A REPORT

ON

Railway Retailing

SUBMITTED TO Mr. Pranav Desai

SUBMITTED BY: ANKIT CHELDIYA (10MBA016)

FACULTY OF MANAGEMENT STUDIES INDUKAKA IPCOWALA INSTITUTE OF MANAGEMENT (IIM) CHAROTAR UNIVERSITY OF SCIENCE AND TECHNOLOGY (CHARUSAT)
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Table of Contents

Railway retailing ...................................................................................3 Indian Railway- a big leap for Private organized Retailer: ..................6 Railways to get into retail......................................................................7 Perceptions and Expectations of the Internal and External Customers: ...............................................................................................................8 Railways to get on retail track with AVB group ...................................9 Indian Railways offering retail space ....................................................9

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Railway Retailing
The turnaround strategies of railways brought paradigm shift in the profitability and opened up new vistas. Railway management once considered as a white elephant, shown immense managerial skills to venture into new areas. Asset utilization and allocation of resources topped the agenda of management. The railway has 43,000 acres of unutilized land and management aspires to add value to its profit through this asset. Railway is planning to develop malls, food plazas, commercial complexes and budget hotels in this land. Retail industry which is experiencing the phenomenal growth and hungry for expansion, wants to grab this opportunity by both the hands. Railway retailing is not the new format but it exists in nascent stage and ready to explode. Railway retailing is classified into railway owned retailing and privately owned retailing. Railway owned retailing, whose control is with the railway department, is further classified into platform, railway land, non store and train based retailing. Privately owned retailing in India is managed by both the organized and unorganized players. In the organized retailing, we observed ticket retailing, platform store retailing, railway land store retailing and train retailing. The unorganized retailing is mainly through hawkers and small time vendors. To achieve unparallel success, it is critical for any service firm to understand and analyze the customer perceptions. In this article, we analyzed customers perceptions about existing and future railway retail formats. The perceptions are analyzed on the basis of convenience, relevance, reliability, motives, cost, time, quality and image. We examined the future expectations of customers like beliefs, personal needs, situational factors, and perception about the alternatives, regarding railway retailing formats and assessed them against the commercial viability.

Organized and Modern retail together today forms around 9 % of the total retail in the country. With the Maximum number of store per person in the world, averaging 11 store per thousand people, India is ahead of UK and US and relatively higher too for neighboring Asian countries like china, South Korea, Indonesia, Philippines, Thailand, Malaysia. Be it an agriculture, insurance, pharmaceuticals, banking services, the concept of Retailing goes hand in hand with almost all sectors in the Industry. Railway is not exceptional as it has already ventured into retailing and advanced in the retail formats like e-tailing.

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Retailing a Powerful Horse

Retailing is the set of Business activities which adds value to the products and services sold to the consumers. Simply to put, Retailing involves various activities of shopping such as purchasing through the internet, dealing in financial services, eating at the restaurant, etc.

The proliferation of malls, multiplexes and supermarket, are providing completely different shopping experience. In the race of economic growth retail sector, contributes 10% the GDP and source of employment for more than 41 million Individual. Indian Retail sector Analysis indicates both the organized and unorganized retail, together contributes significant revenue with the market size of Rs. 10 Trillion. This Powerful Retail horse marrying with Railway will certainly bring a chunk of revenue to the growth of both the sectors. The turnaround of IRa seed for Modern Railway Retailing:

The emerging scenario of Indian railway retailing could be seen as the outgrowth of the strategic direction provided by the Indian Railway (IR). Expert Group on Indian Railway in 2001has declared Indian railway as one of the possible bankruptcy organization. With the Persistent effort of Indian Railways coupled with the strategic implementation by the Railway Minister Lalu Prasad Yadav, Indian Railway has achieved an unprecedented growth in the recent years. Increased Competition interms of technology has spurred the growth of this PSU. The total investment being planned for the eight year time frame (2007-2015) is tentatively in the order of Rs. 3, 50,000 crores. This stupendous performance could be attributed to the turnaround strategy adopted by Indian Railways to increase the share of goods earnings, Passenger earnings and other earnings like Advertising, catering, parcel. The notable turnaround strategies include focus on higher volume business by freezing freight rate increase and rationalizing commodity classification to benefit the high value of goods and charge more from the low rated commodities. Outsourcing through public private partnership (PPP) Model was adopted in areas such as Catering, Parcel and Advertising. Against this backdrop, the avenues for the retailing have been felt and thereby the Railway Ministry is contemplating on the dimension of increased Modern retail formats with Public Private Partnership.

Accordingly, the Ministry also plans to introduce 53 pairs of new trains and host of benefits to passengers such as 7 % cut in A/c First class, 4 % in A/c Second class. For any retailing business, pulling crowd is a major challenge, and it is apparent from these developments,

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besides its capacity to pull the crowd for the transport, the railway may attract the commuters as well as non-commuters for the retail business as well. Shoppers may be able to leverage the brand equity of Indian Railway to lure the customers of the burgeoning middle class.

