Study of Retail Industry with special reference to Leather Sector for TATA International

1. Objective of the study
Objective: -
The objective of the study is to the Retail Market and its constituents.
To evaluate the options of retailing in leather industry.
Research Methodology: -
Qualitative methodology: -
We have done qualitative research in which we have collected the data from the
tailor made sources.
Sources of the Data –
We have collected the data from the secondary sources that is, internet,
newspapers, magazines brochures and text books etc…
Characteristics under study –
The following characteristics were studied:
1) Consumer Behavior in Retailing
2) FDI in Retailing
3) Branding in Retail
4) Supply Chain Management in Retail
5) Merchandising in Retail
6) 7 P’s in Retail.
Conclusion & Recommendations –
It is clear from the figures that the retail sector will show stupendous growth in
the future. So it is the correct time to enter into the retail sector because the
retailing of leather has not taken a proper shape, i.e. , the retailing of leather is
dispersed in the form of shoes, apparels and accessories. But most of its usages
has not taken the proper form like professional leather bags, lap – top bags etc…
Limitations of the study –
We have collected the whole data from the secondary (relevant) sources. So we
are totally relying on the data available from reliable sources. Data which we
have collected is not articulated. We have only presented it in a lucrative form.

2. RETAIL AS AN INDUSTRY
As in the rest of the world, consumerism is spreading like wildfire in India.
Lifestyle and fashion stores, supermarket chains, giant shopping malls and hyper
marts are testimony to post-liberalization India’s retail boom. Little wonder that
some of the hottest jobs are in the sunrise retail sector. The growth of retail
revenues in India is impressive by any yardstick — a steady 25 percent per
annum for the past decade with no signs of slowing down.
India’s estimated 33 million retail outlets, big and small, provide employment to
15 percent of employable Indians and are perhaps the largest contributor to
India’s gross domestic product after services. During the next decade, retailing is
expected to generate one million additional jobs in the newly-emergent organized
retail trade. Therefore there’s a premium on trained personnel, urgently needed
to sustain the growth of this sector.
quot;Retailing is one of the oldest business activities in India. But until the
liberalization and deregulation of the Indian economy in the 1990s, it was
dominated by small one-man retail units. However since the past five years, it has
become more structured and formalized and is moving towards international
standards. Today, the organized retail sector is an industry. Retailers have
started investing in large and quality spaces and shopping malls have sprung up
across the country, combining retailing with entertainment, transforming
shopping into a pleasurable experience. Currently India has over 300 large
shopping malls and the number is multiplying at a phenomenal pace,quot; says
Chandru Chandiramani, deputy general manager (retail) of the textiles division
of Raymond Ltd. This textiles major is among the largest integrated
manufacturers of worsted fabrics with diversified operations including
engineering, steel files and specialty steels, toiletries and cosmetics, ring denim,
prophylactics and the recently launched national chain of stores retailing prêt
fashionwear under the brand name Be.
Retailing - World’s largest private industry (US$ 6.6
trillion sales annually)
 Indian retailing
- Largest employer after agriculture - 8%* of
population
- Highest outlet density in world
- Around 12 million outlets
- Still evolving as an industry
- Long way to go

3. Evolution of Indian retail Modern Formats/
Historic/Rural Traditional/Pervasiv Government
International
Reach e Reach Supported
Exclusive Brand
Outlets
Hyper/Super Markets
DepartmentStores
Shopping Malls
PDS Outlets
Khadi Stores
Cooperatives
Convenience Stores
Mom and
Pop/Kiranas
Weekly Markets
Village Fairs
Melas
Source of Availability/ Low Shopping
Neighborhood
Entertainment Costs / Experience/Efficiency
Stores/Convenience
Distribution
7
Abhishek, Amit & Sumit . IMS MBA(MM)

4. Evolution of Indian Retail
 Informal retailing Sector
- Typically small retailers.
- Evasion of taxes
- Difficulty in enforcing tax collection mechanisms
- No monitoring of labor laws.
 Formal Retailing Sector
- Typically large retailers
- Greater enforcement of taxation mechanisms
- High level of labor usage monitoring
 Modern Format retailers
 Supermarkets (Foodworld)
 Hypermarkets (Big Bazaar)
 Department Stores (S Stop)
 Specialty Chains (Ikea)
 Company Owned Company Operated
 Traditional Format Retailers
 Kiranas: Traditional Mom and Pop Stores
 Kiosks
 Street Markets
 Exclusive /Multiple Brand Outlets
 Hypermarket
 Big Bazaar
 Giants
 Shoprite
 Star
 Department store
 Lifestyle
 Pantaloons
 Piramyds
 Shoppers Stop
 Trent
 Entertainment
 Fame Adlabs
 Fun Republic
 Inox
 PVR

5. Industry Dynamics
 Low domestic competition
- Because of fragmented nature of industry
 Lack of exposure to global best practices
- Low entry barriers for unorganized retailing
- Moderate entry barriers for organized retailing
 Wholesale system under-invested leading to 20-40% wastage
 Non level playing field issues
- Wide differences in treatment of small and large retailers
 Three year compounded annual growth rate of 46.64 %
 Organized retail in India is only two per cent of the total US$ 215 billion
retail industry
 Fastest growing sector in Indian Economy
 Expected to grow 25 per cent annually
Growth Prospects
Organized trade in India is very underdeveloped when compared with other
emerging markets in Asia, Latin America and eastern Europe. Figures show that
developed markets like the US are far, far ahead. (Tables 1 and 2)
Table 1
China India
Parameter
1996 2003 2005
Per capita GDP (USD) 675 1,109 710
Size of retail market (USD billion) 225 400 215
Share of organised trade (per cent) 7-8 ~17 <4

6. Table 2
Country Share of organized trade (per cent) (2003)
India 4
China 17
Poland 20
Indonesia 30
Russia 33
Brazil 35
Thailand 40
Malaysia 55
USA 85
90
India
80
China
70
Poland
60
50 Indonesia
40 Russia
30 Brazil
20
Thailand
10
Malaysia
0
USA
Share of organised trade (per cent) (2003)

7. Organized retail
India v/s China
The Indian and Chinese markets are comparable in many aspects:
Both countries are not homogeneous. They comprise many markets within
•
a single country, with significantly varying cultures and customer
preferences across regions.
There is a significant rural population in both countries, which has much
•
lower purchasing power compared to the urban population.
Both countries are geographically very large and unevenly developed,
•
adding a distribution and logistics dimension to the retail trade.
Consumers in both countries are highly value conscious Research done by
•
the Tata Strategic Management Group (TSMG) indicates that over the
next 10 years, the total retail market in India is likely to grow at a
compounded annual growth rate (CAGR) of 5.5 per cent (at constant
prices) to USD374 billion (Rs 16,77,000 crore) in 2015. The organized
retail market is expected to grow much faster, at a CAGR of 21.8 per cent
to USD55 billion (Rs 246,000 crore) in the same time frame, garnering
around 15 per cent of overall retail sales. Based on our projections, the top
five organized retail categories by 2015 would be food, grocery and
general merchandise; apparel; durables; food service; and home
improvement.
Table 3: Organized retail market in India (Rs crore)

8. Table 4: Organized retail market in India

9. KEY TRENDS
Trend 1: Consolidation — The big get bigger
In the early stages of development in retail markets, there is a proliferation of
players. For example, in China in 2003, the top 100 players accounted for only 8
per cent of the total retail market with the top 10 accounting for 3.2 per cent of
the market. However, when retail markets develop, there is a consolidation of
players with fewer large players dominating the market. This trend is starkly
visible in the developed economies of the US and Europe.
Trend 2: Convenience stores and hypermarkets are gaining
prominence
These are driven by a consumer need for convenience and lower prices / higher
value in mass categories, while the big box category killer stores are gaining
importance in the specialty retail categories. While supermarkets may emerge at
the initial stages of retail market development, in the long term they are unable to
match the consumer value proposition of convenience stores and hypermarkets.
Trend 3: Private label products become increasingly important
Private labels today account for 17 per cent of global retail sales, with the highest
share of 23 per cent in Europe and the lowest share of 4 per cent in Asia. M+M
Planet Retail data shows that private label penetration varies from 25 per cent to
95 per cent among some of the largest retailers in the world.
Implications for Indian retailers
Global trends have important implications for Indian retailers. The Indian
consumer is very value conscious; willing to spend money in most cases, but
constantly cost conscious, evaluating every rupee spent. It is therefore imperative
for retailers to offer a price advantage through sourcing and operational
efficiency, as well as a strong private label programme to attract customers.
Existing and new entrants need to achieve scale quickly to drive efficiencies in
procurement, supply chain and marketing. Else, they risk being marginalized by
larger players.

10. Real estate and human resources will be the critical drivers to build scale. While
there are a few hundred malls under various stages of development across the
country at present, retailers will also need to think out of the box to ensure the
availability of real estate. This may include acquiring and developing the real
estate themselves, rather than wait for mall development. Given the rising
demand for retail real estate, retailers will need to take a long-term view on
rentals and look at alternative options like ownership or very long leases.
Retailers that invest in training will be able to ensure the availability of quality
manpower in a rapidly growing market.
In conclusion, the retail market in India offers an opportunity for a large player
to build a Rs 40,000-crore retail business spanning multiple categories by 2015 (at
current prices). Compared to this, the revenue of the largest Indian retailer,
Pantaloon, grossed only Rs 1,085 crore in 2005. Little wonder that large domestic
business houses and international retailers have expressed a keen interest to enter
the retail sector in India. To capitalise on the opportunity, however, players need
to be aggressive in outlook and build scale quickly.

