RETAIL INDUSTRY

A Domestic & Global View

 RETAIL INDUSTRY
A Brief History
• Retail is the sector of an economy, which includes individuals & companies
engaged in the selling of finished products to end-use consumers.

• It first emerged in USA in the 18th century, but was restricted to general
stores at that time, and Specialty stores were only developed in areas with a
population of above 5,000.

• After World War II, Supermarkets flourished in USA & Canada, with the
growth of suburbs.

• Today Retail mainly comprises of:

▫ General Retailers (managed by individuals/families)
▫ Departmental Stores
▫ Specialty Stores
▫ Discount Stores
Overview of Retail Industry
• Modern Retail Industry, driven by the Demand-Supply dynamics, is
booming across the world.

• The major Demand Drivers of the Retail Industry are:

1. Interest rates
2. Population
3. Employment
4. Personal disposable income
5. Individual debt

• While, the Supply Drivers are:

1. Competitors in the industry
2. Size of the market
3. Cost of the factors of production
• The various types of retailers, differentiated by their marketing strategy are:

▫ Supermarkets – focus on selling mostly food products

▫ Department stores - very large stores offering a huge assortment of “soft” & “hard” goods

▫ Discount stores - offer a wide array of products & services, but mainly compete on price

▫ General merchandise store - a hybrid between a department store & discount store

▫ Warehouse store - low-cost, often high-quantity goods piled on shelves; warehouse clubs
charge a membership fee

▫ Variety store or “Dollar store” - extremely low-cost goods, with limited selection

▫ Demographic retailers - who aim at one particular market segment (like - Luxury brand
retailers).
Activities of the retail industry can be broadly classified into:

• Personal goods store retailing

• Hard goods - this covers goods like electronics & electrical

appliances, furniture, and sporting goods

• Soft goods - this includes apparel retailing

• Non-store retailing - this includes infomercials, catalogue sales,

vending machines and e-commerce

• Food retailing or restaurants

• Automotive services & retailing

 Organized Retail Sector - A Global Perspective

• Involves the direct selling of goods/merchandise from a fixed location, for a

buyer’s direct consumption.

• The world’s 10 largest retail companies in the world, had combined sales of
US$1.15 trillion in 2008.

• Also, the Top 250 Retailers recorded retail sales in excess of US$3.8 trillion
in 2008.

• An estimated two-thirds of the US GDP comes from the Retail Industry.

• Large format retail businesses dominate the industry in the US & across
Europe in terms of retail space, categories, range, brands, & volumes.
 Global Fashion Retail Industry
• The Global apparel retail industry grew by 3% in 2008 to reach a
value of US$1,025.9 billion.

• The global apparel retail industry is forecasted to have a value of

US$1,184.1 billion by 2013, an increase of 15.4% since 2008.

Share of Top 250 Retailers by product sector (share of total)

9% Fashion
15%
FMCG
22%
Hardline &
Leisure
Diversified
54%
 Share of Top 250 Retailers by product sector (share of sales)

9% 8% Fashion

15% FMCG

Hardline &
Leisure

Diversified
68%

• Even though fashion forms a small part of the Retail Industry

(especially in the Top 250 companies), it has one of the highest
profit margins.
• Even as Fashion retail showed negative sales in 2008, it had the highest net
profit margin than other sectors.

Sales growth & profitability by product sector

2003-2008 composite retail sales 2009 composite retail sales growth

2008 composite net profit margin

• Women’s-wear sales dominate the global apparel retail industry,
and in 2008, it generated 53% of the industry's overall revenues.

• The US retail clothing industry includes about 40,000 companies

that operate 80,000 stores with combined annual revenue of about
US$130 billion.

• Retail clothing industry is highly fragmented & heavily concentrated

at the top in US, as the 120 largest companies operate 40,000 stores
& account for 65 percent of industry revenue.

• Large companies in the American apparel retail include Gap,

Macy's, JC Penney, and Abercrombie & Fitch.

