Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Tata International


Published on

Study of Retail Industry with special reference to Leather Sector for TATA International

Published in: Business, Career
  • PAYM Good to Employes, get workdone good&fast .Sell more &make money.
    Are you sure you want to  Yes  No
    Your message goes here

Tata International

  1. 1. Objective of the study Objective: - The objective of the study is to the Retail Market and its constituents. To evaluate the options of retailing in leather industry. Research Methodology: - Qualitative methodology: - We have done qualitative research in which we have collected the data from the tailor made sources. Sources of the Data – We have collected the data from the secondary sources that is, internet, newspapers, magazines brochures and text books etc… Characteristics under study – The following characteristics were studied: 1) Consumer Behavior in Retailing 2) FDI in Retailing 3) Branding in Retail 4) Supply Chain Management in Retail 5) Merchandising in Retail 6) 7 P’s in Retail. Conclusion & Recommendations – It is clear from the figures that the retail sector will show stupendous growth in the future. So it is the correct time to enter into the retail sector because the retailing of leather has not taken a proper shape, i.e. , the retailing of leather is dispersed in the form of shoes, apparels and accessories. But most of its usages has not taken the proper form like professional leather bags, lap – top bags etc… Limitations of the study – We have collected the whole data from the secondary (relevant) sources. So we are totally relying on the data available from reliable sources. Data which we have collected is not articulated. We have only presented it in a lucrative form.
  2. 2. RETAIL AS AN INDUSTRY As in the rest of the world, consumerism is spreading like wildfire in India. Lifestyle and fashion stores, supermarket chains, giant shopping malls and hyper marts are testimony to post-liberalization India’s retail boom. Little wonder that some of the hottest jobs are in the sunrise retail sector. The growth of retail revenues in India is impressive by any yardstick — a steady 25 percent per annum for the past decade with no signs of slowing down. India’s estimated 33 million retail outlets, big and small, provide employment to 15 percent of employable Indians and are perhaps the largest contributor to India’s gross domestic product after services. During the next decade, retailing is expected to generate one million additional jobs in the newly-emergent organized retail trade. Therefore there’s a premium on trained personnel, urgently needed to sustain the growth of this sector. quot;Retailing is one of the oldest business activities in India. But until the liberalization and deregulation of the Indian economy in the 1990s, it was dominated by small one-man retail units. However since the past five years, it has become more structured and formalized and is moving towards international standards. Today, the organized retail sector is an industry. Retailers have started investing in large and quality spaces and shopping malls have sprung up across the country, combining retailing with entertainment, transforming shopping into a pleasurable experience. Currently India has over 300 large shopping malls and the number is multiplying at a phenomenal pace,quot; says Chandru Chandiramani, deputy general manager (retail) of the textiles division of Raymond Ltd. This textiles major is among the largest integrated manufacturers of worsted fabrics with diversified operations including engineering, steel files and specialty steels, toiletries and cosmetics, ring denim, prophylactics and the recently launched national chain of stores retailing prêt fashionwear under the brand name Be. Retailing - World’s largest private industry (US$ 6.6 trillion sales annually)  Indian retailing - Largest employer after agriculture - 8%* of population - Highest outlet density in world - Around 12 million outlets - Still evolving as an industry - Long way to go
  3. 3. Evolution of Indian retail Modern Formats/ Historic/Rural Traditional/Pervasiv Government International Reach e Reach Supported Exclusive Brand Outlets Hyper/Super Markets DepartmentStores Shopping Malls PDS Outlets Khadi Stores Cooperatives Convenience Stores Mom and Pop/Kiranas Weekly Markets Village Fairs Melas Source of Availability/ Low Shopping Neighborhood Entertainment Costs / Experience/Efficiency Stores/Convenience Distribution 7 Abhishek, Amit & Sumit . IMS MBA(MM)
  4. 4. Evolution of Indian Retail  Informal retailing Sector - Typically small retailers. - Evasion of taxes - Difficulty in enforcing tax collection mechanisms - No monitoring of labor laws.  Formal Retailing Sector - Typically large retailers - Greater enforcement of taxation mechanisms - High level of labor usage monitoring  Modern Format retailers  Supermarkets (Foodworld)  Hypermarkets (Big Bazaar)  Department Stores (S Stop)  Specialty Chains (Ikea)  Company Owned Company Operated  Traditional Format Retailers  Kiranas: Traditional Mom and Pop Stores  Kiosks  Street Markets  Exclusive /Multiple Brand Outlets  Hypermarket  Big Bazaar  Giants  Shoprite  Star  Department store  Lifestyle  Pantaloons  Piramyds  Shoppers Stop  Trent  Entertainment  Fame Adlabs  Fun Republic  Inox  PVR
  5. 5. Industry Dynamics  Low domestic competition - Because of fragmented nature of industry  Lack of exposure to global best practices - Low entry barriers for unorganized retailing - Moderate entry barriers for organized retailing  Wholesale system under-invested leading to 20-40% wastage  Non level playing field issues - Wide differences in treatment of small and large retailers  Three year compounded annual growth rate of 46.64 %  Organized retail in India is only two per cent of the total US$ 215 billion retail industry  Fastest growing sector in Indian Economy  Expected to grow 25 per cent annually Growth Prospects Organized trade in India is very underdeveloped when compared with other emerging markets in Asia, Latin America and eastern Europe. Figures show that developed markets like the US are far, far ahead. (Tables 1 and 2) Table 1 China India Parameter 1996 2003 2005 Per capita GDP (USD) 675 1,109 710 Size of retail market (USD billion) 225 400 215 Share of organised trade (per cent) 7-8 ~17 <4
  6. 6. Table 2 Country Share of organized trade (per cent) (2003) India 4 China 17 Poland 20 Indonesia 30 Russia 33 Brazil 35 Thailand 40 Malaysia 55 USA 85 90 India 80 China 70 Poland 60 50 Indonesia 40 Russia 30 Brazil 20 Thailand 10 Malaysia 0 USA Share of organised trade (per cent) (2003)
  7. 7. Organized retail India v/s China The Indian and Chinese markets are comparable in many aspects: Both countries are not homogeneous. They comprise many markets within • a single country, with significantly varying cultures and customer preferences across regions. There is a significant rural population in both countries, which has much • lower purchasing power compared to the urban population. Both countries are geographically very large and unevenly developed, • adding a distribution and logistics dimension to the retail trade. Consumers in both countries are highly value conscious Research done by • the Tata Strategic Management Group (TSMG) indicates that over the next 10 years, the total retail market in India is likely to grow at a compounded annual growth rate (CAGR) of 5.5 per cent (at constant prices) to USD374 billion (Rs 16,77,000 crore) in 2015. The organized retail market is expected to grow much faster, at a CAGR of 21.8 per cent to USD55 billion (Rs 246,000 crore) in the same time frame, garnering around 15 per cent of overall retail sales. Based on our projections, the top five organized retail categories by 2015 would be food, grocery and general merchandise; apparel; durables; food service; and home improvement. Table 3: Organized retail market in India (Rs crore)
  8. 8. Table 4: Organized retail market in India
  9. 9. KEY TRENDS Trend 1: Consolidation — The big get bigger In the early stages of development in retail markets, there is a proliferation of players. For example, in China in 2003, the top 100 players accounted for only 8 per cent of the total retail market with the top 10 accounting for 3.2 per cent of the market. However, when retail markets develop, there is a consolidation of players with fewer large players dominating the market. This trend is starkly visible in the developed economies of the US and Europe. Trend 2: Convenience stores and hypermarkets are gaining prominence These are driven by a consumer need for convenience and lower prices / higher value in mass categories, while the big box category killer stores are gaining importance in the specialty retail categories. While supermarkets may emerge at the initial stages of retail market development, in the long term they are unable to match the consumer value proposition of convenience stores and hypermarkets. Trend 3: Private label products become increasingly important Private labels today account for 17 per cent of global retail sales, with the highest share of 23 per cent in Europe and the lowest share of 4 per cent in Asia. M+M Planet Retail data shows that private label penetration varies from 25 per cent to 95 per cent among some of the largest retailers in the world. Implications for Indian retailers Global trends have important implications for Indian retailers. The Indian consumer is very value conscious; willing to spend money in most cases, but constantly cost conscious, evaluating every rupee spent. It is therefore imperative for retailers to offer a price advantage through sourcing and operational efficiency, as well as a strong private label programme to attract customers. Existing and new entrants need to achieve scale quickly to drive efficiencies in procurement, supply chain and marketing. Else, they risk being marginalized by larger players.
  10. 10. Real estate and human resources will be the critical drivers to build scale. While there are a few hundred malls under various stages of development across the country at present, retailers will also need to think out of the box to ensure the availability of real estate. This may include acquiring and developing the real estate themselves, rather than wait for mall development. Given the rising demand for retail real estate, retailers will need to take a long-term view on rentals and look at alternative options like ownership or very long leases. Retailers that invest in training will be able to ensure the availability of quality manpower in a rapidly growing market. In conclusion, the retail market in India offers an opportunity for a large player to build a Rs 40,000-crore retail business spanning multiple categories by 2015 (at current prices). Compared to this, the revenue of the largest Indian retailer, Pantaloon, grossed only Rs 1,085 crore in 2005. Little wonder that large domestic business houses and international retailers have expressed a keen interest to enter the retail sector in India. To capitalise on the opportunity, however, players need to be aggressive in outlook and build scale quickly.