11. CHARACTERISTICS UNDER STUDY
i) FDI in retail
Current Indian FDI Regime
FDI not permitted in retail trade sector, except in:
- Private labels
- Hi-Tech items / items requiring specialized after sales
service
- Medical and diagnostic items
- Items sourced from the Indian small sector (manufactured
with technology provided by the foreign collaborator)
- For 2 year test marketing (simultaneous commencement of
investment in manufacturing facility required)
Metro Group of Germany
- Cash-and-carry wholesale trading
- Proposal faced strong opposition
Entities established prior to 1997
- Allowed to continue with their existing foreign equity
components.
- No FDI restrictions in the retail sector pre-1997
Food world
- 51:49 JV between RPG and Dairy Farm International,
- Leading food retailer in India now: - Mc Donalds

12. Why FDI
1) Improve competition
2) Develop the market
3) Greater level of exports due to increased sourcing by major players
- Sourcing by Wal-Mart from China improved multifold
after FDI permitted in China
- Similar increase in sourcing observed for Metro in India
- Provides access to global markets for Indian producers
4) Investment in technology
- Cold storage chains solve the perennial problem of wastage
- Greater investment in the food processing sector technology
- Better operations in production cycle and distribution
5) Better lifestyle
- Greater level of wages paid by international players usually
- More product variety
- Newer product categories
- Economies of scale to help lower consumer price
- Increased purchasing capacity of consumers

13. Total wholesale and retail trade
375
300
US $ bn
225
FDI in retail allowed
150
75
9
7 8 8 9 9 9 9 9 9 9 9 9 0 0 0
2
8 0 5 0 1 3 4 5 6 7 8 9 0 1 2
Ye a rs
Retail sales grew @ 19.6% CAGR for the next 4 years after the

introduction of FDI in 1992
36
Abhishek, Amit & Sumit . IMS MBA(MM)

14. The 7 P’s of Marketing
As products, markets, customer and needs change dynamically at a rapid rate,
one need to analyze these 7 P’s for continuously revaluating the business
activities.
Product –
a)
One need to see his own product from the consultant point of view. As
though you are an outside marketing consultant brought in by the
company to check whether this is the right business at this time. One
need to answer such questions like “Are these products are frequently
used by the customer?” because Frequent Buying is one of the major
driving force in the Retail Industry.
Prices –
b)
In the countries like India, the economy is still price sensitive. The
price is the driver for the specialized retailers who had established
themselves in the market like Big Bazaar, Reliance Fresh. Also relating
to the price the customer perception come into the picture, i.e., many
of the people do not visit the retail outlets because they perceive these
as very costlier outlets. This ‘Myth’ about the price was broken by Big
Bazaar; Big Bazaar gives a full page advertise in the leading news
paper of local area highlighting individual prices of the products in it.
Thus, the people realize that the products in the retail outlets are
actually cheaper than their nearest grocery shops.
Place –
c)
The mall has to be located at such a ‘strategic location’ that it must be
easily accessible from each part of the city. Today, according to the
trend, most of the retail outlets are situated in the malls so that when a
person approaches the retail outlet then he can also look for other
things in the mall.

15. d) Promotion –
Retail Outlets are not spending a huge amount in promotions as the
retail concept is newer in India and mouth – to – mouth publicity
which it gets is very difficult otherwise to get by any concept as such.
e) People –
The people are very important part in the retail sector as a whole
because the retail concept is taking its own shape and the trends are
not stable at all. (As it is very new concept in India). So, the retail
organization has to monitor those trends and the workforce has to
change its style of retailing. Within the time span of few weeks.
f) Process –
Today every organization in retailing is following a unique way and
even the strategies to be followed and products to be sold of one
organization does not intersect with other organizations. So, the
process of every organization is totally unique in retailing.
g) Physical Evidence –
A physical object is self defining, a service is not(in some cases). Thus
it is marketers task “define for the services what the services cannot
define for itself”. The three key elements of physical evidence are
ENVIRONMENT, COMMUNICATION & PRICE. The marketer use
homogeneous combination of these three things to lure consumer into
their retail outlet.
P H Y S IC A L
E N V IR O N M E N T
A M B IE N C E H O S P IT A L IT Y
IN F R A S T R U C T U R E
Consumer Behavior

16. CUSTOMER EXPERIENCE OPTIMIZATION
Your customers have conscious and unconscious experiences each and every time
they walk into your store, open your catalogue or visit you online. Good, bad or
indifferent, these experiences create multiple impressions, some rational and
some emotional. The purposeful management of the customer experience builds
deep emotional connections leading to strong brand preference, increased loyalty,
repeat business and ultimately, profitable growth.
Most retail organizations don’t understand how to manage the customer
experience for maximum value or use the experience as a way to differentiate
their business.
Customer Experience Optimization™ is a cutting-edge process for designing
retail experiences that emotionally engage and bond customers to your brand.
Customer Experience Optimization™ gives retailers a competitive advantage
through a prescribed approach to designing and implementing customer
experiences that build relationships. By leveraging in-store and online assessment
and audit tools, we develop a comprehensive evaluation of the current customer
experience and help our clients design, execute and manage an experience that
impacts customer value, loyalty and the bottom line.
Customer Experience Optimization™ has proven to be a profitable brand
positioning methodology for leading retailers, consumer goods companies and
related businesses around the world including Office Depot, Blockbuster, Capital
One, IBM, GE, Penske Truck Leasing, and Taco Bell. Customer Experience
Optimization™:
 Improves financial performance
 Drive profitable growth
 Strengthens competitive advantage
 Builds brand loyalty

17. (Myths related to Consumer Behavior in Retailing)
Myth 1: Consumers behave the same in all markets
The problem: The whole process of creating and introducing a new technology
product is littered with guesswork that leaves the product designers in a
revolutionary frame of mind—even after the product starts shipping and the
information starts to flow. Designers believe that consumers will flock to their
new technology product, service, or web site because it provides a similar value or
copies a concept provided in an established market. In the end, consumers don’t
understand the offering and don’t use it.
The reality:
Consumers behave differently in new markets than in established
markets.
The Consumer Adoption S-Curve demonstrates how consumers change their
behavior as they progress through a product’s growth phases. It shows why new
products in Phase I require a different focus than a similar product that has
already progressed to Phase III.
The solution: New products are more successful when designers analyze usage
patterns earlier to determine the product’s key success factors. Once identified,
these key success factors should be optimized and streamlined to create a
consumer-grade experience that will attract mass consumer success.

18. Myth 2: The more consumers see it, the more successful it will be
The problem: Many companies believe in their product so much that they can’t
understand why it isn’t successful. They assume that the problem is that others
don’t know about the product, so they increase their marketing budget. However,
they soon spend themselves out of business because consumers attracted to the
product don’t stay to become long-term, loyal users.
Consumer Adoption Funnel
The reality:
If the offering isn’t attractive, there is no point in getting more users to see it.

19. The Consumer Adoption Funnel demonstrates how users progress through their
experience with a new product or service.
The solution: Using marketing to attract more users won’t change how these
users behave once they arrive—marketing is only the first gate of four in the
Consumer Adoption Funnel. You can coax users into trying your product or
service, but you can’t compel them to use it long term. Stickiness (value versus
cost) must be optimized before users will increase their usage.
Myth 3: If I’ll use it, my users will
The problem: It is often hard for designers of a new technology product or
service to differentiate themselves from their users. They think that new users
will fall in love with the product just as they have. They find it very difficult to
understand why users reject their offerings.
Consumer Bell Curve
The reality:
Consumers don’t have your knowledge or your motivation when trying your
product.
The Consumer Bell Curve demonstrates where the bulk of users are relative to
their skill levels and willingness to proactively find value in a product.
The solution: Study your average consumer behavior and accept that it won’t
match yours. Understand that you are a power user, while most of your
consumers are not. Look for unnecessary complexities and customization
requirements or long installation processes that are probably hurting your
product’s success. Don’t add settings or preferences to your product as a way to
solve design disputes. Design for your users’ skill levels, not your skill level.

20. Myth 4: Consumers will find a product’s value
The problem: Most companies feel that it is best to have lots of features so that
users can navigate to and use whichever features fit their needs. These companies
are usually disappointed, as users don’t look for the features they want. Instead,
users struggle to find value and give up.
Consumer Churn Graph
The reality:
The value must find the user.
The Consumer Churn Graph demonstrates how focusing on improving a user’s
ability to find value in a product will increase a user’s success with the product.
The solution: Instead of focusing on how to get more users to your product or
trying to design more features for more segments of users, focus on removing or
hiding rarely used features and highlighting your key features and value.
Myth 5: Consumers want more features
The problem: As an idea turns into a product and starts shipping, its designers
and engineers seem to have an unlimited number of new ideas for new features to
include in the next version, each feature designed to make the product “more
complete.” However, in the eyes of the consumer, the exact opposite is happening.
The early users are wondering why the key feature is so hard to use, buggy, or
incomplete.

21. Consumer Behavior Bubble Chart
The reality:
Consumers only want a few key features, and they want them to work well.
The Consumer Behavior Bubble Chart enables comparisons of different features
or services to determine how many consumers use each feature (Attraction), how
much time consumers spend with each feature (Usage), and how often they
return to use the feature again in the future (Stickiness).
The solution: Before shipping a product, all you have is your professional
training and experience to aid you in designing a product. But once you have
built and shipped the product, you have access to a wealth of consumer usage
information that can help drive future design decisions. Use this data to tell you
where your value really is and focus on continuously improving that value.

