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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 Retail5) 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.



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 andhyper 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.

"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,"

says Chandru Chandiramani, deputy general manager (retail) of the textilesdivision 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



E



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



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 otheremerging 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

ParameterChina India

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



Table 2

Country Share of organized trade (per cent) (2003)

India 4

China 17Poland 20

Indonesia 30

Russia 33

Brazil 35

Thailand 40

Malaysia 55

USA 85

010

20

30

40

50

60

70

80

90

Share of organised trade (per cent) (2003)

India

China

Poland

Indonesia

Russia

Brazil

Thailand

Malaysia

USA



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 acompounded 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)



Table 4: Organized retail market in India



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 / highervalue 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 percent 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 andoperational 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.



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 risingdemand 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.



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 (manufacturedwith 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



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



3



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.

a) Product –

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.

b) Prices –

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.

c) Place –

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.



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.

Consumer Behavior

P H Y S I C A L

E N V I R O N M E N T

H O S P I TA M B I E N C EI N F R A S T R U C T U R E



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 rationaland 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



(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.



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 othersdon’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.



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 orservice, 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 yourconsumers 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.



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.



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.



For the retail chains in agri-produce, efficiency of logistics is critical and can

indeed leverage the brand to a great extent.



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 tradingpartners 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



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.



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 projectedconsumer 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 marketingintelligence 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.



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-levelassortments?

• 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



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 beingbelied. 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’.



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 500square 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 widelyaccepted 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. 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 insetting 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 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 tothe 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:

(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 tohave 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.



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. Butretail 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 theproduct or service in itself.



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. ACadbury’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 detailedabove.

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

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 weavedvalues 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 (Nilgirisdepartment 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.

Indian Retailing is coming of age and needs to have a clear brand proposition tooffer 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 .

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 anddifferentiator 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.



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.

R elationship 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 launchfrequent 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 customercommunication 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.



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 otherhand, 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.



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 UnionMinister 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, hesaid.



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.

"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," 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.

"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," 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.

"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 goods," 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 attractedvarious 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 welcomedItalian 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.



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.



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 couldbe 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 investmentsfrom 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 toinvest 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 inthe 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.



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 thecountry’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.

[email protected]



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.



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.



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 leatherin 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 arechief 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.



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 byCentral 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

SectorExport 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%.



Indian Leather Exports

In 2004-05, the industry recorded a

satisfactory 5.8% export growth toreach 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. Slowlyand 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.



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 marketslike 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 placedamong 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.



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.



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.



• 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.



Licensing policy

After the dereservation of 11 items in the leather sector, which include semi-

finished hides and skins, leather shoes, leather washers and laces, moulded

rubber soles and heels for footwear, flexible polyurethane foam, polyurethane

shoe soles, shoe-tacks & eyelets and leather pickers and other leatheraccessories for textile industry, vide Notification No. SO 603(E) dated 29 June,

2001; no Industrial Licence is required to manufacture of most of the items of

the leather industry. The location of industrial projects will, however, be subject

to central or state environmental laws or regulations including local zoning and

land use laws and regulations. Industrial undertakings desiring to set up

industrial undertakings for manufacture of these items have to only file an

Industrial Entrepreneurs’ Memorandum (IEM), in the prescribed format, with

requisite fees to Secretariat for Industrial Assistance in the Department of

Industrial Policy & Promotion, Government of India, Udyog Bhawan, New

Delhi-110011. Some of the items of the leather industry, viz. leather shoe uppers

(closed), leather sandals and chappals, leather garments, industrial leathergloves, leather suitcase and travel goods, leather purses and hand bag, fancy

leather goods and novelty items, watch straps and leather straps of all types are

still reserved for exclusive manufacture by the small scale sector. Small scale

sector units are defined in terms of investment in plant and machinery. Non-

small scale units can manufacture these items after obtaining industrial licence,

which is granted subject to an export obligation of 50 per cent of the production

each year.



