets are occupied by both local and branded retailers. This has made the spaces dearer and rates are showing upward trend.
Manimajra is also a major a commercial area, which is a notified area of Chandigarh, abutting sector 7 of Panchkula. This is a major region for shopping and entertainment. This market also offers' discount formats shops like Factory outlets of brands like Nike and Woodlands. The lone mall-cum-multiplex of the region, The Fun Republic, is located in Manimajra".

LITERATURE REVIEW
• Forecasting demand is one of the main challenges for organized retailers. Retailers face several challenges when it comes to forecasting like scale of the problem (large mmiber of stores and items to forecast), Intermittent demand (slow and erratic sales for many items at the store level). Instability of assortments (frequent new-item introductions and seasonal assortment changes), pricing and promotional activity. Available studies abroad consistently show out-of-stock rates to be higher for promoted items (Corsten & Gruen, 2003;Taylor & Fawcett, 2001), and the differences between promoted and non-promoted items in most cases are substantial. Out-of-stock items mean dead-time, money and energy, but more importantly, stock-outs contribute to consumers switching to other brands or retail stores to fulfill their demands. Consumers facing out-of-stocks behave in a-variety of ways -including switching the brand or changing the shopping location.
• Intemal logistical problems pose another major challenge for organized retail. In some cases, the manufacturer directly supplies the products at the sales outlets. But in some cases where such an arrangement is not possible, intemal logistics takes care of these operations. Here, the goods are supplied by the product manufacturer to one main nodal zone warehouse from where the company employs its own transportation facility or that of a goods transportation contractor to get the goods to the sales outlets. In such a case, the transportation cost is an additional overhead. Also, developing such a system by the company could prove very costly.
Contracting the work to a contractor is an easy way out, but then again, the quality of contractors and their dedication is another question which needs to be taken care of • Ever-increasing customer demand also poses a major challenge to organized retail. Globalization has brought about a change in the Indian consumer psyche with the consumer becoming more aware of his/her value of money strength and their economic purchasing power becoming more evident than in the previous generations. The concept of product quality and service delivery which were earlier not very engraved in the consumer psyche are now very much demanded and delivered for in the new age format of organized product retailing in the Indian consumer goods market. People increasingly want more and more for less.
• Another challenge is that of cost of operation. Organized retailers in India caimot concentrate on their core competency alone like in many developed countries. They will need to manage everything from supply chain, logistics, selling, sourcing, stocking, merchandizing, trend analyzing etc. Players in the organized sector have big expenses to meet, and yet have to keep prices low enough to be able

'Images & CII (2008).Retailing in Punjab 2010 and beyond. ^Global Real estate consultant TVammel Crow Meghraj
to compete with the traditional sector. This is a very huge challenge. High costs for the organized sector arise from: higher labour costs, social security to employees, high quality real estate, rentals, security, maintenance, much bigger premises, comfort facilities such as air-conditioning, back-up power supply, higher electricity tariffs, taxes etc. Organized retailing also has to cope with the middle class psychology that the bigger and brighter a sale outlet is, the more expensive it will be.
• Competition from xmorganized sector is another challenge facing the organized retail industry in India. Traditional retailing has been established in India for some centuries. It is a low cost structure, mostly owner-operated, has negligible real estate and labor costs and little or no taxes to pay. Consumer familiarity that runs from generation to generation is one big advantage for the traditional retailing sector. In addition to that, the unorganized sector has transformed itself with the advent of organized retailing. It has become more customer friendly by offering credit, home deliveries, etc. It adds a personal touch to shopping that organized retailers may find impossible to emulate.
• Another challenge is that of losses due to lack of infrastructure (roads, traffic, airport, railways, ports, and so on). Infrastructure in retail refers to proper pliable roads, airports and railway stations capable of handling large consignments on a daily basis, proper warehouses, cold storage systems, roads with less traffic, proper connectivity etc. The infrastructure for easy transportation of goods is not adequate in the country. Also, the fall in agricultural ou^ut continues to cast on FMCG sector's prospects in the short term. Right now, there is a tremendous amount of wastage and value loss of agricultural products due to lack of storage, refrigeration, transportation and processing facilities.
• Another challenge is that of understanding customers (in terms of customer behavior and loyalty). A number of factors play a part in influencing the loyalty and the commitment of customers, such as quality and value of core offering, levels of customer satisfaction etc. Profits increase by decreasing the rate at which customers defect. By retaining just 5% more of its customers, it was proved in a report how a company could almost double its profits. Furthermore, in a period of only five years, a firm with a 70% customer retention rate will have lost two to three times as many customers as a firm with a 90% retention rate. It pays to engender loyalty.
• Another challenge facing organized retailing in India is the availability of skilled workforce. The talent base is limited, and with the entry of big giants there is a struggle amongst them to retain this talent. Areas such as technology, supply chain, distribution, logistics, marketing, product development and research are becoming very critical for the success of the organizations. All of these would lead to the recruitment of highly professional people who specialize in these fields. This has resulted in big salary hikes at the level of upper and middle management and thereby eroding the profit margin of the business. Shortage of manpower exists even at the lower levels.