22. Supply Chain Management in Retail
Supply chain and retail: The means to the end
A retail revolution is happening in the country. For global giants looking at newer
markets, India presents exciting opportunities on account of its vast middle-class
and a virtually untapped retail industry.
The Indian retail sector has seen unprecedented growth in the last few years. The
KPMG report, `Consumer Markets in India: the next big thing?, has predicted
that the organized retail sector is expected to grow at rate higher than GDP
growth in the next five years. The AT Kearney's 2006 Global Retail Development
Index positions India as a leading destination for retail investment.
The success in this competitive and dynamic sector depends on achieving an
efficient logistics and supply chain, which can be provided by professionals, as
they combine the best systems and expertise to manage a ready flow of goods and
services
The retail boom promises to give an impetus to a host of allied sectors and the
logistics industry, as the backbone of the retail sector, stands to gain the
maximum.
In India, the logistics market is mainly thought to mean transportation. But the
major elements of logistics cost for industries include transportation,
warehousing, inventory management, courier and other valued-added services
such as packaging.
The logistics costs account for 13 per cent of GDP. The industry is currently on
an upswing and is poised for a growth of 20 per cent in the coming years.
With the expansion of retail, supply chain will take on an increasingly important
role. With the end consumer becoming more demanding and time conscious, the
need for just-in-time services is increasing. In retail, where competition is intense
and stakes are high, customer satisfaction is paramount.
Network critical
Industry experts opine that in India too the large retail chains will follow the
global model of outsourcing their logistics so as to better manage complex supply
chains and focus on their core business.
For the retail chains in agri-produce, efficiency of logistics is critical and can
indeed leverage the brand to a great extent.

23. The main asset
Retailers realize that knowing what is selling and what is not can improve the
inventory processes. Inventory is the biggest cost factor, and if not managed well,
it can also be the biggest drain. That's why retailers and their trading partners
today set store by the inventory process and its impact. Effective SCM enables:
Realistic ordering lead-times:
Suppliers are not surprised by the next order. Retailers respond better to demand
spikes, minimize forced markdowns and avoid obsolete-inventory costs.
Averting problems:
Stores easily identify potential stock-outs and request replenishment before the
inventory drops to zero. Deciding to de-list or replace a product is easier.
Facilitating resource planning and allocation:
Product forecasts and supply schedules are easily converted to perform space
planning, establish staffing needs and organize inbound/outbound shipments.
Financial experts can plan cash flow and analyze margins into the future.
Four R’s
Follow the 4 `R's of SCM — Right time, Right place, Right price, Right quantity
— to reap the advantages of:
Sustained inventory reduction by as much as 60 per cent for both the buyer
and seller.
Improved forecast accuracy by as much as 30 per cent.
Enhanced store shelf stock rates by as much as 8 per cent.
Increased sales by as much as 20 per cent.
Reduced logistics costs by as much as 4 per cent.
The key players in the logistics industry are gearing up to meet the challenges by
initiating both organic and inorganic growth to leverage the retail opportunity.
Logistics firms have also started focusing on related services such as Customs
clearing and forwarding, inbound warehousing, labeling and packaging, fleet
management, order picking and inventory management.

24. Cold Chain
The booming retail sector has set off growth in the cold chain segment as well. It
is a highly specialized service and caters to time sensitive and perishable items.
The cold chain industry is growing at 20-25 per cent. However, there is an urgent
need to establish the necessary infrastructure for an effective cold chain.
FICCI presents an overview of the increasing
importance of Supply Chain Management which
helps retailers cope with growing competition
Supply Chain Management (SCM) is an important aspect of the retail
industry and aims at reducing inventory costs. SCM can be defined as,
'controlling and coordinating the operations of manufacturers, suppliers,
distributors and retailers so as to minimize the overall cost that reduces
the delivery time and services the customer more efficiently.' The supply
chain constitutes a different reality for the SME (Small to Medium
Enterprise) as compared to the Fortune 500 companies. For the former, it
may represent a few suppliers, a couple of delivery people, and a handful
of customers. For the latter, however, it may also include distributors,
outsource contact center, and customers as well. Retail industry experts
generally categories the SCM technology into six categories:
Planning – This includes forecasting demand and the amount of
resources, which is necessary to meet demand and sale forecasts
Sourcing - This category is about procuring goods from suppliers that
may involve online auctions and collaboration through the Internet.
Manufacturing - This is the step where raw materials are turned into
finished goods. Tools for determining which involves machines, processes,
and personnel should perform these tasks may be used to provide more
efficiency
Producing - Goods producing industries are primarily associated with
the production of goods. However, these sectors may also produce some
services
Delivery - It is also known as supply chain fulfillment, this step entails

25. getting the finished products to the dealers or end users. It takes into
account how the products will be shipped, including the means of
transportation and how products may be consolidated to cut down on
shipping expenses
Returns - No one wants to think about products coming back due to
defects, damage, or some other problems. However, automating the return
process and capturing data on why products are returned is essential for
cutting expenses.
Supply chain is a complex network of relationships that organizations
maintain with trading partners to source, manufacture and deliver
products. There are huge pressures on a business customer with demand
for greater variety of products and services, investors demanding growth
and competitors forcing more frequent product changes. It is time Indian
corporate start thinking about SCM from a strategic perspective rather
than just as an operational issue.
SCM is the top management priority for
retailers in today's business scenario. Fierce competition is forcing
retailers to respond to changes in the market quickly. This highlights the
growing importance of SCM in managing stock availability, supplier
relationships, new value added services and cost cutting. We are now
moving in an era where supply chains will prefer competing with each
other, than with products and marketing techniques. First class products
and brand power no longer guarantees success in the aggressive battle for
market share. Thus, it is important to get closer to customers by
understanding what they want, when they want, where they want and at
what price they want it.

26. MULTI-CHANNEL STRATEGY FOR RETAIL
A successful multi-channel strategy must reflect shopper's desire to interact with
retailers anytime and anywhere.
Retail multi-channel strategy assesses retailer’s efforts through a consumer lens.
This process helps Retailers create strategies, processes, services and offers that
align consumer activities and needs with the retailer’s capabilities.

27. Retail Merchandising
MERCHANDISING OPTIMIZATION
Interested in developing the best store-level merchandise mix tailored to local
customers while optimizing revenue opportunity and inventory productivity?
Retailers everywhere face a common merchandising challenge: how to provide
the right merchandise mix at each store location to optimally satisfy projected
consumer demand and achieve high levels of productivity. With increased
emphasis on profitability and unprecedented competitive pressures, resolving this
dilemma has become significantly more important and promises to unleash
untapped productivity for retailers.
Retail merchandising optimization, or assortment optimization, combines data
about customers, products and markets to produce improved assortments that
are scientifically derived using predictive business analytics. This solution
correlates information about a retailer’s customers, enhanced with a marketing
intelligence data asset that includes population characteristics surrounding each
store market and predicted purchasing behavior derived from historical sales
performance. Because it considers all the dynamics of the retail demand chain
using a fact-based and quantitative approach, merchandising optimization
delivers increased revenue generation, higher margins and optimized
relationships with key customers.

28. PROCESS FOR IMPLEMENTING MERCHANDISE
PLANS:
1. Information is gathered about target market needs and prospective suppliers.
2. The retailer chooses firm-owned, outside, regularly used and/or new supply
sources of merchandise.
3. The merchandise under consideration is evaluated through inspection,
sampling and/or description.
4. Purchase terms are set. They may have to be negotiated in their entirety or
through uniform contracts.
5. The purchase conclusion is made-manually or automatically.
6. Merchandise handling decisions are taken relating to receiving & storing, price
& inventory marking, displays, pilferage control etc.
7. Reordering decisions are made.
8. Re-evaluation of merchandising plans takes place.
Merchandising Optimization enables quantified, information-based
answers to common questions, such as:
• What is the appropriate merchandise assortment in each store?
• Which stores have a greater potential for sales growth in this merchandise
category?
• How can I implement store-specific assortments without creating supply
chain disruptions?
• How can I forecast inventory based on the optimal store-level
assortments?
• How can I maximize the return on my inventory investments?
• What do customers within individual store markets look like and how
does this information tie to assortment?
• What is the best way to gain insight from and leverage a limited amount of
available Transactional and customer information?
MERCHANDISING ALSO TAKES CARE OF:-
• Operational assessment
• Implementation of customized Best Practices
• Customer service measurement and improvement
• Conversion rate assessment and improvement
• Analytics/metrics/benchmarking
• Labor management and scheduling solutions
• Workload / task balancing
• Functional schedules
• Procedural documentation

29. • Chain-wide rollout programs
BRANDING IN RETAIL
Building Successful Indian Retail Brands
The Global Retail Scenario Large format retail businesses dominate the retail
landscape in the United States and across Europe, in terms of retail space,
categories, range, brands, and volumes. Indian retail industry cannot hope to
learn much by merely looking at the Western success stories in retail. Their scales
of operations are very huge, the profit margins that they earn are also much
higher and they operate in multiple formats like discount stores, warehouses,
supermarkets, departmental stores, hyper-markets, convenience stores and
specialty stores.. The economy and lifestyle of the West is not in line with that of
India and hence the retailing scene in India has not evolved in the same format as
the West nor can we learn valuable lessons from their style of operations.
In retailing, the conventional wisdom used to be, that, the critical success factor
was location. But precise location no longer matters and geo-demographics is
increasingly becoming irrelevant. The leading multiple chain retailers,
superstores and malls create their own centers of gravity, attracting customers by
car, bus, train or even by plane to wherever they are located.
The growth of multiple chain retailers has been relentless for many years in the
west and this has been accompanied by the development of retail names as
brands in their own right. Discount retailer Walmart has catapulted to the top of
the Fortune 500 rankings in the U.S. with a turnover of $258 billions (2003
revenues – the basis for 2004 rankings), ahead even of oil major Exxon Mobil and
the mammoth manufacturing giant General Electric. A ruthless policy, of,
‘Always Low prices. Always.’ has brought Walmart to the top. On the day after
Thanksgiving in November 2002, Wal-Mart sales hit $1.43 billion in one single
day.
Walmart and Nordstrom in the U.S. and Sainsbury’s and Marks & Spencer in
the U.K. have grown by rapid geographic expansion in their own countries.
Specialists like Benetton of Italy and IKEA of Sweden and The Body Shop of the
UK are international and the fast food chains like McDonald’s and Pizza Hut are
everywhere. The same products are increasingly available from the same names
on every continent. Retailers worldwide have immensely benefited from the
sustained growth of the disposable income of their global consumers.

