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Global Retail
Conundrum – The Consulting ClubIIM Ranchi
Agenda
• Introduction
• What is Retail?
• Global Retail: Leading Players
• Global Retail: Retail Statistics
• Global Retail: Issues and Trends
• Retail in India: Changing Landscape
• Online Retail in India
• Challenges Ahead
What is Retail?
Defining Retail Industry
Global Retail
• Industry comprises companies engaged in the sale of finished goods• Defined on the basis of revenues generated by companies operating in this
sector• Classification on the basis of the kind of products sold
• The food retail subsector involves companies engaged in the sale of food and beverages for off-premise consumption through various channels
• Food products sold in this subsector include meat and poultry, bakery, grocery, organic foods, and prepared foods
• Non-food retailing involves the sale of products other than food and beverages through various retail channels
• Non-food retailing broadly includes following:– Apparel and footwear– Electronics and
computers– Pharmaceuticals
• The restaurants and food service subsector involves sale of all food and drink (soft and alcoholic) in or through restaurants and cafes’, quick service restaurants, catering and drinking places
Food Retail Non-Food Retail Restaurants & Food Services
Global Retail Industry on the Recovery Path
Global Retail Industry Size
Sales decline during recession
Source: GCC Retail Industry, Alpen Capital, November 1, 2011
Retail: Some Quick Facts
Sales of Top 250 retailers: US$3.94 Trillion
Average Size of Top 250 Retailers: US$15.76 Billion
Composite y-o-y Sales Growth: 5.3%
Composite Net Profit Margin: 3.8%
Composite Return on Assets: 5.8%
Composite Asset Turnover: 1.5 times
Top 250 Retailers, 2010
Source: Annual Reports, Deloitte
Global Retail: Leading Players# Retailers Country Sales (US$
Billion)Dominant Operational Format
# of Countries of Operation
CAGR (‘05-10)
1 Wal-Mart US 418.95 HM, SC, SS 16 6.0%
2 Carrefour France 119.64 HM, SC, SS 33 3.9%
3 Tesco UK 92.17 HM, SC, SS 13 9.3%
4 Metro Germany 88.93 Cash & Carry 33 3.8%
5 Kroger US 82.19 Supermarket 1 6.3%
6 Schwarz Germany 79.12 Discount Store 26 9.8%
7 Costco US 76.26 Cash & Carry 9 8.0%
8 Home Depot US 67.99 Home Improvement
5 -2.5%
9 Walgreen US 67.42 Pharmacy 2 9.8%
10 Aldi Germany 67.11 Discount Store 18 5.9%
Source: Annual Reports, Deloitte
Notes: HM = Hyper market; SC = Super Center; SS = Super Store
Top 10* Sales: US$1.16 BillionTop 250 Sales: US$3.94 BillionConcentration of Top 10: 29.4%
Food Retail: Carrefour
Source: Annual Reports
• Carrefour SA, is a French company primarily engaged in retail distribution.
• It operates through various retail formats, including cash-and-carry outlets,
convenience stores, discount stores, hypermarkets and supermarkets. It
also offers e-commerce services.
• The company has more than 15,000 stores in35 countries worldwide. Its
stores are either company-operated or franchised.
• It employs approximately 476,000 people globally.
• The company’s auditor is KPMG
Food Retail : Tesco
Source: Annual Reports
• Tesco Plc is an international retailer based in the UK. It entered the US
market in 2008.
• The company operates through two business segments – Financial services
(retail banking and insurance services) and Retailing.
• The company has 4,331 stores worldwide, employing more than 470,000
people across 14 countries.
• The company’s auditor is PriceWaterhouseCoopers
Food Retail : Metro
Source: Annual Reports
• Metro AG is a German trade and retail company. It acts as a holding
company for the Metro Group, which is organized into four independent
sales divisions —
Galeria Kaufhof (department store), Media Market and Saturn (consumer
electronics company), Metro Cash & Carry, and Real (hypermarket
operator).
• The company is active in 2,127 locations in 33 countries, employing 251,650
people.
• The company’s auditor is KPMG
Non-Food Retail : Wal-Mart
Source: Annual Reports
• Wal-Mart Stores, Inc. operates retail stores in various formats around the
globe. It provides an assortment of merchandise and services to its
customers at low prices.
• Wal-Mart’s operations comprise ofthree business segments — Wal-Mart
US, Sam's Club and Wal-Mart International, with Wal-Mart US being the
largest of the three.
• The company has more than 8,400 stores in 15 countries, serving more
than 200 million customers each week.
• It employs approximately 2,100,000 people.