  11. 11. CHARACTERISTICS UNDER STUDY i) FDI in retail Current Indian FDI Regime FDI not permitted in retail trade sector, except in: - Private labels - Hi-Tech items / items requiring specialized after sales service - Medical and diagnostic items - Items sourced from the Indian small sector (manufactured with technology provided by the foreign collaborator) - For 2 year test marketing (simultaneous commencement of investment in manufacturing facility required) Metro Group of Germany - Cash-and-carry wholesale trading - Proposal faced strong opposition Entities established prior to 1997 - Allowed to continue with their existing foreign equity components. - No FDI restrictions in the retail sector pre-1997 Food world - 51:49 JV between RPG and Dairy Farm International, - Leading food retailer in India now: - Mc Donalds
  12. 12. Why FDI 1) Improve competition 2) Develop the market 3) Greater level of exports due to increased sourcing by major players - Sourcing by Wal-Mart from China improved multifold after FDI permitted in China - Similar increase in sourcing observed for Metro in India - Provides access to global markets for Indian producers 4) Investment in technology - Cold storage chains solve the perennial problem of wastage - Greater investment in the food processing sector technology - Better operations in production cycle and distribution 5) Better lifestyle - Greater level of wages paid by international players usually - More product variety - Newer product categories - Economies of scale to help lower consumer price - Increased purchasing capacity of consumers
  13. 13. Total wholesale and retail trade 375 300 US $ bn 225 FDI in retail allowed 150 75 9 7 8 8 9 9 9 9 9 9 9 9 9 0 0 0 2 8 0 5 0 1 3 4 5 6 7 8 9 0 1 2 Ye a rs Retail sales grew @ 19.6% CAGR for the next 4 years after the  introduction of FDI in 1992 36 Abhishek, Amit & Sumit . IMS MBA(MM)
  14. 14. The 7 P’s of Marketing As products, markets, customer and needs change dynamically at a rapid rate, one need to analyze these 7 P’s for continuously revaluating the business activities. Product – a) One need to see his own product from the consultant point of view. As though you are an outside marketing consultant brought in by the company to check whether this is the right business at this time. One need to answer such questions like “Are these products are frequently used by the customer?” because Frequent Buying is one of the major driving force in the Retail Industry. Prices – b) In the countries like India, the economy is still price sensitive. The price is the driver for the specialized retailers who had established themselves in the market like Big Bazaar, Reliance Fresh. Also relating to the price the customer perception come into the picture, i.e., many of the people do not visit the retail outlets because they perceive these as very costlier outlets. This ‘Myth’ about the price was broken by Big Bazaar; Big Bazaar gives a full page advertise in the leading news paper of local area highlighting individual prices of the products in it. Thus, the people realize that the products in the retail outlets are actually cheaper than their nearest grocery shops. Place – c) The mall has to be located at such a ‘strategic location’ that it must be easily accessible from each part of the city. Today, according to the trend, most of the retail outlets are situated in the malls so that when a person approaches the retail outlet then he can also look for other things in the mall.
  15. 15. d) Promotion – Retail Outlets are not spending a huge amount in promotions as the retail concept is newer in India and mouth – to – mouth publicity which it gets is very difficult otherwise to get by any concept as such. e) People – The people are very important part in the retail sector as a whole because the retail concept is taking its own shape and the trends are not stable at all. (As it is very new concept in India). So, the retail organization has to monitor those trends and the workforce has to change its style of retailing. Within the time span of few weeks. f) Process – Today every organization in retailing is following a unique way and even the strategies to be followed and products to be sold of one organization does not intersect with other organizations. So, the process of every organization is totally unique in retailing. g) Physical Evidence – A physical object is self defining, a service is not(in some cases). Thus it is marketers task “define for the services what the services cannot define for itself”. The three key elements of physical evidence are ENVIRONMENT, COMMUNICATION & PRICE. The marketer use homogeneous combination of these three things to lure consumer into their retail outlet. P H Y S IC A L E N V IR O N M E N T A M B IE N C E H O S P IT A L IT Y IN F R A S T R U C T U R E Consumer Behavior
  16. 16. CUSTOMER EXPERIENCE OPTIMIZATION Your customers have conscious and unconscious experiences each and every time they walk into your store, open your catalogue or visit you online. Good, bad or indifferent, these experiences create multiple impressions, some rational and some emotional. The purposeful management of the customer experience builds deep emotional connections leading to strong brand preference, increased loyalty, repeat business and ultimately, profitable growth. Most retail organizations don’t understand how to manage the customer experience for maximum value or use the experience as a way to differentiate their business. Customer Experience Optimization™ is a cutting-edge process for designing retail experiences that emotionally engage and bond customers to your brand. Customer Experience Optimization™ gives retailers a competitive advantage through a prescribed approach to designing and implementing customer experiences that build relationships. By leveraging in-store and online assessment and audit tools, we develop a comprehensive evaluation of the current customer experience and help our clients design, execute and manage an experience that impacts customer value, loyalty and the bottom line. Customer Experience Optimization™ has proven to be a profitable brand positioning methodology for leading retailers, consumer goods companies and related businesses around the world including Office Depot, Blockbuster, Capital One, IBM, GE, Penske Truck Leasing, and Taco Bell. Customer Experience Optimization™:  Improves financial performance  Drive profitable growth  Strengthens competitive advantage  Builds brand loyalty
  17. 17. (Myths related to Consumer Behavior in Retailing) Myth 1: Consumers behave the same in all markets The problem: The whole process of creating and introducing a new technology product is littered with guesswork that leaves the product designers in a revolutionary frame of mind—even after the product starts shipping and the information starts to flow. Designers believe that consumers will flock to their new technology product, service, or web site because it provides a similar value or copies a concept provided in an established market. In the end, consumers don’t understand the offering and don’t use it. The reality: Consumers behave differently in new markets than in established markets. The Consumer Adoption S-Curve demonstrates how consumers change their behavior as they progress through a product’s growth phases. It shows why new products in Phase I require a different focus than a similar product that has already progressed to Phase III. The solution: New products are more successful when designers analyze usage patterns earlier to determine the product’s key success factors. Once identified, these key success factors should be optimized and streamlined to create a consumer-grade experience that will attract mass consumer success.
  18. 18. Myth 2: The more consumers see it, the more successful it will be The problem: Many companies believe in their product so much that they can’t understand why it isn’t successful. They assume that the problem is that others don’t know about the product, so they increase their marketing budget. However, they soon spend themselves out of business because consumers attracted to the product don’t stay to become long-term, loyal users. Consumer Adoption Funnel The reality: If the offering isn’t attractive, there is no point in getting more users to see it.
  19. 19. The Consumer Adoption Funnel demonstrates how users progress through their experience with a new product or service. The solution: Using marketing to attract more users won’t change how these users behave once they arrive—marketing is only the first gate of four in the Consumer Adoption Funnel. You can coax users into trying your product or service, but you can’t compel them to use it long term. Stickiness (value versus cost) must be optimized before users will increase their usage. Myth 3: If I’ll use it, my users will The problem: It is often hard for designers of a new technology product or service to differentiate themselves from their users. They think that new users will fall in love with the product just as they have. They find it very difficult to understand why users reject their offerings. Consumer Bell Curve The reality: Consumers don’t have your knowledge or your motivation when trying your product. The Consumer Bell Curve demonstrates where the bulk of users are relative to their skill levels and willingness to proactively find value in a product. The solution: Study your average consumer behavior and accept that it won’t match yours. Understand that you are a power user, while most of your consumers are not. Look for unnecessary complexities and customization requirements or long installation processes that are probably hurting your product’s success. Don’t add settings or preferences to your product as a way to solve design disputes. Design for your users’ skill levels, not your skill level.
  20. 20. Myth 4: Consumers will find a product’s value The problem: Most companies feel that it is best to have lots of features so that users can navigate to and use whichever features fit their needs. These companies are usually disappointed, as users don’t look for the features they want. Instead, users struggle to find value and give up. Consumer Churn Graph The reality: The value must find the user. The Consumer Churn Graph demonstrates how focusing on improving a user’s ability to find value in a product will increase a user’s success with the product. The solution: Instead of focusing on how to get more users to your product or trying to design more features for more segments of users, focus on removing or hiding rarely used features and highlighting your key features and value. Myth 5: Consumers want more features The problem: As an idea turns into a product and starts shipping, its designers and engineers seem to have an unlimited number of new ideas for new features to include in the next version, each feature designed to make the product “more complete.” However, in the eyes of the consumer, the exact opposite is happening. The early users are wondering why the key feature is so hard to use, buggy, or incomplete.
