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IMRB International February, 2009
PREFACE Thai-Indian business relations have improved considerably over the past decade. Thailand and India are close to concluding a Free Trade Agreement (FTA) covering trade in goods by 2010. The Free Trade Agreement between Thailand and India is expected to improve trade relations between the two countries further. The FTA covering trade in goods would lead to long term mutual benefits in trade and investment and the partnership would be expanded further to cover technology knowledge and expertise India's primary imports from Thailand are machinery, electronic appliances, textiles, plastic material, transport equipment, vegetable oil and latex. The major items of imports under FTA are polycarbonate, cathode-ray tubes, color-TVs, air conditioners and Aluminum products. Thailand‘s main imports from India are jewelry, gemstones, steel, pharmaceuticals and ferrous metal ores. India's trade with Thailand could touch USD 7 billion by 2010-11 propelled by a doubling in transaction under Free Trade Agreement (FTA). The EHS was implemented on September 1, 2004, under which tariffs on 82 items were to be phased out by September 1, 2006 by both the sides. The trade between Thailand and India is estimated to be US $ 7 billion by 2010-11 from US $ 2.2 billion in 2005-06. The total trade of 82 items under Early Harvest Scheme (EHS) of the FTA was increased by over 140 percent to about US $ 358.63 million in 2005-06 from US $ 149 million in 2003-04. The share of these 82 items in India-Thailand trade increased from 10.34 percent in 2003-04 to 15.68 percent in 2005-06. Thailand‘s export to India of the identified 82 EHS items was increased from US $ 84.64 million to US $ 275 million during the period from 2003 – 04 to 2005 – 06. During the same time, India‘s export to Thailand of these items increased from US $ 64.28 million to US $ 83.03 million during the same period.
INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA
In 2007, Thailand‘s export for these 82 items was US $ 406.31 million. Due the FTA between two countries, Thailand is able to manage the trade surplus of US $ 598 in 2007 in bilateral trade between Thailand and India. With significant potential for growth of business between the two countries, the Ministry of Commerce, Thailand and Royal Thai Embassy would like to understand the investment potential in the following two sectors:1. Retail in India (with focus on Apparels & Fashion Accessories, Footwear, Food & Grocery, Furniture & Furnishing, Personal Care, and Consumer Durables as product verticals) 2. Logistics in India In order to understand the trade potential across the above categories, the Ministry of Commerce, Thailand and Royal Thai Embassy has commissioned Business and Industrial Research Division (BIRD) of IMRB International to avail its research based consultancy services. Report for both the product categories are being submitted separately in two different modules. The following report ‘Investment Opportunities in Retail Sector of India’ is based on the study conducted in Retail sector of India.
INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA
.............................................TABLE OF CONTENT 1. CASH AND CARRY STORES ......... EXECUTIVE SUMMARY............................................................................................................................................... 2......6............................................................................... 3.....4...................................................16 2..............................1..................5.... Telephone and Catalogue Buying ..22 Category-wise Penetration of Organized Retail ...3........3.......32 Discount Stores/ factory outlets .................................................. 2........................................38 4.......28 Apparel and Fashion Stores ........... 8 RETAIL SECTOR IN INDIA ....3............................................................................ 3...........29 Hypermarkets........................2.. 4..................1.......................................................3.................................................... 2.....................................................34 Shopping Malls ......................................................4......33 Airport Retailing .....................................38 DOMESTIC PLAYERS NOT FAR BEHIND ................4........... EMERGENCE OF MODERN (ORGANIZED) RETAIL IN INDIA ...........................2..............4............................2........................... 3..............................21 Product Category-wise Break-up of Retail Market ..............................................4.......................1..........................21 Organized Retail as Part of Total Retail .....................................................................................23 Food & Beverage based Servicing Retail in India .... 2.............................................3... 3........... 3.......36 4........................................4....................................................................... 3....2.............................1. 2.......................4........................1...................34 Online...............................................27 LIFESTYLE RETAILING ......................................16 INDIA: A PREFERRED RETAIL DESTINATION ....2.....................17 KEY GROWTH DRIVERS FOR MODERN RETAIL IN INDIA .....2.................................................................................................... 2................1.................... 3..........4.........28 VALUE RETAILING ..................................39 INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 4 .....29 Supermarkets ............................. 3.................... 3...............32 Specialty Stores.4................4..................... 3...........4...................................5..................24 MODERN RETAIL STORE FORMATS .....2...............................28 Departmental Stores .....4............. GLOBAL RETAILERS ENTRY THROUGH CASH & CARRY FORMAT .........................................................4. 3...............................................4.......................................................................... 3.........................................3.................................................................. 2..... 3................................... 2..........................34 Food Outlets as part of Modern Retail ...2..............................2...................... 3................. PREMIUM LIFESTYLE RETAILING ....... 2...........................................................................22 Product Category-wise Break-up of Organized Retail ........................................4.............................1...26 3.......................................18 SIZE AND GROWTH OF RETAIL IN INDIA ...........................................30 OTHER RETAIL FORMATS .........
