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INDIAN RETAIL INDUSTRY ANALYSIS
Retail is the sale of goods and services from individuals or businesses to the end-user.
“A retailer is one who stocks the producers’ goods and is involved in the act of it to the individual consumer, at the “Margin of Profit “.
As such retailing is the last link that connects the individual consumer with the manufacturing and distribution chain.
Selling Directly to consumer- selling in smaller units / quantities in bulk.
Very high numbers near to neighborhood. Reorganized by the service levels .
What is Retail?
According to Philip Kotler “ Retailing includes all the activities involved in selling goods or services to the final consumers for personal, non– business use.
Retaillier (French word), which means to cut off apiece or to break bulk.
Any organization that does this selling is doing retailing.
Retail Sector today is worth of 394 Billion Us $
Barter system
Weekly marketVillage melas
Kirana StoresConvenience store
Government Stores
Super marketsHyper marketsMallsBrand outlets
Introduction to Modern Retail
Barter System was known as the first form of retail. As time passed currency was exchanged for goods
and services. Hawkers carried out the first Retailing in Push
Carts Followed by Kirana Stores …….. Mom and Pop Stores Finally Manufacturing era necessitated the small
stores and Specialty stores
Evolution Of Retail
It was a seller market still than this point of time with the limited no of brands available .
Barter chain Single brand franchise chain Stand alone large store Chain of large stores and finally Malls.
Economist says that Boom has Started of Retail due to more spending Capacity of Indians
Emerging of retail started in brief in patterns like changing face of the Indian retail sector
Provide customers with 3 Vs i.e. Value, Variety and Volume.
Interesting facts on
retailEvery 10th billionaire is a retailer.
25 of the top 50 Fortune 500 companies are in Retail.
In India the Retailing Industry provides employment to over 18 m people, second largest after agriculture.
1 out of every 25 families in India are engaged in the business of retailing
72% of Indian population staying in rural market.
In India Per Capita square feet area under retail is just 2 sq. ft. or 0.2 sq. m.
Retailing in India is one of the pillars of its economy and accounts for 14% to 15 % of its GDP.
Indian retail industry is the second largest employer in the country with almost 12million retail stores in India.
The Indian retail market is estimated to be US$ 450 billion and one of the top five retail markets in the world by economic value.
India is one of the fastest growing retail market in the world, with 1.2 billion people.
India's retailing industry is essentially owner manned small shops.
Retailing In India
Most Indian shopping takes place in open markets or millions of small, independent grocery and retail shops.
Shoppers typically stand outside the retail shop, ask for what they want, and cannot pick or examine a product from the shelf.
The product typically has no price label in these small retail shops; although some products do have a manufactured suggested retail price (MSRP) pre-printed on the packaging.
Price is sometimes negotiated between the shopper and shopkeeper.
India's retail and logistics industry, organized and unorganized in combination, employs about 40 million Indians (3.3% of Indian population).
The unorganized retail shops typically offer no after-sales support or service.
Until the 1990’s, regulations prevented innovation and entrepreneurship in Indian retailing.
Through the 1990s, India introduced widespread free market reforms, including some related to retail.
Between 2000 to 2010, consumers in select Indian cities have gradually begun to experience the quality, choice, convenience and benefits of organized retail industry.
In 2010, larger format convenience stores and supermarkets accounted for about 4 % of the industry, and these were present only in large urban centres.
Until 2011, Indian central government denied foreign direct investment (FDI) in multi-brand retail, forbidding foreign groups from any ownership in supermarkets, convenience stores or any retail outlets.
Even single-brand retail was limited to 51% ownership and a bureaucratic process.
In November 2011, India's central government announced retail reforms for both multi-brand stores and single-brand stores.
These market reforms paved the way for retail innovation and competition with multi-brand retailers such as Walmart, Carrefour and Tesco, as well single brand majors such as IKEA, Nike, and Apple.
In December 2011, under pressure from the opposition, Indian government placed the retail reforms on hold till it reaches a consensus.
In January 2012, India approved reforms for single-brand stores welcoming anyone in the world to innovate in Indian retail market with 100% ownership, but imposed the requirement that the single brand retailer source 30 % of its goods from India.
