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Indian Retail Sector

Indian Retail Sector

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Published by Sankalp Kaushik
brief account of indian retail
brief account of indian retail

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Published by: Sankalp Kaushik on Dec 11, 2010
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Indian Retail Sector

Trends and Future

Indian Retail Story
Fifth largest retail destination in world Has grown at the 28% CAGR for last five years Huge Middle class with increasing Per Capita Income Increase in the availability of credit Growing quality and brand awareness in common mass

Story ahead
Indian retail sector to grow at 19% CAGR for next five year Expected to touch $600 billion in 2014 from $385 billion now Organized retail has touched $23 billion Organized retail to grow at 7-8% for next five year

Highlights of Indian Retailing
Still traditional retail contributes to the 95% of total retail revenue Over 12 million small and medium retail outlets exist in India, the highest in any country. Traditional retail is highly pronounced in small towns and cities, with a primary presence of neighborhood 'kirana' stores, pushcart vendors, 'melas' and 'mandis. Organized retailing is growing at an aggressive pace in urban India, fuelled by burgeoning economic activity An increasing number of domestic and international players are setting up base in the country and expanding their business to tap this growing segment.

Share of revenue in Indian retail industry

Segment Food and beverage Clothing and textile Consumer Durables Jewelry and Watches Home décor Beauty care Footwear Book music and gift

Share 74% 9% 6% 4% 3% 2% 1% 1%

Retail Revolution
People are coming up to age with the concept of malls Branded outlet are patching up with the traditional shops Increase in the awareness about quality standards and personal hygiene The mom n pops store owners are becoming more organized in terms of their operations Though change is prominent in the Metros and tier 1 cities Modern retail is expected to adapt and imbibe from traditional formats. Unorganised retail formats are converging and combining in formats such as mushrooming village malls. Large Indian retail players have already begun formulating strategies for the rural retail space. Global players understand that India presence is imperative

Mixing modern and Traditional retailing in India

But retail story has just begun
Penetration restricted to urban for specific category only 3% which is project to grow to 7% by 2012 Clothing and textile segment contributes to 27% of the total revenue India recorded a gross domestic product (GDP) growth rate of 6.7 per cent in rupee terms during the year 2008±09. The general index of industrial production (IIP) is projected to reach 275.4 for the year 2008±09 (base: 1993±94 = 100). The fast pace of GDP growth is, in turn, driving Indian consumerism, with Indian consumers today more confident and willing to splurge. India is home to one of the largest base of consumers, and a steadily rising rich and super-rich population.

GDP growth in India
1200 1000 800 600 400 200 0 2004-05 2005-06 2006-07 2007-08 2008-09 GDP

Figures in Billion

But retail story has just begun continued«..
Two-thirds of Indiaµs population is under 35 years of age and more than 60 per cent of the population will be in the working age group (15 to 60 years)until the year 2050. The median age of 23 years, opposed to the world median age of 33, sets the emerging young India apart. India is home to about 20 per cent of the global population under 25 years of age. Organised retail penetration is on the rise and offers an attractive proposition for the entry of new players as well as scope for expansion for existing players. The diverse needs of the Indian consumer offers a spectrum of opportunities, spanning from rural retailing to luxury retailing.

But retail story has just begun continued«..
Abundant availability of skilled low cost Manpower The availability of retail space and the growing trend of consumerism in emerging cities and small towns add to the attractiveness of the market. The top three major retailers (Pantaloon Retail Limited, Shoppers Stop and Trent Ltd) account for only 9 per cent of the total organised retail market in India, as compared to England's 14.3 per cent captured by Tesco Plc and Walmarktµs 20 per cent in the US, thus giving an insight into the large untapped potential.

Policy framework
FDI up to 100 per cent is allowed under the automatic route for cash and carry wholesale trading and export trading, and FDI up to 51 per cent is allowed with prior government approval for retail trade in single-brand products.

