Overview Of Retail In India


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Overview Of Retailing In India, Indian Retail Sector

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  • according to Mark Ashman, CEO of the company. The 51:49 joint venture between UK‘s Marks and Spencer and Reliance Retail Ltd already has 15 stores in India
  • JSW Steel currently has 50 such steel retail outlets called JSW Shoppe and is targeting to increase it to 200 by March 2010
  • A recent study by CRISIL has estimated a current annual total loss of about Rs. 1,000 billion in the agricultural supply chain, 57 per cent of which is due to avoidable wastage and the rest due to avoidable costs of storage and commissions ( CRISIL Research, June 2007). Organized retailers have already started procuring fruit and vegetables from farmers directly bypassing the various intermediaries who add more costs than value to the food chain. They are investing heavily on logistics in the form of centralized warehousing and distribution centres, transport and cold storage, either directly or through engaging third party logistics companies.
  • According to India Retail Report 2009 by Images, "India's rural markets Offer a sea of opportunity for the retail sector. The urban-retail split in consumer spending stands at 9:11, with rural India accounting for 55 percent of private retail consumption." As per IBEF, rural India accounted for almost half of the Indian retail market, which was worth about USD 300 billion. With most of the retail markets getting saturated in Tier I and Tier II cities, the next phase of growth is likely to be seen in the rural markets. Major domestic retailers have started setting up farm linkages. Few Examples include, DCM‘s Hariyali Kisan Bazaars, Pantaloon Godrej‘s joint venture Aadhars, ITC‘s Choupal Sagars, Tata‘s Kisan Sansars and Reliance Fresh are some of the established rural retail chains.
  • Overview Of Retail In India

    1. 1. BY R.S Khurana MBA Ci &Cw SEM-4 <ul><li>OVERVIEW OF RETAIL IN INDIA </li></ul>
    2. 4. The Number Game <ul><li>A booming US$ 300 billion retail market in India </li></ul><ul><li>5.5 retail outlets per 1000 population, highest in the world </li></ul><ul><li>25-30% annual growth in retail loans and credit cards </li></ul><ul><li>The organized retail sector currently accounts for around 5 per cent of the Indian retail market. </li></ul><ul><li>Organized Retail is predicted to capture 15 – 20% market share by 2010. </li></ul><ul><li>Over 100 malls of over 30 million sq feet of new shopping centre space are projected to open in India between 2009 and end-2010. </li></ul>
    3. 5. Contd.. <ul><li>720 million Indians to join consuming age by 2010 </li></ul><ul><li>55% of the Indian population will be under 20 years of age by 2015 </li></ul><ul><li>32% rise in urbanization by 2008 </li></ul><ul><li>10% annual growth in Retail market since 2000 </li></ul><ul><li>7% of the population is engaged in retailing </li></ul><ul><li>Largest retail outlets in the world. </li></ul>
    4. 6. Contd…. <ul><li>Compound annual growth rate (CAGR) of 10 per cent. </li></ul><ul><li>Also, organized retail, which is pegged at around US$ 8.14 billion, is expected to grow at a CAGR of 40 per cent to touch US$ 107 billion by 2013. </li></ul>
    5. 7. Contd…. <ul><li>India has emerged the third most attractive market destination for apparel retailers, according to a study by global management consulting firm AT Kearney. </li></ul><ul><li>It further says that in India, apparel is the second largest retail category and is expected to grow by 12-15 per cent per year. Apparel, along with food and grocery, will lead the organized retailing in India. </li></ul>
    6. 11. Profiling Indian Retailers…
    7. 12. TATA <ul><li>Started with Littlewoods retail stores in 1998 . </li></ul><ul><li>Company renamed Trent limited </li></ul><ul><li>Came with Westside – value for money </li></ul><ul><li>In house merchandising </li></ul><ul><li>Took retail store on lease </li></ul><ul><li>Boutique store layout </li></ul>
    8. 13. Contd… <ul><li>Every department headed by manager </li></ul><ul><li>Reports to head of merchandising </li></ul><ul><li>Under department manager are assistant buyers & merchandisers </li></ul><ul><li>Along with in house brands are designer labels – Krishna Mehta ,Wendell Roderick </li></ul><ul><li>Café Taj </li></ul>
