Presentation On Future Of Indian Retail Sector - Share of Retailing in Employment Across Different Countries Country Employment(%) India 8% USA 16% Poland 12% Brazil 15% China 7% Source: Presentation to FICCI by Alan Rosling (Chairman, Jardine Matheson Group): “International Experience on Policy Issues.”
Retail Trade in India and South East Asia •Highest shop density in the world. •Around 12 million shops around the country. •Just 0.9 million in the US, catering to more than 13 times of the Indian retail market size.* •Around 11 shops for every 1,000 peoples.* •Potential to become $300 billion per year market •by2010. * Source: Singhal,Arvind; KSA technopak An overview of Indian retail sector
Rural Retail Market Rural India consists of 720 Million consumers across 627,000 villages 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 Source: Navdanya/ Research Foundation for Science, Technology and Ecology Indian Retail Sector : Bases Of Ownership, 5-6th Nov. 2003, www.ficci.com
India #1 Emerging Retail Growth Market Source:- A.T. Kearney Global Retail Development Index (GRDI) Average Sales Per Sft Per Annum ...High Private Consumption Source : Central Statistical Organization (CS0) and Technopak Analysis GDP US$804 Bn Private Consumption US $ 482 Bn(60%) Public Spending & Gross Capital Formation 40% Retail US $ 300 Bn (62%) Non-retail US $ 182 Bn (38%) Urban US$ 135 Bn (45%) Rural US $ Bn(55%)
Size of the Economy Sources • 2006 GDP :Central Statistical Organization (CS0) • Growth Rates :Goldman Sach’s BRIC report (For details please refer to the appendix of this presentation) Growing retail market Source:- KSA Technopak analysis
Spontaneous Transformation Investments in the range of US$ 22+ Billion expected in the next 5years in Retail & its Supply Chain alone Size of modern retail likely to touch US$ 60 - 75 Billion by 2011-12 implying about 15% - 18% share of modern retail At least 2.5 Million additional direct jobs likely to be created in the next 5 years In short : India attempting to do in 10 years what took 25 – 30 years India shall bypass many stages of “Modern Retail Evolution” F.D.I. Why Only India....? India's GDP Growth Second Highest In The World
F.D.I. Why Only India....? India's GDP Growth Second Highest In The World
The Youth Brigade Takes Charge India has world's youngest population As of today, 66% (over 740 million) of Indians are under 35 years, and about 50% (over 550 million) under 25 Years. By 2020, 61% of Indians will be under 35, i.e. about 780 million Indians will be in this age group. According to the National Sample Survey, the literacy rate recorded an increase of 13.17% points from 1991 to 2001 and literacy in India is likely to touch 75% by 2020.
Workforce Gender Bender The number of female heads of households grew by 16% from 2000 to 2003 In type-A cities, 72% of teenaged girls want to work after marriage Working women form 15% of the total urban female population and this is expected to rise to over 20% by 2020 Increase in ratio of working women
Baby Boomers Apparel: Rs.2209 crores IT Products: Rs.1978 crores Stationery: Rs.621 crores Health & Beauty (not including cosmetics or services): Rs.415 crores Toys: Rs.389 crores Indian kids spend nearly Rs.291 crores as pocket money, as per recent estimates According to an international survey, brand loyalty starts by 11 years of age
F.D.I. GOOD OR BAD? 1 Wal-Mart USA 256329 43.7 79.1 20.9 2 Carrefour France 79609 77.4 50.7 49.3 3 Ahold Netherlands 63325 84.0 15.8 84.2 4 Metro Gr German 60532 50.5 52.9 47.1 5 Kroger USA 53791 70.2 100.0 0.0 6 Tesco UK 50326 74.6 80.1 19.9 7 Target USA 48163 17.8 100.0 0.0 8 Rewe German 44251 75.6 71.4 28.6 9 Costco USA 41693 61.0 81.5 18.5 10 Aldi German 41011 83.6 63.0 37.0 Source: M+M Planet Retail (www.planetretail.net) Top 10 retail Giants Rank Company Origin Net Sales-03 ($mn) Grocery Sales (%) Domestic Sales (%) Foreign Sales (%) Wal-Mart’s : Backdoor Entry The World Of Wal-Mart
Issue of F.D.I or Wal-Mart ? It is the issue of Wal-Mart ,than FDI Due to the its working style - It works on “MONOPSONY” - It works on “EDLP” - Low no. of employees
Wal-Mart v/s Indian Retail Wal-Mart Indian Retail The largest retailer in the world Turnover of $ 256 bn. Avg.annual growth of 12-13%. In 2004 net profit was $9,000 mn 4806 stores employing 1.4 mn (1355 outside US) Avg. size of Wal-mart is 85,000 sq.ft Avg. turnover of a store was $ 51 mn Turnover per employee $ 175,000.
