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8% 6.4%
6.8%
Real Growth Rate
6.6% 6.0%
7% 6.0%
5.4% 5.6%
6% 5.2%
5%
4%
3%
2%
1%
0%
1997
1998
1999
2000
2003
2004
2005
2006
2007
2001
2002
120%
107%
100%
80%
60% 55%
2005-06
41%
40% 37%
2006-07
21% 21%
20% 13% 14%
6% 7%
0%
Tourist Arrivals Passenger Cars Commercial Domestic Air New Cell Phone
Sales Vehicle Sales Passengers Connections
5-7 million
Super Rich
70 – 80 million
Afford Cars, Private Healthcare &
Foreign travel
September 7, 2010
ource: McKinsey,
With High Private Consumption
GDP
US$ 935 billion
Food
Apparel Private Consumption Public Spending and Capital
US$ 580 Billion Formation
Beverages
(62%) US$ 355 Billion (38%)
Footwear
Transport
Consumer
durables Retail Non Retail Communication
US$ 342 Billion US$ 238 Billion Recreation
Appliances
(59%) (41%)
Stationery Cultural
Services
Kitchen utensils
Urban (5,100 towns) Education
Furniture Modern retail – US$ 12 billion
US$ 154 Billion 8% of urban retail spends Rent
Furnishings (45%)
Utilities
Sports goods
Other Services
Health & Beauty Rural (6,27,000 villages)
Modern retail
Personal Care US$ 188 Billion Negligible
(55%)
Jewellery
Timing
Source: Central Statistical Organization (CS0) and Technopak Analysis
Conversion rate: 1 US$ = 40.86 Rs.
September 7, 2010
About US $530 Billion Retail Market by 2012
GDP*
US$ 1,450 billion
Urban
Modern retail – US$ 78 billion
US$ 252 Billion 31% of urban retail spends
(47.5%)
Rural
Modern retail – US$ 9 billion
US$ 278 Billion 3% of rural retail spends
(52.5%)
*All figures are in nominal terms after taking into account inflation Source: Technopak Analysis
September 7, 2010
Which Makes Indian Retail an Attractive
Market
September 7, 2010
Modern Retail – Organized Channels
• The share of organized retail is less than 3% of the total retail market
• The size of modern retail is about US$ 8 Billion and has grown by 35% CAGR in last
five years
100%
20% 20% 3%
36% 30%
80% 40%
55%
60% 85% 81%
40%
20%
0%
US Taiwan Malaysia Thailand Brazil Indonesia Poland China India
September 7, 2010
.. but Rapid Transformation is Anticipated
486
500 445
373 408
400 342
300
200 200
100 87
26 39 59
0 12 18
2007 2008 2009 2010 2011 2012 2017
PDS Outlets
Khadi Stores
Cooperatives
Convenience Stores
Mom and Pop/Kiranas
Weekly Markets
Village Fairs
Melas
September 7, 2010
Adaptation to Local Market – Road for Success
Samsung microwaves
McDonalds Maharaja Samsung laundry
Mac machine
September 7, 2010
McKinsey Quaterly, winning the Indian consumer, 2005
Recent Trends
Traditionally three factors have plagued Recent changes:
the retail industry:
September 7, 2010
Recent Trends …..
September 7, 2010
Retail Market not limited to metros but widely across
India
Pune HyderabadVisakhapatnam
Mumbai
Bangalore
Chennai Above 10 Mn inhabitants
Above 4 Mn inhabitants
Kochin
Above 2 Mn inhabitants
Coimbatore
Madurai Above 1 Mn inhabitants
September 7, 2010
Drivers for Indian Retail
High Income Changing Attitude International Necessities to Market &
Opportunities Exposure Lifestyle Government
••Service
Service Sector:
Sector: creating
creating ••From
From Save
Save to
to Spend
Spend ••International
International travel
travel ••Shift
Shift of
of expense
expense ••Easing
Easing out
out on
on
new jobs.
