Retail Sector Highlights

Global India
Retail Sales 14,200 353
(in $ Billions) (Source: Economist Intelligence Unit) (Source: IBEF, www.ibef.org)

Growth Rate 3.8% 12%

(Source: Economist Intelligence Unit) (Source: IBEF, www.ibef.org)

USA - 85%
France - 80%
Japan - 66% 4% - 5%
Organized Retail Malaysia - 55% (Source: IBEF, www.ibef.org)
Penetration Brazil - 36%
Russia - 33%
China - 20%
(Source: IBEF, www.ibef.org)

Organized Retail 40%

growth rate - (Source: IBEF, www.ibef.org)
 Drivers for Indian growth
 Emergence of Organized Retail Business
• Investments/Expansion plans, Mergers & Acquisitions, Joint ventures/Alliances for
market entry (Exhibit-1 & 2)
• Between 2010 and 2012, the organized retail real estate stock will more than double
from the existing 41 million feet2 to 95 million feet2
(Source: knight Frank – India retail report)
 Rising disposable income & household consumption levels
• Per capita income in 2009-10 more than doubled to US$ 849 from US$ 348 in 2000–
01
• GDP (PPP) forecasted to reach US $4.96 trillion by 2015.
• Indians have an ability to spend over US$ 30,000 a year (PPP terms) on conspicuous
consumption. Disposable incomes are expected to rise at an average of 8.5 per cent
per annum until 2015
(Source: IBEF, www.ibef.org)

 Demographics & Increase in consumer class

• 60 percent of India‘s population is below the age of 30
• India’s consumer class estimated to grow to 583 million by 2025 (Currently 50 million)

 Changing Consumer
• Focus shifting from low price to convenience, high value shopping experience (The
$3.5 billion Indian luxury retail market `is expected to grow to US$ 30 billion by 2015,
with 25% growth per annum, making India the 12th largest luxury retail market in the
world)

 Policy & Regulatory framework

• Implementation of GST – removes tax cascading effect
• FDI for multi-brand retail outlets

Sector/Activity FDI Cap/Equity

Wholesale, Cash & Carry 100%
Single brand product retailing 51%
(Source: Mckinsey http://www.mckinsey.com/mgi/publications/india_consumer_markett)
Multi-brand retail outlets 100% (proposed, not approved)
(Source: India Brand Equity Foundation (IBEF) www.ibef.org)
 Issues
 Logistics ($2.6 billion opportunity) Country Logistic costs as Logistics activities
• Supply chain inefficiencies percentage of GDP performed by 3PL
- Costing $40 billion annually (global) Japan 11.37% 80%
(Source: IBM Smarter planet)
Europe 10% 30% - 40%
• In India, the logistics costs as a component of total retail price
is 10% compared to 5% global average. This is attributed to US 9% 57%
- Underdeveloped supply chains India 13% < 10%
- Lack of strong cold chains
- Poor warehousing facilities Source: Center for Global Logistics and Manufacturing Strategies,
- Bad Infrastructure/roads ISB

- Lack of developed 3rd party logistics industry (3PL) Elements of Logistics cost Contribution
(Source: KPMG report, Indian retail – Time to change lanes) Transportation 39%

 Shrinkage - Accounts to 3% of total sales. This is mainly due to Warehousing 27%

• Wastage & Errors Inventory carrying 24%
• Shop lifting
Order Processing 6%
• Employee theft
Administration 4%
 Inventory management Source: Center for Global Logistics and Manufacturing Strategies,
ISB
• Missed sales accounting to $100 billion (global)

(Source: IBM Smarter planet)

Inventory turnover ratio Stock outs

US 18 5%

India 4 - 10 5 – 15%
(Source: KPMG report: Indian retail)
Exhibit 1 : Investment/Expansion plans
Company Plans
Reliance Retail Plans to invest US$ 125 million (INR 6 billion) to open 200 Reliance Footprint stores in
tier II and tier III cities in India by 2013; Reliance Lifestyle plans to open 3,000 new stores
by 2015

Shoppers Stop Ltd Currently operates more than 99 stores in 14 Indian cities, with 2.24 million sq ft. of
trading space across 10 store formats; plans to aggressively expand retail outlets across
formats in new cities and achieve 3.89 million sq ft. of trading space by 2013–14

Spencer's Retail Ltd Plans to launch 100 Beverly Hills Polo Clubs (BHPC) stores by 2011 (currently has 14
stores)

Lifestyle International Pvt Ltd Plans to open 50 more stores across India by 2012–13, which will include 35 lifestyle
retail stores selling apparel, cosmetics and footwear, as well as about 15 Home Centers
stores that will sell home furnishing goods, among others

Timex group Plans to nearly double its retail stores by mid-2011 to around 120 from its existing 68
outlets, at an estimated investment of US$ 1.25 million

Bharti Retail Plans to invest up to US$ 2.5 billion (INR 120 billion) and add about 10 million sq ft. of
retail space in five years

Marks and Spencer Targeting 50 new stores during 2011–14 to double its presence in the Indian market

Gucci Group NV, Netherlands Acquired a 51 per cent stake in its Indian franchisee, Luxury Goods Retail Private Ltd, at
an investment of US$ 217,000 (INR 10.42 million) in order to open single-brand stores

Source: India Brand Equity Foundation (IBEF) www.ibef.org

Exhibit 2 : Region wise Retail opportunity

Source: CRISIL Research