Available route Franchisee Cash and carry Joint venture Manufacturing Distribution

International Players Pizza hut, dominos, subway, Tommy hilfiger etc Metro,Shoprite, walmart, carrefour etc. McDonalds, Reebok etc. Bata, Liberty, UCB etc. Swarovski, Hugo Boss, Mango

Enhancement in Policy framework
Value-added tax (VAT) has been introduced and implemented in most states to resolve multiple taxation Labour laws in India are under the scanner for higher liberalisation Single-window clearance mechanism introduced to reduce the entry and establishment timelines for new players in the market The government is expected to adopt a calibrated approach in land and rent reforms to improve the real estate regulatory environment Initiatives such as special economic zones (SEZs) to address the problem like lease rentals and pro-tenancy laws APMC will introduce a new act to promotes direct marketing to corporates by farmers The government is also encouraging contract farming.

Emerging Retail hubs
Approximately 397 hypermarkets were in existence in India as of June 2009. 52 leading towns are likely to emerge as retail hubs by 2011 with tier-III towns gaining the market potential to host five or more hypermarkets. Current Hubs: Metros and Tier I cities

High Growth cities: Pune, Chandighar, Jaipur, Lucknow etc Emerging cities: Indore, Amritsar, Surat, Kanpur, Mysore, Vishakhapatnam etc. Potential Cities: Jodhpur, Patna, Meerut, Srinagar, Madurai etc.

Real Estate is a major Issue
The number of malls in the top seven cities (NCR, Mumbai, Hyderabad, Pune, Bangalore, Kolkata and Chennai) is expected to go up to 360 by 2010 from the present 148. The issue of higher rentals restricted the increase in the year 2008-09 The pictures looks more bright now thanks to slowdown The total number of malls is projected to increase to 600 by 2010±11.

Integrated retailing formats
Modern retailing formats: Malls Department stores Discounters Cash and carry Retailers are rapidly integrating and diversifying store formats to cater to emerging trends in consumer behaviour. The retailer are planning their business strategies as per the mindset of the Indian consumers. Retailers are expanding into emerging cities with modest store formats as opposed to the glitzy mall formats adopted in metros.

Indian consumer is Changing
Lifestyle patterns of Indiaµs middle class are being redefined with the adoption of Western values and growing brand consciousness. From a 'saving' to a 'spending' mindset, the face of Indian consumerism is buoyant. There has been a marked increase in the number of new entrants and in retail revenues across all verticals. Retail revenues are soaring with increased consumer exposure, driven by the mass media, to latest trends and brands. High percentage of youth population has changed the mindset from saving to spending Higher disposable income give rise to the higher propensity to consume Increasing effect of media has influenced each section of society and thus increased urbanization

Some Major Activities
Walmart has entered into a 50:50 joint venture and franchisee agreement with Bharti Retail Ltd, and has set up its first cash and carry outlet in Punjab. Coffee chain Starbucks Corp plans to enter India within two years. Carrefour, French retail major, is set to finalise its entry route into India. There have been major merger and acquisition activities within the India retail major and smaller players

Innovative formats
Formats like 'Wedding Malls', which are unheard of in the West are making their presence in the Indian market. The Khadi and Village Industries Commission is set to roll out a chain of more than 7,000 'Khadi Plazas', to showcase handloom textiles in a new format. 'Village Malls', under which fair price shops are being revamped to cater to the larger needs of the local population. The Gujarat government has spearheaded this initiative by launching 512 such malls; another 508 are on the anvil.

Retail in rural India
Rural hypermarkets are growing at an aggressive pace, providing multiple services, from creating platforms to buy and sell farm produce, to forming banks and restaurants. ITC Choupal Saagar: There are 24 outlets in operation and ITC plans to increase the number to 100 by 2010. Choupal Saagar retails products and also acts as a procurement hub for ITCµs echoupals, where farmers are offered better rates for produce, compared with the prevalent mandi rates. DSCLµs Hariyali Kisan Bazaar: It has over 302 outlets cross eight states ²Haryana, Punjab, Uttar Pradesh, Rajasthan, Chhattisgarh, Madhya Pradesh, Maharashtra and Andhra Pradesh.

Retail in rural India continued«.
Indian Oil Corporationµs Kisan Seva Kendra: These offer fuel, agriproduce, FMCG and value-added services across a network of over 1,400 outlets. Reliance Retail and Pantaloon Retail: The two companies are likely to venture more aggressively into the rural retailing space. Asian Development Bank is lending US$ 150 million for the revival of khadi and this is expected to bolster employment in rural areas.

Thank you

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