30. Geographic saturation
The end of the nineties has signified a turning tide of retailer power. The limit to
retail ambition is geographic saturation. There is already a fear that the U.S is
‘over-malled’, that available shopping space exceeds customer demand for
products. The retailer logic that ‘if we build new stores they will come’, is being
belied. Many retailers have started postponing their store expansion plans. The
track record of some of their international store expansions is also not promising.
Category killer competition
The threat of saturation is accompanied by a new competition from the low cost
category killers. Specialist competition is eating away at the market share and
forcing down the prices and gross margins of the multiple chains. The success of
the giant killers in the toys segment – Toys R Us and in home furnishings – Home
Depot, in the are a case in point.
Alternative shopping channels.
The newest retail format that is showing growth in the U.S., and is more
frightening for retailers than for consumers, is the Internet. The potential for on-
line shopping which is growing in the U.S. questions retailers’ investments in
more physical sites and stores and makes it imperative that they too explore the
new agenda of ‘E-retailing’ or ‘e-tailing’.

31. THE INDIAN RETAIL SCENE
India is the country having the most unorganized retail market. Traditionally it is
a family’s livelihood, with their shop in the front and house at the back, while
they run the retail business. More than 99% retailers function in less than 500
square feet of shopping space. Global retail consultants KSA Technopak, have
estimated that organized retailing in India is expected to touch Rs 35,000 crore in
the year 2005-06. The Indian retail sector is estimated at around Rs 900,000
crore, of which the organized sector accounts for a mere 2 per cent indicating a
huge potential market opportunity that is lying in the waiting for the consumer-
savvy organized retailer.
Purchasing power of Indian urban consumer is growing and branded
merchandise in categories like Apparels, Cosmetics, Shoes, Watches, Beverages,
Food and even Jewellery, are slowly becoming lifestyle products that are widely
accepted by the urban Indian consumer. Indian retailers need to advantage of
this growth and aiming to grow, diversify and introduce new formats have to pay
more attention to the brand building process. The emphasis here is on retail as a
brand rather than retailers selling brands. The focus should be on branding the
retail business itself. In their preparation to face fierce competitive pressure,
Indian retailers must come to recognize the value of building their own stores as
brands to reinforce their marketing positioning, to communicate quality as well
as value for money. Sustainable competitive advantage will be dependent on
translating core values combining products, image and reputation into a coherent
retail brand strategy.
There is no doubt that the Indian retail scene is booming. A number of large
corporate houses — Tata’s, Raheja’s, Piramals’s, Goenka’s — have already
made their foray into this arena, with beauty and health stores, supermarkets,
self-service music stores, new- age book stores, every-day-low-price stores,
computers and peripherals stores, office equipment stores and home/building
construction stores. Every retail category has been attacked, by the organized
players today. The Indian retail scene has witnessed too many players in too short
a time, crowding several categories without looking at their core competencies, or
having a well thought out branding strategy. To illustrate, the Indian
lifestyle/fashion retail scene is already exhibiting the following characteristics,
which do not augur well for its future:
Lack of store differentiation:
Leading retail stores like Shoppers Stop, Lifestyle, Ebony, Globus, and Piramyd,
offer common brands, similar ambience, and a commitment to improved service.

32. Where is the scope for differentiation and brand building? Can these retailers
hope that location and ambience alone will do the trick?
Merchandising muddle:
Mumbai’s original retailers of Mumbai —, Amarsons, Akbarallys, Benzer,
Premsons — have experienced no decrease in traffic in their stores, even after
Piramyd and Westside opened shop. These retailers exploit what they know best
— what the customer wants with regard to product, selection and price — and
ensure their customers do not go back disappointed. Consumer insights built over
their years of experience in business is helping them to hold the fort against the
onslaught of the new players on the horizon.
The organized new generation Indian retailers (Shoppers Stop and Westside)
have recruited senior retail persons from abroad, who have the expertise in
setting up systems and procedures, but they are going to take a long while to tune
into the psyche of the Indian consumer.
With the permutations and combinations of seasons, fashions and regional
preferences, merchandising is at the best of times a complex task. India’s cultural
diversity poses additional challenges to the merchandisers requiring them to be
aware of local tastes and to be able to compete with the local retailer in terms of
market knowledge and speed of response. While technology and systems are no
doubt enablers, there can be little substitute for experience and insight.
Lack of labels/suppliers:
Organized Indian retailing has to face the situation of lack of professional
suppliers who are accustomed to deadlines, systematic in their production and
consistent with their quality. Often, the local suppliers do not have financial
strength or production infrastructure or discipline. Indian merchandisers are
forced to compromise due to a true lack of choice — which leads to huge unsold
stocks and reduced profitability to the retailers.
Discounting:
Given widespread availability of the same brands, large retailers have to cope
with the phenomenon of discounts offered by the smaller retailers. Large stores
are able wrangle larger margins from most suppliers, but these margins are
retained to meet the higher operating cost. Small retailers are tempted to pass on

33. the lower overhead in the form of a discount to the customer to get them to their
stores. In a middle class- dominated, price-sensitive market like India, price
manipulation is a strong weapon in the arsenal of the small independent retailer.
The large retailers themselves further dilute the strength of the retail market.
With promotions becoming the order of the day, they too have entered into price
wars against each other. ‘Up to 50% off’ sales and ‘Two for one’ price offers have
now become commonplace even at the top retail outlets across our country. Deep
price cuts may not be the answer to maintain their relevance against the small
retailers nor does it auger well for the brand building of the store.
Limited margins and high real estate costs:
It is well accepted that Indian retailers work on low margins compared to
international chains. The retail margins in India are a meager 30 to 35 per cent
for fashion brands (as, say, compared to 50 to 100 per cent across Europe). With
overheads and allowance for dead stock, the Indian retailer is not left with much
scope for error. Cost of prime land for the retail store is prohibitive. Land prices
in prime localities across the metros have themselves become a major deterrent to
sustaining a profitable retailing model for organized players. A number of the
new chains have therefore preferred to spread in smaller metros, hoping to offset
lower revenue potential with lower real estate costs.
‘Time abundant’ consumers?:
In recent years, it would seem that the consumer has thrown the adage ‘time is
money’ to the winds. The customer is willing to spend more time if he/she is
getting a better deal. Scarcity of time seems to be the prerogative only of a few
consumers. The crowds inside Sarvana Stores or Jayachandran textiles in Pondy
Bazaar in Chennai, drive home the point that consumers are prepared to travel to
reach stores that promise best prices. The Indian model of organized retailing is
still in a stage of evolution, and retailers need to understand the value of retail as
a brand rather than remaining as retailers selling brands. However, the
characteristics of the branding process, which are of interest to the retailers, are
still the characteristics of the traditional product brands – they are simply
extended to the intangible part of the business. Thus, the characteristics of a
branded product, are simply applied in a different space.
What are the fundamental characteristics of a brand? While a myriad of
characteristics have been catalogued by several researchers on this subject, five
characteristics deserve mention:

34. (1) Recognizability:
A true brand is instantly recognized and identified. The brand name passes into
every day use (Nike’s ‘Just do it’) or becomes satirized (‘Don’t be such a
Duracell’) or appropriated (‘Make a Xerox of this document’). Indian retailers
like Shoppers Stop, the RPG Group’s Food World and Music World have
already earned national recognition. Subiksha in Tamilnadu and ‘Margin Free’
supermarkets in Kerala are household names in the two states.
(2) Meaning, story, value:
This is the second characteristic of a brand. The brand must have a value
proposition. It must stand for something and one of the most effective ways is to
have a story to transmit those values. Examples abound of effective leaderships
that have helped to build corporate brand values in other sectors, but few
retailers have succeeded in building a story to carry brand meaning. When they
do so, their power will increase.
(3) Legitimacy:
The meaning of the brand should be obviously appropriated by the target
customer group. Legitimacy rests on authority, earned by the brand and granted
by the customers. Lessons can be learned from social organizations like
Greenpeace, Medicins sans frontiers, CRY and Helpage India. In this case,
legitimacy rests on moral authority. In retail businesses it may rest on an
emotional authority (a unique shopping experience, a store filled with warmth
and friendliness.)
(4) Consistency, alignment:
A brand story should contain no internal contradictions and should be appear to
be consistent over time. It should be applicable across the business and attempt at
total brand integration.
(5) Proximity:
The brand building process should culminate with assuring the brand’s
proximity to the consumer. The brand’s definition gets expanded by opening
stores in a number of locations to make it convenient to the consumer.