12th largest economy in the world
4th largest in purchasing-power parity terms
Over 58% of Indian population
below 26yrs. That is over 564 million people,
nearly twice the total population of the United States
Indian Retail Scenario Today
Market & CompositionTotal No. of Retail stores in India
12-15 MillionHawkers
8-10 MillionGrocery Outlets
4-5 MillionUrban Grocery Outlets
1 Million
Over 96% of
Indian Retailis unorganized
LARGER MALLS (1M Sq.ft)2004-5
2000 Multiplex & Leisure Cinema
DiscountStores MALLS
1990 MALLS (Price, Quality, Service & Entertainment)
1980 DEPARTMENTAL STORES (Price, Quality, Service Sensitive)
BEFORE1980
TRADITIONAL RETAIL(Price Sensitive)
Market & Composition
4% rapidly evolving
modern organized Retail
Growth over 1997-2010 India in 1997 allowed foreign direct investment (FDI) in cash
and carry wholesale. Between 2000 to 2010, Indian retail attracted about $1.8
billion in foreign direct investment, representing a very small 1.5% of total investment flow into India.
Single brand retailing attracted 94 proposals between 2006 and 2010, of which 57 were approved and implemented.
For a country of 1.2 billion people, this is a very small number. Some claim one of the primary restraint inhibiting better
participation was that India required single brand retailers to limit their ownership in Indian outlets to 51%.
Growth Of Retail Sector In India
Indian retail has experienced limited growth, and its spoilage of food harvest is amongst the highest in the world, because of very limited integrated cold-chain and other infrastructure.
Growth after 2011Before 2011, India had prevented innovation and
organized competition in its consumer retail industry.Reports estimates the 2011 Indian retail market as
generating sales of about $470 billion a year, of which a miniscule $27 billion comes from organized retail such as supermarkets, chain stores with centralized operations and shops in malls.
A 25% market share, given the expected growth of Indian retail industry through 2021, is estimated to be over $250 billion a year.
This is equal to the 2009 revenue share from Japan for the world's 250 largest retailers.
The Economist forecasts that Indian retail will nearly double in economic value, expanding by about $400 billion by 2020.
The projected increase alone is equivalent to the current retail market size of France.
Contribution Of Retail Industry to GDP of Various Economies
USA
China
Japan
Brazil
India
20%
8%
16%
6%
14%
Contribution Respective to GDP
IndiaChina
IndonesiaThailandMalaysia
TaiwanUS
0 10 20 30 40 50 60 70 80 90 100
OrganisedUnorganised
US Taiwan
Malaysia
Thailand
Indonesia
China
India
Unorganised
15%
19% 45% 60% 70% 80% 95%
Organised 85%
81% 55% 40% 30% 20% 5%
Organized vs. Unorganized Retail at Global Level
Indian retail story remains intact with strong fundamentals: Consumer incomes growing Consumer aspirations rising Growing urbanization Still Very Low Penetration of Modern Retail Growth in Modern retail’s capability to achieve and share efficiencies across the value chain
Economic slowdown/ inflation not crippling the opportunity
Types Of Retail Sectors In India
FOOD AND GROCERY RETAIL - The business in India is largely unorganized adding up to barely Rs.400 billion, with other large players adding 50 per cent that. - The all India food consumption is close to Rs.9000 billion, with the total urban consumption being around Rs.3300 billion. -The aggregate revenues of large food player is currently only 5 per cent of total Indian market, and around 15-20 per cent of total urban food consumption. - Most food is sold in the local “wet market”, vendors, roadside push cart sellers or tiny kirana stores.
- According to McKinsey report, the share of an Indian household’s spending on food is one of the highest in the world, with 48 per cent of income being spent on food and beverages.
GEMS AND JEWELLERY RETAIL - The gems and jewellery market is the key emerging area, accounting for a high proportion of retail spends. - India is the largest consumer of gold in the world with an estimated annual consumption of 1000 tonnes, considering actual imports and recycled gold. - The market for jewellery is estimated upwards of Rs.650 billion.
APPAREL RETAIL -The ready-mades and western outfits are growing at 40-45 per cent annually. -The market teams up with international brands and new entrants entering this segment creates a Rs. 5 billion market for the premium grooming segment would grow to Rs.3 billion in next three years.PHARMACEUTICALS RETAILS -The pharma retailing is estimated at about Rs.300 billion, with 15 per cent of the 51 lakh retail stores in India being chemists.