  21. 21. Consumer Behavior Bubble Chart The reality: Consumers only want a few key features, and they want them to work well. The Consumer Behavior Bubble Chart enables comparisons of different features or services to determine how many consumers use each feature (Attraction), how much time consumers spend with each feature (Usage), and how often they return to use the feature again in the future (Stickiness). The solution: Before shipping a product, all you have is your professional training and experience to aid you in designing a product. But once you have built and shipped the product, you have access to a wealth of consumer usage information that can help drive future design decisions. Use this data to tell you where your value really is and focus on continuously improving that value.
  22. 22. Supply Chain Management in Retail Supply chain and retail: The means to the end A retail revolution is happening in the country. For global giants looking at newer markets, India presents exciting opportunities on account of its vast middle-class and a virtually untapped retail industry. The Indian retail sector has seen unprecedented growth in the last few years. The KPMG report, `Consumer Markets in India: the next big thing?, has predicted that the organized retail sector is expected to grow at rate higher than GDP growth in the next five years. The AT Kearney's 2006 Global Retail Development Index positions India as a leading destination for retail investment. The success in this competitive and dynamic sector depends on achieving an efficient logistics and supply chain, which can be provided by professionals, as they combine the best systems and expertise to manage a ready flow of goods and services The retail boom promises to give an impetus to a host of allied sectors and the logistics industry, as the backbone of the retail sector, stands to gain the maximum. In India, the logistics market is mainly thought to mean transportation. But the major elements of logistics cost for industries include transportation, warehousing, inventory management, courier and other valued-added services such as packaging. The logistics costs account for 13 per cent of GDP. The industry is currently on an upswing and is poised for a growth of 20 per cent in the coming years. With the expansion of retail, supply chain will take on an increasingly important role. With the end consumer becoming more demanding and time conscious, the need for just-in-time services is increasing. In retail, where competition is intense and stakes are high, customer satisfaction is paramount. Network critical Industry experts opine that in India too the large retail chains will follow the global model of outsourcing their logistics so as to better manage complex supply chains and focus on their core business. For the retail chains in agri-produce, efficiency of logistics is critical and can indeed leverage the brand to a great extent.
  23. 23. The main asset Retailers realize that knowing what is selling and what is not can improve the inventory processes. Inventory is the biggest cost factor, and if not managed well, it can also be the biggest drain. That's why retailers and their trading partners today set store by the inventory process and its impact. Effective SCM enables: Realistic ordering lead-times: Suppliers are not surprised by the next order. Retailers respond better to demand spikes, minimize forced markdowns and avoid obsolete-inventory costs. Averting problems: Stores easily identify potential stock-outs and request replenishment before the inventory drops to zero. Deciding to de-list or replace a product is easier. Facilitating resource planning and allocation: Product forecasts and supply schedules are easily converted to perform space planning, establish staffing needs and organize inbound/outbound shipments. Financial experts can plan cash flow and analyze margins into the future. Four R’s Follow the 4 `R's of SCM — Right time, Right place, Right price, Right quantity — to reap the advantages of: Sustained inventory reduction by as much as 60 per cent for both the buyer and seller. Improved forecast accuracy by as much as 30 per cent. Enhanced store shelf stock rates by as much as 8 per cent. Increased sales by as much as 20 per cent. Reduced logistics costs by as much as 4 per cent. The key players in the logistics industry are gearing up to meet the challenges by initiating both organic and inorganic growth to leverage the retail opportunity. Logistics firms have also started focusing on related services such as Customs clearing and forwarding, inbound warehousing, labeling and packaging, fleet management, order picking and inventory management.
  24. 24. Cold Chain The booming retail sector has set off growth in the cold chain segment as well. It is a highly specialized service and caters to time sensitive and perishable items. The cold chain industry is growing at 20-25 per cent. However, there is an urgent need to establish the necessary infrastructure for an effective cold chain. FICCI presents an overview of the increasing importance of Supply Chain Management which helps retailers cope with growing competition Supply Chain Management (SCM) is an important aspect of the retail industry and aims at reducing inventory costs. SCM can be defined as, 'controlling and coordinating the operations of manufacturers, suppliers, distributors and retailers so as to minimize the overall cost that reduces the delivery time and services the customer more efficiently.' The supply chain constitutes a different reality for the SME (Small to Medium Enterprise) as compared to the Fortune 500 companies. For the former, it may represent a few suppliers, a couple of delivery people, and a handful of customers. For the latter, however, it may also include distributors, outsource contact center, and customers as well. Retail industry experts generally categories the SCM technology into six categories: Planning – This includes forecasting demand and the amount of resources, which is necessary to meet demand and sale forecasts Sourcing - This category is about procuring goods from suppliers that may involve online auctions and collaboration through the Internet. Manufacturing - This is the step where raw materials are turned into finished goods. Tools for determining which involves machines, processes, and personnel should perform these tasks may be used to provide more efficiency Producing - Goods producing industries are primarily associated with the production of goods. However, these sectors may also produce some services Delivery - It is also known as supply chain fulfillment, this step entails
  25. 25. getting the finished products to the dealers or end users. It takes into account how the products will be shipped, including the means of transportation and how products may be consolidated to cut down on shipping expenses Returns - No one wants to think about products coming back due to defects, damage, or some other problems. However, automating the return process and capturing data on why products are returned is essential for cutting expenses. Supply chain is a complex network of relationships that organizations maintain with trading partners to source, manufacture and deliver products. There are huge pressures on a business customer with demand for greater variety of products and services, investors demanding growth and competitors forcing more frequent product changes. It is time Indian corporate start thinking about SCM from a strategic perspective rather than just as an operational issue. SCM is the top management priority for retailers in today's business scenario. Fierce competition is forcing retailers to respond to changes in the market quickly. This highlights the growing importance of SCM in managing stock availability, supplier relationships, new value added services and cost cutting. We are now moving in an era where supply chains will prefer competing with each other, than with products and marketing techniques. First class products and brand power no longer guarantees success in the aggressive battle for market share. Thus, it is important to get closer to customers by understanding what they want, when they want, where they want and at what price they want it.
  26. 26. MULTI-CHANNEL STRATEGY FOR RETAIL A successful multi-channel strategy must reflect shopper's desire to interact with retailers anytime and anywhere. Retail multi-channel strategy assesses retailer’s efforts through a consumer lens. This process helps Retailers create strategies, processes, services and offers that align consumer activities and needs with the retailer’s capabilities.
  27. 27. Retail Merchandising MERCHANDISING OPTIMIZATION Interested in developing the best store-level merchandise mix tailored to local customers while optimizing revenue opportunity and inventory productivity? Retailers everywhere face a common merchandising challenge: how to provide the right merchandise mix at each store location to optimally satisfy projected consumer demand and achieve high levels of productivity. With increased emphasis on profitability and unprecedented competitive pressures, resolving this dilemma has become significantly more important and promises to unleash untapped productivity for retailers. Retail merchandising optimization, or assortment optimization, combines data about customers, products and markets to produce improved assortments that are scientifically derived using predictive business analytics. This solution correlates information about a retailer’s customers, enhanced with a marketing intelligence data asset that includes population characteristics surrounding each store market and predicted purchasing behavior derived from historical sales performance. Because it considers all the dynamics of the retail demand chain using a fact-based and quantitative approach, merchandising optimization delivers increased revenue generation, higher margins and optimized relationships with key customers.
  28. 28. PROCESS FOR IMPLEMENTING MERCHANDISE PLANS: 1. Information is gathered about target market needs and prospective suppliers. 2. The retailer chooses firm-owned, outside, regularly used and/or new supply sources of merchandise. 3. The merchandise under consideration is evaluated through inspection, sampling and/or description. 4. Purchase terms are set. They may have to be negotiated in their entirety or through uniform contracts. 5. The purchase conclusion is made-manually or automatically. 6. Merchandise handling decisions are taken relating to receiving & storing, price & inventory marking, displays, pilferage control etc. 7. Reordering decisions are made. 8. Re-evaluation of merchandising plans takes place. Merchandising Optimization enables quantified, information-based answers to common questions, such as: • What is the appropriate merchandise assortment in each store? • Which stores have a greater potential for sales growth in this merchandise category? • How can I implement store-specific assortments without creating supply chain disruptions? • How can I forecast inventory based on the optimal store-level assortments? • How can I maximize the return on my inventory investments? • What do customers within individual store markets look like and how does this information tie to assortment? • What is the best way to gain insight from and leverage a limited amount of available Transactional and customer information? MERCHANDISING ALSO TAKES CARE OF:- • Operational assessment • Implementation of customized Best Practices • Customer service measurement and improvement • Conversion rate assessment and improvement • Analytics/metrics/benchmarking • Labor management and scheduling solutions • Workload / task balancing • Functional schedules • Procedural documentation
  29. 29. • Chain-wide rollout programs BRANDING IN RETAIL Building Successful Indian Retail Brands The Global Retail Scenario Large format retail businesses dominate the retail landscape in the United States and across Europe, in terms of retail space, categories, range, brands, and volumes. Indian retail industry cannot hope to learn much by merely looking at the Western success stories in retail. Their scales of operations are very huge, the profit margins that they earn are also much higher and they operate in multiple formats like discount stores, warehouses, supermarkets, departmental stores, hyper-markets, convenience stores and specialty stores.. The economy and lifestyle of the West is not in line with that of India and hence the retailing scene in India has not evolved in the same format as the West nor can we learn valuable lessons from their style of operations. In retailing, the conventional wisdom used to be, that, the critical success factor was location. But precise location no longer matters and geo-demographics is increasingly becoming irrelevant. The leading multiple chain retailers, superstores and malls create their own centers of gravity, attracting customers by car, bus, train or even by plane to wherever they are located. The growth of multiple chain retailers has been relentless for many years in the west and this has been accompanied by the development of retail names as brands in their own right. Discount retailer Walmart has catapulted to the top of the Fortune 500 rankings in the U.S. with a turnover of $258 billions (2003 revenues – the basis for 2004 rankings), ahead even of oil major Exxon Mobil and the mammoth manufacturing giant General Electric. A ruthless policy, of, ‘Always Low prices. Always.’ has brought Walmart to the top. On the day after Thanksgiving in November 2002, Wal-Mart sales hit $1.43 billion in one single day. Walmart and Nordstrom in the U.S. and Sainsbury’s and Marks & Spencer in the U.K. have grown by rapid geographic expansion in their own countries. Specialists like Benetton of Italy and IKEA of Sweden and The Body Shop of the UK are international and the fast food chains like McDonald’s and Pizza Hut are everywhere. The same products are increasingly available from the same names on every continent. Retailers worldwide have immensely benefited from the sustained growth of the disposable income of their global consumers.