35. Retail brand building
Product brands make life easier. They make it possible to recognize products,
which simplifies the decision making process. Furthermore, product brands make
the consumer a part of a group, they create a sense of belonging. But retail
brands do even more than that. These brands are visible platforms for kindred
spirits: the physical shop is a container for the entire retail formula and therefore
constitutes a large part of the retail brand. The tangible nature of retail makes
the familiar slogan ‘experiencing the brand’ most logical of all, in a physical
store.
Retail brands have gained in popularity in the past few years. Indeed, they have a
number of advantages above product brands. In the first place, they are closer to
the consumer. The physical store space offers the possibility of literally and
figuratively communicating with consumers at the moment of purchase (one-to-
one marketing). Retailers can show who they are and what they stand for through
the store formula. Moreover, in principle, retailers are neutral, because the
choice of product brand (or store brand, if present) is left to the consumers.
Retailers help consumers because they make a shrewd pre-selection and present
their product assortment in a specific manner. Once a consumer knows and
trusts a retailer and has good experiences and memories about a store, the
foundation has been laid for a long-lasting relationship that will ultimately lead to
customer loyalty.
Retail branding creates a brand preference, which goes beyond the
product or service in itself.

36. Retail Branding versus Product Branding
A great difference between product branding and retail branding is that in many
cases products have an anonymous or even fictitious presenter, whereas in retail,
consumers come in direct contact with the company and/or product. A Cadbury’s
Dairy Milk chocolate bar, for example, is a product made according to a set
recipe in a factory that is not open to the public. In addition, the people who work
there never come into contact with the consumers because the retail channel lies
in between. And those who do sell the ‘CDM’ to the end-consumer (the retailers)
do not have very much to do with it by virtue of their function. Therefore it is
possible to conceive a brand identity for the product, establish it for a specific
target group and then fix it in the minds of consumers. Compare the identities of
‘Five Star’ ‘Perk’, ‘Gems’ and ‘Temptations’: all very different, yet they come
from the same manufacturer.
Contrast this with a store like Food World, for example. Because of its direct
contact with the end-user, it must effectively live up to its brand reputation in
every aspect, every day. It is impossible for retailers to escape the need to
continually sustain the store brand. In a store, the entire retail organization is
revealed and the true nature of a company can be experienced. A retail store, as
said earlier, is the container that holds the entire formula. All the elements of the
formula (including the elements of the marketing mix) come together in-store.
The formula should be deliberately shaped from the standpoint of identity (the
‘brand’ of the retail organization) with mutual coordination of the elements being
important. What might it then mean, when branding is applied to retailing? The
issue is not of retailers selling brands but branding the retail business itself, like
the grocery supermarket chain or the fashion store. A hypermarket or
department store, may offer several well-known brands, but in today’s
competitive world cannot afford to rest on its strategic product assortment and
pricing initiatives to bring in the customers. The retailer must attempt to brand
himself differently, especially when today’s product brands are being launched
through their product brand’s own shops. (Examples in the shoe segment – Nike,
Adidas and Reebok. Jeans segment – Lee and Wrangler, Perfumes –Hugo Boss. )
A retail organization, like any other corporate company, will have to ensure that
its own brand includes the characteristics of product brands detailed above.
Retailers need to work on three dimensions to achieve this:
( 1 ) Brand value:
The retail brand has to embody and transmit clear values to the customer. (Like
‘value for money’, ‘Luxury shopping redefined’). Some companies have
attempted to define this in their mission statements but they are often too vague

37. and not actionable. For example the U.K. Virgin brand has the value of
challenging conventions and the U.S. retailer Nordstrom has a built a value of
customer service. While many Indian product brands have successfully weaved
values around their brands (Hamam on ‘trust’, Godrej on ‘quality’ and TVS on
‘service’) retailers are yet to develop a consistent value across their businesses.
(2) Brand strategy:
It is imperative that retailers have a systematic strategy on issues like whether to
develop the retail brand or corporate brand and decisions on one product/one
brand that they may be selling in their shop. Retailers can also decide to launch
high quality retailer brands (‘own labels’) backed by promotional campaigns,
reinforcing clear personalities. Pricing policies, today position retailer brands as
good value lines or premium lines (Nilgiris department stores prices its grocery
lines above manufacturer brand prices).
The view that retailer brands offer a cheaper alternative to manufacturer brand
is no longer valid. There is even scope for retailers to develop alternative types of
‘own labels’ targeted at different consumer groups in their outlets. An essential
ingredient for success, in such cases, must be consumer-relevant added values –
not just lower prices. It is only a minority of consumers, today, who are prepared
to trade off added values for lower prices. Experienced consumers are no longer
primarily motivated by low prices.
There is scope to attempt a retail segmentation strategy. For example, DCM
Benetton India redesigned its stores as per its international format and also
repositioned the brand from a casual wear brand to a wardrobe option. The
company is now attempting to target a niche audience through its concept stores.
It launched a ‘Baby-on-Board' store, which targets mothers-to-be and kids, an
`Accessories' stores that sells luggage, bags, sunglasses and vanity cases and an
‘Adults Only’ store that showcases Benetton's apparel collection for men and
women.
( 3) Brand structure :
Operational levels of the retail business have to be held together to integrate the
whole brand proposal. At this level, marketing, human resources, distribution,
logistics, administration and sales have to work towards a common brand value
that has to be communicated to the consumer. The retail brand’s messages must
be weaved into the every day experiences that the consumer has with the retail
brand.
Brand building constitutes a way in which the main value of the retail store shifts
to what has been traditionally called an intangible.

38. Indian Retailing is coming of age and needs to have a clear brand proposition to
offer the discerning Indian consumer. There is no doubt that the retail business is
gravitating from high street towards destination shopping (mall development)
with an estimated 10million square feet of mall space expected to hit the metros
and mini-metros across the country this year.
However, we need not assume that retailing at shopping-malls, is going to be
fundamentally different from shopping at the traditional shopping areas, except
that a mall has a more modern structure and in most cases brings multiple brand
outlets under a single roof. The local retailers moving into malls, however, have to
face the challenge of building brand recognition and loyalty right from scratch.
Most mall developers have on offer, the same combination of shopping
(International/national brands), Entertainment (Theatre Multiplex) and food
(McDonald’s/Pizza Hut/Café Coffee Day) in their malls. It is therefore not
surprising to note, that many mall visitors come out having no shopping bags,
since they have been enticed to visit only for watching a movie and / or having a
burger or a pizza or even a cup of coffee. Malls are also fast becoming a place
that youth can ‘hang out’, but if the crowds do troop in, but the cash registers are
not ringing, it can harm the serious business of retailing and hurt this nascent
industry on the growth path.
The critical lesson for mall developers is, to invest some quality effort in
understanding the shopping-needs of customers in their targeted areas, and then
build a carefully planned portfolio of retail options that can meet the needs of
these targeted customers. Mall developers also have to create distinctive (brand)
identities for their specific malls.
It is equally important for the would-be retailer tenants, to realize that merely
moving into a mall does not build their brand or guarantee business for them.
They have to work as hard to draw consumers to their own stores once the latter
have entered the mall, and then have the right value proposition for them, to get
them converted into customers, and then to become repeat customers. Building a
differentiating brand identity would work for both the mall owner and the mall
retailer.
We are also seeing organized Indian retailing in several businesses that speaks
volumes of the staggering potential for the expansion of this sunrise sector in our
country. But here again, the early initiatives in the sectors illustrated below seem
to rely more on novelty and excitement of newer ambiences rather than truly
investing in brand building .

39. Gourmet coffee retailing:
The organized coffee retail business is estimated at Rs.250 crores and is showing a
growth rate of 40%. Apart from the Quickys, Café Coffee Day and Baristas
chains, the Tatas have aunched their Bean Coffee Junction chain in Chennai.
Coffee World an international gourmet coffee chain is set to launch its outlet in
Bangalore this year. Reliance is offering gourmet coffee at some of its Reliance
WebWorld outlets under the brand name ‘Java Green’. There are not more than
350 outlets in the organised sector today but retail consultancy KSA Technopak
opines that India’s potential for coffee retail outlets could be around two
thousand. However the coffee retailers are already cloning each others’ strategies
- by offering that “total experience” — right coffee, food and ambience with Wi-
fis and jukeboxes — to pull customers, across all their outlets and consumers are
finding it hard to identify themselves with any one outlet.
Lifestyle retailing :
Chennai has witnessed a manifold increase in the total retail space devoted to
non-grocery or lifestyle retail. The four major lifestyle retailers — LifeStyle,
Westside, Shoppers' Stop, and Globus — alone account for a little over 200,000
square feet of retail space. Add to that the retail space of the traditional apparel
retailers such as Nalli's and Kumarans and the recent entrants such as Pothy's,
R.M.K.V and Chennai Silks and that of the scores of multi-brand outlets, the
figure shoots up. The reasonable real estate prices, overall lower cost of
operations and accessibility to consumers vis-à-vis other metros, have spurned
the growth of organized retail at Chennai. But, on the brand building front, the
story is no different. A retail analyst has already observed that Chennai is over-
retailed in the lifestyle segment, with little differentiation among the players.
Petrol pump retailing :
As consumers, we have been noticing how India’s state-owned petroleum
companies are undertaking a massive image improvement, makeover and
differentiator exercise. From signage to logos to canopies, clean floors, channel
music, lighting, convenience stores, uniformed attendants, internet browsing and
promotion schemes, the public sector pumps are working hard at delivering a
new experience to the Indian motoring consumer. All this, of course, is being done
as part of a bigger game plan to cope with the coming private sector competition
from Reliance, Essar and Shell. Let’s wait and watch whether public sector
hindsight into branding pays off for them in the face of private competition in the
next few years.