- Pharma retailing will follow the trend of becoming more organised and corporatized as is seen in other retailing formats(food, apparel etc.). - A few corporates who have already forayed into this segment include Morepen, Medicine shoppe, Appollo Health from SAK industries. - In the south, RPG group’s Health&Glow is already in this category, though it is not a pure play pharma retailer but more in the health and beauty care business.
MUSIC RETAIL - The size of Indian music industry, as per this images-KSA Study, is estimated at RS. 11 billion . - It is of which about 36 per cent is consumed by pirated market. - Organized music retailing constitutes about 14 per cent, equivalent to Rs.1.5 billion.
BOOK RETAIL - The book industry is estimated at over Rs.30 billion out of which organised retail accounts for only 7 per cent(at Rs.2.10 billion).
- This segment is seen to be emerging with text and curriculum books accounting about 50 per cent of total sales. - The gifting habit in India is catching on fast with books enjoying a significant share, thus expecting this sector to grow by 15 per cent annually. CONSUMER DURABLE RETAIL -The consumer durables market can be stratified into consumer electronics comprising of TV sets, audio systems, VCD players and others. -The existing size of this sector stands at an estimated US$ 4.5 billion with organized retailing being 5 per cent.
Indian Shopping Basket
16%3%
9%5%
4%3%
50%
GROSS RENT, FUEL & POWER
MEDICAL & HEALTH
CLOTHING & FOOTWEAR
RECREATION, EDUCATION &CULTURALFURNITURE APPLIANCES
FOOD BEVERAGES & TOBACCO
TRANSPORT &COMMUNICATION
Format Of Retail In India
Mom-and-pop stores: They are family owned business catering to small sections; they are individually handled retail outlets and have a personal touch.
Departmental stores: They are general retail merchandisers offering quality products and services.
Convenience stores: Are located in residential areas with slightly higher prices goods due to the convenience offered.
E-tailers: Are retailers providing online buying and selling of products and services.
Discount stores: These are factory outlets that give discount on the MRP.
Vending: It is a relatively new entry, in the retail sector. Here beverages, snacks and other small items can be bought via vending machine.
Shopping malls: The biggest form of retail in India, malls offers customers a mix of all types of products and services including entertainment and food under a single roof.
Category killers: Small specialty stores that offer a variety of categories.
They are known as category killers as they focus on specific categories, such as electronics and sporting goods.
This is also known as Multi Brand Outlets or MBO's. Specialty stores: Are retail chains dealing in
specific categories and provide deep assortment. Mumbai's Crossword Book Store and RPG's Music
World are a couple of examples.
Wholesale stores: Selling goods in bulk quantity only e.g. metro and Shoprite holding.
Hypermarts/Supermarkets: Large self-service outlets, catering to varied shopper needs are termed as Supermarkets
Types of Retailing Formats
Based on Ownership Independent Retailers Chain Retailers Franchisees Leased Department
Stores/Shop-In Shops Co-operatives
Special Formats E-tailers Direct Selling Vending
Machine/Kiosk/Airport
Based on Assortment Convenience Stores Supermarkets Hypermarkets Specialty Stores Department Stores Off-Price Stores Category Killers
Factors that attracted major industry players to enter the retail sector
Phenomenal success of certain players in retail sector
Eg: Shopper’s StopHype created by management consultants and
mediaPhenomenal growth of service sector and down
turn in manufacturing sectorA good way to leverage existing property Eg: Primals started developing Crossroads after closing of Roche factory they have acquired on prime property in Mumbai
Globalization Success of organized retail sector in
developed countries Changes in Consumer behavior and increase
in their purchasing power. Ever green demand for basic things like food Negative working capital ; Companies buy
on credit and sell for cash
• Indian retail sector :
Employs 8% (35 million)of the working population.
Could yield 12 to 15 million retail jobs in the coming five years.
• Out of which organized segment is about 0.3 million.
• Retail sector grew at 9.4% on real terms & 15.4% on nominal
terms.