• The company’s auditor is Ernst & Young
Non-Food Retail : CVS Caremark Corporation
Source: Annual Reports
• CVS Caremark Corporation is one of the largest providers of prescriptions
and related healthcare services in the US through its 7,000 stores and its
CVS.com retail website.
• The company comprises of two business segments — Retail Segment and
Prescription Benefit Management.
• The average number of prescriptions managed orfilled by the company in a
year is more than 1 billion. It employs approximately 211,000 people.
• CVS Caremark Corporation drives value for its customers by managing their
pharmaceutical costs as well as improving healthcare results through its
stores.
• The company’s auditor is Ernst & Young
Non-Food Retail : Costco Wholesale Corporation
Source: Annual Reports
• Costco Wholesale Corporation operates an international chain of
membership warehouses, under the name of “Costco Wholesale”.
• The warehouses are designed to help small to mid-size businesses reduce
costs in purchasing for resale or for everyday use.
• Some of the product categories that the company offers include groceries,
candy, appliances, television and media, automotive supplies, tyres, and
toys.
• Costco Wholesale Corporation is open only to members and offers three
types of memberships — Business, Gold Star (individual) and Executive.
• It employs approximately 79,000 people.
• The company’s auditor is KPMG
Restaurant & Food Services : McDonald’s
Source: Annual Reports
• McDonald’s Corporation franchises and operates more than 30,000
McDonald’s restaurants, serving nearly 50 million people in more than 100
countries worldwide.
• Independently-owned and operated distribution centers, approved by the
company, distribute products and supplies to most McDonald’s restaurants.
• In 2009, of its 32,478 restaurants in 117 countries, 26,216 were operated by
franchisees and 6,262 by the company.
• It employs approximately 385,000 people.
• The company’s auditor is Ernst & Young.
Restaurant & Food Services : Compass Group Plc
Source: Annual Reports
• Compass Group Plc is a UK food service provider, which operates in over 50
countries worldwide.
• The company provides services to a wide range of consumers in hospitals,
schools, sporting or cultural events, workplaces and remote environments.
• Its well-known brands include “Catering to You” and “Outtakes.”
• It employs approximately 386,168 people.
• The company’s auditor is Deloitte & Touch
Restaurant & Food Services : Yum! Brands
Source: Annual Reports
• Yum! Brands, Inc. (Yum) is one of the largest restaurant companies, with
37,000 restaurants in more than 110 countries and approximately 1.4
million associates.
• The company develops, operates, franchises and licenses a worldwide
system of restaurants that prepare, package and sell a range of food items.
• The well-known restaurant brands of the company include KFC, Pizza Hut,
Taco Bell and Long John Silver’s.
• It employs approximately 49,000 people.
• The company’s auditor is KPMG
Global Retail: Share of Top 250 sales, by Country
Source: Annual Reports, Deloitte
1.20% 2.60% 6.50%
8.80%
11.60%
5.40%
1.80%9.50%
41.70%
11.10% Africa/MECanadaUKJapanOther EUOther APACLatin AmericaFranceUSGermany
Global Retail: Sales by Product, 2010
Source: Annual Reports, Deloitte
8.00%
66.60%
15.60%
9.80%
FasionFMCGHardlines & LeisureDiversified
Retailers: Value Chain Analysis
Retailers
Procurement through third party vendors
Fully integrated retailer*
*A fully-integrated retailer is one which operates by itself, at each level of the value chain
Value Chain Analysis –Retailers (Food / Non-food) Procuring from Third-Party Vendors
Procurement of products
Transportation and Distribution
Display, Sales & Marketing
Feedback
Source: KPMG
Manufacturers Distributors Retailers
Feedback
Display, Sales & Marketing
Value Chain Analysis – Fully Integrated Retailers
Transportation and Distribution
Display, Sales & Marketing Feedback
Processing and Packaging
Farming and procurement
Source: KPMG
Trends in Global Retail Industry
Source: Deloitte
Trend Description
• Globalization is not a new theme any more• Retailers continue to look to enter new markets
in Asia, Africa and South America
• Retailers have learnt to deal with barriers in emerging markets. They are customizing their business model as well as product offerings to meet local needs & preferences.
• Retailers will not only be looking for growth in emerging markets; they will also look to innovate in multi-channel strategies, mobile and data analytics to maintain or grow their market shares in developed markets.
