0
technopak Arvind Singhal TiE – Delhi 22 nd  July 2006 Indian Retail Sector Trends & Opportunities
Contents <ul><li>Overview of Indian retail opportunity </li></ul><ul><li>The emerging Indian consumer  </li></ul><ul><li>C...
Overview Of Indian Retail Opportunity
Size of the economy  <ul><li>Sources </li></ul><ul><li>2006 GDP :Central Statistical Organization (CS0)  </li></ul><ul><li...
..With high Private Consumption  GDP US$ 804 Bn Private  Consumption US $482 Bn (60%) Retail US $300 Bn (62%) Non-Retail U...
Growing Retail Market 2006  2010  2015 Source :Technopak Analysis
Retail Market : Rural/Urban Split <ul><li>Almost half of retail market in 2006 is in rural India; although share of urban ...
Retail Market : Urban Split Source :RK Swami BBDO  35% 33% 31% 27% 22% 13% 9% % of Total Market  (Cumulative) 104 100 94 8...
Retail Market : Rural Split <ul><li>Rural India consists of 720 Million consumers across 627,000 villages </li></ul><ul><l...
Retail :Share of categories  Above are indicative calculations only  Share is % share of Retail market.  The share would b...
Key Trends Impacting The Market… <ul><li>Urbanization? </li></ul><ul><ul><li>How rapid is it going to be? </li></ul></ul><...
In View Of The Rapidly Expanding Spend Categories… <ul><li>Food and Grocery </li></ul><ul><li>Clothing </li></ul><ul><li>F...
Two-faced Indian Consumers… <ul><li>Seeking upgradation in some categories & value in the others! </li></ul><ul><li>Key is...
Implications <ul><li>Profile of the Indian consumer is changing and so are the aspirations and buying behavior </li></ul><...
Current Retail Channels
Current Channels  Over 12 million outlets in India 95% of outlets are smaller than 500 sq ft Indian retail space per capit...
<ul><li>The share of organized retail is less than 3% of the total retail market  </li></ul><ul><li>The size of modern ret...
Current Channels : Organized Retail  Market Size : US $ 8billion Source: Technopak Analysis
Leading Players (Illustrative List) : Turnover   The above analysis does not include the specialty retailers like Bata, Ti...
Rapid Transformation Anticipated <ul><li>Top 20 players put together will target about US$ 60+ Billion revenue by 2011, ac...
Rapid Transformation …. <ul><li>Investments in the range of US$ 20+ Billion expected in the next 5years in Retail & its Su...
Impact Areas
Impact Areas Traditional Retailers
TREM: Technopak Retail Evolution Model
G-1 Shift In Channel Mix (Value) For the Key Categories stocked by the Kirana Stores  2005 : 0.68 Million 2010 : 0.88 Mill...
G-2 Shift In Channel Mix (Value) 2005 : 0.84 Million 2010 : 1.09 Million 2015 : 1.58 Million Source: Technopak Retail Evol...
G-3 Shift In Channel Mix (Value) Modern Grows by 3.4% Reduces by 8% 2005 : 5.61 Million 2010 : 6.71 Million 2015 : 9.53 Mi...
Impact On Traditional Retailers <ul><li>Impact confined to perhaps 300,000 to 500,000 retailers across India coming in dir...
Impact Areas Current Modern Retailers
Current Modern Retailers <ul><li>Most will come under severe pressure </li></ul><ul><li>Most are grossly undercapitalized,...
Value Driver in Retail   Illustrative :The Food & Grocery Sector
Supply Chain Peculiarities  Indian farmer  trapped in a  vicious   cycle of low risk taking ability ,  low investment ,  l...
…  Leading to Significant Quality Drop and Value Loss Quantity drop through Food Supply Chain <ul><li>More Intermediaries ...
Consumer Price is 3.5 times of Farm Gate Price High margin buildup at every intermediary and wastage lead to abnormal cons...
‘ Perishable (F&V)’ Supply Chain  Consumer Retailer Regional  Mandi Local Broker Local Mandi Farmer 7-8 % Margin 8-9% Comm...
Potato Cost and Margin Structure Source: Technopak Retail Research Cost and Margin Structure of Potato 0.00 1.00 2.00 3.00...
Implications … <ul><li>Farm to Kitchen is the right though most challenging and most capital intensive strategy </li></ul>...
Impact Areas Branded Consumer Goods Players
Branded Consumer Goods Areas <ul><li>At the mass market, most Indian consumers are brand-blanked through aspiring for bran...
Impact Areas   Opportunities
Incredible Opportunities In The Supply Side <ul><li>A new ecosystem of suppliers needed across diverse areas e.g. </li></u...
To Conclude ……
Conclusions <ul><li>Size of Indian retail market very promising </li></ul><ul><li>Indian consumer is already behaving diff...
Thank You  !
<ul><li>For further dialogue, please contact : </li></ul><ul><li>Arvind Singhal </li></ul><ul><li>Chairman </li></ul><ul><...
Upcoming SlideShare
Loading in...5
×