..........................................................7.....................40 5......................... 5............1...............48 Level I: Suppliers ...... INDIAN RETAIL INDUSTRY ANALYSIS ..........3.................................................................................................................... 5.................................................................................................................. 6...............1..................... FOOD & GROCERY AND HOME APPLIANCES ......................2..2.................................. 5..........2....................53 Fixed Lease Rental Model ...........................................2........ 6...................................53 6................................................................................70 9......1...61 8..1...................8...................................................................................1....3........................................................................47 SUPPLY CHAIN FOR FOOD & BEVERAGE SERVICING RETAIL IN INDIA ....................................................................................2..........................................58 7.............54 ECONOMIC SLOWDOWN AND CHANGES IN STRATEGIES OF RETAILERS....... 5..................4.................5.....................2..........................................................................................................................1.......................................................... 6...58 8..................... A COMPARISON BETWEEN APPARELS.............................................................2..................55 EXCESS SUPPLY OF RETAIL SPACE IN PIPELINE ..........51 Cost of Logistics in Indian Retail .........42 Level II: Storage and Distribution ........53 MAJOR COMPONENTS OF OCCUPANCY COSTS IN INDIA .......................48 Level II: Distribution ...............................................................1...6................................................3.................... SUPPLY CHAIN INSIGHTS ............................1........................................4............................................ 5..................41 Methods of Procurement... 5............................................................................................................1.........57 7.......................................52 6....1..... 5.. 5.......50 LOGISTIC FACILITIES FOR RETAIL INDUSTRY IN INDIA ............................................ PREVALENT RENTAL MODELS IN INDIA ............49 Level III: Outlets .........................................................53 Revenue Sharing Model ............................................................................46 Level III: Retail Stores .... RENT STRUCTURE IN RETAIL ...............3...............3..................53 ANCHOR TENANTS VERSUS VANILLA RETAILERS ................ 6.........62 9... 6...........54 INCREASE IN LEASE RENTAL .....1........................1....1......5.......................56 THE ROAD AHEAD .................56 CHANGING RENTAL MODELS .................................. 6..............40 Level 1: Product Sourcing ........ LEADING RETAIL COMPANIES OF INDIA ..... INDIAN RETAIL MARKET ANALYSIS BASED ON NINE FORCES MODEL .............. 5........................................ PROFITABILITY ACROSS VERTICALS .......................... 6..... SUPPLY CHAIN MODEL FOR MODERN RETAIL OUTLETS ................................. 6.........2................1...................................................70 INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 5 .... 6.... STRENGTHS AND WEAKNESSES OF KEY ORGANIZED PLAYERS .....1......................... 5...
.... 9................... 11.................................................................................92 HOME DÉCOR ITEMS & ELECTRIC GOODS ...............................................................................................................................3.... 9..................3................ 9........................................................1.............................102 INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 6 ................................................2............. 10...................................... 10..........101 PHASE I .................................1...............................................78 Social Shifts ......................................94 PROCESSED FOOD ............................................................3.............81 EMERGING TRENDS IN THE INDIAN RETAIL INDUSTRY ....................... 10. 12....5........9........................96 OTHER FACTORS RELATED TO THAILAND.................97 FRANCHISING .....98 CONCLUSIONS AND RECOMMENDATIONS .....................89 RETAILERS’ PERCEPTION ABOUT THAI IMPORTS.............................5....93 FURNITURE............................................. 9......2.......................85 CRITICAL SUCCESS FACTORS IN RETAIL ............................... 11........7.....92 PLASTIC GOODS .......................................................................................................... 9................. 11.............................. 10..........................70 Threat of Substitutes (High)....80 MAJOR CONSTRAINTS FOR MODERN RETAIL IN INDIA ..............1..................................................2...................93 FOOTWEAR ....... 11...............................................................................3................................................. 10...........1...... 10.......99 PROPOSED ENTRY STRATEGY .....................................77 Government (Legal and Political Shifts) ..1................................................99 LEVEL OF ATTRACTIVENESS VERSUS SUITABILITY FOR THAI INVESTORS ......................3.....76 Competitive Rivalry (Medium)................94 PERSONAL CARE ITEMS..............................7..............................................1...................................................79 Technological Shifts .......................................8.................................................. 9................................2............................................1....................................................... 10.................................8.............................1..............................9........... 12............................... 9........................................................................ 9...............................................................4............................................... 10.................... 12..................2.................97 CASH-AND-CARRY OPERATION..................................................................................97 TEST MARKETING ......................... 9.........................................................................................................................................1......... 10............. Threat of New Entrants (High) .........74 Bargaining Power of Suppliers..........6..... 9...........96 POSSIBLE WAYS FOR ENTRY OF FOREIGN RETAILERS IN INDIA . 12.... 11...............1.4......92 APPARELS ...80 Economic/ International Shifts .....................6...........................74 Bargaining Power of Buyers (High) ........................................................................................................................................1.......................................................4..........................1..................................1...........................97 MANUFACTURING AND SOURCING...4............................................................................ 9........