Growth in Emerging Markets
Trends in Global Retail Industry
Source: Deloitte
N America
Africa
Mid-East
Cent America
Oceania
Southeast Asia
E Asia
E Europe
Cent Europe
W Europe
0 2 4 6 8 10 12 14 16 18 20
1
1
2
6
5
7
10
3
2
3
1
3
8
5
2
3
2
1
3
2
4
9
1
1
1
Franchising/Licensing Organic Growth Acquisition JV
In 2010, 40 retailers began operations in new country, with a combined total of 88 new market entries
Market expansion by Top 250 retailers, 2010
Trends in Global Retail Industry
Source: Deloitte
Trend Description
• Retailers are entering new markets through various channels
• Retailers to focus on multi-channel strategy
• As consumers become more tech-savvy, retailers will focus on seam less integration across retail channels
• They will have their presence in internet based-as well as physical retailing
• Some retailers are using online medium to test grounds in new geographies before physical expansion
Multi-Channel Retailing
Other Global Trends/Issues
• Mergers and acquisitions picking up
• Growth of private labels
• Emphasis on cost management
• Shift in consumer demand
Organic Foods, Eat at Home
• Retailers pushing pressure on suppliers for discounts
• Shrinkage and loss prevention
• Customer-centric merchandising practices
• Sustainability and Environment
Retail in India
Bright Future Prospects
• One of the top 5 retail markets of the world
• Accounts for 22 % of India’s GDP
• Market estimated to reach US$650 billion by 2015
• Organized retail penetration to cross 10% in next 5 years
Source: Indian retail: Short-term blips but long term prospects bright, CRISIL Research, May 2012
Overall retail growth in India Organized retail growth in India
Changing Landscape of Retail in India: Post FDI
Changing Landscape of Retail in India: Post FDI
Source: Economic Times
At least 10 states in India are opposing FDI in Retail
Saga of Online Retail in India
Both external and internal drivers are likely to propel online retail growth in the coming years
• Rising per capita disposable income• Growing employment and opportunities• Increasing percentage of households with at
least one computer• Growth in broadband penetration
Improving incomes and greater internet access will likely benefit the online retail sector
• Consumers’ greater comfort to purchase online• Improved online presence of retail categories• Broader web shopping capabilities (mobile and
tablet devices)• Innovative new shopping models (increased
personalization, greater integration of social media tools in the online shopping experience, improved back-end logistics, flash sites, subscription models, shopping walls etc.)
• Online loyalty programs • Aggressive promotional offers from online
retailers (daily deal sites)
Technology, innovation, and increasing comfort to shop online will drive online retail spending
Ext
ern
al D
rive
rs
Inte
rnal
Dri
ver
s
India
China
US
UK
Brazil
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
50
44
19
14
36
26
33
16
20
23
2
1
19
30
8
5
6
19
18
5
6
2
17
6
19
11
14
10
12
10
Social Digital Shoppers Digital Shopaholics Rational Online Shoppers Value Seekers Occasional Online Shoppers Techno-Shy Shoppers
Source: Digital Shopper Relevancy, Capgemini, 2012
Indians are already comfortable with Digital Retail
Social Digital Shoppers: Heavy users of social media who want to share opinions and experiences through social media Digital Shopaholics: Early adopters and experimenters who actively use smart phone apps and in-store technologyRational Online Shoppers: Internet is preferred mode of shopping but little interest in mobile apps and social mediaValue Seekers: Price sensitive customers who barely care about digital shopping. They shop online to get best dealsOccasional Online Shoppers: Infrequent shoppers who generally use digital channels for comparing and tracking deliveryTechno-Shy Shoppers: Shoppers who do not feel confident while using digital technology in any step of shopping
• Only 11% of the surveyed Indian population falls into the Techno-Shy Category, implying a strong inclination toward digital shopping
• Additional 11% Indian respondents fall under Occasional Shopper and Value Seeker category. It shows great confidence for digital innovation and sends a strong signal to retailers
Percentage of digital shopper segments by country, 2012 (Capgemini)
Mobiles opening up new avenues for consumer interaction in Retail Industry
Self Checkout &
Scanning
M-Commerce
Loyalty Points
Promotions
Coupons
In-store Navigation
Payments
Shopping Lists Scanning & Self
Checkout
M-Commerce
Loyalty Points
PromotionsCouponsIn-store Navigation
Payments
Shopping Lists
Source: Getting your retail environment ready for mobile, GS1 MobileCom, 2010
Challenges for Retail in India
• Shortage of Skilled Manpower There are very few courses specific to the retail sector and
graduates/post graduates from other streams are recruited.
• Lack of Industry Status Due to the absence of ‘industry status’, organized retail in India
faces difficulties in procurement of organized financing and fiscal incentives.
• Real Estate In most cities, it is difficult to find suitable properties in central
locations for retail, primarily due to fragmented private holdings, infrequent auctioning of large government owned vacant lands and litigation disputes between owners
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