Challenges Underdeveloped supply chain: India is the 7th largest country in the world and catering to people across such a vast region is difficult, leading to complexities in merchandise and inventory management. Long intermediation chains would increase the costs by 15 per cent. Inadequate and insufficient supply chain existing in India’s retail sector is a major deterrent to the growth of this market. There is a strong need for retail to concentrate on developing a back-end solid chain support especially for perishable products to help reduce wastages which is estimated to be at 40% of ational produce.
Lack of cold chain infrastructure in India poses storage threat and acts as a major challenge for the retail sector. Due to India’s complex tax structure and large geographic spread, companies have developed regional distribution and re-distribution networks. Retailers need to work closely with the suppliers and try to shorten the supply chain network to save both time and money. ??? Real estate hurdles: Location of retail outlets are indispensable for their success and issues pertaining to procurement of suitable real estate is another major hallenge this sector faces.
Finding suitable properties in central locations is difficult due to fragmented private holdings, infrequent auctioning of large government owned lands and litigation disputes between owners. Rent also plays a very significant role as it forms around 6-10% of the total expenditure and can easily convert a profitable store into a loss making one if not decided upon carefully. Available spaces in most big cities are easily interchangeable between commercial and retail use, which makes their availability even scarce. Difficulty in retail planning, specially relating real estate issues, is a major impediment for this market in India.
Inadequate general and specific infrastructure: Information technology implementation and digitization of services will make transfer of goods easy and an improvement in supply chain management will definitely play a significant role in attracting more consumers and less consumer grievances and it will generate easier payments option for customer and easier money movement. Lack of adequate infrastructure with respect to roads, electricity, cold chains and ports has further led to the impediment of a pan-India network of suppliers.
Due to these constraints, retail chains have to resort to multiple vendors for their requirements, thereby, raising costs and prices. ??? Laxity in implementation of policies: At present, indirect tax structure in India with varying tax rates is complex with multiplicity of taxes and multiple tax enforcement authorities. This has an impact on the supply chain model and cost structure of distributive trade followed by consumer packaged goods companies. Multiplicity of taxes and requisite licences leads to delay in the entire supply chain process, hampering the productivity of the retail sector.
Government restrictions and delays on the FDI are leading to an absence of foreign players resulting into limited exposure to best practices. manpower employed in the organized retail sector, and front-end and retail assistant profiles also occupy a significant proportion. In India retail training opportunities are there only for areas like merchandising and supply chain and there are very few good educational institutes in India offering specific courses relating to the retail sector. In the unorganized sector, the manpower is not even equipped with the basic retail specific or customer service skills.
The available talent pool does not back retail sector as the sector has only recently emerged from its nascent phase. Limited consumer insights: Retail differentiation and merchandising mix are improperly planned due to limited consumer insights. As we are moving to the next phase of retail development, the focus is shifting towards offering experiential shopping. For customers it is very difficult to find the uniqueness of retail stores. Merchandising planning involves getting the right mix of product, which is store specific across organization, and is a combination of customer insight, allocation and ssortment techniques.
Insufficient Government incentives: The retail sector does not have industry status yet making it difficult for retailers to raise finance from banks to fund their expansion plans. Multiple clearances are required by the same company for opening new outlets adding to the costs incurred and time taken to expand presence in the country. Zonal restrictions make it difficult to find a good real estate in terms of location and size. Lack of clear ownership titles and high stamp duty has resulted in disorganized nature of transactions.