Key Domestic & Foreign Players

Superhouse Leathers

Superhouse Leathers Ltd. was incorporated in 1980 by a private Indian party to

produce shoe uppers. The company has plants at Jaimau (Kanpur Dehat, Uttar

Pradesh) producing leather goods, at Kanpur (Uttar Pradesh); shoe uppers, at

Noida (Ghaziabad, Uttar Pradesh); leather and textile garments, at Sikandra

(Agra, Uttar Pradesh); shoes at Unnao (Uttar Pradesh) shoes and sole leather,

at Unnao (2 plants; in Uttar Pradesh) producing chrome leather and chrome

leather (skins). Revenue for the year 2004-05 was US$ 45 million. Mirza

International Mirza Tanners Ltd. was incorporated in 1979 by the Mirza

Tanners Group to produce leather shoes. The company has plants at Juhi,

Kanpur Nagar (in Uttar Pradesh), for manufacturing shoe uppers and shoes; at

Magarwara, Unnao (Uttar Pradesh) for bags, finished leather, shoe uppers and

shoes; at Noida, Ghaziabad, in Uttar Pradesh, which produces shoe uppers and

shoes and another at Shahjani, Unnao (Uttar Pradesh) which produces bags,

finished leather, shoe uppers and shoes. Its revenue for the year 2004-05 stood

at US$ 57 million.

Bata India Ltd.

Bata India Ltd. was incorporated in 1931 by a private Indian party and mainly

produces leather shoes. The company has plants at Bangalore (Karnataka),

Bataganj (Patna, Bihar), Hosur, (Dharmapuri, Tamilnadu) and at Batanagar

(North 24 Parganas, West Bengal) producing leather footwear; at Faridabad inHaryana producing rubber & canvas footwear and at Mokamehghat (Patna,

Bihar), which produces finished leather from hides. Bata India Ltd. is an

affiliate of the Toronto based Bata Shoe organisation. Bata India had revenues

of US$ 158 million in the year 2003-04. Liberty Shoes Ltd. Liberty Shoes Ltd.

was incorporated in 1996 by a private Indian party and produces shoes. The

company has plants at Kutail, (Karnal, Haryana) producing Eva co-polymer

compound, lshoe uppers, leather shoes, non leather shoes and rubber chappals

(slippers). The revenue for the year 2004-05 was US$ 44.5 million and the profit

stood at US$ 2.2 million.

Bhartiya International Ltd.

Bhartiya International Ltd. was incorporated in the year 1987 by a private

Indian party. The company mainly produces leather apparel and clothing

accessories. The company has a plant at Bangalore, Karnataka, producing

leather garments. The revenue and profit for the year 2004-05 was US$ 21

million and US$ 1 million respectively. Lakhani India Ltd. Lakhani India Ltd.



was incorporated in 1981 by the Lakhani group and produces leather shoes.

The company has plants at Faridabad in Haryana for producing leather shoes.

The revenue and profit for the year 2004-05 was US$ 28 million and US$ 0.6

million respectively. Forward Group

The company generated revenues of US$ 25 million in 2003. Nearly 90 per cent

of its revenue comes from the UK market. The Forward group has entered intoa first-of-its-kind joint venture with Conceria Virginia Italy (CVI), a 10-year-

old Italian tannery, specialising in leathers for shoes and leather goods, and has

set up a six million sq. ft state of- the-art leather manufacturing facility in

Chennai. This is the first FDI in the tanning sector in India with investments by

both partners, ‘raw material resourcing expertise’ & ‘technology transfer’ from

Italy and marketing by the joint venture partner.

Future outlook

India has distinct advantages in the leather industry. These are primarily low

costs, widely available raw material and well-developed quality and researchand development facilities. These have enabled India to ecome a significant

player in the world leather market, with exports growing at 8 per cent CAGR.

Multinational companies in this sector are increasingly looking at India and

many of them have also entered India in different ways. For example:

• International fashion chain Fossil has already picked up a minority stake

of 2.5 per cent in domestic fashion accessories major Crew B.O.S.

Products, while a Spain-based fashion chain is in talks with Worldwide

Leather for a joint venture.