12..............................................................108 Test Marketing .109 12........................... ANNEXURE II ..4..................1............................................................................................3...................105 Cash and Carry Stores ....................................................113 2.......................................................110 Establishing Manufacturing Base in Select Product Categories .................. CITY-WISE RENTAL TRENDS ........113 1......................102 Look Out for Joint Ventures/ Franchisees/ 3 PL.3............... REFERENCES ....... 12...................................................................... 1...........................130 2.............................................................5....5.......................................................................2.........3.............2............................................. 12.............1...........................................2..5......1.....................................104 Single Brand Outlets .........111 Entering Theme / Specialty Malls .........................................137 INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 7 .......................................................1.................................................................................................................................................4...... 12............................................... PHASE III................................................... 12.........................103 PHASE II ....................................4....4................. COMPANY PROFILES IN RETAIL .................................. As Suppliers ............................... 12..........................................................130 3..112 ANNEXURE 1 .............................1. 12...............111 12........12........ RECOMMENDATIONS ON FOCUS WITHIN EACH IDENTIFIED PRODUCT CATEGORY ..............................................................................6...............
1. EXECUTIVE SUMMARY 1.1 Retail Sector in India
Retail business contributes around 11 percent of country‘s GDP and is the second largest sector in India, only after agriculture. Retailing as a sector is witnessing revolution in India. Modern retail has entered India as seen in sprawling shopping centres, multistoreyed malls and huge complexes that offer shopping, entertainment and food all under one roof. Though at present, around 94-95% of India‘s retail market is unorganized, as compared to unorganized retail, organized retail is experiencing much higher growth and throwing open opportunities for new entrants to come and grow. India: A Preferred Retail Destination For three years in a row (2005-07), India has been ranked as the top retail destination globally by a study from A T Kearney that measured retail investment attractiveness for 30 emerging markets in the world. Key Growth Drivers for Modern Retail in India: Higher disposable income coupled with favourable demographic changes (Increase in working women population, rise in nuclear family, largest young population and higher growth in urban and sub-urban population), changes in consumer needs, attitudes and behaviour, and increased credit friendliness are some of the key growth drivers for modern retail in India. Size and Growth of Retail in India Retail sales in India have grown from $US 230 billion in 2003-04 to $US 330 billion in 2007-08. Organized retail at present accounts for only around 5-6% of the total retailing in India. However, growth experienced by organized retail (more than 35% against an overall retail growth of around 11% in 2006-07) is much higher as compared to unorganized retail within India. The graphs below depict the product category-wise break-up of total and organized retail.
INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA
THE INDIAN RETAIL PIE (INDIA) 2007- 08
( M a r k e t S i z e : $ US 3 3 0 bi l l i on) Books, Music & Gif t s 1.2% Out -of -Home Food Services 5.4% Clot hing, 9.9% Ent ert ainment 3.4% Jwellery 5.2% Wat ches 0.3% Foot wear 1.2% Healt h & Beaut y Services, 0.3% Pharma 3.7% Consumer Durables Food & Gr o c e r y 59.5% Furnit ure & Ut ensils 3.4% 4.3% Mobile& Services 2.0%
THE ORGANIZED RETAIL PIE (INDIA) 2007-08
( M ar ket Siz e: $U S 19 .4 2 b iliio n)
Books, Music & Out -of -Home Food Services 7.3% Food & Grocery 11.5% Clot hing, Furnit ure & Ut ensils 6.4% Mobile, & Services 3.5% Consumer Durables 9.1% Pharma 2.0% Beaut y Services 0.8% Foot wear 9.9% Wat ches 2.7% 38.1% Jwellery 2.9% Gif t s 2.8% Ent ert ainment 3.1%
Source: F &R Research
Coming to the category-wise share of organized retail out of total retail, timewear and footwear are the categories with maximum organized retail (almost 50% of total retail in each category). ‗Clothing & Textile‘ stands third with more than 20% of the trade in organized retail.
