Changing Retail Landscape in India

Indian Retail – Buoyed by high GDP growth
1 0% 9%
Real Growth Rate




8% 7% 6% 5% 4% 3% 2% 1 % 1 7 99 5.4%

6.4% 6.6% 5.2% 5.6% 6.0% 6.0%


1 8 99

1 9 99

2 0 00

2 3 00

2 4 00

2 5 00

2 6 00

Source :Central Statistical Organization (CS0)

Projections of 8% sustainable real GDP growth rate till 2020 promise high growth potential for Indian Retail…
August 29, 2011

2 7 00

2 1 00

2 2 00


2011 Real Growth Rate GDP (US$ bn) .India Experiencing Rapid Economic Growth 9.4% growth rate makes India the second fastest growing economy in the world August 29.

Led by Growth in Services Sector % Increase in growth over the previous year 120% 107% 100% 80% 55% 2005-06 37% 21% 20% 0% Tourist Arrivals Passenger Cars Sales Commercial Vehicle Sales Domestic Air Passengers New Cell Phone Connections 13% 14% 6% 7% 21% 41% 2006-07 60% 40% Services sector adding to GDP in a significant manner August 29. 2011 .

300 million Afford goods like Refrigerators . radios . . textiles verty Line = income less than $ 1/day 60 % of India’s population are under 24 years August 29.1 Billion Population 5-7 million Super Rich 70 – 80 million Afford Cars.Driven from Consumption Throughout the 1. Private Healthcare & Foreign travel 250 . 2011 ource: McKinsey.g. bicycles . Scooters & Colour TVs 600-700 million (Generally Rural) Afford simple industrial products e.

000 villages) US$ 188 Billion (55%) Modern retail Negligible Private Consumption US$ 580 Billion (62%) Public Spending and Capital Formation US$ 355 Billion (38%) Transport Retail US$ 342 Billion (59%) Non Retail US$ 238 Billion (41%) Communication Recreation Cultural Services Education Rent Utilities Other Services Urban (5.27.86 Rs. August 29.100 towns) US$ 154 Billion (45%) Modern retail – US$ 12 billion 8% of urban retail spends Source: Central Statistical Organization (CS0) and Technopak Analysis Conversion rate: 1 US$ = 40. 2011 .With High Private Consumption GDP US$ 935 billion Food Apparel Beverages Footwear Consumer durables Appliances Stationery Kitchen utensils Furniture Furnishings Sports goods Health & Beauty Personal Care Jewellery Timing Rural (6.

2011 .5%) Modern retail – US$ 9 billion 3% of rural retail spends *All figures are in nominal terms after taking into account inflation Source: Technopak Analysis August 29.5%) Modern retail – US$ 78 billion 31% of urban retail spends Rural US$ 278 Billion (52.About US $530 Billion Retail Market by 2012 GDP* US$ 1.450 billion Private Consumption US$ 870 Billion (60%) Public Spending and Capital Formation US$ 580 Billion (40%) Retail US$ 530 Billion (61%) Non Retail US$ 340 Billion (39%) Urban US$ 252 Billion (47.

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% 80% 55% 60% 40% 20% 0% US Taiwan Malaysia Thailand Brazil Indonesia Poland China 85% 81% 40% 36% 30% 20% 20% 3% India Traditional Channel Modern Channel August 29. 2011 .

. but Rapid Transformation is Anticipated Current Size & Future Projections for Indian Retail Market 900 800 700 600 500 400 300 200 100 0 800 US$ Billion 342 373 408 445 486 530 200 12 2007 18 2008 26 2009 Total Retail 39 2010 59 2011 Organized Retail 87 2012 2017 And may reach a share of 25% by 2017 August 29. 2011 ..

Evolution of Indian retail Historic/Rural Reach Traditional/Pervasi ve Reach Government Supported Modern Formats/ International Exclusive Brand Outlets Hyper/Super Markets Department Stores Shopping Malls PDS Outlets Khadi Stores Cooperatives Convenience Stores Mom and Pop/Kiranas Weekly Markets Village Fairs Melas Source of Entertainmen t Availability/ Low Costs / Distribution Neighborhood Stores/Convenie nce Shopping Experience/Efficie ncy August 29. 2011 .

