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Swot analysis of retail industry

This document provides a SWOT analysis of the retail industry in India. It identifies several strengths, including a large purchasing power from the emerging middle class, favorable population demographics, and low retail penetration compared to other countries. Weaknesses include political and regulatory uncertainty, poor infrastructure, and low conversion rates. Opportunities exist in developing digital strategies, rural retailing, and taking a customer-centric approach. Threats include the availability and cost of real estate, high employee attrition rates, and an underdeveloped shopping culture.

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SWOT ANALYSIS OF RETAIL INDUSTRY BY: Anchal Singla 0161MBA125 Anunay Sinha 0161MBA132 Radhika Gupta 0161MBA164 Utkarsh Vashist 0161MBA180
INTRODUCTION  Retail involves the process of selling consumer goods or services to customers through multiple channels of distribution to earn a profit.  The Indian retail industry has emerged as one of the most dynamic and fast-paced industries due to the entry of several new players.  It accounts for over 10 per cent of the country’s Gross Domestic Product (GDP) and around 8 per cent of the employment.  India is the world’s fifth-largest global destination in the retail space.  India’s retail market is expected to nearly double to US$ 1 trillion by 2020 from US$ 600 billion in 2015.  India’s Business to Business (B2B) e-commerce market is expected to reach US$ 700 billion by 2020 whereas the Business to Consumer (B2C) e-commerce market is expected to reach US$ 102 billion by 2020
CONTINUE:  With the rising need for consumer goods in different sectors including consumer electronics and home appliances, many companies have invested in the Indian retail space in the past few months
SWOT ANALYSIS: 1. STRENGTH: A. PURCHASING POWER:  An increasing number of Indian consumers are ascending the economic pyramid to form an emerging middle class.  In 2010, there were about 470 million people in the emerging middle class. As per PwC estimate, this segment will grow to 570 million by 2021. B. POPULATION DEMOGRAPHICS:  India’s working population is expected to be 117 million over the next decade as compared to China’s four million.  In the following decade, from 2020, the former will add 98 million to its workforce, while China will contract 51 million.
C. LOW RETAIL PENETRATION:  The penetration of organized retail in India is still very low at 6 to 8%, especially when compared to developed nations such as the US and the UK which have retail penetration of 85% and 80%,respectively. D. ASPIRING MIDDLE CLASS:  With a population of 100 million, the tier II and III cities in India are larger than countries such as Germany and the UK. Besides, the untapped rural population holds immense potential for retailers. It is estimated that by 2021, approximately 67% of Indians will still live in rural areas.
2. WEAKNESS A. POLITICAL UNCERTAINTY AND REGULATORY REQUIREMENTS:  The announcement of FDI in retail has open the political pot. The Government faces stiff opposition with its allies threatening to withdraw support. In case, this policy is finally implemented, there is another important aspect for the companies to overcome.  The way the policy is currently drafted, a retailer can set-up stores only in those states which have agreed or will agree in the future to allow FDI in multi-brand retail. B. POOR INFRASTRUCTURE AND SUPPLY CHAIN MANAGEMENT  Infrastructure will play an important role in deciding how this sector will evolve and retailers will manage the supply chain.  Due to poor infrastructure, multiplicity of taxes, high cost of fuel, dependence largely on the road transportation, etc., logistics still remains a high percentage of the cost of a product, in certain cases going beyond 15 to 20%.
C. LESS CONVERSION LEVEL: Despite high footfalls, the conversion ratio has been very low in the retail outlets in a mall as compared to the standalone counter parts. It is seen that actual conversions of footfall into sales for a mall outlet is approximately 20-25%. On the other hand, a high street store of retail chain has an average conversion of about 50-60%. As a result, a stand-alone store has a ROI (return on investment) of 25-30%; in contrast the retail majors are experiencing a ROI of 8-10%.
3. OPPORTUNITY: Retailers in India have been experimenting to arrive at a successful formula, but there is no ‘one size fits all’ strategy. The market is still undergoing a lot of changes, both from the regulatory as well as demand side. A. DIGITAL STRATEGY:  Going digital is not only about e-commerce but the way interaction with employee and customer engagement and investment in technology.  Customers are demanding an improved experience in terms of how to search, browse products and conduct transactions online.  Organizations need to engage with customers differently, in terms of using a range of channels.  Social media is also becoming a popular tool for consumers to educate about products and compare brands.  For retail companies it is important to define how social media can support sales activities throughout the various channels, especially e- commerce. Social media analytics is the focus area for retailers.
B. RURAL RETAILING: India’s huge rural population has caught the eye of the retailers looking for new areas of growth. ITC launched India’s first rural mall “Chaupal Saga” offering a diverse range of products from FMCG to electronic goods to automobiles, attempting to provide farmers a one-stop destination for all their needs.” The Godrej group has launched the concept of ‘agri-stores’ named “Adhaar” which offers agricultural products such as fertilizers & animal feed C. CUSTOMER-CENTRIC APPROACH D. CHANGING THE REGULATORY SCENARIO  Recently, the Indian Government made the following two significant announcements that will go a long way in developing the Indian retail sector a. Permitting foreign investment in multi-brand retail trading. b. Simplifying the rules for single brand retail trading to make it more business-friendly
4. THREAT: A. AVAILABILITY OF LAND AND REAL-ESTATE:  Retail space and rentals are key considerations in multi-brand retail and getting a feasible rate in the desired location is important. There retailers who have exited cities because of the high rentals that put more pressure on profitability. B. HUMAN CAPITAL:  With attrition still very high in the industry, human capital management continues to remain one of the top three agenda points for the retailer. The attrition in the industry can be anywhere between 20 and 25% in non-food and grocery business to as high as 60% in the food and grocery segment. C. SHOPPING CULTURE:  Shopping culture has not developed in India as yet. Even now malls are just a place to hang around with family and friends and largely confined to window-shopping
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