1.2 Modern Retail Store Formats
Indian Retailers are experimenting with various modern retail formats customized to customer categories and product mix. Following is a snapshot of various formats that exist in India at present.
Modern Retail Store Formats
Premium Lifestyle based Retailing
Lifestyle based Retailing
Value based Retailing
Other Retail Formats
Key product categories with luxury brands: Apparel Jwellery Time wear Accessories Furniture
Apparel and Fashion Stores
Online/ telephonic & catalogue buying
Food & grocery
Books & Stationery Electrical & Electronic Equipments Beauty & Health Care
Furniture & Furnishing Other Retail Formats
Music & Entertainment
INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA
This section discusses in details each of the above mentioned formats, average store space under each format, preferred store locations and key players and their principal fascia operating under these formats. Cash and Carry Stores As Government of India has allowed 100% FDI in cash and carry format, many foreign companies are choosing to enter the market through this format. Amidst the increasing interest from foreign players, domestic retailers have also been entering this format in India.
1.3 Supply Chain of Modern Retail in India
Distribution Centre (Owned by Company‘s Franchisee or its Logistic Partner)
Companies Manufacturing Branded Products
Company‘s In-house Inventory
Local Manufacturers supplying to a single retail company for selling under private labels Distribution Centres or Warehouses owned by Retail Company or by its Logistic Partners
Local Manufacturers supplying to more than one retailing company for selling under private labels
Products from other countries
Importer / Retail company‘ Import Partners Retail Company‘s own procurement office in other countries
Supermarket These may be central or regional distribution centres depending upon the structure adopted by the retailer Retailer may have common or separate warehousing arrange-ments for its different retail formats
Level I: Sourcing
Level II: Storage & Distribution
Level III: Retail Stores
INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA
g: Trent in tier II cities Sub-letting Selling of space by retailers to other brands (mostly happens as part of Concessionaire model) E.4 Rent Structure in Retail Two types of rental models are prevalent in India – fixed lease rental model and revenue sharing model.g.: Shopper‘s Stop sub-lets some space of its store to brands like FCUK and CK. Zero Rent System Retailer exempt from paying rental charges during the initial years of operation. Slump in real estate sector and excess supply of mall space in pipeline has also forced real estate developers to either cut down on rentals or adopt ‗revenue sharing based rental‘ or any other rental models.The section discusses in details each of the three levels of supply chain alongwith details on standard methods of procurement and margins enjoyed in case of select product categories. Given the increasing competition in retail industry. According to industry sources. high lease rentals and the sudden economic slowdown.g: Inorbit mall in Mumbai ‗Select City Walk‘ mall in Delhi Franchisee Route The Road Ahead… ‗License‘ granted by a company to a person or group allowing them to use/ sell certain products E. Revenue Sharing Model A minimum guarantee on rental and/or percentage share of the revenue whichever is higher E.g.: Pantaloon is learnt to have signed such an agreement with a developer. The diagram below depicts the rental models that are likely to be used more frequently in Indian retail sector in future. many large players with national footprint have opted to develop in-house logistic systems. Though mall developers have been chasing for fixed lease rentals. many retailers have changed their business strategies to mitigate the negative impacts and consolidate their position. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 11 . Logistic facilities for retail industry in India While some of the modern retailers in India have been outsourcing their logistics needs to specialist service providers. of late the retailers are bargaining hard for revenue sharing rental model. level of satisfaction of retailers with their logistic partners is mostly low in India and that speaks of the poor level of logistic services. 1. E.
5 Profitability across Verticals A comparison between Apparels.1. Food & Grocery and Home Appliances concludes that apparels enjoy maximum gross margins. Bharti-Walmart is expected to set new standards for supply chain and back end logistics management and has aggressive growth plans in cash and carry format. Shoppers‘ Stop and Lifestyle are leading in Departmental store format.6 Leading Retail Companies of India Pantaloon Retail is at present the largest retail company in terms of turnover. Cost of developing & training manpower and wage inflation in case of Home Appliances higher as compared to Apparels and Food & Grocery.1 Indian Retail Market Analysis based on Nine Forces Model Threat of New Entrants is high. Specialist Knowledge requirement is addressable through right recruitment. Key reasons for higher gross margins in case of Apparels among the three verticals are: Scope for higher share of private labels in case of Apparels. and Store space largest in case of Home Appliances followed by Apparels and then Food & Grocery 1. Retailing doesn‘t require huge capital investments into owning machineries and other assets.7 Indian Retail Industry Analysis 1. required technology can be obtained by any new entrant. whereas Vishal Retail leads in terms of presence and penetration across in India. followed by food & grocery and home appliances. for a foreign player. Distribution Channel are largely standardized and replicable by new entrants. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 12 . However.7. 1. New entrants can differentiate themselves in multiple ways. there are FDI related restrictions. Reliance and Aditya Birla have forayed into the retail market only in 2006. pharmacy and telecom retail chain. Subhiksha is only next to Pantaloon Retail (figures from 2007-08). Smaller ticket size in case of food & grocery. training and technology support. however. In terms of turnover. Subhiksha is India's largest supermarket. they are poised to grow big and expand aggressively.