• Europe accounts for 41% of the global apparel retail industry's

value.
The Top 10 Global Fashion Retailers of 2008 are:

Sector Top250 Company Retail Sales Country of

Rank Rank (US $ origin
million)

1 35 Macy’s 24,892 USA

2 42 TJX 19,000 USA
3 45 JC Penney 18,486 USA
4 48 Kohl’s 16,389 USA
5 54 Inditex 15,048 Spain
6 55 Gap 14,526 USA
7 60 H&M 13,821 Sweden
8 63 Isetan Mitsukoshi Holdings 13,723 Japan
9 64 LVMH 13,660 France
10 71 Arcandor 12,640 Germany
Organized Retail Sector - Inside India
• Retail is one of India’s largest industry (worth US$300 billion), generating
more than 10% of India’s GDP, however, the organized retail sector occupies
about 3% of it.

• In terms of the Retail Development Index, India ranks 5 th globally, &

occupies the 2nd position in Asia, next to China.

• The Retail Industry (organized) employs a workforce of 1.2 million people,

i.e., about 8% of total employment.

• The inception of the Indian Retail industry dates back to times where retail
stores were found in the village fairs, ‘melas’ or in the weekly markets.

• The maturity of the retail sector took place with the establishment of
convenience stores in the locality.
• Indian retail industry gathered a new dimension with the setting up of the
different MBOs & EBOs, Hyper & Supermarkets, shopping malls &
departmental stores.

• Important participants in the Indian Retail sector are Bata, Big Bazaar,
Pantaloons, Landmark, Khadims, Crossword, etc.

• Recent researches have projected that organized retail will capture a share
of 10% of the total retail sector by the end of 2010.

• According to the Union Minister of Commerce & Industry, the organized

retail sector is expected to grow to a value of Rs. 2,00,000 crore (US$45
billion).

• This industry is expected to generate 10 to15 million jobs in next 5 years in

the form of direct association or gainful employment.
• India topped the A.T. Kearney's Global Retail Development Index
for two consecutive years and this has made the Indian market
viable for Indian & Foreign retail players alike.

• However, the industry suffers from lack of management talent, poor

access to capital, unfavourable regulation & denial of access to best
practices.

• India has some 12 million retail outlets, but many of these are
merely subsistence providers for the owners & survive on a cost
structure where labour & land is assumed to be free, and taxes nil.

• Even though the unorganized sector is larger than the organized

sector, the latter is growing at 25-30%, while the former is growing
at 5%.

• The Indian retail industry is only now beginning to evolve in line

with the transformation that has swept other large economies.
• Only recently has there been an awakening in this sector, with more
organized retailers starting to make an impact.

• Liberalization policies, initiated in the 80s & accelerated through

the 90s, have now begun to impact the structure & conduct of the
retail industry.

• Retailing in India presents vast opportunities as it is backed by the

changing consumer trends & mindsets, new opportunities &
increasing wealth.

• The growth of organised retail is likely to have a positive impact not

only on end consumers, but also on employment generation, supply
chain efficiency, agricultural practices, sourcing from India, etc.
 Domestic Fashion Retail Industry
• Retail sector is a sunrise industry in India, and the prospect for growth is
simply huge as can be seen with the rise of the shopping centres &
multiplexes.

• Rise in the purchasing power of Indians with increase in the per capita
income in the last few years, has led to the generation of insatiable wants in
the upper & middle class.

• Lifestyle habits have shifted from austerity to complete self-indulgence,

with a greater emphasis on personal care items & luxury goods.

• Urbanisation has led to densely packed cities & towns which has led to the
retail giants rolling out stores after stores in almost all metro-cities in the
country.
• Saturation of retail business in the European & other Asian markets has
prompted foreign retailers to set shops in India.
• K. Raheja group of companies founded Shoppers' Stop in 1991 as a provider
quality services, products and the right kind of shopping environment.

• Founded by the Tata Group in 1998, Westside is one of the largest & fastest
growing fashion retail chain that offers diverse products with a balance
between style & price.

• Pantaloon Retail made an incursion into the modern retail (fashion) in

1997, and caters to a large section of the society with over 140 stores across
India.