40. Indian Retail Brand Building – the road map ahead
There is no doubt that the Indian retail shopping experience has been enhanced
by giant superstores and shopping malls across our country. They should
however learn quickly to build the retail brand directly and not look to factors
like prime location, value pricing or product assortment to build their businesses.
Indian retailers, to build a strong retail brand presence, can use the following
strategies.
Relationship management to enhance in-store shopping experience:
Competition will force retailers to think about their customers as individuals,
analyze their shares of customers and calculate their customer lifetime values.
Retailers need to build data bases using in-store data collection and launch
frequent shopper rewards, carry on an interactive communication with them,
make special offers, drive traffic and add value outside the in-store relationship.
Retail brands get built by developing personal relationships with consumers
rather than only through product and pricing. For example, staff should be
trained to recognize their V.I.P customers. ‘Soft’ rewards for V.I.P customers
include priority service, free gift wrapping, enhanced guarantees and sales pre-
notifications. ‘Hard’ benefits include privileged rewards and extra value offers as
well as straight discounts.
The quality of management of the customer is becoming an increasingly
important source towards building the retail brand. Education and training of
staff needs to be done to enhance customer service. Local store management can
be empowered to maximize the value of each customer visit. Analysis of customer
behavior can guide store merchandising to match the profile of their customers
and even the needs of the shoppers at different times of the day.
External communication to add value outside the store:
Retailers use advertising to build their brands and promotions to drive store
traffic. Retailers have, still not felt the concept of individual customer
communication outside the stores as a necessity. It is necessary that they seek to
add a new form of dialogue with their customers. Retail chain Subiksha, for
examples, mails a broadsheet to its customers giving them details of the
promotional offers available and price comparisons across brands that helps its
customers to take more informed decisions.

41. Motivating the staff to volunteer value :
The quality of in-store service is a key factor in differentiating the retailer and
winning a higher share of customer spend. In one survey, shoppers were asked,
would they ask for the same salesperson on their next purchase visit; the ‘yes’
respondents were found to more likely give the store a 8-10 rating. On the other
hand, shoppers unhappy with the salesperson gave the store a very low
performance on overall service and performance. Staff must be trained and
motivated to recognize their best customers and to offer them superior service.
Successful retailing has always been said to be, about getting the nitty-gritty right
of merchandising, forecasting, the supply chain, training and recruitment of high
quality personnel and category management. Building retail brands that offer
value will, in future, overshadow all these areas, and emerge as the dominant
reason for the success of the organized Indian retailer. Indian retailers should
also understand that the retail experience has become a popular leisure activity
and they are vulnerable to any new competition for customers’ entertainment.
Indian retailers must build their brands with images that seek to entertain and
involve their customers. It is the quality and value of the retail brands that they
have sought to establish that will determine the loyalty of the retail shopper in
future.

42. AN OVERVIEW OF INDIAN LEATHER INDUSTRY
India : Leather industry should focus on the US
February 2, 2007
Leather industry should change its focus to creation of
jobs, production for mass market, from Europe to the U.S.
and from Tamil Nadu to the rest of India, said Minister of
State for Commerce Jairam Ramesh at the inauguration of
India International Leather Fair 2007, at Chennai Trade
Centre on Wednesday.
Anti-dumping duties slammed on China and Vietnam recently has given India an
opportunity to enter high-volume, low-value footwear market, informed the
Minister.
To reach the U.S. market India would require to expand its capacity, said Union
Minister for Communications and Information Technology Dayanidhi Maran,
who inaugurated the fair.
State governments should encourage the industry as the U.K. market may
require 10,000 pairs of shoes per order the U.S. on the other hand would require
production of 100,000 to 200,000 pairs.
For India to compete with China in the U.S. footwear market, logistics needed to
be improved and Shipping Ministry would require to start a direct container
shipping link from Chennai port to the U.S. and Europe which presently gets
routed through Colombo or Singapore.
It was also important to generate half a million new jobs in leather sector while
attempting to reach leather exports target of $7 billion by 2011, Ramesh said.
Council for Leather Exports' (CLE) Rs 7 crore project being carried out in
Kancheepuram district was lauded by Ramesh.
The project will be expanded to six other districtsacross the country.
CLE should also establish such centres in Tamil Nadu, Uttar Pradesh, West
Bengal, Andhra Pradesh and Punjab, besides focusing on Bihar and Assam, he
said.

43. Indian leather industry poised to double its global share by
2010
Chennai, Feb.3 (ANI): Indian leather exports is poised to double its global market
share by 2010, an industry representative said during the 22nd India
International Leather Fair here on Saturday.
India currently has a share of 2.51 percent in the 97.606 dollars billion global
leather market.
quot;We have a big plan. Today, the industry has exports of about three billion
dollars and, we have a plan to increase it to seven billion dollars in the next four
to five years. Today the share of leather industry in the world leather trade is
about 2.5 percent, and when we will have seven billion dollars worth of export,
the share will go up to five percent,quot; said, Mukhtar-ul Amin, the Chairman of the
Council of Leather Exporters.
According to projections made by Confederation of Indian industry (CII), leather
exports are going to increase to nine billion dollars by 2010 from six billion
dollars in 2005-06.
India however still has a long way to go to match its rival China, which dominates
the global leather market with over 20 per cent share.
Industry representatives however, say the country needs to boost its animal
husbandry to match China's capability.
quot;We do not have any organized farming in India, like we have in England,
Holland or ay European country we got to have animal farming. America and
Brazil are biggest meat exporters only because of animal farming. We have to
take care of animal husbandry the quality of animal has to be improved,quot; said
Anil K Sodhi, a leather exporter.
They are hopeful of benefiting from India's growing retail sector to boost its
domestic market especially in footwear.
The four-day annual leather fair organized here, was an attempt to showcase
India's technological advancement in the field.
Over 300 exhibitors, including overseas participants, showcased their leather
goods and related technologies. Products exhibited in the fair include finished
leather of all kinds, shoes, shoe components, leather garments, handbags and
wallets.
quot;From the manufacturing point of view I think India has a very much advanced
skills and technology and is able to compete in the world market with its finished

44. goods,quot; said, Christopher Breuninger, a German exporter showcasing his
products at the fair.
The United States, single largest buyer of Indian leather goods, accounts for 18
percent of the country's leather exports.
The huge size of the Indian market, the easy availability of skilled labour, the
abundance of high quality raw material and a strategic location have attracted
various international players in the leather industry.
Indian leather, which is among the top eight foreign exchange earners, employs
around 2.5 million people, 30 percent of whom are women. (ANI).
India : Italy to assist Bengal leather industry
February 14, 2007
The state’s leather industry will get a boost with
technical assistance from Italy along with the setting up of
a training centre in leather technology and a regional
office for trade in the city.
The project will be undertaken by Italian Trade
Commission spending € 1 million in the process,
informed Massimo Mamberti, CEO and Managing
Director, Italian Institute for Foreign Trade.
Chief Minister Buddhadeb Bhattacharjee welcomed
Italian assistance in areas of joint interest, including leather, while addressing the
“Indo-Italian Synergy: Destination West Bengal” forum here on Tuesday.
Bhattacharjee, sharing the dais with the visiting Italian Prime Minister, Romano
Prodi, said The regional leather industry is a major partner for Indian leather
goods production and the leather complex (at Bantola) can benefit greatly
through Italian expertise.
Besides leather and food processing, Italian businesses are exploring sectors of
mutual interest too.
“Textile industry, fashion technology are also sectors of interest. Italy is spending
€ 10 million in India within one year for promoting trade,” Mamberti said.

45. India : Council for Leather Exports - Vision 2010 - 2011
February 15, 2007
Leather Exports' vision map for 2010-2011 by Council for Leather Exports
(CLE) chairman Mukhtarhul Amin.
1. The road map of CLE for increasing the exports from $ 3bn to $ 7bn
Council has developed a prospective plan for increasing exports to US $ 7 Billion
by 2010-11. The plan envisages major interventions in the areas like capacity
building, increasing the scale of production, diversifying in to non-leather
footwear manufacturing, Design improvements to Indian products etc…It is
estimated that about Rs.7,300 Crores would be required in the form of
investments in the next five to six years.
According to the road map, footwear would continue to be the
largest segment of exports constituting about 56% of the total exports and to a
value of US $ 4.3 Billion out of the total US $ 7 billion. This would be followed by
Leather articles and finished leather. Percentage of Finished leather would
decrease from the present 24% to about 18% and the leather articles would
increase from 26% to about 28%.
2. Increase in tanning and production capacity to meet the 1 m. footwear
The present tanning capacity of 2 Billion Sq. ft would be doubled to 4 Billion
Sq.ft. In the case of footwear, the present capacity of 2, 50,000 pairs a day would
increase to 1 million pairs a day. This means an increase of 7, 50,000 pairs a day.
This increase comprises of both leather and non-leather footwear. Non-leather
footwear would increase in large numbers as compared to the leather footwear.
In the case of Leather garment the capacity would be additional 45, 000 pieces a
month and in Leather articles, about 6 million pieces would be added every
month to the existing capacity.
3. Developing tanning clusters
Two Tanning clusters are planned for increasing the tanning capacity. One to be
implemented by the Government of Andhra Pradesh near Nellore is yet to take
off. Once the issues concerning the water sources is sorted out, a tanning park in
about 300 acres of land would be developed by ILFS for the government of
Andhra Pradesh. With regard to the another park, we would discuss and decide
the location.