Cost of substitution is also not high in this case.g. Government regulations related to licenses. pricing etc.7.2 Major Constraints for Modern Retail in India Poor physical infrastructure coupled with lack of 3 PL players. Competitive rivalry can be perceived as medium because of medium to low industry concentration ratio. Absence of cold chain and proper storage. Please refer to the section for further details on social. revenue sharing). concentration of players in few pockets. and other outlets as part of unorganized retail. presence of untapped market with room for new players to enter and grow. all are close substitutes of various Modern retail formats.3 Emerging Trends in the Indian Retail Industry Key emerging trends in the Indian retail industry are aggressive future plans of leading retailers with higher focus on value retailing. Bargaining power of real estate suppliers can be perceived as high to medium. and low exit barriers Government of India allows FDI in retail under two categories: Up to 100 per cent in cash-and-carry (wholesale) retail and Up to 51 per cent in single brand retail.7. high price sensitivity among Indian buyers and availability of close substitute in form of unorganized retail. and Stringent Government Regulations are some of the key constraints faced by modern retail in India. Neighbourhood mom & pop stores. Inadequate Human Resources. technological and international/ economic shifts. more cases of market entry through INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 13 . Recent real estate slowdown has given modern retailers power to bargain for lower rentals or adoption of alternate lease models (e. Threat of substitutes is high. 1. 1. High lease rentals. quality.. permits and taxation require further simplification. Bargaining power of vendors varies from product to product and depends hugely upon whether a product is branded or unbranded and whether the relationship with supplier is formalized or not. Bargaining power of buyers is high in case of modern retail largely because of increased level of awareness among buyers on brands.
Merchandize.10 Conclusions and Recommendations Among all product categories. tie-up with global retailers. and Manufacturing & Sourcing are the possible routes through which International players can enter India 1. women and kids Footwear Personal Care Plasticware Furniture Female footwear (specially the stiletto heel sandals). Knowledge & Information stands for Knowledge about customers‘ tastes & preferences and Information is with regard to Efficient Supply Chain and Inventory Management through Proper Information System. Recommendations on Focus within Each Identified Product Category Product Categories Apparel Category-wise Focus All types of denim based apparels for men. and Knowledge & Information. Apparel comes out as the most attractive from Thai Investors‘ point of view. 1. Cash and Carry Format. home décor items.inorganic route. Personal Care and Plasticware are the other high potential categories for Thailand. women and kids. Footwear. Other fashion and casual apparels for men.8 Retailers’ Perception about Thai Imports Apparels. focus on tier II & lower cities. Furniture. plastic goods including kids‘ toys. footwears. 1.4 Critical Success Factors in Retail Three most critical success factors for modern retail in India are: Location. increased share of goods under private labels and advent of self service outlets. furniture. Test Marketing.9 Possible ways for entry of Foreign Retailers in India Franchising.7. Thai manufacturers need to keep higher quality standards for female footwears Various available range of products (skin care. cosmetics & health care products) All types of plasticwares (including plastic containers) Rubber-wood/ Parawood based furniture INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 14 . and personal care items are some of the product categories in which Thai imports are being preferred by retailers in India 1.