Objective of study
The broad objectives of the study are: • To study the trends in growth of retail real estate in the tri-city region • To study the opportunities faced by organized retail players in the region

• To study the challenges faced by organized retail players in the region
The research methodology adopted for the study is as follows:

Research Sample
The data for the study was collected from a sample of fifty managers of organized retail outlets and fifty unorganized retail outlets in the tri-city (Chandigarh, Panchkula & Mohali). The sample retail outlets were selected by convenience sampling methods.

Research Instrument
The respondents were administered a structured questionnaire in which they were asked to rate the extent to which they were affected % each challenge factor and each opportunity factor on a seven-point Likert scale. The type of study conducted was descriptive as well as exploratory, with emphasis on identification of factors that could possibly affect the growth of retailing, and analyzing the extent of impact of these factors. Primary data ,was elicited directly from retailers. Interviews were carried out to get further insight into the challenges faced and overcome by the industry. Data was also collected from retailers to assess the extent of impact of each factor on the different product formats. Secondary data was collected from various soxu-ces such as journals, industry reports, magazines, newspapers, and websites.

DATA ANALYSIS
The extent to which organized and unorganized retailers perceive the impact of the challenge factors is summarized in Table 1. Organized retailers see competition from the imorganized sector as their biggest challenge, followed by competition between organized retailers and the inefficiency of distribution channels, internal logistical problem and retail shrinkage. For unorganized retailers, the major challenge they see ahead of them is organized retailing, followed by cost of operation, logistical problem, competition between other kirana retailers and inefficient distribution channels. Government's opposition to FDI does not seem to affect organized or unorganized sectors. Overall, it was found that the first few rankings are the same for organized and unorganized retailing. So it can be understood that the major challenges faced by organized and unorganized retailers are largely the same. Dealing with these challenges could lead to the benefit of both sides, and the co-existence of both kirana and organized retailing in the same retail landscape.
The extent to which organized and unorganized retailers perceive different opportunity factors is simmiarized in Table 2. Organized retailers see tri-city's growing middle class as their greatest opportunity followed by large number of earning youth customers; tri-city has people from all over India, proportionate increase in spending with earnings and India's booming economy. TTie kirana retailers on the oAer hand see tri-city having people from all over India as their biggest opportunity followed by tri-city growing middle class, India's booming economy, large number of educational institutions in tri-city and proportionate increase in spending with earnings. Organized retailers as well as unorganized retailers feel that higher bargaining power with suppliers and in-house branding of goods are not a huge opportunity. Comparing between the organized and unorganized sectors of retailing, it was found that even though there are differences in the extent to which organized retail and imorganized retail sector perceives a challenge or opportunity factor, the first few major factors are common for both segments.
The extent to which the challenge and opportunity factors are perceived to affect different product segments is summarized in Tables 3 and 4.  According to the Technopak report on organized retailing in India (2007), the following table shows the share of each product segment in the total retailing scenario in India in 2006, and a projection for the year 2010. Considering the top five challenges and opportunities in case of food & beverage segment, the following results are found. The Study also found some interesting miscellaneous results concerning organized and unorganized retail outlets. Kirana stores show a higher conversion of footfalls to customers than organized retail outlets. Organized retail outlets are mostly rented out, whereas kirana shops are mostly owned by the family running the shop. In-house branding of goods are more in organized retail outlets than in unorganized outlets; but on the whole, it is low in both cases. Kirana shops have in house brands in home d6cor and furnishing, food and beverage and general merchandise.
Both organized as well as unorganized retail outlets give free home delivery, but organized retail outlets never sell goods on credit (not credit cards). Except home d6cor and furnishing, all other product format based l^ana shops give credit to their customers. Kirana shops do not have loyalty programs at all.

CONCLUSION
Both the organized sector and the unorganized sector see each other as their biggest threat. But actually, it was found in the study that their major challenges as well as opportunities are almost the same. This means that mitigating the challenges and leveraging on the opportunities could benefit both sectors. This comes as a pacifier to the much talked about debate about organized retailers taking unorganized retailers out of business. It is not possible to deal with all the challenge and opportunity factors all at once. The most popular product segment in the Indian retailing scenario is the food & beverage segment, followed by the fashion clothing, footwear and accessories segment. They together contribute to about 74% of the entire retailing revenue. Therefore dealing with the most critical challenge and opportunity factors of these two segments would definitely give a face lift to the entire organized retailing sector.
Organized retail players must adopt strategies to enhance their growth. Without doubt, they have to make substantial investments in technology to ensure zero wastage of goods, time, and effort and in particular, they have to invest in supply chain infrastructure. On the other hand, the Government can take several steps to help enhance organized retail growth. It can ensure single window clearance for retail chains, and can permit FDI in retail in phases, starting perhaps with food retailing. It can ensiure flexibility of labor laws, ensuring availability of a skilled workforce for organized retail. It can ease distribution-infrastructure creation and Octroi.
It can ease real estate and rent laws for retail outlets, and enforce zoning laws and city development plans. The present study has some mild limitations. The sample selection was judgmental and convenience-based and this may not be perfectly representative of the retail scenario. Also, the sample size for kirana retailers was low, and could have given a better representation if a higher sample size was considered.