• The Forward group has entered into a joint venture with Conceria

Virginia Italy (CVI), a 10-year-old Italian tannery specialising in

leathers for shoes and leather goods; the joint venture has set up a six

million sq. ft state of- theart leather manufacturing facility in Chennai.

With the government keen to support the industry to modernise and grow and

double exports by 2010, the outlook for the leather industry in India is quite

positive.



Strategies for Indian Leather Sector

The Indian leather industry is targeting over US$ 5 billion exports by 2010 and

is expected to add about additional 1 million direct and indirect jobs during thisperiod. At present, the industry employs 2.5 million people directly and

indirectly.

Shifting of Manufacturing Base

Major world tanning firms are in the process of shifting their manufacturing

base to developing countries due to high wage levels and strict environmental

norms in developed countries. Factors such as availability of leather, production

know-how, processing of shoes work in India’s favour. India could effectively

use these advantages to augment its share in global production and exports.

Government Support

Technology upgradation and modernization of the entire leather value chain

should be given priority. Recently, the Government has approved Rs. 290 crores

for modernisation and technology upgradation programme.

Strong Production Base

The industry should lay emphasis on design and technology, quality and

innovation and economies of scale. Skill development for the manpowerengaged in the sector is vital for enhancing the export potential of this sector.

Investment by Large Corporate

Indian leather industry is dominated by household and small scale sectors.

Corporate presence would enhance the capability of producing quality leather

products. The large capacity would also bring down the unit cost and increase the

competitiveness in international markets.

New Markets

Diversification of export markets is another important strategy for Indian

leather industry. Consolidation in new markets such as Croatia, Slovakia and

Serbia would sustain the export growth momentum for the Indian leather

industry. Imports of leather articles by these countries have increased in the

range of 20-30% in a period of five years.



New Trends

The industry needs to keep itself abreast with latest fashion trends in the sector.

It is observed that Italian buyers pay attention not only to the quality of the

leather products but also to the accessories used in the garments. It is

imperative that adequate care is taken about the packing material.

Diverse Marketing Techniques

India needs to adopt aggressive marketing techniques in order to endure global

competition. The industry could undertake business delegation to secure

overseas investments and technology partnerships, besides building brand

image. Developing countries like India should have two pronged marketing

strategy of simultaneously targeting both low price and high quality markets,

rather than the traditional strategy of being a low price-low quality supplier.

Enabling Infrastructure

The development of the Calcutta Leather Complex is a positive sign as all

amenities are available at one place. Such exclusive leather complexes could be

developed in other major production centers. Improvements in efficiency of

ports, internal transport, customs procedures and supply chain management

are necessary for augmenting the productivity and exports in this sector.

Fairs and Exhibitions

It is imperative that Indian exporters participate in fairs and exhibitionsorganized in the international market. It could serve as a good platform to

showcase our products. Lack of information about Indian leather

manufacturers also acts as a hurdle for international buyers.

Training Facilities

Training programmes should enable the industry to foresee and adapt to

changing trends and technology. It is imperative that the staff is skilled and well

qualified to train the students. Further, programmes need to be conducted to

make Indian exporters aware of different standards and requirements in theglobal market to ensure that Indian exports do not get rejected due to

environmental norms.

The contents of the census are based on information available with Export-Import Bank of India and primary desk research through published information of various agencies. Duecare has been taken to ensure that the information provided in the publication is correct.



CONTRIBUTION OF INDIAN STATES IN

INDIAN LEATHER INDUSTRY



BUSINESS OPPORTUNITIES in TAMIL NADU

KARNATAKA

Karnataka is keen to promote itself as the destination for domestic and foreign

investment to catalyse industrial growth. The State Policy aims to achieve a

consistent economic growth rate of 8-9 per cent over the next decade. Policy

makers propose to create employment opportunities through industrial growth

in the state and several sectors have been identified as thrust areas. The state

offers incentives such as tax exemptions for investment in these sectors. These

sectors are electronics, telecommunication, informatics, precision tooling and

tool room industries, readymade garments including leather garments

(excluding leather tanning), units manufacturing pollution control and effluent

treatment plants, equipment and appliances and biotechnology.



MADHYA PRADESH



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http://www.bim.edu/








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