  30. 30. Geographic saturation The end of the nineties has signified a turning tide of retailer power. The limit to retail ambition is geographic saturation. There is already a fear that the U.S is ‘over-malled’, that available shopping space exceeds customer demand for products. The retailer logic that ‘if we build new stores they will come’, is being belied. Many retailers have started postponing their store expansion plans. The track record of some of their international store expansions is also not promising. Category killer competition The threat of saturation is accompanied by a new competition from the low cost category killers. Specialist competition is eating away at the market share and forcing down the prices and gross margins of the multiple chains. The success of the giant killers in the toys segment – Toys R Us and in home furnishings – Home Depot, in the are a case in point. Alternative shopping channels. The newest retail format that is showing growth in the U.S., and is more frightening for retailers than for consumers, is the Internet. The potential for on- line shopping which is growing in the U.S. questions retailers’ investments in more physical sites and stores and makes it imperative that they too explore the new agenda of ‘E-retailing’ or ‘e-tailing’.
  31. 31. THE INDIAN RETAIL SCENE India is the country having the most unorganized retail market. Traditionally it is a family’s livelihood, with their shop in the front and house at the back, while they run the retail business. More than 99% retailers function in less than 500 square feet of shopping space. Global retail consultants KSA Technopak, have estimated that organized retailing in India is expected to touch Rs 35,000 crore in the year 2005-06. The Indian retail sector is estimated at around Rs 900,000 crore, of which the organized sector accounts for a mere 2 per cent indicating a huge potential market opportunity that is lying in the waiting for the consumer- savvy organized retailer. Purchasing power of Indian urban consumer is growing and branded merchandise in categories like Apparels, Cosmetics, Shoes, Watches, Beverages, Food and even Jewellery, are slowly becoming lifestyle products that are widely accepted by the urban Indian consumer. Indian retailers need to advantage of this growth and aiming to grow, diversify and introduce new formats have to pay more attention to the brand building process. The emphasis here is on retail as a brand rather than retailers selling brands. The focus should be on branding the retail business itself. In their preparation to face fierce competitive pressure, Indian retailers must come to recognize the value of building their own stores as brands to reinforce their marketing positioning, to communicate quality as well as value for money. Sustainable competitive advantage will be dependent on translating core values combining products, image and reputation into a coherent retail brand strategy. There is no doubt that the Indian retail scene is booming. A number of large corporate houses — Tata’s, Raheja’s, Piramals’s, Goenka’s — have already made their foray into this arena, with beauty and health stores, supermarkets, self-service music stores, new- age book stores, every-day-low-price stores, computers and peripherals stores, office equipment stores and home/building construction stores. Every retail category has been attacked, by the organized players today. The Indian retail scene has witnessed too many players in too short a time, crowding several categories without looking at their core competencies, or having a well thought out branding strategy. To illustrate, the Indian lifestyle/fashion retail scene is already exhibiting the following characteristics, which do not augur well for its future: Lack of store differentiation: Leading retail stores like Shoppers Stop, Lifestyle, Ebony, Globus, and Piramyd, offer common brands, similar ambience, and a commitment to improved service.
  32. 32. Where is the scope for differentiation and brand building? Can these retailers hope that location and ambience alone will do the trick? Merchandising muddle: Mumbai’s original retailers of Mumbai —, Amarsons, Akbarallys, Benzer, Premsons — have experienced no decrease in traffic in their stores, even after Piramyd and Westside opened shop. These retailers exploit what they know best — what the customer wants with regard to product, selection and price — and ensure their customers do not go back disappointed. Consumer insights built over their years of experience in business is helping them to hold the fort against the onslaught of the new players on the horizon. The organized new generation Indian retailers (Shoppers Stop and Westside) have recruited senior retail persons from abroad, who have the expertise in setting up systems and procedures, but they are going to take a long while to tune into the psyche of the Indian consumer. With the permutations and combinations of seasons, fashions and regional preferences, merchandising is at the best of times a complex task. India’s cultural diversity poses additional challenges to the merchandisers requiring them to be aware of local tastes and to be able to compete with the local retailer in terms of market knowledge and speed of response. While technology and systems are no doubt enablers, there can be little substitute for experience and insight. Lack of labels/suppliers: Organized Indian retailing has to face the situation of lack of professional suppliers who are accustomed to deadlines, systematic in their production and consistent with their quality. Often, the local suppliers do not have financial strength or production infrastructure or discipline. Indian merchandisers are forced to compromise due to a true lack of choice — which leads to huge unsold stocks and reduced profitability to the retailers. Discounting: Given widespread availability of the same brands, large retailers have to cope with the phenomenon of discounts offered by the smaller retailers. Large stores are able wrangle larger margins from most suppliers, but these margins are retained to meet the higher operating cost. Small retailers are tempted to pass on
  33. 33. the lower overhead in the form of a discount to the customer to get them to their stores. In a middle class- dominated, price-sensitive market like India, price manipulation is a strong weapon in the arsenal of the small independent retailer. The large retailers themselves further dilute the strength of the retail market. With promotions becoming the order of the day, they too have entered into price wars against each other. ‘Up to 50% off’ sales and ‘Two for one’ price offers have now become commonplace even at the top retail outlets across our country. Deep price cuts may not be the answer to maintain their relevance against the small retailers nor does it auger well for the brand building of the store. Limited margins and high real estate costs: It is well accepted that Indian retailers work on low margins compared to international chains. The retail margins in India are a meager 30 to 35 per cent for fashion brands (as, say, compared to 50 to 100 per cent across Europe). With overheads and allowance for dead stock, the Indian retailer is not left with much scope for error. Cost of prime land for the retail store is prohibitive. Land prices in prime localities across the metros have themselves become a major deterrent to sustaining a profitable retailing model for organized players. A number of the new chains have therefore preferred to spread in smaller metros, hoping to offset lower revenue potential with lower real estate costs. ‘Time abundant’ consumers?: In recent years, it would seem that the consumer has thrown the adage ‘time is money’ to the winds. The customer is willing to spend more time if he/she is getting a better deal. Scarcity of time seems to be the prerogative only of a few consumers. The crowds inside Sarvana Stores or Jayachandran textiles in Pondy Bazaar in Chennai, drive home the point that consumers are prepared to travel to reach stores that promise best prices. The Indian model of organized retailing is still in a stage of evolution, and retailers need to understand the value of retail as a brand rather than remaining as retailers selling brands. However, the characteristics of the branding process, which are of interest to the retailers, are still the characteristics of the traditional product brands – they are simply extended to the intangible part of the business. Thus, the characteristics of a branded product, are simply applied in a different space. What are the fundamental characteristics of a brand? While a myriad of characteristics have been catalogued by several researchers on this subject, five characteristics deserve mention:
  34. 34. (1) Recognizability: A true brand is instantly recognized and identified. The brand name passes into every day use (Nike’s ‘Just do it’) or becomes satirized (‘Don’t be such a Duracell’) or appropriated (‘Make a Xerox of this document’). Indian retailers like Shoppers Stop, the RPG Group’s Food World and Music World have already earned national recognition. Subiksha in Tamilnadu and ‘Margin Free’ supermarkets in Kerala are household names in the two states. (2) Meaning, story, value: This is the second characteristic of a brand. The brand must have a value proposition. It must stand for something and one of the most effective ways is to have a story to transmit those values. Examples abound of effective leaderships that have helped to build corporate brand values in other sectors, but few retailers have succeeded in building a story to carry brand meaning. When they do so, their power will increase. (3) Legitimacy: The meaning of the brand should be obviously appropriated by the target customer group. Legitimacy rests on authority, earned by the brand and granted by the customers. Lessons can be learned from social organizations like Greenpeace, Medicins sans frontiers, CRY and Helpage India. In this case, legitimacy rests on moral authority. In retail businesses it may rest on an emotional authority (a unique shopping experience, a store filled with warmth and friendliness.) (4) Consistency, alignment: A brand story should contain no internal contradictions and should be appear to be consistent over time. It should be applicable across the business and attempt at total brand integration. (5) Proximity: The brand building process should culminate with assuring the brand’s proximity to the consumer. The brand’s definition gets expanded by opening stores in a number of locations to make it convenient to the consumer.