    9. 14. Contd….. <ul><li>Trent launched starindia bazaar in 2004 </li></ul><ul><li>Trent bought 26 % stake in landmark </li></ul><ul><li>Titan – 25 % market share </li></ul><ul><li>Manufactured watches to cater every segment </li></ul><ul><li>Fast track, edge, raga, sonata, regalia, dash , bhandan </li></ul><ul><li>1998- launched sonata </li></ul><ul><li>For price & quality conscious </li></ul>
    10. 15. Contd.. <ul><li>Titan – edge slimmest watch in the world </li></ul><ul><li>Nebula – premium watch range, with Rohit Bal collection </li></ul><ul><li>Manufacturing at Bangalore- 50000 sq feet </li></ul><ul><li>Entered into jewelry segment with the brand name tanishq in 1995 </li></ul><ul><li>Extensive distribution network </li></ul><ul><li>600 service centers </li></ul>
    11. 16. Contd… <ul><li>Franchisee management programme </li></ul><ul><li>Customer loyalty programme- Titan signet </li></ul><ul><li>Point scheme followed in Signet </li></ul><ul><li>2006 among top6 manufacturer in the world </li></ul>
    12. 17. RPG group <ul><li>RPG Group – power, tires, retail, transmission, entertainment, technology. </li></ul><ul><li>Food world chain of grocery stores in 99 </li></ul><ul><li>Growth rate 0f 30 % </li></ul><ul><li>Western & Sothern India presence </li></ul><ul><li>Stocks 5000 items hub & spoke model centralized ware house shorten the distribution channel </li></ul><ul><li>2002 – started sealing in house brands 10 -15 % lower no question asked replacement programme </li></ul>
    13. 18. Contd… <ul><li>1997-Music world – videos, audios , accessories </li></ul><ul><li>Music world destination stores -4000 square feet </li></ul><ul><li>Music world express outlets- 300 to 600 sq feet located in large departmental store </li></ul><ul><li>Music world unplugged outlets- gondola placed in high traffic outlets . Caters to impulse customer with just released titles </li></ul>
    14. 19. Contd… <ul><li>Focused on ambience </li></ul><ul><li>Health & glow- join venture b/w RPG & dairy farm international. </li></ul><ul><li>Catering to health & beauty requirements </li></ul><ul><li>Cosmetic & medicinal services under 1 roof </li></ul>
    15. 20. Pantaloon Retail India Limited <ul><li>Pantaloons </li></ul><ul><li>Big bazaar </li></ul><ul><li>Food bazaar </li></ul><ul><li>gold bazaar </li></ul><ul><li>Central mall </li></ul><ul><li>Incorporated in 1987- menz wear private ltd </li></ul><ul><li>First outlet in 93 </li></ul><ul><li>Products sold under the name of Bare, pantaloon & john miller </li></ul>
    16. 21. Contd… <ul><li>Wide range of choosing options </li></ul><ul><li>Manager given authority for usage of shelf space </li></ul><ul><li>In house labels </li></ul><ul><li>25- 30 % cheaper than others </li></ul><ul><li>Central ware house in tarapur Maharashtra- 25000 square feet </li></ul>
    17. 23. Overview <ul><li>In 1991 the Rahejas handed over Shoppers Stop to B.S. Nagesh (M.D. Shoppers Stop) </li></ul><ul><li>Ravi and Neil Raheja are official investors </li></ul><ul><li>B.S. Nagesh owns 0.8% stake of Shoppers Stop. </li></ul>
    18. 24. <ul><li>Fashion & lifestyle store for the family </li></ul><ul><li>Have never crossed 1:1 debt equity ratio. </li></ul><ul><li>Rahejas are constantly investing in the project. </li></ul><ul><li>Shoppers Stop has 51 stores all over India. </li></ul><ul><li>51 crosswords stores and 3 Hyper city marts. </li></ul>
    19. 25. Contd.. <ul><li>One of the First retailer to in India to realize the importance of SCM in the operations of a retail business. </li></ul><ul><li>Developed process manuals for each part of the logistics chain. </li></ul><ul><li>Modules included – vendor management </li></ul><ul><li> purchase order management </li></ul><ul><li>stock receiving system </li></ul><ul><li> purchase verification & inventory build up </li></ul><ul><li>Generation & fixing of price & store tags </li></ul><ul><li>ERP with arthur planning system & oracle financials </li></ul>
    20. 26. Contd.. <ul><li>First to launch Indians retail loyalty programme “The first citizen” . </li></ul>
    21. 27. Shoppers Stop – A growing phenomenon <ul><li>YEAR REVENUE </li></ul><ul><li>In FY 03-04 Rs 3,448 million </li></ul><ul><li>In FY 04-05 Rs 4,411 million </li></ul><ul><li>In FY 05-06 (42%) Rs 6,228 million </li></ul><ul><li>In FY 05-07 (30%) Rs 8,123 million </li></ul><ul><li>In FY 07-08 (32%) Rs 10,794million </li></ul>
    22. 29. BUT WHY……………………???