Leveraging the turnaround experience to retailing: Railway owned retailing is managed by the railway department. Further it is classified as Store retailing, Non-store retailing and train retailing. The store retailing includes platform retailing, and rail land retailing. Platform retailing( Stores on the railway platform) that exists ever since the operation of Indian Railway sells FMCG products. Rail land retailing is the yet to be launched retail format of Indian railways. A railway has 45,000 hectares of waste land in the vicinity of Railway station. The improved financial power of railways influenced its decision makers to convert this waste land into the modern retail hub. The ASSOCHAM (The Associated Chamber of Commerce and Industry of India) has prescribed the development activities that include the establishment of motels, smaller huts and apartments and pizza huts to enhance railways revenue and to make use of the land for profiteering. Rail Land Development Authority has been set up under the Railway (Amendment) Act to pursue this objective of commercial development to generate steady stream of Non-fare revenue. It is also envisaged in the current union Budget; the Railway Development Authority would raise Rs.4000crore by making commercial use of Railways surplus land.

The Non-store retailing includes kiosk and vending retailing, online retailing and mobile retailing. Kiosks are the machines that provide information to the passengers in the railway stations while vending machines distributes the platform tickets. Online retailing is the emerging and better format of railway retailing. The e- ticket facility has become major hit among the corporate customers. The railway website is one of the top hit website in the world. Further, the e-ticketing facility is simplified so that the passenger are allowed to take a print out after booking the ticket. Further the Automatic ticket vending machine would go up from 250 to 6000. Railways recently started mobile ticket facility also. Incase of mobile retailing customers will be provided the pin which he/ she can show it in the railway station and get the tickets.

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Indian Railway- a big leap for Private organized Retailer:

Indian Railway has about 7500 stations and it aims to move 661 crore passenger in the current fiscal. Each destination or station is a market as it is contemplating to allow many different retail formats to operate. To meet the emergency needs, Apollo, Fortis and life spring is to set up pharmacy cum clinics to tap train passengers. In this connection, the Railway has set up a committee to recommend a model for allowing healthcare chains for awarding license to set up pharmacy-cum-clinic at various stations. Passengers could also check in the Budget hotels for a relaxed stay, as Indian Railway has planned for setting up of 100 budget hotels across the country. IRTC has invited bids from private hospitality developers and foreign players for setting up two or three star hotels in 20 locations. The locations include Madurai, Vijayawada, secunderabad, Chandigarh, Mumbai, Tirupati, kanyakumari, etc. Bangalore based (ROHL) Royal Orchid Hotels has been tied up with IRTC (Indian Railway Tourism Corporation. For developing these hotels, ROHL plans to set up venture with local developers. The agency mode of ticket distribution is also helping the railways to reach masses very easily. Railway is planning to provide space inside the train to private companies to sell their products. This may eventually terminate the unorganized train retailing by hawkers and improve the private players retail services like catering. Some of the major initiatives in bringing private players to railway retailing are discussed below. The prominent one is the plan to invite firms to invest in setting up infrastructure on its land for creating a supply chain to move agricultural products from their points of produce to demand destinations. The Railway has announced its plans to have 7500 agricultural outlets at stations. Retail players who want to use these outlets will be required to invest in the backend infrastructure as well. These outlets can also sell non-agricultural commodities. In view of this, the Indian Railway had a meeting with several players including ITC, Cargill India, Adami Enterprises, Pantaloon, Godrej Agrovet.

The pleasant experience need not come only from railway journey; it can also come from shopping experience in the places which comes under the purview of Indian Railway. The fabulous performance of railway has given rise to the developmental strategies including bid for the private players to set up kiosks. 287 bids have been awarded to ABCTL (Amalgamated Beans coffee Trading Limited), Hindustan unilever limited, Hindustan Coca6|Page

Cola Beverages Pvt Ltd, Fresh and honest caf Ltd. Surya Food and Agro Ltd, the makers of the priyagold biscuits, and Nestle India recently won bids. Out of these already more than 90 Kiosks have been commissioned. Caf Coffee Day, owned by ABCTL has won the maximum bids and would be putting up 121 kiosks. Coca-Cola has bagged the bids for putting 61kiosks, followed by Fresh and Honest (49).IRTC has been mandated to develop catering services, budget hotels and food plazas at major stations through involvement of private entrepreneurs.

In an effort to facilitate the tourism, the railway has plan to tie-up with private rental car players such as Hertz and India Travel House and several hotel operators to offer off-theshelf packages along with rail tickets. The IRTC CMD PK Goel has told to Economic Times that the idea of tie-up is to create tourism products and services specifically tailored for the mid-segment. Yet another effort is to make the internet easily available to passengers, VSNL has been working on setting 68 Internet kiosks in 68 different locations on Indian Railway. Beyond this, the Indian Railway is also launching Mobile Ticketing facility to delight its customers. In line with this, Reliance communications introduced railway ticket booking on its mobile phones through its tie-up with Indian Railway Catering and Tourism Corporation for the first time in the country in April 2004. In alliance with Indian Railway the SBI announced The SBI Railway card specifically to meet the need for efficient payment processes by Indias growing number of consumers.