Present Scenario
Profile RequiredMBA Graduates with 5-10years of Experience
Graduates with 2-5years of Experience
Graduates/ 12th Pass/ 10th Pass
Graduates/ 12th Pass/ 10th Pass
tOP PLAYERS
Pantaloon Retail (India) Limited, is a large Indian retailer, part of the Future Group, and operates in multiple retail formats in both, value and lifestyle, segments of the Indian consumer market.
Headquartered in Mumbai, the company has over 1,000 stores across 71 cities in India and employs over 30,000 people.
As of 2010, it was the country's largest listed retailer by market capitalization and revenue.
The company’s brands include Pantaloons, a chain of fashion outlets, Big Bazaar, a hypermarket chain, and Food Bazaar, a supermarket chain.
Total Revenue: 60.190 billion (US$1.2 billion)
Pantaloon Retail India
The company is present across several lines of business which have various formats
Fashion - Pantaloons, Central, aLL, Brand Factory, Blue Sky, Top 10, Fashion Station, Big Bazaar, Lee Cooper (JV)
General Merchandise - Big Bazaar, Shoe Factory, Navras, Electronics Bazaar, Furniture Bazaar, KB'S FAIR PRICE, Food Rite
E-tailing (online shopping) - www.futurebazaar.com Leisure and entertainment - Bowling Co., F123, TGIF (Thank
God it's Friday!) Consumer durables - Koryo, Sensei, IPAQ Service - E Care, H Care , Design & Service Malls - Central (Bangalore, Hyderabad, Pune, Mumbai,Kochi,
Vadodara, Gurgaon, Indore, Ahmedabad, Thane
Lines of Business
Reliance Retail, Ltd. is a subsidiary company of Reliance Industries.
Founded in 2006 and based in Mumbai,it is the second largest retailer in India.
Its retail outlets offer foods, groceries, apparel and footwear, lifestyle and home improvement products, electronic goods, and farm implements and inputs.
The company’s outlets also provide vegetables, fruits, and flowers. It focuses on consumer goods, consumer durables, travel services, energy, entertainment and leisure, and health and well-being products, as well as on educational products and services.
Reliance Retail
Reliance Fresh - Retail Outlets of fruits, Vegetables & Groceries.
Reliance Digital - Consumer Electronics retail Store Reliance Jewels - Jewellery Reliance Time Out - Lifestyle store of Books, Music,
Movies, Toys, Gaming, Fragrances, Stationery. Reliance Trends - Apparel and Clothing
Subsidiaries & Divisions
Shoppers Stop is an Indian department store chain promoted by the K Raheja Corp Group (Chandru L Raheja Group), started in the year 1991 with its first store in Andheri, Mumbai.
Shoppers Stop retails a range of branded apparel and private label under the following categories of apparel, footwear, fashion jewellery, leather products, accessories and home products.
These are complemented by cafe, food, entertainment, personal care and various beauty related services.
Shoppers Stop launched its e-store with delivery across major cities in India in 2008.
The website retails all the products available at Shoppers Stop stores, including apparel, cosmetics and accessories.
Shoppers Stop
Shoppers Stop has 97 stores across the country (with the latest one being the outlet at Kumar Pacific Mall, Pune) including three airport stores.
Shoppers Stop retails products of domestic and international brands such as Louis Philippe, Pepe, Arrow, BIBA, Gini & Jony, Carbon, Corelle, Magppie , Nike, Reebok, LEGO, and Mattel.
Shoppers Stop retails merchandise under its own labels, such as STOP, Kashish, LIFE and Vettorio Fratini, Elliza Donatein, Acropolis etc.
Total Revenue: Rs 60.190 billion (US$1.2 billion)
First outlet in 1973. The Landmark Group provides a value-driven product range
for the entire family through a diverse portfolio of core retail brands.
This includes a host of home grown brands in addition to international franchise offerings
Key Facts Turnover in excess of USD 4.7 billion Strong growth at a CAGR of 23% Presence in 17 countries with over 1000 outlets Over 18 million sq. ft. of retail space Team of Over 40,000 employees.