Supply of fresh items such as lettuce leaf Processed & Fresh Food Thai manufacturers need to change the product packaging in following ways: no shrimps or fishes drawn on the packets. vases. paintings. and few ready to cook items (preferably vegetarian). establishing local manufacturing base. Ketch-ups. Consumer Durables. cooking instructions and other details to be in clear font. In the meantime they should be at constant look out for suitable business partners in India for opening of single brand outlets in various product categories. such as Personal Care Items. In case of a few brands within select product categories. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 15 . Also. this would be the time to decide about putting up manufacturing facilities for the products that were Test Marketed during Phase II. Also. Green and red labels standing for vegetarian. and Processed food. Spices based pastes. lamp shades. should plan to start Cash and Carry business in India. some of the leading Thai retailers. preferably with past experience in the same categories. Phase II: 2nd and 3rd Year Once the partner companies have been identified and the formal agreements have happened. Phase III: 4th Year onwards To stay profitable in long term. wall hangings etc. Sauces. Thai Investors may plan to develop Thai Specialty Malls. Theme malls would have grown big on popularity. the branded products manufacturers of Thailand should then immediately focus on opening of single brand outlets. it is being proposed that Thai investors explore the business opportunities as suppliers to Indian retailers. By the time phase III is entered. Thai Manufacturers may plan to enter India through the route of Test Marketing. and non-vegetarian items respectively to be put clearly on the packets Food & Beverage Outlets Fast food Outlets and Coffee Chains Proposed Entry Strategy : Thai Entrepreneurs should plan to invest in Indian Retail Market in three phases that are briefed below: Phase I: 1st Year During the first year. is a much desired step for select product categories. rather than continuing to import. electric lamps.Home Décor Artificial flowers.
and has been in peaking stage in 2006. retail is already the second largest sector in India.2 billion and an economy that is likely to double in size by 2015. India seems destined to become one of the largest consumer markets in the world over the next decade.1. From employment perspective. Modern retail has entered India as seen in sprawling shopping centres. only behind agriculture. India's retail market is expected to grow tremendously in next few years. RETAIL SECTOR IN INDIA With a population fast approaching 1. According to AT Kearney. entertainment and food all under one roof. Retailing as a sector is witnessing revolution in India. ushering in a revolution in shopping. The Indian retailing sector is at an INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 16 . Window of Opportunity Analysis (based on GRDI rankings for 1995-2006) Source: A T Kearney 2. multi-storeyed malls and huge complexes that offer shopping. The whole concept of shopping has altered in terms of format and consumer buying behavior.2. The Windows of Opportunity shows that Modern Retailing in India was at opening stage in 1995. Emergence of Modern (Organized) Retail in India Retailing in India is gradually inching its way to becoming the next boom industry. Retail business contributes around 11 percent of country‘s GDP.
as compared to unorganized retail. ahead of Russia and China by a study that measured retail investment attractiveness for 30 emerging markets in the world. 2007 ranking 1 2 3 4 5 6 7 8 Country India Russia China Vietnam Ukraine Chile Latvia Malaysia 2006 ranking 1 2 5 3 4 6 7 14 Source: A. These issues have been discussed under ‗Major Constraints for Modern Retail in India‘. 2007 The same study. around 94-95% of India‘s retail market is unorganized.T. also identifies few key issues that stand in the way of India‘s retail industry reaching its full potential. Though at present. however. India: A Preferred Retail Destination With markets in most of the developed countries reaching the stage of saturation.2. 2. India has been ranked as the top retail destination globally.inflexion point where the growth of organised retail and growth in the consumption by Indians is going to adopt a higher growth trajectory. organized retail is experiencing much higher growth and throwing open opportunities for new entrants to come and grow. This is evident from the number of retailers across the globe that have already forayed into India‘s retail market or planning to do so soon. Kearney. June. For three years in a row (2005-07). INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 17 . India has emerged as one of the most preferred destination for global retailers.
working women‘ propensity for spending is higher by 1. The proportion of major consuming class (with income above Rs 90. During the last few years in India.3. Also. Rise in Nuclear Family The per capita consumption increases in case of a nuclear family.2.36 in 2001 from 5. households in '000 num bers) 10000+ 100% 5001-10000 2001-5000 1001-2000 501-1000 201-500 91-200 0% 1995-96 2001-02 2005-06 2009-10* < 90 Source: NCAER 2.2 Demographic Changes Higher Level of Working Women According to census 2001. nuclear family as a percentage of total household population has increased.000 per annum) is expected to reach 48% by 2009-10 from 20% in 1995-96. CHANGING INCOME DISTRIBUTION (Incom e figures in '000 per annum at 2001-02 prices.57 in 1991 and is INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 18 . This would lead to a higher retail spending as the buying behaviour of working women differs from that of housewives because of low availability of time.3. The average household size has reduced to 5. Key Growth Drivers for Modern Retail in India 2.3 times as compared to Indian housewives.3. working women population has increased to 26% in 2001 as compared to 22% in 1991.1 Higher Disposable Income and Economic Prosperity Disposable income of Indian consumers has increased steadily.
