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The Indian Retail Sector

Lakshmi Narayanaswamy (203/43) Mudit Sharma (222/43)

Food World. Raymond's.Value. Crossword and Fountainhead in books. 13.g. Textiles sector with companies like Bombay Dyeing. Planet M and Music World in music. ± mainly in urban areas. For e. At year end of 2000 the size of the Indian organized retail industry is estimated at Rs.example of reaching to the bottom of the pyramid.Industry Evolution  Traditionally retailing in India can be traced to ± The emergence of the neighborhood µKirana¶ stores catering to the convenience of the consumers          Era of government support for rural retail: Indigenous franchise model of store chains run by Khadi & Village Industries Commission 1980s experienced slow change as India began to open up economy. S Kumar's and Grasim first saw the emergence of retail chains Later Titan successfully created an organized retailing concept and established a series of showrooms for its premium watches The latter half of the 1990s saw a fresh wave of entrants with a shift from Manufactures to Pure Retailers. with facilities like car parking ± targeted to provide a complete destination experience for all segments of society Emergence of hyper and super markets trying to provide customer with 3 V¶s . Variety and Volume Expanding target consumer segment: The Sachet revolution .000 crore ± . Post 1995 onwards saw an emergence of shopping centers. Subhiksha and Nilgiris in food and FMCG.

 MBO¶s : Multi Brand outlets. These usually do well in busy market places and Metros. the Mumbai books retailer Crossword. Super Markets can further be classified in to mini supermarkets typically 1. etc. Among these. toys. Further classified into localized departments such as clothing. ft. Ranges from 60.000 sq ft.  Specialty Stores: Chains such as the Bangalore based Kids Kemp. ft) across India and even has its own in store brand for clothes called Stop!. groceries. They lend an ideal shopping experience with an amalgamation of product. These stores today contribute to 30% of all food & grocery organized retail sales. which started in Mumbai and now has more than seven large stores (over 30.  Department Stores: Departmental Stores are expected to take over the apparel business from exclusive brand showrooms. Prices are slightly higher due to the convenience premium.  Department Stores: Large stores ranging from 20000-50000 sq.000 sq ft to 7. in proximity to urban outskirts. offer discounts on the MRP through selling in bulk reaching economies of scale or excess stock left over at the season. The product category can range from a variety of perishable/ non perishable goods  Convenience Stores: These are relatively small stores 400-2. . discount stores or factory outlets. service and entertainment. having a strong focus on food & grocery and personal sales. Pantaloon.000 sq. also known as Category Killers. catering to varied shopper needs are termed as Supermarkets.  Hypermarts/Supermarkets: Large self service outlets. These are located in or near residential high streets. Located mainly in metro cities.  Discount Stores: As the name suggests.000 sq ft and above. Piramyd.Retailing formats in India  Malls: The largest form of organized retailing today.Examples include Shoppers Stop. the biggest success is K Raheja's Shoppers Stop. seven days a week. home.000 sq ft to 2. offer several brands across a single product category. catering to a variety of consumer needs. are focusing on specific market segments and have established themselves strongly in their sectors.000 sq ft and large supermarkets ranging from of 3. feet located near residential areas. all under a common roof.500 sq ft to 5. RPG's Music World and the Times Group's music chain Planet M.000 sq. They stock a limited range of high-turnover convenience products and are usually open for extended periods during the day.00.

Retailing formats in India India¶s number of Domestic grocery chains and Early Foreign Entrants .

4 billion As per a report by KPMG the annual growth of department stores is estimated at 24% Ranked second in a Global Retail Development Index of 30 developing countries drawn up by AT Kearney. modern trade) makes up 3 percent or US$ 6.e. of which organized retailing (i. Estimated to be US$ 200 billion.Recent Trends Retail Sales in India      Retailing in India is witnessing a huge revamping exercise as can be seen in the graph India is rated the fifth most attractive emerging retail market: a potential goldmine. .

Piramyd and Globus are laying major emphasis & investing heavily in store design. the retail space per capita at 2 s. Quasi-mall. Emergence of discount stores: They are expected to spearhead the organised retailing revolution. . and malls. suburban discount stores. ft. Unorganized retailing is getting organized: To meet the challenges of organized retailing such as large cineplexes. Rural bias: Nearly two thirds of the stores are located in rural areas. ft per person is amongst the lowest. Ex. Store design : Biggest challenge for organised retailing to create a ³customer-pull´ environment that increases the amount of impulse shopping. Big Bazaar. Retail chains like MusicWorld. Baristas. Rural retail industry has typically two forms: "Haats" and ³Melas". RPGs. Bombay Bazaar. average size of outlet equals 50 s. Though India has the highest number of retail outlets per capita in the world. 25 stores in Delhi under the banner of Provision mart are joining hands to combine monthly buying.Recent Trends contd.q. Stores trying to emulate the model of Wal-Mart. Ex. Research shows that the chances of senses dictating sales are upto 10-15%. Haats are the weekly markets : serve groups of 10-50 villages and sell day-to-day necessities.q. Melas are larger in size and more sophisticated in terms of the goods sold (like TVs) Experimentation with formats: Retailing in India is still evolving and the sector is witnessing a series of experiments across the country with new formats being tested out. Cash and carry etc. which are backed by the corporate house such as 'Ansals' and 'PVRµ the unorganized sector is getting organized. Bombay Bazaar and Efoodmart formed which are aggregations of Kiranas. Traditionally three factors have plagued the retail industry: Recent changes: Unorganized : Vast majority of the twelve million stores are small "father and son" outlets Fragmented : Mostly small individually owned businesses.