Arvind Singhal

1,218

Published on

Published in: Business, Health & Medicine
0 Comments
1 Like
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total Views
1,218
On Slideshare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
75
Comments
0
Likes
1
Embeds 0
No embeds

No notes for slide

Transcript of "Arvind Singhal"

  1. 1. technopak Arvind Singhal TiE – Delhi 22 nd July 2006 Indian Retail Sector Trends & Opportunities
  2. 2. Contents <ul><li>Overview of Indian retail opportunity </li></ul><ul><li>The emerging Indian consumer </li></ul><ul><li>Changes in the retail sector </li></ul><ul><li>Impact Areas </li></ul><ul><li>Conclusion </li></ul>
  3. 3. Overview Of Indian Retail Opportunity
  4. 4. Size of the economy <ul><li>Sources </li></ul><ul><li>2006 GDP :Central Statistical Organization (CS0) </li></ul><ul><li>Growth Rates :Goldman Sach’s BRIC report </li></ul><ul><li>(For details please refer to the appendix of this presentation) </li></ul>1721 2014-15 1133 2009-10 804 2005-6 GDP at current prices (US$ Billion) Fiscal Year
  5. 5. ..With high Private Consumption GDP US$ 804 Bn Private Consumption US $482 Bn (60%) Retail US $300 Bn (62%) Non-Retail US $182 Bn (38%) Urban US $135 Bn (45%) Rural US $165 Bn (55%) India is a consumption led economy : Private Final Consumption Expenditure (PFCE) is 60% of the economy (as against 42% of China and 55% of Japan) Source :Central Statistical Organization (CS0) and Technopak Analysis Public Spending and Gross Capital Formation 40%
  6. 6. Growing Retail Market 2006 2010 2015 Source :Technopak Analysis
  7. 7. Retail Market : Rural/Urban Split <ul><li>Almost half of retail market in 2006 is in rural India; although share of urban market is increasing by almost 5% every 8-10 years </li></ul>Source :National Account Statistics; Monthly per capita Expenditure and Technopak Analysis 55% Rural 45% Urban % Split
  8. 8. Retail Market : Urban Split Source :RK Swami BBDO 35% 33% 31% 27% 22% 13% 9% % of Total Market (Cumulative) 104 100 94 80 67 40 27 Cumulative Market US $ Billion 78% 74% Top 784 75% 69% Top 530 70% 63% Top 338 60% 53% Top 141 50% 43% Top 62 30% 24% Top 9 20% 16% Top 4 % of Urban Market (Cumulative) % of Population   City Type  
  9. 9. Retail Market : Rural Split <ul><li>Rural India consists of 720 Million consumers across 627,000 villages </li></ul><ul><li>17% of these villages account for 50% of the rural population and 60% of the rural wealth implying reaching out to almost 100,000+ villages to address even 50% of this rural opportunity </li></ul>Source: Census; National Council of Applied Economic Research (NCAER)
  10. 10. Retail :Share of categories Above are indicative calculations only Share is % share of Retail market. The share would be about 60% of the above numbers in case they are to be seen as % PFCE. For example Food, Beverages and Tobacco would be about 40% of the PFCE 100% 637 8.4% 100% 427 9% 100% 300   8% 53 18% 5% 23 18% 4% 12 Others 1% 7 15% 1% 3 17% 0.6% 2 Recreation 3% 21 12% 3% 12 12% 3% 8 Medical Care and Health Services 6% 37 9% 6% 24 12% 5% 15 Jewellery & Watches 4% 28 12% 4% 16 15% 3% 9 Furniture 7% 43 12% 6% 24 15% 5% 14 Consumer Durables & IT 2% 12 12% 2% 7 15% 1% 4 Furnishings 2% 11 9% 2% 7 11% 2% 5 Footwear 8% 50 9% 8% 33 11% 7% 21 Apparel 5% 35 9% 5% 23 11% 5% 15 Personal Care 54% 342 6% 60% 256 7.0% 65% 195 Food, Beverages and Tobacco % Share 2015 Market Size US $billion 2015 Growth Rate b/w 2015-10 % Share 2010 Market Size $billion 2010 Growth Rate b/w 2010-05 % Share 2006 Market Size $billion 2006  
  11. 11. Key Trends Impacting The Market… <ul><li>Urbanization? </li></ul><ul><ul><li>How rapid is it going to be? </li></ul></ul><ul><ul><li>What is the likely impact on consumption and its growth/trends? </li></ul></ul><ul><li>Changing family structures? </li></ul><ul><ul><li>What is the future family structure? </li></ul></ul><ul><ul><li>How is it going to impact shopping behavior? </li></ul></ul><ul><ul><li>How is it going to impact the spending power and hence consumption? </li></ul></ul><ul><li>Demographic Changes? </li></ul><ul><ul><li>What would be the demographic structure of India in next 5, 10, 15 years? </li></ul></ul><ul><ul><li>How is it going to impact shopping behavior? </li></ul></ul><ul><ul><li>How is it going to impact the spending power and hence consumption? </li></ul></ul>