    23. 30. Reasons Behind Retail Growth: <ul><li>Consumer spending has risen sharply at 75% as the youth population (more than 33 percent of the country is below the age of 15) has seen a significant increase in its disposable income. </li></ul><ul><li>Retail industry in India is expected to rise 25% yearly being driven by strong income growth, changing lifestyles, and favorable demographic patterns. </li></ul><ul><li>India‘s retail still unexploited and under penetrated. </li></ul><ul><li>Easy availability of credit, and large scale real estate developments were fuelling the growth of India‘s approximately USD 25 billion organized retail market. </li></ul><ul><li>Ever-expanding middle- and upper-class consumer base, there will also be opportunities in India‘s tier II and tier III cities. </li></ul>
    24. 31. <ul><li>The greater availability of personal credit </li></ul><ul><li>The terms commonly used include ―billion-plus‖ population, ―a middle class consisting of hundreds of millions‖, ―rapidly-growing income and consumption‖. </li></ul><ul><li>India has had one of the consistently highest GDP growth rates of the last few years. </li></ul><ul><li>Newer opportunities such as airport real estate are emerging with the upgrade of the major and secondary airports, as well as a change in government policy allowing expansion of retail activity at airports. </li></ul>
    25. 32. Demographics…
    26. 33. Major expansion plans in retail sector: <ul><li>Marks & Spencer Reliance India is planning to open 35 more stores over the next five years,. </li></ul><ul><li>Carrefour SA, Europe‘s largest retailer, may start wholesale operations in India by 2010. Carrefour exports goods worth US$ 170 million from India to Europe, UAE, Indonesia, Europe, Thailand, Singapore and Malaysia. </li></ul><ul><li>Mahindra Retail, a part of the US$ 6.7-billion Mahindra Group, plans to invest US$ 19.8 million by 2010 to step up its specialty retail concept 'Mom and Me'. </li></ul><ul><li>. </li></ul>
    27. 34. Expansions.. (Contd) <ul><li>Pantaloon Retail India (PRIL) plans to invest more than US$ 103.3 million to expand its seamless mall Central and the value fashion format Brand Factory over the next two years. </li></ul><ul><li>Jewellery manufacturer and retailer, Gitanjali Group and MMTC are jointly setting up a chain of exclusive retail outlets called Shuddi–Sampurna Vishwas. The joint venture, which plans to open around 60 stores across India by end of this year, will retail hallmarked gold and diamond jewellery. </li></ul>
    28. 35. Expansions.. (Contd) <ul><li>Bharti Retail has introduced eight Wal-Mart private labels—including two of its largest, ‗Great Value‘ and ‗George‘—in its supermarket chain Easy day. </li></ul><ul><li>Italian sportswear brand Lotto will launch two new footwear brands Sabots and Calcetto in the country in the next few weeks. The plan is to have at least 50 exclusive outlets by March 2010. </li></ul><ul><li>Steel players such as JSW Steel and Essar Steel are increasing their focus on opening up more retail outlets pan India.. Similarly, Essar Steel also has such retail outlets called Essar hyper marts. With a total 150 such outlets currently, this segment contributes to about 20-25 per cent to the Essar‘s total revenue. </li></ul>
    29. 36. Contd… <ul><li>EBONY Homes, the home furniture retail arm of the US$ 3 billion DS Constructions, has plans to invest US$ 25.1 billion to set up a chain of 20-25 furniture stores styled Ebony Gautier across the country by March 2012. </li></ul><ul><li>Gujarat Co-operative Milk Marketing Federation (GCMMF), which owns and markets Asia's largest dairy brand, Amul, plans to add 6,000 Amul retail parlors across the country in FY 2009. </li></ul><ul><li>The brands planning an India entry include: </li></ul><ul><li>The Pizza Company and Spicchio Pizza </li></ul><ul><li>Coffee Club from Australia </li></ul><ul><li>Japanese brand Lolita Fashion </li></ul><ul><li>Revive Juice Bars from the UK </li></ul><ul><li>Mrs. Fields Cookies </li></ul><ul><li>Jamba Juice from the US </li></ul><ul><li>French fashion brand Jules. </li></ul><ul><li>Retail brands such as United Colors of Benetton, Tommy Hilfiger and Puma are opening factory outlets to sell excess stock and woo the price-conscious buyers. </li></ul>