new jobs. basket
basket from
from basics
basics Import
Import barriers,
barriers,
••High
High disposable
disposable ••Exposure
Exposure to
to global
global
••Working to
to lifestyle
lifestyle products
products Government
Government
Working Population
Population in
in income
income family
family trends
trends
2010 sponsorship
sponsorship taking
2010 will
will 70%
70% structures
structures on
on aa rise
rise ••Highest
••Increased spend on
Highest Growth
Growth in
in shape
shape (FDI
(FDI Policy,
Policy,
•IT Apparel,
Apparel, personal
personal
•IT Industry:
Industry: increasing
increasing ••Nuclear
Nuclear Families
Families outbound
outbound tourists
tourists in Tax
Tax and
and Duty
Duty
care, entertainment
care, entertainment
professional
professional the
the world
world structure,
structure, Subsidies)
Subsidies)
••DINKS
DINKS (Double
(Double
opportunities
opportunities ••Easy
Easy Bank
Bank credit
credit
Income
Income No
No Kids)
Kids) ••Fluid
Fluid retail
retail
••Rising boosts
boosts retail
retail
Rising Salary
Salary levels
levels Segments
Segments
••Multi
Multi income
income families
families
••MNCs
MNCs entering
entering India
India ••M-Commerce
M-Commerce &
& e-
e-
and homegrown
and homegrown Commerce
Commerce boosts
companies
companies going
going global
global retail
retail
Customer value drivers are continuing to fragment as a result of changing demographics & value
systems
September 7, 2010
Global Heavyweights in Indian Retailing
Joint Ventures Product Range Retail Formats
Bharti-Walmart (with $2.5 Food & grocery, electronics & appliances, clothing & Hypermarkets, Supermarkets and
Billion investment by Bharti) footwear, furniture & furnishing, household articles. Convenience
Home Retail Group plc - Franchising the Argos concept under the terms of the Multi Channel propositions
Shopper's Stop Ltd and arrangement, Argos will be providing its brand,
Hypercity Retail India Private catalogue and multi-channel expertise and IT support
Ltd
Tata-Woolworths Sourcing agreement for Consumer durables and Foods Multi brand retail chain
under brand name CROMA
Staples Inc – Pantaloon RetailGlobal Sourcing of Office equipments across various Cash and carry
businesses
Reliance Food & grocery, electronics & appliances, clothing & Multi format and Multi Category
footwear, furniture & furnishing, household articles.
Birla Food & grocery, electronics & appliances, clothing & Convenience and Supermarket
footwear, furniture & furnishing, household articles.
September 7, 2010
12
Format Definition
Key categories Typical size Example
Formats Description
retailed Sq.ft.
A large superstore,
combining a supermarket Food, groceries, apparel, 15,000-100,000 Big Bazaar, Hypercity, Spencer,
and departmental store, furnishings, consumer Star India Bazaar, Vishal
Hyper offering full lines of grocery durables Megamart
markets and general merchandise all
under one roof
A large self service outlet Food, groceries, medicines 3,000-15,000 FoodWorld, Trinethra, Subshiksha,
Super offering food and household Food baazar
goods
markets
Small size, easily accessible Food, groceries, medicines 500-2,000 In&Out, Trinethra, Subhiksha,
stores offering a quick traditional stores
Convenience shopping, fast check out
experience and extended
stores working hours
A large self service outlet Apparel, Jewellery, watches, 10,000-50,000 Shopper’s Stop, Lifestyle,
offering a variety of fashion accessories, footwear, Pantaloon, Westside
Departmental merchandise furniture, furnishings
stores
Retail outlet offering products of Apparel, footwear, tyres, food •1,000-5,000 Nike, Adidas, Colourplus,
Single brand a single brand services, furniture McDonalds, Gautier, Gucci, TBZ
outlets
Multibrand Retail outlet offering multiple Footwear, apparel, electronics, •1,000-20,000 Planet Sports, Planet Fashion,
branded products belonging books Crosswords
speciality to a single category class
stores
September 7, 2010
Organizing Retail in India-Challenges
• Heterogeneous market
– Product offerings in different stores across the country will be
very different
– No standard mode of operation across formats
– Market not mature (has to be validated)
• Infrastructure will bring about logistical challenges
– Though, improvements in road networks, power supply are
underway
Retail Challenges
• Trained employees with understanding of retail business are
inadequate compared to the needs of organized retail
• Barriers to Entry
– High taxes, bureaucratic clearance process and labour laws
• High cost of real estate
– though over 600 malls are to come up all over the country by the
next 4 years
• Indian retailers are deeply entrenched, are expanding and
building on logistics and technology initiatives
September 7, 2010
At ground level ….
• Complex Processes - Multiple MRP, Deals & Promotions, Forecasting & Replenishment, Lean supply chain – JIT inventory, flow
through warehouse
• Evolving processes in Supply chain & merchandising
Processes • Global Best Practices not adopted
Supplier/
•
Complex trading contracts and off invoice discounts
•
Vendor
September 7, 2010
Thank You