2005 . winning the Indian consumer. sachet for less than 5 cents increased the shampoo buying population dramatically Price.Adaptation to Local Market – Road for Success Samsung microwaves McDonalds Maharaja Mac Samsung laundry machine Nokia 1100 Memory backup to compensate for frequent power Anti dust keypad for dirty shortage roads. anti slip grip for the heat and flash-light in case of electricity shortage Indian menus with singe touch Head & Shoulders Chicken hamburger to reach segments that do not eat beef 10 milli lt. 2011 McKinsey Quaterly. concern and typical Indian features are some examples August 29.

Piramyd and Globus are laying major emphasis & investing heavily in store design. sub-urban discount stores. August 29. ft. Big Bazaar. Research shows that the chances of senses dictating sales are upto 10-15%. Retail chains like MusicWorld. Bombay Bazaar. which are backed by the corporate house such as 'Ansals' and 'PVR‘ the unorganized sector is getting organized. average size of outlet equals 50 s. and malls. Store design : Biggest challenge for organized retailing to create a “customer-pull” environment that increases the amount of impulse shopping. 2011 .Recent Trends 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. Ex. Though India has the highest number of retail outlets per capita in the world.q. ft per person is amongst the lowest. 25 stores in Delhi under the banner of Provision mart are joining hands to combine monthly buying. Ex. the retail space per capita at 2 s. Cash and carry etc.q. Bombay Bazaar and Efoodmart formed which are aggregations of Kiranas. Haats are the weekly markets : serve groups of 10-50 villages and sell day-to-day necessities. Rural bias: Nearly two thirds of the stores are located in rural areas. Unorganized retailing is getting organized: To meet the challenges of organized retailing such as large Cineplex's. RPGs. Stores trying to emulate the model of Wal-Mart. Quasi-mall. Baristas. Rural retail industry has typically two forms: "Haats" and “Melas". Emergence of discount stores: They are expected to spearhead the organized retailing revolution. 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.

2011 .Recent Trends ….. August 29.

Retail Market not limited to metros but widely across India • The classic ”skimming” strategy in the metros is not longer sufficient – 100 cities strategy • Over 250 large size shopping malls are currently under construction • Leading cities 2030 are forecasted to be – Mumbai – New Delhi Ahamabad Vadodara – Chandigarh Surat Ludhiana New Delhi Lucknow Varanasi Patna Jaipur Kanpur Indore Bhopal Nagpur Kolkata Pune HyderabadVisakhapatnam Mumbai Bangalore Chennai Kochin Coimbatore Madurai Above 10 Mn inhabitants Above 4 Mn inhabitants Above 2 Mn inhabitants Above 1 Mn inhabitants August 29. 2011 .

new jobs. shape (FDI Policy.Drivers for Indian Retail High Income Opportunities Changing Attitude International Exposure Necessities to Lifestyle Market & Government •Service Sector: creating •Service Sector: creating new jobs. Tax and Duty Tax and Duty structure. 2011 . entertainment care. personal care. Import barriers. Government Government sponsorship taking sponsorship shape (FDI Policy. Subsidies) •Fluid retail •Fluid retail Segments Segments •M-Commerce & e•M-Commerce & eCommerce boosts Commerce retail retail Consumption expenditure is 60 % of India’s GDP Customer value drivers are continuing to fragment as a result of changing demographics & value systems August 29. personal Apparel. Subsidies) structure. •Working Population in •Working Population in 2010 will 70% 2010 will 70% •IT Industry: increasing •IT Industry: increasing professional professional opportunities opportunities •Rising Salary levels •Rising Salary levels •MNCs entering India •MNCs entering India and homegrown and homegrown companies going global companies going global •From Save to Spend •From Save to Spend •High disposable •High disposable income family income family structures on a rise structures on a rise •Nuclear Families •Nuclear Families •DINKS (Double •DINKS (Double Income No Kids) Income No Kids) •Multi income families •Multi income families •International travel •International travel •Exposure to global •Exposure to global trends trends •Highest Growth in •Highest Growth in outbound tourists in outbound tourists the world the world •Shift of expense •Shift of expense basket from basics basket from basics to lifestyle products to lifestyle products •Increased spend on • Apparel. entertainment •Easy Bank credit •Easy Bank credit boosts retail boosts retail •Easing out on •Easing out on Import barriers.