UK.e. attitudes and behaviour. This would further increase the consumption and in turn. Approximately 60% of the Indian population is below 30 years of age. As a result. the retail industry. which has increased spending on health and beauty products apart from apparels. huge sub-urban agglomerates are developing and expanding at a huge scale. Indian markets have witnessed a strong shift towards branded products. The composition of the Indian population is shifting towards the age group of 20-49 i.4 percent between 2000 and 2015. Japan etc.7 percent. Higher Growth in Urban and Sub-Urban Population Over the last 10 years (1990-2000). growth in organized retailing is likely to be concentrated in urban and semi-urban areas.3 Changes in Consumer Needs. Baby Boomer Effect India has the lowest median age of 24 as compared to developed countries like USA. Over the next 10 years. Around urban centres. Thus. Indians are willing to try new things and look different. This trend is expected to continue and urbanization is likely to grow at 2. urbanization has increased at a rate of 2. Today. India has the largest ‗young‘ population in terms of sheer size and this young segment is the major driver of consumption as they have the ability (disposable income) and willingness to spend. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 19 .expected to decline further to 5. Rising income levels. Also. purchasing and shopping habits have been inculcated and are increasing day by day.3. Attitudes and Behaviour The growth of modern retail is linked to consumer needs. education and global exposure have contributed to the evolution of the Indian middle class. in the last 4-5 years. the working population with purchasing power.02 by 2011. 2. food and grocery items.
credit and debit cards will provide further fillip to organised retail.2. In fact the ease of payments (ability to spend without cash) due to the use of credit and debit cards. With the acceptance of and the increase in the number of electronic data converter machines installed in retailing outlets.4 Increased Credit Friendliness The use of plastic money (credit and debit cards) has increased significantly in the last 34 years. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 20 .3. has also led to an increase in total spending on shopping and eating out.
A ccesso ries & Services 2.4.08 (Market Size: $ US 330 billion) Entertainment 3. Product Category-wise Break-up of Retail Market Out of the total market size in retail.3% P harmaceuticals 3.3% M o bile.9% Jwellery Out-o f-Ho me Fo o d Watches Fo o twear 5. Furnishings & Utensils 3.2% (Catering) Services 0. Size and Growth of Retail in India Indian Retail Market has experienced enormous growth during the last few years.4% Health & B eauty Services 0.2% 5.4% Source: F &R Research Source: Images F & R Research INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 21 .4.3% 1 .5% Furniture. THE INDIAN RETAIL PIE (INDIA) 2007.2% 9. Food & Grocery is the dominant category (valued at $US 196. 2.7% Co nsumer Durables & Ho me A ppliances 126.96.36.199% Food & Grocery 59. Textile & Fashio n B o o ks. Textile & Fashion Accessories (valued at $US 32. Retail sales in India have grown from $US 230 billion in 2003-04 to $US 330 billion in 200708.4% Clo thing.47 billion in 2007-08) followed by Clothing. M usic & Gifts A ccesso ries 1 .57 billion in 2007-08).
M us ic & G if t s 2 .4 % M o bile .H o m e F o o d ( C a t e ring) S e rv ic e s 7 . A c c e s s o rie s & S e rv ic e s 3 . Owing to high growth rate. the category-wise shares are very different from the THE ORGANIZED RETAIL PIE (INDIA) 2007-08 (Market Size: $US 19. T e xt ile & F a s hio n A c c e s s o rie s 3 8 . Product Category-wise Break-up of Organized Retail In the organized retail segment.2.9 % Source: F &R Research INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA Source: F &R Research Organized Retail 35% against an overall retail growth of 22 . At present.8 % O ut .5 % C lo t hing.o f . 2.1% F urnit ure .4.4.42 biliion) B o o k s .3. However. growth experienced by organized retail (more than Retail Market (Unorganized + Organized) GROWTH OF TOTAL AND ORGANIZED RETAIL MARKET IN INDIA 500 (in $ US billion) 40 330 231 256 1 9 (in $US billion) 298 1 4 around 11% in 2006-07) is much higher as compared to unorganized retail within India. it accounts for only around 5-6% of the total retailing in India.1% P ha rm a c e ut ic a ls 2 .7 % H e a lt h & B e a ut y S e rv ic e s 0 . F urnis hings & Ut e ns ils 6 . Organized Retail as Part of Total Retail Organized retail happens to be a very small part of total retail market in India.5 % C o ns um e r D ura ble s & H o m e A pplia nc e s 9 .3 % E nt e rt a inm e nt 3 .9 % Wa t c he s 2 .8 % J we lle ry 2 .1% F o o d & G ro c e ry 11. 7 9 0 2004 2005 2006 2007 0 organized retailing has finally emerged from the shadows of unorganized retailing Source: F &R Research and is contributing significantly to the growth of Indian retail sector.2.0 % F o o t we a r 9 .