46. 4. Special economic zones for production
There is one SEZ footwear park being developed by Government of Tamil Nadu
in Sriperambattur near Chennai. This park would have a salable area of 105
Acres and could house about 20 units. The total capacity of the park could be
about 1, 00,000 pairs a day. However, in the perspective planning, five SEZ were
envisaged all over the country.
5. The countries been targeted
The Council for Leather Exports has identified USA as a focus market for
Footwear. CLE has also identified Scandinavian countries as other focus
countries.
6. Targeting big global brands and top companies and aggressively going after
them to make an investment in India Council is planning to attract investments
from some of the major producers in the east and west. Some of the major
footwear manufacturers from China are already planning to invest in India. We
would in the next two or three years would like to have investments from some of
the western European countries as the leather industry there is increasingly
facing problems due to labor cost. In this regard, Council would formulate
strategy for presenting the country’s credentials as an investing destination.
7. Countries planning to enter India A Taiwanese company APACHE has
invested in TADA, near Nellore in Andhra Pradesh and another Taiwanese
company FENG TAE is proposing to invest in Cheyyar, near Chennai for
producing Non-leather footwear. There are other major companies planning to
invest in India. However, these are in the initial stages only.
8. Shift of focus from men's shoes to women and children Of late there is
considerable shift towards ladies shoes from the traditional way of making more
men’s shoes. In the year 1998-99, men: ladies used to be 71 : 29 and the same in
the year 2005-06 was 56 : 44. This clearly indicated the shift in favor of ladies
shoes to men’s shoes.
9. Change in technology in leather processing There is no major change in the
tanning technology as such but there are number of improvements in the leather
processing either in terms of using lesser water and chemicals than in the past or
in terms of getting wide range of finishes for the leather.
10. Changes in fashion requirements for export market Fashion keeps changing
every season. For ladies wears the fashion changes every season and for men’s
wears the fashion changes a bit slower. Therefore, for the makers of the ladies
fashions, they need to keep in tune with the changing fashions more frequently
than the others.

47. Europeans turn to Indian leather as China gets tough
RATNA GANGULI & RAKHI MAZUMDAR
TIMES NEWS NETWORK [ TUESDAY, FEBRUARY 20, 2007 ]
KOLKATA: The recent clampdown by China on polluting tanneries has come as
a boon to Indian leather goods exporters. Several tanneries in China have closed
down owing to strict implementation of environment laws. The Chinese industry
has also been hit by the 30% rise in prices of raw hides and skins globally.
Against this backdrop, India’s acknowledged status as a high-quality leather
processing centre and availability of skilled labour compared to China seems to
have turned the focus of leading European buyers of leather goods on India.
Interest about Indian leather goods is increasingly been shown by Italy, which as
the world leader in leather products is becoming more active in stitching up joint
manufacturing and sourcing ties with India.
Reflecting Italy’s interest in India as one of the sourcing hubs for leather goods, a
10-member consortium of buyers from Italian Leather Goods Manufacturing
Association (ILGMA) is coming to Kolkata, a key leather processing centre,
between February 23-25, to participate in a leather fair.
The consortium represents around 100 retail outlets in Italy. The exhibition is
part of an annual event organised by Indian Leather Products Association
(ILPA), in association with Indian Trade Promotion Organisation (ITPO) and
Council of Leather Exports (CLE).
Apart from Italy, 35 buyers from Spain, Germany, the UK, the US and a couple
of Latin American countries will also participate in the fair. Incidentally, a
separate team of Italian buyers also visited another leather hub, Chennai,
between January 31 and February 2 to forge similar alliances.
“These Italian companies control about 100 retail leather goods outlets in their
country, their participation in the fair is expected to generate export orders for
West Bengal based leather goods units,” said Yogesh Gupta, chairman of trade
development subcommittee under ILPA.
Buyers are essentially looking at sourcing high quality but low volume leather
accessories like bags, wallets and laptop cases, mobile phone covers. “China
specialises in low cost, high volume output, which is completely reverse in case of
India. This is yet another factor that seems to be working in our favour,” he
added.

48. ILPA is counting heavily on ILGMA participation in the fair because Italy as the
largest manufacturing hub of leather goods in Europe is more interested to
source leather goods from India in the wake of uncertainties of getting steady
supply of such goods from China owing to the recent shut-down of several
tanneries in that country, said Paresh Rajda, former president of ILPA.
Apart from facilitating a buyers-sellers meet in the fair, ILPA is also organising a
series of workshops to make Indian producers aware about country-specific
environmental laws, security measures in packaging and social auditing.
Since it wants to make members aware about latest trends in international
fashion in leather goods and accessories, it has invited leading Italian design
studio, Arpel, to set up a stall at the fair.
West Bengal, with exports of Rs 1,800 crore, is the largest exporter of leather
goods in the country. With this, the state contributes more than 60% of the
country’s leather exports.
Indian leather goods as a whole for its better quality and designs are fast
improving acceptability in the global market. Price-wise, goods are positioned in
the middle-segment of the market, which is higher than low quality Chinese
goods, but lower than internationally acclaimed global brands.
ratna.ganguli@timesgroup.com

49. The Indian leather industry comprises the following key sub-sectors - tanning
and finishing, footwear, footwear components, leather garments and leather
goods and accessories. A large part (nearly 60-65 per cent) of the production is
done by the small/cottage sector.
Leather and leather products production is
centred in southern, northern and eastern India. Key production units are
located in Tamil Nadu, West Bengal, Uttar Pradesh, Punjab, Karnataka, Andhra
Pradesh, Haryana and Delhi. Tamil Nadu is the biggest leather exporter in the
country with the south accounting for 43 per cent of the country’s share. The
industry uses primarily indigenous natural resources with little dependence on
imported resources.
The Government of India has announced
various initiatives to make the leather industry more competitive. A few
initiatives are:
Concessional duty on imported machinery and chemicals.
•
Free export of raw hides & skins, semi-finished and finished leather and
•
leather products.
Policies to facilitate modernisation / upgradation: In June 2005 the
•
government initiated a US$ 64 million ‘modernising scheme’ called the
‘Integrated Leather Development Programme’, whereby all leather
tanning and product units will be eligible for modernisation assistance.
The assistance will be to the extent of 30 per cent of project cost for SSI
units and 20 per cent for non-SSI units, subject to a ceiling of US$ 110
thousand per unit.
Setting up of leather parks: An outlay of US$ 24.5 million for setting up
•
five leather parks — two in Chennai and one each in Nellore, Agra and
Kolkata. 12 The Council for Leather Exports has estimated that this
scheme will generate a total investment of US$ 267 million in about three
years.
Establishment of ‘design centres’ at individual manufacturing units, to
•
facilitate improvement in design capabilities: Under this scheme, 25 per
cent of the project cost is provided to the units under the market access
initiative scheme of the Ministry of Commerce and Industry. Several
individual units have come forward to establish their own design centres.

50. Indian Leather Industry: Perspective and
Export Potential
World Livestock Population
Hides and skins are the basic raw materials for the leather industry, which
originate from the source of livestock. There was an upsurge in the number of
bovine animals and goats and kids during 1990-2005, while population of sheep
and lambs was on a decline. Developing countries accounted for around 78% of
the total population of bovine animals and 93% of world population of goats and
kids in 2005. World bovine animals population stood at 1,529 million heads in
2005. India had the largest number of bovine animals (283 million heads) with a
share of 19% followed by Brazil (13%), China (9%) and USA (6%). World sheep
and lambs population stood at 1,079 million heads in 2005. With a total
population of 170 million heads, China had a share of 16% in the world sheep
and lambs population. India (6%) lagged behind at third position, with a
population of 62 million heads. World goats and kids population stood at 807
million heads in 2005. China has the highest population of goats and kids, which
stood at 195 million heads in 2005. Although in 1990, India had the highest
population of goats and kids (21% of the total), it was overtaken by China in 1995
and the gap between the two countries has been widening.

51. World Raw Hides and Skins Production
World production of raw hides and skins was nearly 7 million metric tonnes, of
which production of bovine hides and skins alone accounted for 90% in 2004.
Developing countries are the major producers of raw hides and skins. China
played a significant role in turning developing countries as the major source of
global imports of raw hides and skins.