  12. 12. In View Of The Rapidly Expanding Spend Categories… <ul><li>Food and Grocery </li></ul><ul><li>Clothing </li></ul><ul><li>Footwear </li></ul><ul><li>Consumer durables </li></ul><ul><li>Home linen </li></ul><ul><li>Movies and theatre </li></ul><ul><li>Eating out </li></ul>1991 <ul><li>Food and Grocery </li></ul><ul><li>Clothing </li></ul><ul><li>Footwear </li></ul><ul><li>Consumer durables </li></ul><ul><li>Expenditure on DVDs and VCDs </li></ul><ul><li>Home linen </li></ul><ul><li>Home accessories </li></ul><ul><li>Accessories </li></ul><ul><li>Gifts </li></ul><ul><li>Take-away/ Pre cooked / RTE meals </li></ul><ul><li>Movies and theatre </li></ul><ul><li>Eating out </li></ul><ul><li>Entertainment parks </li></ul><ul><li>Mobile phones and service </li></ul><ul><li>Household help </li></ul><ul><li>Travel packages </li></ul><ul><li>Club membership </li></ul><ul><li>Computer Peripheral & Internet Usage </li></ul>2004 2010 <ul><li>Food and Grocery </li></ul><ul><li>Clothing </li></ul><ul><li>Footwear </li></ul><ul><li>Consumer durables </li></ul><ul><li>Expenditure on DVDs and VCDs </li></ul><ul><li>Home linen </li></ul><ul><li>Home accessories </li></ul><ul><li>Accessories </li></ul><ul><li>Gifts </li></ul><ul><li>Take-away/ Pre cooked / RTE meals </li></ul><ul><li>Movies and theatre </li></ul><ul><li>Eating out </li></ul><ul><li>Entertainment parks </li></ul><ul><li>Mobile phones and service </li></ul><ul><li>Household help </li></ul><ul><li>Travel packages </li></ul><ul><li>Club membership </li></ul><ul><li>Computer Peripheral & Internet Usage </li></ul><ul><li>??? </li></ul><ul><li>??? </li></ul><ul><li>??? </li></ul><ul><li>??? </li></ul>Note : The above categories account for 80% of consumer spending
  13. 13. Two-faced Indian Consumers… <ul><li>Seeking upgradation in some categories & value in the others! </li></ul><ul><li>Key issue for any retailer is to identify the “upgrades” and “value-focused” product categories to rationalize the product mix and maintain healthy margins </li></ul>Consumer Spends Grocery Apparel Eating Out Upgrading Mobile phones Housing Automobiles Durables Education Seeking cheaper options
  14. 14. Implications <ul><li>Profile of the Indian consumer is changing and so are the aspirations and buying behavior </li></ul><ul><li>Consumer understanding and consumer orientation will be one of the key drivers of future success </li></ul>
  15. 15. Current Retail Channels
  16. 16. Current Channels Over 12 million outlets in India 95% of outlets are smaller than 500 sq ft Indian retail space per capita at 2 sq ft/ person is lowest in the world Indian retail density of 6% is highest in the world Highest number of outlets per person (7 per thousand) One of the most fragmented markets in the World
  17. 17. <ul><li>The share of organized retail is less than 3% of the total retail market </li></ul><ul><li>The size of modern retail is about US$ 8 Billion and has grown by 35% CAGR in last five years </li></ul>Current Channels : Organized Retail
  18. 18. Current Channels : Organized Retail Market Size : US $ 8billion Source: Technopak Analysis
  19. 19. Leading Players (Illustrative List) : Turnover The above analysis does not include the specialty retailers like Bata, Titan and Tanishq Source: myIRIS,Media and Technopak Analysis The biggest players are small as yet ! 80 Landmark (Lifestyle) 25 Vishal Mega Mart 44 Subhiksha 53 Trent 133 Shoppers Stop 444 Future Group (Pantaloon) US $ Million   Name
  20. 20. Rapid Transformation Anticipated <ul><li>Top 20 players put together will target about US$ 60+ Billion revenue by 2011, accelerating the growth of Modern Retail </li></ul>Within next 5years 7.0+ Next 15 Retailers Within next 5years 1.0+ R5 20+ Total Within next 5years 2.0+ R4 Within next 5years 2.0+ R3 Within next 5years 2.0+ R2 Within next 5years 6.0+ R1 No. Of Years Estimated Investment in US$ Billion Retailer