    30. 37. Organized Retailing: Advantage To Indian Economy ..Is It?? Lets see.. <ul><li>Organized retail will result in a complete revamp of the agricultural supply chain in the country. </li></ul><ul><li>Boost to Exports : Some of the international retailers that have plans for India in the future have already developed suppliers in the country and have started exporting from India. For example, Wal-Mart exported an equivalent of US$ 600 million, and IKEA about 380 million Euros from India in 2006-07. </li></ul><ul><li>Organized retailing will work with farmers to: </li></ul><ul><li>(i) improve yields by enabling them to obtain quality input supplies </li></ul><ul><li> (ii) adopt superior farm technology and practices </li></ul><ul><li> (iii) access timely credit at reasonable rates. </li></ul>
    31. 38. Contd… <ul><li>Small-scale manufacturers will be the major beneficiaries of private labels. </li></ul><ul><li>Organized retail‘s direct purchase from farmers and other suppliers compresses the supply chain and eliminates a large number of intermediaries and hence can offer consumers a lower price than the traditional channels. </li></ul><ul><li>Unorganized retailers normally do not pay taxes and most of them are not even registered for sales tax, VAT, or income tax. Organized retailers, by contrast, are corporate entities and hence file tax returns regularly. </li></ul>
    32. 39. What will be the impact on the traditional mom and pop store…? <ul><li>The answer could be a co-existence. The major advantage for the smaller players is the size, complexity and diversity of our Indian Markets. </li></ul><ul><li>It is too early to predict the erosion of the mom and pop stores in India. This is also proved by countries where Wal-Mart the world‘s biggest retailer operates. The smaller stores have a peaceful coexistence in these countries with the number one company in the fortune 500 list. </li></ul>
    33. 40. Impact Of Slowdown
    34. 41. <ul><li>Challenges </li></ul>
    35. 42. Rentals – skyrocketing to all time high:
    36. 43. Liquidity under pressure:
    37. 44. Contd.. <ul><li>Besides the weak economy and the feeble consumer sentiments, the disappointing retail growth is also attributed to Poor supply chain management and weak support infrastructure, absence of a mature 3PL player providing high service levels at competitive prices. </li></ul>
    38. 45. Solutions..
    39. 46. Contd…
    40. 47. Contd…
    41. 48. Entering into alliances and leveraging expertise
    42. 49. Some Of The Strategies Adopted By Retailers:
    43. 50. Private Labeling….picking up
    44. 51. Private labeling : Indian Context
    45. 52. <ul><li>Innovative Concepts …. In Indian Retail </li></ul>
    46. 53. Rural Retailing
    47. 54. Contd..
    48. 55. Contd….
    49. 56. <ul><li>Current Indian FDI Regime </li></ul><ul><ul><li>FDI not permitted in retail trade sector, except in: </li></ul></ul><ul><ul><ul><li>Private labels </li></ul></ul></ul><ul><ul><ul><li>Hi-Tech items / items requiring specialized after sales service </li></ul></ul></ul><ul><ul><ul><li>Medical and diagnostic items </li></ul></ul></ul><ul><ul><ul><li>Items sourced from the Indian small sector (manufactured with technology provided by the foreign collaborator) </li></ul></ul></ul><ul><ul><ul><li>For 2 year test marketing (simultaneous commencement of investment in manufacturing facility required) </li></ul></ul></ul>FDI in Retail not permitted FDI in Indian retailing
    50. 57. <ul><li>Metro Group of Germany </li></ul><ul><ul><li>Cash-and-carry wholesale trading </li></ul></ul><ul><ul><li>Proposal faced strong opposition </li></ul></ul><ul><li>Entities established prior to 1997 </li></ul><ul><ul><li>Allowed to continue with their existing foreign equity components. </li></ul></ul><ul><ul><li>No FDI restrictions in the retail sector pre-1997 </li></ul></ul><ul><ul><li>Food world </li></ul></ul><ul><ul><ul><li>51:49 JV between RPG and Dairy Farm International, </li></ul></ul></ul><ul><ul><ul><li>Leading food retailer in India now </li></ul></ul></ul><ul><ul><li>Mc Donalds </li></ul></ul>Current FDI FDI in Indian retailing