Country of “Dukandaars” Turnover of Rs. 735,000 crores 12 million stores employing 3.95 mn 4% are larger than 500 sq.ft average Indian retailer turnover of Rs. 186,075
F.D.I – Numerous Jobs? Organized :- 5 lakh unorganized :- 3.95 crores Wal-Mart example:- > To open an average Wal-Mart store – Avg.Performance / Store > Means Rs. 80,330 Mn turnover/store > With only 10195 employees means displacing 4,32,000 persons Efficiency and improvement of living standards Consumer will be benefited Technology introductions More jobs in Mfg.
F.D.I : Good Labor displacing Destroying traditional retailing Opening of a giant pipeline of cheaply sourced goods from China, Thailand, ASEAN, etc. post industrialization without industrialization F.D.I : Bad Impact On : Traditional Retailers & Modern Retailers Impact confined to perhaps 300,000 to 500,000 retailers across India Only hold on FMCG market Universe to be increase by 2011 and even by 2015
Traditional Retailers Impact Area : Modern retailers Come under severe pressure Most have weak business processes and IT system No investment on supply chain No real margin drivers for near future
Some Information If you assume 40 mn adults in the retail sector, it would translate into around 160 million dependents using a 1:4 dependency ratio. 70% of merchandise in Wal-Mart contains components made in China. * Planet Retail, December 2, 2005 Wal-Mart has an established network of 10, 000 suppliers in China. TREM: Technopak Retail Evolution Model Not So Bad News, Yet ! Source: KSA Technopak For The Key Categories Stocked By The Kirana Stores G1 Shift In Channel Mix Reduced by 16% Grows by 28% G2 Shift In Channel Mix Reduced by 18% Grows by 34% G3 Shift In Channel Mix Reduces by 8%
Lessons From Other Countries From Malaysia :- One hypermarket is permitted per 350,000 people and no new hypermarket is permitted within 35 km of existing town centers or housing estates. From Thailand:- Large retail stores have to be located at least 15 km from the commercial centers of provincial towns
Lessons From Other Countries contd. From China:- In year 1994- 26% cap In year 2002-49% cap In year2004-100% cap Kishore Biyani’s-Fair Price Store “ After the fight in organized retail with biggies entering it, now its turn of unorganized market to hot up.” -Times Of India Small retail offer different combinations of prices (better prices offered by large formats) and convenience (offered by small retail), or purchasing costs to the consumer (including cost of travel, distance moved inside store, time lost in choosing products, time lost in checkout line etc.) The consumers have distinct preferences in relation to price and convenience. Competitive Advantage Of Small Retailers
Giants Coming To Support Good News For Small Retailers Small retailers are likely to witness support from suppliers with players like HUL, Marico, Godrej & Tata Tea already helping ‘Kirana’ stores in store design, inventory management, computerization and accounting systems
Whisper Started Associativism Rajkot Small Retailers Association and All India Association of Pharmacists are current examples in India which have been formed to centralize purchasing Large investments are anticipated in wholesale cash & carry format in coming year, which would help provide small retailers