  21. 21. Rapid Transformation …. <ul><li>Investments in the range of US$ 20+ Billion expected in the next 5years in Retail & its Supply Chain alone </li></ul><ul><li>Size of modern retail likely to touch US$ 60+ Billion by 2011 </li></ul><ul><li>At least 2.5 Million additional direct jobs likely to be created in the next 5 years </li></ul><ul><li>Hyper-competition is expected to set in by 2008-9 as the footprint of the top-5 players starts significant overlapping in top 20 – 30 towns </li></ul><ul><li>Significant impact on other retailers and branded good players – creating new opportunities and threats </li></ul>
  22. 22. Impact Areas
  23. 23. Impact Areas Traditional Retailers
  24. 24. TREM: Technopak Retail Evolution Model
  25. 25. G-1 Shift In Channel Mix (Value) For the Key Categories stocked by the Kirana Stores 2005 : 0.68 Million 2010 : 0.88 Million 2015 : 1.29 Million Source: Technopak Retail Evolution Model Retail Universe: Grows by 28% Reduces by 16%
  26. 26. G-2 Shift In Channel Mix (Value) 2005 : 0.84 Million 2010 : 1.09 Million 2015 : 1.58 Million Source: Technopak Retail Evolution Model Retail Universe Grows by 34% Reduces by 18% For the Key Categories stocked by the Kirana Stores
  27. 27. G-3 Shift In Channel Mix (Value) Modern Grows by 3.4% Reduces by 8% 2005 : 5.61 Million 2010 : 6.71 Million 2015 : 9.53 Million Retail Universe: For the Key Categories stocked by the Kirana Stores
  28. 28. Impact On Traditional Retailers <ul><li>Impact confined to perhaps 300,000 to 500,000 retailers across India coming in direct range of about 1000 Hypermarkets and about 3000+ supermarkets by 2011 </li></ul><ul><li>Overall, the universe of traditional retailers will actually increase by 2011 and even by 2015 </li></ul><ul><li>Importance of traditional channel to become even more for established FMCG and other consumer product companies </li></ul>
  29. 29. Impact Areas Current Modern Retailers
  30. 30. Current Modern Retailers <ul><li>Most will come under severe pressure </li></ul><ul><li>Most are grossly undercapitalized, and have largely invested in the “front end” rather than the back end </li></ul><ul><li>Most have weak business processes and IT systems </li></ul><ul><li>Most have no serious understanding or investment in supply chain </li></ul><ul><li>Most have no real margin drivers in their business model that can enable them to make exceptional investments in the immediate future </li></ul>
  31. 31. Value Driver in Retail Illustrative :The Food & Grocery Sector
  32. 32. Supply Chain Peculiarities Indian farmer trapped in a vicious cycle of low risk taking ability , low investment , low productivity , weak market orientation , low value addition , low margin . Indian agribusiness globally uncompetitive, despite rich & abundant natural resources. Large number of retailers, but most are small and fragmented. Low volume, and low bargain power. Numerous intermediaries , lead to cost addition without value addition while blocking the information flow Farmers Traders Commission Agents Wholesalers Retailers
  33. 33. … Leading to Significant Quality Drop and Value Loss Quantity drop through Food Supply Chain <ul><li>More Intermediaries add to the inefficiency in the Chain : </li></ul><ul><ul><li>Leading to wastage in the Chain </li></ul></ul><ul><ul><li>Drop in the quality of the product </li></ul></ul>Source : KSA Analysis Price Increase through the Chain Abnormal Cost Addition Very High Wastage
  34. 34. Consumer Price is 3.5 times of Farm Gate Price High margin buildup at every intermediary and wastage lead to abnormal consumer end prices Illustrative Farmer Trader Com. Agent Wholesaler Retailer Addnl. Cost Wastage Mark-up Price 100 5% 10% 25% 125 2.5% - 5% 131 5% 10% 50% 197 10% 25% 75% 344 Farmer Growers Co-op Distribution Co. Retailer Addnl. Cost Wastage Mark-Up Price 100 10% 2% 13.2% 113 40% 2% 50% 170 25% 2% 50% 255