  35. 35. Retail brand building Product brands make life easier. They make it possible to recognize products, which simplifies the decision making process. Furthermore, product brands make the consumer a part of a group, they create a sense of belonging. But retail brands do even more than that. These brands are visible platforms for kindred spirits: the physical shop is a container for the entire retail formula and therefore constitutes a large part of the retail brand. The tangible nature of retail makes the familiar slogan ‘experiencing the brand’ most logical of all, in a physical store. Retail brands have gained in popularity in the past few years. Indeed, they have a number of advantages above product brands. In the first place, they are closer to the consumer. The physical store space offers the possibility of literally and figuratively communicating with consumers at the moment of purchase (one-to- one marketing). Retailers can show who they are and what they stand for through the store formula. Moreover, in principle, retailers are neutral, because the choice of product brand (or store brand, if present) is left to the consumers. Retailers help consumers because they make a shrewd pre-selection and present their product assortment in a specific manner. Once a consumer knows and trusts a retailer and has good experiences and memories about a store, the foundation has been laid for a long-lasting relationship that will ultimately lead to customer loyalty. Retail branding creates a brand preference, which goes beyond the product or service in itself.
  36. 36. Retail Branding versus Product Branding A great difference between product branding and retail branding is that in many cases products have an anonymous or even fictitious presenter, whereas in retail, consumers come in direct contact with the company and/or product. A Cadbury’s Dairy Milk chocolate bar, for example, is a product made according to a set recipe in a factory that is not open to the public. In addition, the people who work there never come into contact with the consumers because the retail channel lies in between. And those who do sell the ‘CDM’ to the end-consumer (the retailers) do not have very much to do with it by virtue of their function. Therefore it is possible to conceive a brand identity for the product, establish it for a specific target group and then fix it in the minds of consumers. Compare the identities of ‘Five Star’ ‘Perk’, ‘Gems’ and ‘Temptations’: all very different, yet they come from the same manufacturer. Contrast this with a store like Food World, for example. Because of its direct contact with the end-user, it must effectively live up to its brand reputation in every aspect, every day. It is impossible for retailers to escape the need to continually sustain the store brand. In a store, the entire retail organization is revealed and the true nature of a company can be experienced. A retail store, as said earlier, is the container that holds the entire formula. All the elements of the formula (including the elements of the marketing mix) come together in-store. The formula should be deliberately shaped from the standpoint of identity (the ‘brand’ of the retail organization) with mutual coordination of the elements being important. What might it then mean, when branding is applied to retailing? The issue is not of retailers selling brands but branding the retail business itself, like the grocery supermarket chain or the fashion store. A hypermarket or department store, may offer several well-known brands, but in today’s competitive world cannot afford to rest on its strategic product assortment and pricing initiatives to bring in the customers. The retailer must attempt to brand himself differently, especially when today’s product brands are being launched through their product brand’s own shops. (Examples in the shoe segment – Nike, Adidas and Reebok. Jeans segment – Lee and Wrangler, Perfumes –Hugo Boss. ) A retail organization, like any other corporate company, will have to ensure that its own brand includes the characteristics of product brands detailed above. Retailers need to work on three dimensions to achieve this: ( 1 ) Brand value: The retail brand has to embody and transmit clear values to the customer. (Like ‘value for money’, ‘Luxury shopping redefined’). Some companies have attempted to define this in their mission statements but they are often too vague
  37. 37. and not actionable. For example the U.K. Virgin brand has the value of challenging conventions and the U.S. retailer Nordstrom has a built a value of customer service. While many Indian product brands have successfully weaved values around their brands (Hamam on ‘trust’, Godrej on ‘quality’ and TVS on ‘service’) retailers are yet to develop a consistent value across their businesses. (2) Brand strategy: It is imperative that retailers have a systematic strategy on issues like whether to develop the retail brand or corporate brand and decisions on one product/one brand that they may be selling in their shop. Retailers can also decide to launch high quality retailer brands (‘own labels’) backed by promotional campaigns, reinforcing clear personalities. Pricing policies, today position retailer brands as good value lines or premium lines (Nilgiris department stores prices its grocery lines above manufacturer brand prices). The view that retailer brands offer a cheaper alternative to manufacturer brand is no longer valid. There is even scope for retailers to develop alternative types of ‘own labels’ targeted at different consumer groups in their outlets. An essential ingredient for success, in such cases, must be consumer-relevant added values – not just lower prices. It is only a minority of consumers, today, who are prepared to trade off added values for lower prices. Experienced consumers are no longer primarily motivated by low prices. There is scope to attempt a retail segmentation strategy. For example, DCM Benetton India redesigned its stores as per its international format and also repositioned the brand from a casual wear brand to a wardrobe option. The company is now attempting to target a niche audience through its concept stores. It launched a ‘Baby-on-Board' store, which targets mothers-to-be and kids, an `Accessories' stores that sells luggage, bags, sunglasses and vanity cases and an ‘Adults Only’ store that showcases Benetton's apparel collection for men and women. ( 3) Brand structure : Operational levels of the retail business have to be held together to integrate the whole brand proposal. At this level, marketing, human resources, distribution, logistics, administration and sales have to work towards a common brand value that has to be communicated to the consumer. The retail brand’s messages must be weaved into the every day experiences that the consumer has with the retail brand. Brand building constitutes a way in which the main value of the retail store shifts to what has been traditionally called an intangible.
  38. 38. Indian Retailing is coming of age and needs to have a clear brand proposition to offer the discerning Indian consumer. There is no doubt that the retail business is gravitating from high street towards destination shopping (mall development) with an estimated 10million square feet of mall space expected to hit the metros and mini-metros across the country this year. However, we need not assume that retailing at shopping-malls, is going to be fundamentally different from shopping at the traditional shopping areas, except that a mall has a more modern structure and in most cases brings multiple brand outlets under a single roof. The local retailers moving into malls, however, have to face the challenge of building brand recognition and loyalty right from scratch. Most mall developers have on offer, the same combination of shopping (International/national brands), Entertainment (Theatre Multiplex) and food (McDonald’s/Pizza Hut/Café Coffee Day) in their malls. It is therefore not surprising to note, that many mall visitors come out having no shopping bags, since they have been enticed to visit only for watching a movie and / or having a burger or a pizza or even a cup of coffee. Malls are also fast becoming a place that youth can ‘hang out’, but if the crowds do troop in, but the cash registers are not ringing, it can harm the serious business of retailing and hurt this nascent industry on the growth path. The critical lesson for mall developers is, to invest some quality effort in understanding the shopping-needs of customers in their targeted areas, and then build a carefully planned portfolio of retail options that can meet the needs of these targeted customers. Mall developers also have to create distinctive (brand) identities for their specific malls. It is equally important for the would-be retailer tenants, to realize that merely moving into a mall does not build their brand or guarantee business for them. They have to work as hard to draw consumers to their own stores once the latter have entered the mall, and then have the right value proposition for them, to get them converted into customers, and then to become repeat customers. Building a differentiating brand identity would work for both the mall owner and the mall retailer. We are also seeing organized Indian retailing in several businesses that speaks volumes of the staggering potential for the expansion of this sunrise sector in our country. But here again, the early initiatives in the sectors illustrated below seem to rely more on novelty and excitement of newer ambiences rather than truly investing in brand building .
  39. 39. Gourmet coffee retailing: The organized coffee retail business is estimated at Rs.250 crores and is showing a growth rate of 40%. Apart from the Quickys, Café Coffee Day and Baristas chains, the Tatas have aunched their Bean Coffee Junction chain in Chennai. Coffee World an international gourmet coffee chain is set to launch its outlet in Bangalore this year. Reliance is offering gourmet coffee at some of its Reliance WebWorld outlets under the brand name ‘Java Green’. There are not more than 350 outlets in the organised sector today but retail consultancy KSA Technopak opines that India’s potential for coffee retail outlets could be around two thousand. However the coffee retailers are already cloning each others’ strategies - by offering that “total experience” — right coffee, food and ambience with Wi- fis and jukeboxes — to pull customers, across all their outlets and consumers are finding it hard to identify themselves with any one outlet. Lifestyle retailing : Chennai has witnessed a manifold increase in the total retail space devoted to non-grocery or lifestyle retail. The four major lifestyle retailers — LifeStyle, Westside, Shoppers' Stop, and Globus — alone account for a little over 200,000 square feet of retail space. Add to that the retail space of the traditional apparel retailers such as Nalli's and Kumarans and the recent entrants such as Pothy's, R.M.K.V and Chennai Silks and that of the scores of multi-brand outlets, the figure shoots up. The reasonable real estate prices, overall lower cost of operations and accessibility to consumers vis-à-vis other metros, have spurned the growth of organized retail at Chennai. But, on the brand building front, the story is no different. A retail analyst has already observed that Chennai is over- retailed in the lifestyle segment, with little differentiation among the players. Petrol pump retailing : As consumers, we have been noticing how India’s state-owned petroleum companies are undertaking a massive image improvement, makeover and differentiator exercise. From signage to logos to canopies, clean floors, channel music, lighting, convenience stores, uniformed attendants, internet browsing and promotion schemes, the public sector pumps are working hard at delivering a new experience to the Indian motoring consumer. All this, of course, is being done as part of a bigger game plan to cope with the coming private sector competition from Reliance, Essar and Shell. Let’s wait and watch whether public sector hindsight into branding pays off for them in the face of private competition in the next few years.