• Lifestyle, an international fashion store of the Dubai-based Landmark

Group, is a heaven for shoppers that provides a wide choice of products at
affordable prices.

• ITC has made a presence in the Fashion Retail sector through its exclusive
specialty store ‘Wills Lifestyle’ that has developed itself as a fashion
destination offering a range of apparels & accessories.
 Nike
• Nike was founded as “Blue Ribbon Sports” in 1964 by University of
Oregon track athlete Philip Knight & coach Bill Bowerman.

• The company initially operated as a distributor for Japanese shoe

maker Onitsuka Tiger.

• The quick growth in the company's profits led to the opening of its first
retail store in 1966, on the Pico Boulevard in Santa Monica, California.

• The name Nike, Inc. was officially adopted in 1978.

• The company takes its name from Nike, the Greek goddess of victory,
with the ‘Swoosh’ sign representing wings of the goddess.

• By 1980, Nike had a 50% market share in the United States athletic
shoe market.
• It is now the world's leading supplier of athletic shoes & apparel, and a
major manufacturer of sports equipment.

• Nike also has many subsidiaries like Cole Haan, Hurley International,
Umbro & Converse Inc.

• Nike advertises itself by sponsoring high-profile athletes & teams

around the world, with its highly recognized trademark of “Just do it”
& the Swoosh logo.

• Today Nike provides its customers not just athletic shoes, but also
apparel, sports equipment, & accessories.

• Nike has earned a revenue in excess of US$18.6 billion in its fiscal year
2008, and it employed more than 30,000 people worldwide.

• Nike has more than 700 shops around the world & has offices located
in 45 countries outside the US.
 Raymond
• The Singhania family, in a bid to broaden their horizons, acquired the
Raymond Woollen Mills (in Thane) from the Sassoon family, which was
originally set up by Mr. Wadia.

• A 100% subsidiary of Raymond Ltd., Raymond Apparel Ltd. (RAL) has brands
like Raymond Premium Apparel, Manzoni, Park Avenue, ColorPlus, Parx,
Notting Hill & Zapp!

• RAL entered into the ready-to-wear business with the introduction of Park
Avenue in 1986 catering to the men's formal wear market.

• It was followed by the launch of Parx in 1998, Manzoni in 2000, and Notting
Hill in 2007.

• Raymond Premium Apparel is a premium formal wear brand designed to meet

the needs of the “Global Indian”.
• They offer a diverse product range of nearly 20,000 design & colors
of suiting & worsted fabric.

• Raymond commands over 60% market share in worsted suiting in

India, & also ranks amongst the first three fully integrated
manufacturers of worsted suiting in the world.

• Raymond exports its designs & fabrics to over 50 countries,

including USA, Canada, Europe, Japan and the Middle East.

• Raymond has pioneered some new products that have set new
benchmarks in the worsted suiting industry in India.

• Raymond indulges heavily in promoting its brands through print &

TV advertisements.
 Pepe Jeans
• Pepe Jeans was founded in 1973, by Kenyan brothers Nitin, Arun
and Milan Shah.

• With its humble beginnings in a small stall at London's Portobello

Road market, Pepe Jeans is now a well-known jeans company.

• By 1975, Pepe Jeans were sold at four market stalls around London,
& by 1980, it was regarded as the most successful UK denim brand.

• Pepe Jeans London entered the Indian market in 1989, & has
become a top international premium denim brand in India today.

• Pepe Jeans is a market leader in its segment, with 25% market share
in the premium international jeans & casual wear market in India.
• Pepe Jeans London, initially a denim-wear brand has now become a
complete lifestyle brand with a diverse target market ranging from
ages 8 – 25 years.

• Pepe Jeans London has a presence in 60 countries, with over 300

stores globally, & has over 2,000 employees on its payrolls.

• Pepe Jeans currently has 155 EBOs, more than 90 large-format

stores & presence in over 1500 MBOs.

• With the help of franchisees & aggressive expansion plans, Pepe

Jeans has now made its presence in more than 80 cities across
India.
THANKS