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Current GDP ~ $1 trillion 4th largest in terms of GDP (PPP) terms Target customer base 405 mn. Growth rate likely to be sustained above 8% Changing consumer behavior consumerism Growth in availability of infrastructure and mall space
Indian companies
Foreign Players
Future Group Reliance Retail Bharti Shoppers'Stop Pyramid Aditya Birla Group Subhiksha Spencer Group Tata Westside, Tata Chroma
Nike (Single brand) Levis (Single brand) Wal-mart (JV) Metro (Cash&Carry)
$300bln
$8bln 3%
FORMATS
Hypermarkets
Relatively
established, limited competition Entrenched in Indian Mindset Score on shopping experience Stress on branding Price not critical as they cater to upper income class
new concept, but already as big as department stores Growing fast, but competition to intensify Price Discount and Wide Varieties act as key attractions Key to success will be efficient Supply Chains and Store locations
challenge to mom and pop stores How to compensate for facilities that mom and pop stores provide namely Home Delivery and Monthly Credit ? Immense Competitions, building scale to achieve cost efficiencies will be critical
POLICIES
Government Policies
51% FDI allowed in single-brand formats 100% FDI in cash-and-carry format NO FDI in multi-brand stores ( like Wal-Mart) Trends indicate that the FDI would open up in retail sector, however political consensus has to be reached before that happens
Inflow of investment and funds. Improvement in the quality of employment. Generating more employment. Increased local sourcing. Provide better value to end consumers. Investments and improvement in the supply chains and warehousing. Franchising opportunities for local entrepreneurs. Growth of infrastructure. Increased efficiency. Cost reduction. Implementation of IT in retail. Stimulate infant industries and other supporting industries.
Would give rise to cut-throat competition rather than promoting incremental business. Promoting cartels and creating monopoly. Increase in the real estate prices. Marginalize domestic entrepreneurs. The financial strength of foreign players would displace the unorganized players. Absence of proper regulatory guidelines would induce unfair trade practices like Predatory
OPINIONS
Barriers to Entry
Regulatory barriers Fragmented Suppliers Lack of infrastructure Supply Chain Complexities Lack of skilled Human Resource Differential Taxation System Labor Legislation Clustering of Malls
Boom, Higher
Incomes Favorable Demographics Changing Lifestyles and Preferences Real estate boom Manufacturing Reforms Reduction in import dutiesoffering
Consumer financing will be an important tool to drive consumption Income growth alone may not be sufficient Margins to be driven by non-core businesses Retailing will remain concentrated in the top 10 towns Multi-format retailing to thrive Large scope for rural retailing
Views of Mr Kishore Biyani, Pantaloon Retail India Retail Forum
Only 51% FDI in single brand retailing Many retailers (e.g.. IKEA) unwilling to enter without 100% FDI)
Insufficient data on consumer behavior Focus in India only on growth and not profitability Scope for private labels (only 4% in Asia compared to 17% in western markets)
Source: Morgan Stanley India Retail: Key Takeaways from the India Retail Forum
Strong long-term growth potential Severe cost pressure largely related to property rentals Profitability likely to remain low - patient capital should survive but weak players likely to exit in the near term Consolidation is on the cards Driven more by traffic growth than ticket growth Convenience stores to remain integral part of retail Need for catering to local flavors Internet retailing still to pick up in India
Source: Morgan Stanley India Retail: Key Takeaways from the India Retail Forum
India's Populists Resist Big Retail (WSJ 9/10/2007) Spencer's to reduce retail formats (ET 14/10/2007) Small retailers embrace IT to boost operations (ET
12/10/2007)
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