. More successful in cities in the south and west of India.com to offer products on the web.Recent Trends contd.com and Indiatimes.com to eBay to radically change buying behavior across the globe.         Multiple drivers leading to a consumption boom: ± Favorable demographics ± Growth in income ± Increasing population of women ± Raising aspirations : Value added goods sales Food and apparel retailing key drivers of growth Organized retailing in India has been largely an urban phenomenon with affluent classes and growing number of double-income households. IT is a tool that has been used by retailers ranging from Amazon. Reasons range from differences in consumer buying behavior to cost of real estate and taxation laws. ± HLL is using its Project Shakti initiative ± leveraging women self-help groups ± to explore the rural market. µe-tailing¶ slowly making its presence felt. Rural markets emerging as a huge opportunity for retailers reflected in the share of the rural market across most categories of consumption ± ITC is experimenting with retailing through its e-Choupal and Choupal Sagar ± rural hypermarkets. ± Mahamaza is leveraging technology and network marketing concepts to act as an aggregator and serve the rural markets. Companies using their own web portal or tie-sups with horizontal players like Rediff.

Shoppers¶ Stop and Lifestyle are likely to target metros and small cities almost doubling their current number of stores These Walmart wannabes have the economy of scale to be low ±medium cost retailers pocketing narrow margin Leading Retailers . clothing and apparel stores This is followed by grocery stores Following the past trends and business models in the west retail giants such as Pantaloon.Major Retailers     India¶s top retailers are largely lifestyle.

This is in comparison to 0.S. World           Indian retail is fragmented with over 12 million outlets operating in the country. retail sector has an average inventory turns ratio of about 18. Lifestyle) can compare. catering to more than 13 times of the total retail market size as compared to India India has the highest number of outlets per capita in the world . per person) Annual turnover of Wal-Mart (Sales in 2001 were $219 billion) is higher than the size of Indian retail industry. 60% of retailers in India feel that the multiple format approach will be successful here whereas in US 34 of the fastest-growing 50 retailers have just one format Inventory turns ratio: measures efficiency of operations. Wal-Mart .3 million where as the entire Indian retail industry employs about three million people.800 stores (over 47 million square meters) where as none of India's large format store (Shoppers' Stop.The stock-out levels among Indian retailers surveyed ranged from 5 to 15 percent.S. employ between 10 and 11 percent of their workforce in retailing (against 7 percent employed in India today). Westside. The sales per hour of $22 million are incomparable to any retailer in the world. Many Indian retailers KPMG surveyed have inventory turns levels between 4 and 10. Number of employees in Wal-Mart are about 1.9 million outlets in USA. Developed economies like the U.India vs.25 billion . .roughly two third of HLL's annual turnover. ft.widely spread retail network but with the lowest per capita retail space (@ 2 sq. The U. One-day sales record at Wal-Mart (11/23/01) $1. Almost 100 times more than the turnover of HLL (India's largest FMCG company).over 4. Global best-practice retailers can achieve more than 95 percent availability of all SKUs on the retail shelves (translating into a stock-out level of less than 5 %).

Future direction: Positives        AT Kearney has estimated India¶s total retail market at US$ 202. The share of modern retail is likely to grow from its current 2 per cent to 15-20 percent over the next decade Over next two years India will see several Indian retail businesses attaining a critical mass as growth in the industry picks up momentum driven by two key factors: ± Availability of quality real estate and mall management practices ± Consumer preference for shopping in new environments Wal-Mart : huge plans for India. . expects to open one store each in Delhi. New York-based high-end fashion retailer Saks Fifth Avenue has tied up with realty major DLF Properties to set up shop in a mall in New Delhi. Moving a senior official from its headquarters in Bentonville.7 billion to US$ 24 billion by 2010.6 billion which is expected to grow at a compounded 30 per cent over the next five years. With the organised retail segment growing at the rate of 25-30 per cent per annum. Tommy Hilfiger. Lucknow and Bangalore in the next four months. retailer of apparels. Ahmedabad. Arkansas. to head its market research and business development functions pertaining to its retail plans in India. revenues from the sector are expected to triple from the current US$ 7.

Efficient replenishment practices practiced in the Indian auto and auto-component industry can be leveraged to implement efficient supply chain management techniques. Supply chain and customer relations followed by merchandising. Poor inventory turns and stock availability measures . in terms of adherence to delivery schedules and delivering the quantity ordered.Future direction: Concerns         68 million square feet of mall space is expected to be available by end of 2007. VAT has helped alleviate this a bit.retailers clearly need to augment their operations. Supplier maturity. . Operations of retailers and suppliers are not integrated. Increased adoption of IT and shrinkage management will be a critical area. which might lead to over-capacity of malls Lack of differentiation among the malls that are coming up. One option may be to look at specialization. is an issue Sales tax laws .lead to retailers having state-level procurement and storage leads to Indian retailers having higher inventories. facilities management and vendor development are areas which have significant gaps and proactive training is a key imperative for overcoming these.

Sources     AT Kearny Forrester Research 2006 KPMG-FICCI Report http://www.in/ .nic.indiainbusiness.

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