    51. 58. <ul><li>Franchise </li></ul><ul><ul><li>International company gives name and technology to local partner. Gets royalty in return </li></ul></ul><ul><ul><li>In case master franchise is appointed for region or country, he has right to appoint local franchisees </li></ul></ul><ul><ul><ul><li>Nike, Pizza Hut, Tommy Hilfiger, Marks and Spencer, Mango </li></ul></ul></ul><ul><li>Manufacturing </li></ul><ul><ul><li>Company sets up Indian arm for production </li></ul></ul>How they are present International retailers in India: Strategies
    52. 59. <ul><li>Distribution </li></ul><ul><ul><li>International company sets up local distribution office </li></ul></ul><ul><ul><li>Supply products to Indian retailers to sell </li></ul></ul><ul><ul><li>Also set up franchised outlets for brand </li></ul></ul><ul><ul><ul><li>Swarovski, Hugo Boss </li></ul></ul></ul><ul><li>Wholesale trading </li></ul><ul><ul><li>Cash and Carry operations </li></ul></ul><ul><ul><li>100% FDI permitted </li></ul></ul><ul><ul><ul><li>Metro Cash n Carry </li></ul></ul></ul>How they are present International retailers in India: Strategies
    53. 60. <ul><li>Improve competition </li></ul><ul><li>Develop the market </li></ul><ul><li>Greater level of exports due to increased sourcing by major players </li></ul><ul><ul><li>Sourcing by Wal-Mart from China improved multifold after FDI permitted in China </li></ul></ul><ul><ul><li>Similar increase in sourcing observed for Metro in India </li></ul></ul><ul><ul><li>Provides access to global markets for Indian producers </li></ul></ul>Benefits of FDI Why FDI?
    54. 61. <ul><li>Investment in technology </li></ul><ul><ul><li>Cold storage chains solve the perennial problem of wastage </li></ul></ul><ul><ul><li>Greater investment in the food processing sector technology </li></ul></ul><ul><ul><li>Better operations in production cycle and distribution </li></ul></ul><ul><li>Better lifestyle </li></ul><ul><ul><li>Greater level of wages paid by international players usually </li></ul></ul><ul><ul><li>More product variety </li></ul></ul><ul><ul><li>Newer product categories </li></ul></ul><ul><ul><li>Economies of scale to help lower consumer price </li></ul></ul><ul><ul><li>Increased purchasing capacity of consumers </li></ul></ul>Benefits of FDI Why FDI?
    55. 62. Speaking facts.. <ul><li>Foreign direct investment (FDI) inflows as on July 2009, in single-brand retail trading, stood at approx. US$ 46.60 million. (Department of Industrial Policy and Promotion DIPP.) </li></ul><ul><li>This sector is expected to invest around US$ 503.2 million in retail technology service solutions in the current financial year. </li></ul><ul><li>This could go further up to US$ 1.26 billion in the next four to five years, at a CAGR of 40 per cent. </li></ul>
    56. 63. The Way Ahead <ul><li>India is amongst the least saturated of all major global markets in terms of penetration of modern retailing formats </li></ul><ul><li>Many strong regional and national players emerging across formats and product categories </li></ul><ul><li>Most of these players are now gearing up to expand rapidly after having gone through their respective learning curves </li></ul><ul><li>Real Estate Developers are also moving fast through the learning curve to provide qualitative environment for the consumers </li></ul><ul><li>The Shopping Mall formats are fast evolving </li></ul><ul><li>Partnering among Brands, retailers, franchisees, investors and malls </li></ul><ul><li>Improved Infrastructure </li></ul>
    57. 64. Conclusion <ul><li>The demanding assertive Indian consumer is now sowing the seeds for an exciting retail transformation that has already started bringing in larger interest from International Brands / formats. </li></ul><ul><li>With the advent of these players, the race is on to please the Indian consumer and its time for the Indian Consumer to sit back and enjoy the hospitality of being treated like a King. </li></ul><ul><li>The future looks extremely bright indeed, with lots of possibilities ahead -- big possibilities. Like the song says, ''We've just begun.''” </li></ul>
    58. 65. <ul><li>THANK YOU </li></ul><ul><li>By </li></ul><ul><li>R.S Khurana </li></ul><ul><li> MBA Marketing & Sales </li></ul><ul><li>Amity University </li></ul>