Railways to get into retail

Railways, India's biggest land owner after defence ministry, plans to start the initiative from around a dozen stations initially. It is estimated that railways owns 4.2 lakh hectares across the country and initiative will be driven through Railway Land Development Authority, a dedicated body set up last year. With public private partnership, the railways proposes to build "national retail hubs," by leasing about 100 acres at stations located near capital cities. It also plans to develop similar retail hubs at stations close to district headquarters and even at local levels. Thus 25-100 acres will be given to highest bidders. It proposes to give land on long-term lease, ranges from 30-35 years.
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The private player will be permitted to build malls but at the same time they will have to ensure back-end business like cold storage, godown, sorting and packaging facilities. Railways will only provide them with transportation facility.

Perceptions and Expectations of the Internal and External Customers:

It is against this background, this study is intended to identify the effects of these trend shift in Railway Retailing on the perceptions and expectations of internal and external customers. Clearly, the Internal Customers are the Employees of Indian Railways and the external customers are the passengers. Any marketing program of a service company firstly is marketed to the internal customers. The quite obvious reason is that these internal customers have direct contact with the external customers. Any new policy at the corporate level may have impact on its internal customers. Recognizing this, railway minister in his budget speech 2008, brought the credit of the Success of to the Indian Railway employees saying,14 Lakh railway employees have worked relentlessly, day and night, for the financial turnaround of the Railways. In recognition of this we have increased their Bonus for 2006-07 from 65 to 70 day s Hence the importance of internal customers should never be overlooked. The implementation of any corporate level strategy depends on the whole hearted commitment of its employees whether they are directly or indirectly related to the corporate strategy. As the Indian Economy is witnessing retail boom, marketers are trying to tap this opportunity. As railway is inherently surrounded by people, it is not surprising for the railway to adopt different railway formats. But what is important is the perception and expectations of the external customers about the new retail formats since it may require more co-ordination from the employees of various departments of railway and the private parties setting up ventures. While the impressive growth of railway has brought applause from all quarters, it has exposed the problems of infrastructure, congestion and saturation of the network especially on the high-density corridor connecting the four metropolitan cities.

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Railways to get on retail track with AVB group

For its retail venture, the AVB Group is talking to the railway ministry to operate refrigerated containers to transport fresh farm produce. The group has also shown interest in setting up agri-commodities retail outlets at railway stations as well as warehouses and cold chains at surplus land with the railways. Railway minister Lalu Prasad had in August said that the ministry would develop supply chain infrastructure for agri-produce, including warehouses and processing centres at railway properties. He had also invited private players to own and operate refrigerated containers to transport agri-perishables. It is an offer that the AVB group is learnt to have taken up. The group is keeping retail plans under wraps and when contacted, the group spokesperson declined to comment. The importance for a robust supply chain mechanism for the retail player and sector can be gauged by the fact that India loses Rs 50,000 crore annually due to an inefficient vegetables and fruit supply system. Through retail supply chains, the railways hope to double revenue in five years. "In recent years, road freight has taken revenues off the railways. Of about 400m tonnes of freight in agri-products, the railways has a share of only 50m tonnes. With frequent diesel price hikes, road transport will become less and less cost effective. Therefore, the dedicated supply chain can effectively prove to be significant revenue generator for the railways," said a railway ministry official.

Indian Railways offering retail space

The Indian Railways is soon going to offer around 4,800 hectares of land to retail and logistics companies to set up retail outlets, agri-retail infrastructure and warehouses. Around 3,000 sites have already been identified by the railways across the country for the purpose. According to an official from the Rail Bhawan, Companies will have to provide a minimum traffic guarantee to the railways in a quid pro quo for real estate.

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The policy further stated that the lands will be given to the retailers on a 10-year lease agreement. Moreover, to avoid any monopoly, vacant land at one station will not be given to a single company. The policy also proposes to provide ideal remunerative price for farmers produce that rots at times due to lack of proper storage facilities and transportation. The Indian Railways is also considering retailers proposal to create a refrigerated rail link between agri hubs in order to transport perishable agri commodities. The hubs will be created in non-metro stations, facilitating transportation of agri products using the rail network and providing for their sale at the local level. For every hub, retailers will enter into a joint venture with the railways. The railways will have land as their equity in JVs.

The Rail Vikas Nigam will float the tender inviting expression of interest from corporate houses and co-operative institutions. According to sources in the industry, Reliance, Future Group, ITC, Tata, AV Birla Group and GE Logistics are interested in railway land, and are believed to be in talks with the Indian Railways.

In February, India retailing had reported that Parsvnath Developers Ltd and Indiabulls Real Estate Ltd (IBREL) had jointly submitted a request for qualification (RFQ) to the Rail Land Development Authority (RLDA) for developing commercial complexes.

The companies are bidding for ten prime location plots being offered by the Indian Railways for commercial development across various cities that include Delhi, Kanpur, Gwalior, Visakhapatnam, Kolkata and Bengaluru.

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References

www.indianretailer.com www.pppinindia.com/ppp-centre-railways.php indianretailsector.com/news/rail-budget-2012 delhi.quikr.com/railway-Retail/railway indianrailways.gov.in/railwayboard/uploads/codesmanual

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