clothing & footwear. clothing & footwear. furniture & furnishing. FMCG. clothing & footwear. Cash and carry Multi format and Multi Category Birla Convenience and Supermarket August 29. Hypercity Retail India Private catalogue and multi-channel expertise and IT support Ltd Tata-Woolworths Multi Channel propositions 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 businesses Reliance Food & grocery. Food & grocery. household articles. 2011 . Argos will be providing its brand. household articles. furniture & furnishing. household articles. Food and groceries. electronics & appliances.Global Heavyweights in Indian Retailing Joint Ventures Bharti-Walmart (with $2. electronics & appliances. electronics & appliances. apparel and electronics Retail Formats Hypermarkets.5 Billion investment by Bharti) Carrefour-Landmark Product Range Food & grocery. Supermarkets and Convenience Hypermarkets Home Retail Group plc Franchising the Argos concept under the terms of the Shopper's Stop Ltd and arrangement. furniture & furnishing.

footwear. traditional stores Departmental stores A large self service outlet offering a variety of merchandise Apparel.000 Example Big Bazaar. apparel 20.12 Format Definition Formats Description A large superstore. groceries. Westside Category killers Large speciality stores focussed on one or a few categories of merchandise. Pantaloon. furniture.000 Shopper’s Stop. groceries. apparel. Jewellery. watches. fashion accessories. offering a wide selection at low prices Electronics. 2011 .ft. Hypercity. office supplies. medicines 500-2. Vishal Megamart Hyper markets Super markets A large self service outlet offering food and household goods Food. consumer durables Typical size Sq. offering full lines of grocery and general merchandise all under one roof Key categories retailed Food. furnishings 10.000-100. Food baazar Convenience stores Small size. Trinethra. easily accessible stores offering a quick shopping. 15. Trinethra.000 Best Buy – Circuit City. groceries. furnishings. Star India Bazaar. Subshiksha.000 In&Out. Staples August 29. Spencer.000 FoodWorld. medicines 3. Subhiksha.000-100.000-15. combining a supermarket and departmental store. fast check out experience and extended working hours Food.000-50. Lifestyle.

Adidas. tyres.12 Format Definition (Contd. McDonalds. Gucci.ft. electronics. Costco. food services.) Formats Description Warehouse style large stores. footwear. books •1. Colourplus. offering goods in bulk at discount prices to members Key categories retailed Food. Sam’s Club Warehouse clubs Single brand outlets Retail outlet offering products of a single brand Apparel. TBZ Multibrand speciality stores Retail outlet offering multiple branded products belonging to a single category class Footwear. groceries Typical size Sq.000-20. Crosswords August 29.000 + Example Metro cash and carry.000-5.000 Planet Sports. 2011 . apparel.000 Nike. Planet Fashion. •100. Gautier. furniture •1.

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. 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. 2011 . improvements in road networks. power supply are underway • Trained employees with understanding of retail business are inadequate compared to the needs of organized retail • Barriers to Entry – High taxes. are expanding and building on logistics and technology initiatives Retail Challenges August 29.

Deals & Promotions. Cold storage infrastructure evolving • Outsourced transportation • Low level automation in warehouses • Little or no collaboration between vendor & retailer • Low fill rates from vendors • Highly localized assortments leading to relationship with multiple vendors • Complex trading contracts and off invoice discounts • Multiplicity of disparate Systems & Data Formats • No architecture roadmap • Base ERP and home grown POS solutions.Multiple MRP. 2011 Consumer Infrastructure Supplier/ Vendor Current IT . Processes • Complex Processes . 250+ festivals • Supply chain not reliable.At ground level …. flow through warehouse • Evolving processes in Supply chain & merchandising • Global Best Practices not adopted • High disposable income • Changing consumer preferences • 28 states. Lean supply chain – JIT inventory. Forecasting & Replenishment. 100+ religion. Low investments in store systems • No investments in planning & optimization technologies August 29.

Execution and efficiency August 29. retailers. investors and malls Improved Infrastructure • • • • • • In view of a compressed evolution cycle. 2011 . franchisees.The Way Ahead • India is amongst the least saturated of all major global markets in terms of penetration of modern retailing formats Many strong regional and national players emerging across formats and product categories Most of these players are now gearing up to expand rapidly after having gone through their respective learning curves Real Estate Developers are also moving fast through the learning curve to provide qualitative environment for the consumers The Shopping Mall formats are fast evolving Partnering among Brands. retailers need to simultaneously address issues of speed.

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