  40. 40. Indian Retail Brand Building – the road map ahead There is no doubt that the Indian retail shopping experience has been enhanced by giant superstores and shopping malls across our country. They should however learn quickly to build the retail brand directly and not look to factors like prime location, value pricing or product assortment to build their businesses. Indian retailers, to build a strong retail brand presence, can use the following strategies. Relationship management to enhance in-store shopping experience: Competition will force retailers to think about their customers as individuals, analyze their shares of customers and calculate their customer lifetime values. Retailers need to build data bases using in-store data collection and launch frequent shopper rewards, carry on an interactive communication with them, make special offers, drive traffic and add value outside the in-store relationship. Retail brands get built by developing personal relationships with consumers rather than only through product and pricing. For example, staff should be trained to recognize their V.I.P customers. ‘Soft’ rewards for V.I.P customers include priority service, free gift wrapping, enhanced guarantees and sales pre- notifications. ‘Hard’ benefits include privileged rewards and extra value offers as well as straight discounts. The quality of management of the customer is becoming an increasingly important source towards building the retail brand. Education and training of staff needs to be done to enhance customer service. Local store management can be empowered to maximize the value of each customer visit. Analysis of customer behavior can guide store merchandising to match the profile of their customers and even the needs of the shoppers at different times of the day. External communication to add value outside the store: Retailers use advertising to build their brands and promotions to drive store traffic. Retailers have, still not felt the concept of individual customer communication outside the stores as a necessity. It is necessary that they seek to add a new form of dialogue with their customers. Retail chain Subiksha, for examples, mails a broadsheet to its customers giving them details of the promotional offers available and price comparisons across brands that helps its customers to take more informed decisions.
  41. 41. Motivating the staff to volunteer value : The quality of in-store service is a key factor in differentiating the retailer and winning a higher share of customer spend. In one survey, shoppers were asked, would they ask for the same salesperson on their next purchase visit; the ‘yes’ respondents were found to more likely give the store a 8-10 rating. On the other hand, shoppers unhappy with the salesperson gave the store a very low performance on overall service and performance. Staff must be trained and motivated to recognize their best customers and to offer them superior service. Successful retailing has always been said to be, about getting the nitty-gritty right of merchandising, forecasting, the supply chain, training and recruitment of high quality personnel and category management. Building retail brands that offer value will, in future, overshadow all these areas, and emerge as the dominant reason for the success of the organized Indian retailer. Indian retailers should also understand that the retail experience has become a popular leisure activity and they are vulnerable to any new competition for customers’ entertainment. Indian retailers must build their brands with images that seek to entertain and involve their customers. It is the quality and value of the retail brands that they have sought to establish that will determine the loyalty of the retail shopper in future.
  42. 42. AN OVERVIEW OF INDIAN LEATHER INDUSTRY India : Leather industry should focus on the US February 2, 2007 Leather industry should change its focus to creation of jobs, production for mass market, from Europe to the U.S. and from Tamil Nadu to the rest of India, said Minister of State for Commerce Jairam Ramesh at the inauguration of India International Leather Fair 2007, at Chennai Trade Centre on Wednesday. Anti-dumping duties slammed on China and Vietnam recently has given India an opportunity to enter high-volume, low-value footwear market, informed the Minister. To reach the U.S. market India would require to expand its capacity, said Union Minister for Communications and Information Technology Dayanidhi Maran, who inaugurated the fair. State governments should encourage the industry as the U.K. market may require 10,000 pairs of shoes per order the U.S. on the other hand would require production of 100,000 to 200,000 pairs. For India to compete with China in the U.S. footwear market, logistics needed to be improved and Shipping Ministry would require to start a direct container shipping link from Chennai port to the U.S. and Europe which presently gets routed through Colombo or Singapore. It was also important to generate half a million new jobs in leather sector while attempting to reach leather exports target of $7 billion by 2011, Ramesh said. Council for Leather Exports' (CLE) Rs 7 crore project being carried out in Kancheepuram district was lauded by Ramesh. The project will be expanded to six other districtsacross the country. CLE should also establish such centres in Tamil Nadu, Uttar Pradesh, West Bengal, Andhra Pradesh and Punjab, besides focusing on Bihar and Assam, he said.
  43. 43. Indian leather industry poised to double its global share by 2010 Chennai, Feb.3 (ANI): Indian leather exports is poised to double its global market share by 2010, an industry representative said during the 22nd India International Leather Fair here on Saturday. India currently has a share of 2.51 percent in the 97.606 dollars billion global leather market. quot;We have a big plan. Today, the industry has exports of about three billion dollars and, we have a plan to increase it to seven billion dollars in the next four to five years. Today the share of leather industry in the world leather trade is about 2.5 percent, and when we will have seven billion dollars worth of export, the share will go up to five percent,quot; said, Mukhtar-ul Amin, the Chairman of the Council of Leather Exporters. According to projections made by Confederation of Indian industry (CII), leather exports are going to increase to nine billion dollars by 2010 from six billion dollars in 2005-06. India however still has a long way to go to match its rival China, which dominates the global leather market with over 20 per cent share. Industry representatives however, say the country needs to boost its animal husbandry to match China's capability. quot;We do not have any organized farming in India, like we have in England, Holland or ay European country we got to have animal farming. America and Brazil are biggest meat exporters only because of animal farming. We have to take care of animal husbandry the quality of animal has to be improved,quot; said Anil K Sodhi, a leather exporter. They are hopeful of benefiting from India's growing retail sector to boost its domestic market especially in footwear. The four-day annual leather fair organized here, was an attempt to showcase India's technological advancement in the field. Over 300 exhibitors, including overseas participants, showcased their leather goods and related technologies. Products exhibited in the fair include finished leather of all kinds, shoes, shoe components, leather garments, handbags and wallets. quot;From the manufacturing point of view I think India has a very much advanced skills and technology and is able to compete in the world market with its finished
  44. 44. goods,quot; said, Christopher Breuninger, a German exporter showcasing his products at the fair. The United States, single largest buyer of Indian leather goods, accounts for 18 percent of the country's leather exports. The huge size of the Indian market, the easy availability of skilled labour, the abundance of high quality raw material and a strategic location have attracted various international players in the leather industry. Indian leather, which is among the top eight foreign exchange earners, employs around 2.5 million people, 30 percent of whom are women. (ANI). India : Italy to assist Bengal leather industry February 14, 2007 The state’s leather industry will get a boost with technical assistance from Italy along with the setting up of a training centre in leather technology and a regional office for trade in the city. The project will be undertaken by Italian Trade Commission spending € 1 million in the process, informed Massimo Mamberti, CEO and Managing Director, Italian Institute for Foreign Trade. Chief Minister Buddhadeb Bhattacharjee welcomed Italian assistance in areas of joint interest, including leather, while addressing the “Indo-Italian Synergy: Destination West Bengal” forum here on Tuesday. Bhattacharjee, sharing the dais with the visiting Italian Prime Minister, Romano Prodi, said The regional leather industry is a major partner for Indian leather goods production and the leather complex (at Bantola) can benefit greatly through Italian expertise. Besides leather and food processing, Italian businesses are exploring sectors of mutual interest too. “Textile industry, fashion technology are also sectors of interest. Italy is spending € 10 million in India within one year for promoting trade,” Mamberti said.
  45. 45. India : Council for Leather Exports - Vision 2010 - 2011 February 15, 2007 Leather Exports' vision map for 2010-2011 by Council for Leather Exports (CLE) chairman Mukhtarhul Amin. 1. The road map of CLE for increasing the exports from $ 3bn to $ 7bn Council has developed a prospective plan for increasing exports to US $ 7 Billion by 2010-11. The plan envisages major interventions in the areas like capacity building, increasing the scale of production, diversifying in to non-leather footwear manufacturing, Design improvements to Indian products etc…It is estimated that about Rs.7,300 Crores would be required in the form of investments in the next five to six years. According to the road map, footwear would continue to be the largest segment of exports constituting about 56% of the total exports and to a value of US $ 4.3 Billion out of the total US $ 7 billion. This would be followed by Leather articles and finished leather. Percentage of Finished leather would decrease from the present 24% to about 18% and the leather articles would increase from 26% to about 28%. 2. Increase in tanning and production capacity to meet the 1 m. footwear The present tanning capacity of 2 Billion Sq. ft would be doubled to 4 Billion Sq.ft. In the case of footwear, the present capacity of 2, 50,000 pairs a day would increase to 1 million pairs a day. This means an increase of 7, 50,000 pairs a day. This increase comprises of both leather and non-leather footwear. Non-leather footwear would increase in large numbers as compared to the leather footwear. In the case of Leather garment the capacity would be additional 45, 000 pieces a month and in Leather articles, about 6 million pieces would be added every month to the existing capacity. 3. Developing tanning clusters Two Tanning clusters are planned for increasing the tanning capacity. One to be implemented by the Government of Andhra Pradesh near Nellore is yet to take off. Once the issues concerning the water sources is sorted out, a tanning park in about 300 acres of land would be developed by ILFS for the government of Andhra Pradesh. With regard to the another park, we would discuss and decide the location.