52. World Leather Exports
World leather exports grew moderately, by a CAGR of 7.3%, from US$ 46 billion
in 2000 to US$ 61 billion in 2004. World leather exports can be categorised in to
raw hides and skins (40%), leather articles (49%) and furskins (11%).China,
Hong Kong, Italy, USA and France are major exporters of leather in the world.
World leather articles exports increased by a CAGR of 8.06%, from US$ 22
billion in 2000 to US$ 30 billion in 2004. China constitutes 34% of the total
leather articles exports. Hong Kong (17%), Italy (11%) and France (9%) are
other major exporters. India’s exports of leather articles have stabilized around
US$ 1,033 million in 2004.
World Leather Imports
World leather imports can be classified in to raw hides and skins, leather articles
and furskins, with a share of 38%, 55% and 7% of the total world leather
imports, respectively. Leather articles is predominantly imported by USA, Spain,
UK and Belgium; whereas China, Mexico, Turkey and Romania are mainly into
imports of raw hides and skins. Hong Kong, USA and Italy are chief importers of
furskins. World imports of leather articles is estimated to have grown marginally
from US$ 27 billion in 2000 to nearly US$ 34 billion in 2004. USA, the largest
importer of this product, is predominantly captured by China. China’s share in
USA’s import of leather articles has increased gradually, from 54% in 2000 to
70% in 2004.

53. Indian Scenario
With about 15% of the world livestock population, India accounted for only 8%
of the leather production in 2002. The Indian leather industry consists of 42,000
small-scale industry (SSI) units, which account for 75% of the total production.
Nearly, 2.5 million people earn their livelihood from this sector. A survey by
Central Leather Research Institute (CLRI) estimated that about 1,600 tanneries
were present in India in 2000. The concentration of tanning industries is mainly
in Tamil Nadu, with a share of 52%. Other states where tanning industry is
concentrated include West Bengal and Uttar Pradesh. Small scale sector accounts
for large processing capacity ranging from 70-87% for different leather
products.
Exim Bank of India’s Role in Promoting Indian Leather
Sector
Export Import Bank of India (Exim Bank) has helped the leather exporting units
to modernize and upgrade their production facilities, install pollution control and
environmental safety systems of internationally accepted standards and develop
export market for value added products through strategic export market
development plans. Exim Bank implemented Agency Line of Credit and Export
Development Project, joining hands respectively with International Finance
Corporation (IFC), Washington and the World Bank to support small and
medium enterprises in the leather sector.
Composition of Indian Leather Exports
Composition of Indian leather
exports has undergone a radical
change, from being a mere
exporter of raw hides and skins,
to a status of an exporter of value
added leather products. From
1991-92, India has been exporting
only finished leather because of
export restriction on semifinished
leather. Total leather and leather
manufactures exports stood at
Rs.10,286 crores in 2004-05.
Leather footwear is the largest
component of leather exports,
with a share of 26%.

54. Indian Leather Exports
In 2004-05, the industry recorded a
satisfactory 5.8% export growth to reach
a level of US$ 2.3 billion. Although,
leather exports have increased in
absolute terms, its share in total exports
have declined in percentage terms from
a high of 7.99% in 1990-91 to 2.89% in
2004-05.
Major Export Markets
The main export markets for India
are Germany, USA, Italy, UK and
France. Due to the two bans
imposed by Germany on imports
from India, there was a lull in
India’s exports in 2002-03. Slowly
and steadily, it picked up pace and
stood at US$ 326 million in
2004-05. Exports to USA, which
was US$ 343 million in 2000- 01,
dropped to US$ 243 million in
2002-03 and was at US$ 266 million
in 2004-05.

55. Analysis of India’s Export Potential
India’s major export markets for leather handbags are USA, Germany, UK and
Spain. In UK and Spain, Italy is the top exporting country of leather handbags.
However, China has overtaken Italy and emerged as major exporter in markets
like USA, Canada, Hong Kong and Russia. India has lot of potential in these
markets, as it has unique advantage of economies of scale and capability of
producing niche products. Footwear is a critical segment for the Indian leather
industry as this is expected to be the engine of growth for the Indian leather
sector. Currently, the trend in export of Indian footwear has been encouraging;
however the trend for footwear components exports has been declining. India’s
exports of footwear components have dropped from US$ 238 million in 2000-01 to
US$ 164 million in 2004-05. Top importers of leather footwear uppers in the
world are China, United Kingdom and Canada. World leather garments exports
have increased over the years. USA, Germany and Japan were the largest
importers of leather garments in the world in 2004. India was placed among the
top three exporting countries of leather garments in these markets. Further,
India is the largest sourcing partner of leather garments to Spain and Italy, which
are the major markets for Indian leather
garments. India’s other major export markets are Germany, USA and France.
But, India must be cautious of China, as its unit price of leather garments is
cheaper than that of India.

56. Major Issues Affecting the Sector
The issues that are hindering the export growth of the Indian leather industry are
as follows:
Environmental Issues
The leather industry is traditionally considered as a polluting industry in the
tanning and finishing stages of the production chain. Global standards set by
importing countries affect the entry and increase the cost of market access to
products of developing countries. Usage of many chemicals has been banned by
various countries. The product specifications for leather are constantly under
review, leading to greater stringency.
Impact of PETA
Campaigns by NGOs, such as People for Ethical Treatment of Animals (PETA),
related to cruelty against animals have led to boycott of Indian leather products
by many foreign companies.
WTO Related Matters
With the advent of WTO, the average and bound tariffs for manufactured
products have fallen in the developed countries. However, the average and bound
tariffs for leather products remain relatively high. Many developed countries are
implementing Technical Barriers to Trade (TBT) as Non-Tariff Barriers to
restrict leather exports from developing countries like India.
Cost Escalation
Leather exporters have to meet domestic as well international environmental
norms. Testing and certification requirements add to the costs of leather
manufacturers. However, it is observed that small supplier firms may not be able
to comply with stringent environmental standards. High costs of compliance
impose real economic costs on firms.
Chinese Competition
Chinese leather industry ranks top on the raw material resources, product yield
and import and export trade in the world. China is one of the major competitors
to India’s leather sector as it has the capability to produce large volume at low
price. Chinese leather exports have increased by three-fold after its entry into
WTO.

57. Competitive Advantages
The leather industry can benefit from several characteristics of the Indian
market and the corresponding advantages they offer.
Some of these advantages are:
1) Supply side advantages
• Availability of low cost skilled labour
• Abundance of raw material
• Availability of supporting institutions to develop the industry
2) Demand side advantages
• Large and growing domestic market
3) Regulatory / Policy related advantages
Supply side advantages
• Availability of low cost, skilled labour
India’s advantage as a source of low cost, skilled labour is quite relevant to
industries such as manufacturing of leather goods and footwear that are
relatively labour intensive. India has among the lowest cost of labour among key
footwear producing countries. In addition to low costs, India also has the world’s
largest technically trained manpower in leather craft. The twin advantages of low
cost and technical skills offer India a distinct competitive advantage in this
industry.
• Availability of Raw Materials
India is the largest livestock holding country with 21 per cent of the large animals
and 11 per cent of small animals in the world. The large population of cattle,
buffaloes, goat and sheep that the country possesses ensures that India has ten
per cent of the world’s raw material base. In addition, some of the leather
available in India is premium quality and much sought after.
• Availability of supporting institutions
India has institutions that support the leather industry in specific areas such as
product development, design and R&D. These institutions enable capability
building in the industry and help it become globally competitive.

58. • Product development/ design
A design development centre for leather garments and leather accessories is
underway under the joint efforts of the Council for Leather Exports and the
National Institute of Fashion Technology (NIFT). The design development centre
functions from the NIFT campus in New Delhi.
Research and Development capabilities The Central Leather Research Institute
(CLRI) (is the world’s largest leather research institute. CLRI today, is a central
hub in Indian leather sector with direct roles in education, research, training,
testing, designing, forecasting, planning, social empowerment and leading in
science and technology relating to leather. State-of-art facilities in CLRI support
innovation in leather processing, creative designing of leather products and
development of novel environmental technologies for the leather sector.
Demand side advantages
• Large domestic market
India has a large and growing consuming class (with an annual income of US$
449 or above), that constitutes the largest segment of the population today. This
segment is estimated to constitute nearly 90 million households by 2006-07, up
from just 32.5 million households in 1997-98 – a CAGR of over 12 per cent.
Coupled with relatively lower penetration levels - penetration levels for footwear
has been estimated to be about 60 per cent – this represents a large and growing
market for leather goods.

59. Government Regulation & Support
The Government of India has announced various initiatives to make the leather
industry more competitive. Key policy initiatives include:
• De-licensing of integrated tanneries that convert raw hides and skins into
finished leather.
• Several leather goods have been de-reserved from the Small Scale sector.
• Free import of raw hides & skins, semi-finished and finished leather.
• Concessional duty on imported machinery and chemicals.
• Free export of raw hides & skins, semi-finished and finished leather and
leather products.
• Policies to facilitate modernisation / upgradation: In June 2005 the
government initiated a US$ 64 million ‘modernising scheme’ called the
‘Integrated Leather Development Programme’, whereby all leather
tanning and product units will be eligible for modernisation assistance.
The assistance will be to the extent of 30 per cent of project cost for SSI
units and 20 per cent for non-SSI units, subject to a ceiling of US$ 110
thousand per unit.
• Setting up of leather parks: An outlay of US$ 24.5 million for setting up
five leather parks — two in Chennai and one each in Nellore, Agra and
Kolkata. 12 The Council for Leather Exports has estimated that this
scheme will generate a total investment of US$ 267 million in about three
years.
• Establishment of ‘design centres’ at individual manufacturing units, to
facilitate improvement in design capabilities: Under this scheme, 25 per
cent of the project cost is provided to the units under the market access
initiative scheme of the Ministry of Commerce and Industry. Several
individual units have come forward to establish their own design centres.