  35. 35. ‘ Perishable (F&V)’ Supply Chain Consumer Retailer Regional Mandi Local Broker Local Mandi Farmer 7-8 % Margin 8-9% Commission 6-8 % Margin 13-15% Margins Back-end Front-end Wholesalers 9-11 Margin Auction rate 9-14% Commission Source: Technopak Retail Research Illustrative
  36. 36. Potato Cost and Margin Structure Source: Technopak Retail Research Cost and Margin Structure of Potato 0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 9.00 10.00 Intermediaries Price in Rs. / Kg Margin Storage Labour Wastage Grading/Packaging Transportation Cost Price Margin 0.25 0.35 1.00 1.40 Storage 0.10 0.10 0.30 0.00 Labour 0.05 0.05 0.07 0.03 Wastage 0.10 0.15 0.22 0.10 Grading/Packaging 0.00 0.10 0.40 0.00 Transportation 0.00 0.05 1.00 0.00 Cost Price 3.20 3.70 4.50 7.50 Farmer Local mandi / CA Wholesalers Retailers Rs. 3.70 Rs. 4.50 Rs. 7.50 Rs9.03 Disintermediation, that is, purchasing directly from the consolidator will add up to 50% of margin at the retailer level, which is 33.3% more than that of an unorganized retailer. . Illustrative
  37. 37. Implications … <ul><li>Farm to Kitchen is the right though most challenging and most capital intensive strategy </li></ul><ul><li>Current players have not even dis-intermediated beyond the first level from their front end and hence will find immediate challenge from the new entrants who are focussing on the entire value chain, and can potentially deliver more value (quality, availability, price, service) to their consumers than many of the current players </li></ul>
  38. 38. Impact Areas Branded Consumer Goods Players
  39. 39. Branded Consumer Goods Areas <ul><li>At the mass market, most Indian consumers are brand-blanked through aspiring for brands (that can denote quality, trust, value) </li></ul><ul><li>Most major new entrants will start with heavy proportion of Private Labels, and will probably use branded goods to demonstrate the price – value imbalance between such branded goods and their private labels </li></ul><ul><li>Technopak believes that Branded good companies are in for some surprises, and have to go back to the drawing board for strategy – learning from US and UK markets will not be of much use! </li></ul>
  40. 40. Impact Areas Opportunities
  41. 41. Incredible Opportunities In The Supply Side <ul><li>A new ecosystem of suppliers needed across diverse areas e.g. </li></ul><ul><ul><li>Manufacturing </li></ul></ul><ul><ul><ul><li>All categories of consumer goods </li></ul></ul></ul><ul><ul><ul><li>Store fit-outs and accessories e.g. shopping carts, packaging, etc. </li></ul></ul></ul><ul><ul><li>Services </li></ul></ul><ul><ul><ul><li>Entire gamut including IT, Logistics, Design (Store and Product), Communication, Promotions, HR – recruitment and training et al </li></ul></ul></ul>
  42. 42. To Conclude ……
  43. 43. Conclusions <ul><li>Size of Indian retail market very promising </li></ul><ul><li>Indian consumer is already behaving differently and more so in the coming years – fresh learning needed even by the most experienced consumer oriented businesses </li></ul><ul><li>Disruptive changes in the offing – however major disruption anticipated for current modern retailers and many consumer product manufacturing and marketing companies. Opportunities for many others </li></ul><ul><li>Evaluate investment opportunity on the basis of future change rather than recent history ! </li></ul>
  44. 44. Thank You !
  45. 45. <ul><li>For further dialogue, please contact : </li></ul><ul><li>Arvind Singhal </li></ul><ul><li>Chairman </li></ul><ul><li>Technopak Advisors </li></ul><ul><li>Second Floor, Tower D, Global Business Park </li></ul><ul><li>Gurgaon 122 002 (National Capital Region of Delhi) </li></ul><ul><li>Haryana, India </li></ul><ul><li>Tel : (91-124) 414 1111, 288 1111 </li></ul><ul><li>Fax : (91-124) 414 1112, 288 1112 </li></ul><ul><li>Email : [email_address] </li></ul><ul><li>Web : www.technopak.com </li></ul>
  1. A particular slide catching your eye?

    Clipping is a handy way to collect important slides you want to go back to later.

×