  46. 46. 4. Special economic zones for production There is one SEZ footwear park being developed by Government of Tamil Nadu in Sriperambattur near Chennai. This park would have a salable area of 105 Acres and could house about 20 units. The total capacity of the park could be about 1, 00,000 pairs a day. However, in the perspective planning, five SEZ were envisaged all over the country. 5. The countries been targeted The Council for Leather Exports has identified USA as a focus market for Footwear. CLE has also identified Scandinavian countries as other focus countries. 6. Targeting big global brands and top companies and aggressively going after them to make an investment in India Council is planning to attract investments from some of the major producers in the east and west. Some of the major footwear manufacturers from China are already planning to invest in India. We would in the next two or three years would like to have investments from some of the western European countries as the leather industry there is increasingly facing problems due to labor cost. In this regard, Council would formulate strategy for presenting the country’s credentials as an investing destination. 7. Countries planning to enter India A Taiwanese company APACHE has invested in TADA, near Nellore in Andhra Pradesh and another Taiwanese company FENG TAE is proposing to invest in Cheyyar, near Chennai for producing Non-leather footwear. There are other major companies planning to invest in India. However, these are in the initial stages only. 8. Shift of focus from men's shoes to women and children Of late there is considerable shift towards ladies shoes from the traditional way of making more men’s shoes. In the year 1998-99, men: ladies used to be 71 : 29 and the same in the year 2005-06 was 56 : 44. This clearly indicated the shift in favor of ladies shoes to men’s shoes. 9. Change in technology in leather processing There is no major change in the tanning technology as such but there are number of improvements in the leather processing either in terms of using lesser water and chemicals than in the past or in terms of getting wide range of finishes for the leather. 10. Changes in fashion requirements for export market Fashion keeps changing every season. For ladies wears the fashion changes every season and for men’s wears the fashion changes a bit slower. Therefore, for the makers of the ladies fashions, they need to keep in tune with the changing fashions more frequently than the others.
  47. 47. Europeans turn to Indian leather as China gets tough RATNA GANGULI & RAKHI MAZUMDAR TIMES NEWS NETWORK [ TUESDAY, FEBRUARY 20, 2007 ] KOLKATA: The recent clampdown by China on polluting tanneries has come as a boon to Indian leather goods exporters. Several tanneries in China have closed down owing to strict implementation of environment laws. The Chinese industry has also been hit by the 30% rise in prices of raw hides and skins globally. Against this backdrop, India’s acknowledged status as a high-quality leather processing centre and availability of skilled labour compared to China seems to have turned the focus of leading European buyers of leather goods on India. Interest about Indian leather goods is increasingly been shown by Italy, which as the world leader in leather products is becoming more active in stitching up joint manufacturing and sourcing ties with India. Reflecting Italy’s interest in India as one of the sourcing hubs for leather goods, a 10-member consortium of buyers from Italian Leather Goods Manufacturing Association (ILGMA) is coming to Kolkata, a key leather processing centre, between February 23-25, to participate in a leather fair. The consortium represents around 100 retail outlets in Italy. The exhibition is part of an annual event organised by Indian Leather Products Association (ILPA), in association with Indian Trade Promotion Organisation (ITPO) and Council of Leather Exports (CLE). Apart from Italy, 35 buyers from Spain, Germany, the UK, the US and a couple of Latin American countries will also participate in the fair. Incidentally, a separate team of Italian buyers also visited another leather hub, Chennai, between January 31 and February 2 to forge similar alliances. “These Italian companies control about 100 retail leather goods outlets in their country, their participation in the fair is expected to generate export orders for West Bengal based leather goods units,” said Yogesh Gupta, chairman of trade development subcommittee under ILPA. Buyers are essentially looking at sourcing high quality but low volume leather accessories like bags, wallets and laptop cases, mobile phone covers. “China specialises in low cost, high volume output, which is completely reverse in case of India. This is yet another factor that seems to be working in our favour,” he added.
  48. 48. ILPA is counting heavily on ILGMA participation in the fair because Italy as the largest manufacturing hub of leather goods in Europe is more interested to source leather goods from India in the wake of uncertainties of getting steady supply of such goods from China owing to the recent shut-down of several tanneries in that country, said Paresh Rajda, former president of ILPA. Apart from facilitating a buyers-sellers meet in the fair, ILPA is also organising a series of workshops to make Indian producers aware about country-specific environmental laws, security measures in packaging and social auditing. Since it wants to make members aware about latest trends in international fashion in leather goods and accessories, it has invited leading Italian design studio, Arpel, to set up a stall at the fair. West Bengal, with exports of Rs 1,800 crore, is the largest exporter of leather goods in the country. With this, the state contributes more than 60% of the country’s leather exports. Indian leather goods as a whole for its better quality and designs are fast improving acceptability in the global market. Price-wise, goods are positioned in the middle-segment of the market, which is higher than low quality Chinese goods, but lower than internationally acclaimed global brands.
  49. 49. The Indian leather industry comprises the following key sub-sectors - tanning and finishing, footwear, footwear components, leather garments and leather goods and accessories. A large part (nearly 60-65 per cent) of the production is done by the small/cottage sector. Leather and leather products production is centred in southern, northern and eastern India. Key production units are located in Tamil Nadu, West Bengal, Uttar Pradesh, Punjab, Karnataka, Andhra Pradesh, Haryana and Delhi. Tamil Nadu is the biggest leather exporter in the country with the south accounting for 43 per cent of the country’s share. The industry uses primarily indigenous natural resources with little dependence on imported resources. The Government of India has announced various initiatives to make the leather industry more competitive. A few initiatives are: Concessional duty on imported machinery and chemicals. • Free export of raw hides & skins, semi-finished and finished leather and • leather products. Policies to facilitate modernisation / upgradation: In June 2005 the • government initiated a US$ 64 million ‘modernising scheme’ called the ‘Integrated Leather Development Programme’, whereby all leather tanning and product units will be eligible for modernisation assistance. The assistance will be to the extent of 30 per cent of project cost for SSI units and 20 per cent for non-SSI units, subject to a ceiling of US$ 110 thousand per unit. Setting up of leather parks: An outlay of US$ 24.5 million for setting up • five leather parks — two in Chennai and one each in Nellore, Agra and Kolkata. 12 The Council for Leather Exports has estimated that this scheme will generate a total investment of US$ 267 million in about three years. Establishment of ‘design centres’ at individual manufacturing units, to • facilitate improvement in design capabilities: Under this scheme, 25 per cent of the project cost is provided to the units under the market access initiative scheme of the Ministry of Commerce and Industry. Several individual units have come forward to establish their own design centres.
  50. 50. Indian Leather Industry: Perspective and Export Potential World Livestock Population Hides and skins are the basic raw materials for the leather industry, which originate from the source of livestock. There was an upsurge in the number of bovine animals and goats and kids during 1990-2005, while population of sheep and lambs was on a decline. Developing countries accounted for around 78% of the total population of bovine animals and 93% of world population of goats and kids in 2005. World bovine animals population stood at 1,529 million heads in 2005. India had the largest number of bovine animals (283 million heads) with a share of 19% followed by Brazil (13%), China (9%) and USA (6%). World sheep and lambs population stood at 1,079 million heads in 2005. With a total population of 170 million heads, China had a share of 16% in the world sheep and lambs population. India (6%) lagged behind at third position, with a population of 62 million heads. World goats and kids population stood at 807 million heads in 2005. China has the highest population of goats and kids, which stood at 195 million heads in 2005. Although in 1990, India had the highest population of goats and kids (21% of the total), it was overtaken by China in 1995 and the gap between the two countries has been widening.
  51. 51. World Raw Hides and Skins Production World production of raw hides and skins was nearly 7 million metric tonnes, of which production of bovine hides and skins alone accounted for 90% in 2004. Developing countries are the major producers of raw hides and skins. China played a significant role in turning developing countries as the major source of global imports of raw hides and skins.
