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Productivity in retail industry in India

Productivity in retail industry in India

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Published by splusk
A report on 'productivity in the retail industry of India'
A report on 'productivity in the retail industry of India'

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Published by: splusk on Jul 29, 2008
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AReportOn
Productivity in Retail Industry in India
Submitted ByLoony and Partner
 
The Indian Retail Scene
Organized Retailing and Kirana Shops
India's retail sector is going to transform and with a three-year compounded annualgrowth rate of 46.64 per cent, retail sector is the fastest growing sector in the Indianeconomy. Traditional markets are transforming themselves in new formats such asdepartmental stores, hypermarkets, supermarkets and specialty stores. Western-stylemalls have begun appearing in metros and near metro cities, introducing the Indianconsumer to a new shopping experience.KSA-Technopak, a retail consulting and research agency, predicts that by 2010, organizedretailing in India will cross the US$ 21.5-billion mark from the current size of US$ 7.5 billion.The Indian retail market is of enormous size about US$ 350 billion. But organized retailis not so huge and it is at only US$ 8 billion. However, the opportunity for growth is huge —by 2010, organized retail is expected to grow to US$ 22 billion. With the growth of organized retailing estimated at 40 per cent over the next few years, Indian retailing isclearly at a tipping point.This report attempts to analyse the areas where retail sector is growing and will grow,what will be the target market segment for the retailers and how will they try to serve thissegment.
Overview
India is witnessing an unprecedented consumption boom. The economy is growing between 8 to 10 percent and the resulting improvements in income dynamics along withfactors like favorable demographics and spending patterns are driving the consumptiondemand. Indian Retail Industry is ranked among the ten largest retail markets in theworld. The attitudinal shift of the Indian consumer in terms of "Choice Preference","Value for Money" and the emergence of organized retail formats have transformed theface of Retailing in India. The Indian retail industry is currently estimated to be a US$200 billion industry and organized Retailing comprises of 3 per cent (or) US$6.4 Billionof the retail industry. With a growth over 20 percent per annum over the last 5 years,organized retailing is projected to reach US$ 23 Billion by 2010.The Indian retail industry though predominantly fragmented through the owner -run "Mom and Pop outlets" has been witnessing the emergence of a few medium sized IndianRetail chains, namely Pantaloon Retail, RPG Retail, Shoppers Stop, Westside (TataGroup) and Lifestyle International. In the last few years, Indians have gone through adramatic transformation in lifestyle by moving from traditional spending on food,groceries and clothing to lifestyle categories that deliver better quality and taste. Modernretailing satisfies rising demand for such goods and services with many players enteringthe bandwagon in an attempt to tap greater opportunities.According to the report of American Management Consulting Firm A. T. Kearney's 2006Global Retail Development Index (GRDI), India is on the first position , continuing for 
 
two years (2005 and 2006), among 30 countries as the world's most attractive market for mass merchant and food retailers seeking overseas growth. On the other hand, China isloosing its attractiveness and making the way to India GRDI helps retailers to prioritizetheir global development strategies by ranking emerging countries based on a set of 25variables including economic and political risk, retail market alternatives, retail saturationlevel, and the difference between gross domestic product growth and retail growth. Thestudy quotes: "The Indian retail market is gradually but surely opening up, while China'smarket becomes increasingly saturated."
The Growth Drivers
The Indian Retail growth can be attributed to the several factors including* Demography Dynamics: Approximately 60 per cent of Indian population below 30years of age.* Double Incomes: Increasing instances of Double Incomes in most families coupled withthe rise in spending power.* Plastic Revolution: Increasing use of credit cards for categories relating to Apparel,Consumer Durable Goods, Food and Grocery etc.* Urbanization: increased urbanization has led to higher customer density areas thusenabling retailers to use lesser number of stores to target the same number of customers.Aggregation of demand that occurs due to urbanization helps a retailer in reaping theeconomies of scale.Investment Opportunities* Potential for Investment: The total estimated Investment Opportunity in the retail sector is around US$ 5-6 Billion in the Next five years.* Location: with modern retail formats having made their foray into the top cities namelyHyderabad, Coimbatore, Ahmedabad, Mumbai, Pune, Chennai, Bangalore, Delhi, Nagpur there exists tremendous potential in two tier towns over the next 5 years.* Sectors with High Growth Potential: Certain segments that promise a high growth are oFood and Grocery (91 per cent)o Clothing (55 per cent)o Furniture and Fixtures (27 per cent)o Pharmacy (27 per cent) o Durables, Footwear & Leather, Watch & Jewellery (18 per cent).* Fastest Growing Formats: Some of the formats that offer good growth potential are: oSpecialty and Super Market (45 per cent) o Hyper Market (36 per cent)o Discount stores(27 per cent)o Department Stores (18 per cent)o Convenience Stores and E-Retailing (9 per cent)* Supply Chain Infrastructure: Supply chain infrastructure in terms of cold chain andLogistics.* Rural Retail: Retail sector offers opportunities for exploration and investment in ruralareas, with Corporates and Entrepreneurs having made a foray in the past. India's largelyrural population has caught the eye of retailers looking for new areas of growth . ITClaunched the country's first rural mall 'Chaupal Sagar', offering a diverse product rangesfrom FMCG to electronics appliance to automobiles, attempting to provide farmers a

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