Organized Retail in India

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OrganizedOrganized Retail inRetail in IIndiandia

From :STVP-2007-002

[June 12, 2007]

Presented by :

Prashant Rastogi 10202010

Anshuk Sengupta 10202046Chiradeep Mukherjee 10202048

Debojyoti Majumdar 10202063



Current Landscape of Retail in IndiaCurrent Landscape of Retail in India

y In India 98% of the retail sector consists

of counter-stores and street-vendors.

y retail in India is a USD 320 billion dollar

industry.

y Organized Indian retail·s target population

is larger than that of the entire US which

is growing at a staggering 35% per year.



Worry factors for major retailersWorry factors for major retailers

y Lack of infrastructure to support supply chains andefficient retail operations in India.

y Inadequate highways, the absence of a cold storagefacilities, an underdeveloped supply chain,

y Limitless bureaucracy and the lack of regulationscreated a situation where the local corner-storesand hawkers thrived.

y What the street-vendors gain will be a major

hurdle for large-scale organized retailers.y They will have to demonstrate unprecedented

innovation, adaptation and experimentation tosucceed in the Indian retail industry.



IndianIndian ConsumerConsumer

y Young Shoppers

y Higher Incomes

y No Money, No Problem

y Urbanization

y The Lure of Organized Retaily Unorganized Retail in India:

1) Family-run stores

2) Lack of best practices when it comes toinventory control and supply-chain management

3) Lack of standardization

4) Essentially a sector populated by anyone whohas something to sell



Causes of Low Productivity inCauses of Low Productivity in

UnorganizedUnorganized RetailRetaily Labor intensity:

y Inventory and Supply Chain Management

y low barriers to entry and the absence of

regulation.y No competition.

Low Productivity, but Still Successf ul:

y Home-Deliveryy Credit

y Proximity as of need to buy concept.



Indian Organized Retail SectorIndian Organized Retail Sector

Organized Retail comprises of only 2% of Indian Industry.

It is growing at a healthy rate of 35%.

The sector is dormant due to:

Lack of infrastructure

Absence of product variety

Conservative Indian consumer

Organized retail aims to tap at $320 billion Indianretail industry due to

Flood of products in the market

Well informed customers



The origin of retailThe origin of retaily USA took four decades of experiments on various

retail formats to establish into an organized retailsector since 1950.

y China could accelerate its experiments and established

its retail sector within only two decades as it hadaccess to US.

y India similar to China had huge disparity in penetrationof urban & rural organized retail penetration.

y Thus India is expected to accelerate to develop into anorganized retail sector by bridging the gap betweenurban & rural.



Significant development in Indian marketSignificant development in Indian market

Telecom Industry: Improvement of technologies,

removal of market regulations & influx of capital ensured

better penetration from 1% to 10% within only 8 years.

Tata motors: It seriously suffered in the postliberalization phase in early 90s where foreign competition

took advantage.

It recovered by realizing the cost inefficiencies & is now

one of the fastest growing automobile industry.

Govt Interest: Removal of entry barriers, sanction of

large plots of retail sector and permission of FDI.



Critical Policy improvements requiredCritical Policy improvements required

y Opening of 100% FDI from 51% in single

branded outlet.

y Setting up of one-stop department store to

catering all needs.

y Provision of status to Indian retail by the

Govt as separate outlets require different

permits.



Current Indian scenario in retailCurrent Indian scenario in retail

yCorner-stores and hawkers continue to be a part of Indianretail market which have diverse sales & low margin.

y They don't compete in the small market as organized retail.

y The consumer behavior has transformed, but is partial &sector dependent.

y Higher income groups who have more exposure dependent

on organized retail sector.

y Corner-stores and hawkers survive due to just- in-timepurchase, credit purchase, credit purchase & proximity.



Pantaloons Retail: Market leader in IndiaPantaloons Retail: Market leader in India



Condition of Wal-mart in China & South

Korea

From the above article we have seen aboutWal ² Mart·s failure to capture market inChina and its severe failure in South Korea.

The challenges faced in China are:

y Lack of space to set up malls in big cities.

y

Inefficient distribution channel and s

upplychain management.

y Manufacturers are highly scattered.



ContdContd««

� Causes of Failure in South Korea is thatthey concentrated on the non food items

(electronics and garments) while South

Koreans are attracted to Hypermarkets forfood and beverages.

� The organized retail industry is at just itsgrowth stage in India and the causes for itslate growth are similar to that of China.

� India prefers more unorganized retail thanorganized one.



Subsequent Increase in the retail market of IndiaSubsequent Increase in the retail market of India



Contribution of retail industry in the GDP

growth of India





Consumer classificationConsumer classification



COMPARISON OF ORGANISEDCOMPARISON OF ORGANISED

vsvsUNORGANISED RETAIL SECTOR UNORGANISED RETAIL SECTOR



Characteristics of UnorganizedCharacteristics of Unorganized

Retail:Retail:

I. Family Run Store

II. Lack of best practices when it comes toInventory Control & Supply-Chain Mgt.

III. Lack of Standardization

IV. Essentially a sector populated by anyone

who has something to sell.



Low Productivity, But still SuccessfulLow Productivity, But still Successful

Low productivity due tounderutilization/overutilization of resources.

Home-DeliveryCredit

Proximity

Labor CostsUtilities

Tax



Food & Groceries, 60%

Clothing & Textile, 4%

Consumer Durables, 4%

Jewellery &Watches, 4%

Home Décor & Furnishings, 3%

Beauty Care, 2%

Others, 23%

Unorganised Retail:Sector-wise Break-up

Food & Groceries

Clothing & Textile

Consumer Durables

Jewellery & Watches

Home Décor & Furnishings

Beauty Care

Others



ORGANISED SECTORSORGANISED SECTORS

y In comparison with developedcountries, organized retail was very low, 2%

of retail industry.

y Organized retail remained dormant sector-Due to lack of infrastructure

Absence of product variety

Conservative Indian consumer



0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

Clothingtextiles &

FashionAccessories

Footwear Jewellery &Watches

Food &Groceries

ConsumerDurables

Books,Music& Gifts

Home Décor

41.28%

16.96%

0.00%

48.12%

42.06%

30.06%

71.00%

Sector-wise CAGR Growth: Organised Retail

Clothing textiles & Fashion Accessories

Footwear

Jewellery & Watches

Food & Groceries

Consumer Durables

Books,Music & Gifts

Home Décor



CURRENT & FUTURE PLAYERSCURRENT & FUTURE PLAYERS

y Pantaloon Retail

y Shopper·s Stop

y Haldiram

y Raymonds

y Titan

The Aditya Birla Group

Reliance

Bharti ²a joint venture withWal Mart



y Supermarkets

y Hypermarkets

y Malls

y Departmental Stores

y Fresh-produce marketsy Single area shop

� Office supply shop

� Sports shop



Thank you«..

Documents

Organized Retail in India