  52. 52. World Leather Exports World leather exports grew moderately, by a CAGR of 7.3%, from US$ 46 billion in 2000 to US$ 61 billion in 2004. World leather exports can be categorised in to raw hides and skins (40%), leather articles (49%) and furskins (11%).China, Hong Kong, Italy, USA and France are major exporters of leather in the world. World leather articles exports increased by a CAGR of 8.06%, from US$ 22 billion in 2000 to US$ 30 billion in 2004. China constitutes 34% of the total leather articles exports. Hong Kong (17%), Italy (11%) and France (9%) are other major exporters. India’s exports of leather articles have stabilized around US$ 1,033 million in 2004. World Leather Imports World leather imports can be classified in to raw hides and skins, leather articles and furskins, with a share of 38%, 55% and 7% of the total world leather imports, respectively. Leather articles is predominantly imported by USA, Spain, UK and Belgium; whereas China, Mexico, Turkey and Romania are mainly into imports of raw hides and skins. Hong Kong, USA and Italy are chief importers of furskins. World imports of leather articles is estimated to have grown marginally from US$ 27 billion in 2000 to nearly US$ 34 billion in 2004. USA, the largest importer of this product, is predominantly captured by China. China’s share in USA’s import of leather articles has increased gradually, from 54% in 2000 to 70% in 2004.
  53. 53. Indian Scenario With about 15% of the world livestock population, India accounted for only 8% of the leather production in 2002. The Indian leather industry consists of 42,000 small-scale industry (SSI) units, which account for 75% of the total production. Nearly, 2.5 million people earn their livelihood from this sector. A survey by Central Leather Research Institute (CLRI) estimated that about 1,600 tanneries were present in India in 2000. The concentration of tanning industries is mainly in Tamil Nadu, with a share of 52%. Other states where tanning industry is concentrated include West Bengal and Uttar Pradesh. Small scale sector accounts for large processing capacity ranging from 70-87% for different leather products. Exim Bank of India’s Role in Promoting Indian Leather Sector Export Import Bank of India (Exim Bank) has helped the leather exporting units to modernize and upgrade their production facilities, install pollution control and environmental safety systems of internationally accepted standards and develop export market for value added products through strategic export market development plans. Exim Bank implemented Agency Line of Credit and Export Development Project, joining hands respectively with International Finance Corporation (IFC), Washington and the World Bank to support small and medium enterprises in the leather sector. Composition of Indian Leather Exports Composition of Indian leather exports has undergone a radical change, from being a mere exporter of raw hides and skins, to a status of an exporter of value added leather products. From 1991-92, India has been exporting only finished leather because of export restriction on semifinished leather. Total leather and leather manufactures exports stood at Rs.10,286 crores in 2004-05. Leather footwear is the largest component of leather exports, with a share of 26%.
  54. 54. Indian Leather Exports In 2004-05, the industry recorded a satisfactory 5.8% export growth to reach a level of US$ 2.3 billion. Although, leather exports have increased in absolute terms, its share in total exports have declined in percentage terms from a high of 7.99% in 1990-91 to 2.89% in 2004-05. Major Export Markets The main export markets for India are Germany, USA, Italy, UK and France. Due to the two bans imposed by Germany on imports from India, there was a lull in India’s exports in 2002-03. Slowly and steadily, it picked up pace and stood at US$ 326 million in 2004-05. Exports to USA, which was US$ 343 million in 2000- 01, dropped to US$ 243 million in 2002-03 and was at US$ 266 million in 2004-05.
  55. 55. Analysis of India’s Export Potential India’s major export markets for leather handbags are USA, Germany, UK and Spain. In UK and Spain, Italy is the top exporting country of leather handbags. However, China has overtaken Italy and emerged as major exporter in markets like USA, Canada, Hong Kong and Russia. India has lot of potential in these markets, as it has unique advantage of economies of scale and capability of producing niche products. Footwear is a critical segment for the Indian leather industry as this is expected to be the engine of growth for the Indian leather sector. Currently, the trend in export of Indian footwear has been encouraging; however the trend for footwear components exports has been declining. India’s exports of footwear components have dropped from US$ 238 million in 2000-01 to US$ 164 million in 2004-05. Top importers of leather footwear uppers in the world are China, United Kingdom and Canada. World leather garments exports have increased over the years. USA, Germany and Japan were the largest importers of leather garments in the world in 2004. India was placed among the top three exporting countries of leather garments in these markets. Further, India is the largest sourcing partner of leather garments to Spain and Italy, which are the major markets for Indian leather garments. India’s other major export markets are Germany, USA and France. But, India must be cautious of China, as its unit price of leather garments is cheaper than that of India.
  56. 56. Major Issues Affecting the Sector The issues that are hindering the export growth of the Indian leather industry are as follows: Environmental Issues The leather industry is traditionally considered as a polluting industry in the tanning and finishing stages of the production chain. Global standards set by importing countries affect the entry and increase the cost of market access to products of developing countries. Usage of many chemicals has been banned by various countries. The product specifications for leather are constantly under review, leading to greater stringency. Impact of PETA Campaigns by NGOs, such as People for Ethical Treatment of Animals (PETA), related to cruelty against animals have led to boycott of Indian leather products by many foreign companies. WTO Related Matters With the advent of WTO, the average and bound tariffs for manufactured products have fallen in the developed countries. However, the average and bound tariffs for leather products remain relatively high. Many developed countries are implementing Technical Barriers to Trade (TBT) as Non-Tariff Barriers to restrict leather exports from developing countries like India. Cost Escalation Leather exporters have to meet domestic as well international environmental norms. Testing and certification requirements add to the costs of leather manufacturers. However, it is observed that small supplier firms may not be able to comply with stringent environmental standards. High costs of compliance impose real economic costs on firms. Chinese Competition Chinese leather industry ranks top on the raw material resources, product yield and import and export trade in the world. China is one of the major competitors to India’s leather sector as it has the capability to produce large volume at low price. Chinese leather exports have increased by three-fold after its entry into WTO.
  57. 57. Competitive Advantages The leather industry can benefit from several characteristics of the Indian market and the corresponding advantages they offer. Some of these advantages are: 1) Supply side advantages • Availability of low cost skilled labour • Abundance of raw material • Availability of supporting institutions to develop the industry 2) Demand side advantages • Large and growing domestic market 3) Regulatory / Policy related advantages Supply side advantages • Availability of low cost, skilled labour India’s advantage as a source of low cost, skilled labour is quite relevant to industries such as manufacturing of leather goods and footwear that are relatively labour intensive. India has among the lowest cost of labour among key footwear producing countries. In addition to low costs, India also has the world’s largest technically trained manpower in leather craft. The twin advantages of low cost and technical skills offer India a distinct competitive advantage in this industry. • Availability of Raw Materials India is the largest livestock holding country with 21 per cent of the large animals and 11 per cent of small animals in the world. The large population of cattle, buffaloes, goat and sheep that the country possesses ensures that India has ten per cent of the world’s raw material base. In addition, some of the leather available in India is premium quality and much sought after. • Availability of supporting institutions India has institutions that support the leather industry in specific areas such as product development, design and R&D. These institutions enable capability building in the industry and help it become globally competitive.
  58. 58. • Product development/ design A design development centre for leather garments and leather accessories is underway under the joint efforts of the Council for Leather Exports and the National Institute of Fashion Technology (NIFT). The design development centre functions from the NIFT campus in New Delhi. Research and Development capabilities The Central Leather Research Institute (CLRI) (is the world’s largest leather research institute. CLRI today, is a central hub in Indian leather sector with direct roles in education, research, training, testing, designing, forecasting, planning, social empowerment and leading in science and technology relating to leather. State-of-art facilities in CLRI support innovation in leather processing, creative designing of leather products and development of novel environmental technologies for the leather sector. Demand side advantages • Large domestic market India has a large and growing consuming class (with an annual income of US$ 449 or above), that constitutes the largest segment of the population today. This segment is estimated to constitute nearly 90 million households by 2006-07, up from just 32.5 million households in 1997-98 – a CAGR of over 12 per cent. Coupled with relatively lower penetration levels - penetration levels for footwear has been estimated to be about 60 per cent – this represents a large and growing market for leather goods.
  59. 59. Government Regulation & Support The Government of India has announced various initiatives to make the leather industry more competitive. Key policy initiatives include: • De-licensing of integrated tanneries that convert raw hides and skins into finished leather. • Several leather goods have been de-reserved from the Small Scale sector. • Free import of raw hides & skins, semi-finished and finished leather. • Concessional duty on imported machinery and chemicals. • Free export of raw hides & skins, semi-finished and finished leather and leather products. • Policies to facilitate modernisation / upgradation: In June 2005 the government initiated a US$ 64 million ‘modernising scheme’ called the ‘Integrated Leather Development Programme’, whereby all leather tanning and product units will be eligible for modernisation assistance. The assistance will be to the extent of 30 per cent of project cost for SSI units and 20 per cent for non-SSI units, subject to a ceiling of US$ 110 thousand per unit. • Setting up of leather parks: An outlay of US$ 24.5 million for setting up five leather parks — two in Chennai and one each in Nellore, Agra and Kolkata. 12 The Council for Leather Exports has estimated that this scheme will generate a total investment of US$ 267 million in about three years. • Establishment of ‘design centres’ at individual manufacturing units, to facilitate improvement in design capabilities: Under this scheme, 25 per cent of the project cost is provided to the units under the market access initiative scheme of the Ministry of Commerce and Industry. Several individual units have come forward to establish their own design centres.