Landmark Group
Landmark brands
Home Centre Centre point Baby shop Splash Shoe Mart Lifestyle Beauty bay Iconic
Q Home Décor Candelite Max Shoexpress Emax Lifestyle Department
Stores SPAR hypermarkets
Key Figures
2011-12
2010-11
2009-10
2008-09
2007-08
0 500 1000 1500 2000 2500 3000 3500 4000 4500 5000
Sales(USD million)
Sales(USD million)
ADITYA BIRLA GROUP A $35 billion corporation, The Aditya Birla Group is in the League of Fortune 500. Force of over 133,000 employees. Belonging to 42 different nationalities. The Group has been ranked Number 4 in the Global 'Top
Companies for Leaders' survey Ranked Number 1 in Asia Pacific for 2011. The group has diversified business interests and is
dominant player in all the sectors in which it operates such as viscose staple fibre, metals, cement, viscose filament yarn, branded apparel, carbon black, chemicals, fertilisers, insulators, financial services, telecom, BPO and IT services.
Globally- the Aditya Birla Group
No.1 in viscose staple fibre No.1 in carbon black The fourth-largest producer of insulators The fifth-largest producer of acrylic fibre Among the top 10 cement producers Among the best energy-efficient fertiliser plants The largest Indian MNC with manufacturing
operations in the USA
Aditya Birla Group - In India
A top fashion (branded apparel) and lifestyle player The second-largest player in viscose filament yarn The largest producer in the alkali sector Among the top three mobile telephony companies A leading player in life insurance and asset
management Aditya Birla Retail Ltd. expanded its presence
across the country under the brand "more." with 2 formats Supermarket & Hypermarket.
Among the top 10 BPO companies
Strength….. Demographic favour Rising disposable income Increase in number of people in earner category Urbanization Shopping convenience Low labour cost of skilled ones Changing consumer habits and lifestyles. Plastic card revolution. Greater availability of quality retail space.
Policy related issues- - lack of industry status for retail. - numerous licence, permits and registration requirement. - farmer and retailer unfriendly APMC act.
Limited consumer insight- - lack of detailed region specific customer data. - less data on spending pattern.
Inadequate human resources- - lack of trained personnel at all level. - stringent employment and industry laws. - fragment approach to human resources.
Weakness…..
Taxation hurdle - inconsistent octroi and entry tax structure. - VAT and multiple taxation issues. - large grey market presence. Underdeveloped supply chain - underdeveloped logistics infrastructure. - absence of national cold chain networks. - lack of national distribution networks and hubs Lack of adequate utilities - lack of basic infrastructure like power, transport and communication creates difficulty in sustaining retail operations across the large geographical spread of country.
Potential for investment. Locational advantage. Sectors with high growth potential. Fastest growing formats. Rural retail. Wholesale trading. E-retailing. Retail franchising.
Opportunities…..
Political issues. Social issues. Inflation. Lack of differentiation among the malls that
are coming. Poor inventory turns and stock availability
measures.
Threats…..
FDI IN RETAIL
Investment done by citizens and government of one country (home country) invest in industries of another country (host country).
An investment becomes foreign investment when..
Foreign Investme
nt through
Foreign Direct
Investments
Foreign Institutional Investors
Why Global Retailers Look Up to India?
Incentives attract FDI.
Market size and potential are sufficient inducers.
Tax breaks, import duty exemptions, land and
power subsidies, and other enticements.
FDI in Multibrand retail
ADVANTAGES Better choice for
customers Quality products Job opportunities More capital investments
– good for our BOP Parasite retailing Increases Forex reserve Technological
advancements
DISADVANTAGES Threat for small scale
retailers in villages High competition Deletion of supply
chain levels Consumerism
increases
Future Predictions
2008 2011 2013 20180
0.20.40.60.8
11.21.4
0.35
0.59
0.830000000000001
1.3Expected Growth
CAGR 10%
• In the last four year, the consumer spending in India climbed up to 75%.
• By the year 2013, the organized sector is also expected to grow at a CAGR of 40%.
• The total number of shopping malls is expected to expand at a CAGR of over 18.9 per cent by 2015.
TenCustomer
Experience
E-tailing
Technology/MIS
Services
HotCategory
Management
Integrated Marketing/Social Networking
Dynamic Pricing
Trends
Private Label
Use of Metrics
Innovative Formats/Mode
ls
CONCLUSION
Opportunity awaits for MBA’s like us Strat thinking about retail industry dear aspiring
entrepreneurs of MIIM Government is soon expected to allow FDI in multi
brand retail – will double the opportunities. Let us hope for the best !!!!!!