2.4. timewear and footwear are the categories with maximum organized retail (almost 50% of total retail in each category). Clothing. Footwear and Consumer Durables happen to be the third and fourth largest categories followed by Consumer Durables in organized retail at present. er Ac Du ce rab ss Fu les ori rn itu es re. ‗Clothing & Textile‘ stands third with more than 20% of the trade in organized retail. CATEGORY-WISE SHARE OF ORGANIZED RETAIL OUT OF TOTAL RETAIL IN INDIA 100% 2007 2005 2006 2004 50% 40% 30% 20% 10% 0% Wa tch es He Fo alt ot h& we ar Be au ty Se rvi ce Ph s arm ac eu Co tic Mo ns als bil um e. & Se Fu rv rn ice ish s i ng s& Ut en sil s Fo Ou od t-o & f-H Gr oc om er eF y oo dS er Bo vic ok es s.4. Category-wise Penetration of Organized Retail Coming to the category-wise share of organized retail out of total retail. Textile & Fashion Accessories is the largest category followed by Food & Grocery.overall retail picture. Mu sic & Gi fts En ter tai nm en t Jw ell ery Cl oth Ov era ll ing Source: F &R Research INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 23 .
2008) INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 24 Organized Segment 0 Total Market .4. Organized food outlets are expected to grow at the rate of 20 . Food & Beverage based Servicing Retail in India The Indian F&B services sector is estimated to be worth US $ 15. (Source: Business Standard.25% even under the present situation of economic slowdown. Cafe Coffee Day. part of the Bangalore-based Amalgamated Bean Coffee Trading Company Limited (ABCTCL). out of which about US $ 1. Cafe Coffee day is also working towards creating more formats like selling coffees through dine-ins (for lunch and dinner) and coffee pubs for youths to hang out in strategic locations. India currently has more than 1000 fast food restaurants and coffee joints as part of modern retail and there exists huge potential for more number of similar outlets to come in different parts and different cities of India. 0 2004 2005 2006 2007 SIZE OF F & B (SERVICING) RETAIL (in US $ billion) 18 3 Total F&B (Servicing) Retail Organized F&B (Servicing) Retail Source: Business Standard Mc Donald‘s has 160 restaurants in India at present (in 2008). is planning to spend Rs 120-150 crore for expansion during next year to take its number of cafes to around 1. This is roughly 8.56 billion in 2007. All key players have major expansion plans in the coming few years.28 billion is accounted for by the organized sector. the company plans to add 40-60 outlets each year nationally and also intends to invest Rs 400 Crores over the next three years (that is 2009-2011).000 from the current 700. With an aim to achieve 30-35 per growth per annum.9 percent of the market being organized in the previous year.2.2 percent of the market being organised as compared to just 6.5. Dec 23.
17 Nov. (Company Sources. (Source: Business Wire) INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 25 . Yum plans to scale up Pizza Hut to 175 by 2010 and also add 15-20 new restaurants every year. The company has announced an investment of Rs220-230 crore in India over the next three years for expanding its retail fast-food chain and manufacturing capacities. As of the first quarter 2008 earnings. the company had 140 Pizza Huts in 35 cities and 33 KFCs in nine cities. Domino‘s intends to increase its outlets to 250 by March 2009 from the present number of 230. 2008) Over the past 10 years. Yum! has become the largest and fastest growing restaurant company in India.
Modern Retail Store Formats Premium Lifestyle based Retailing Lifestyle based Retailing Departmental Stores Apparel and Fashion Stores Value based Retailing Specialty Stores Other Retail Formats Discount stores Airport retailing Online/ telephonic & catalogue buying Destination Malls Supermarket Hypermarket Key product categories with luxury brands: Apparel Jwellery Timewear Accessories Furniture Food & grocery Clothing Footwear Jwellery. Magazine & Stationery Electrical & Electronic Equipments Music & Entertainment INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 26 .3. MODERN RETAIL STORE FORMATS Indian Retailers are experimenting with various modern retail formats customized to customer categories and product mix. Watches/ Accessories Furniture & Furnishing Other Retail Formats Beauty & Health Care Pharmaceutical Books.
000 sq ft Major concentration of Premium Lifestyle based Retail outlets are in some select locations of the top 4-5 cities of India such as South Mumbai. Christian Dior. Rado. Verticals 1 2 3 4 Clothing Jwellery Watches Luxury Brands Gucci. Corum Furniture Baker and Henredon. status and pride in owning expensive items. electronics. Fcuk.Following section deals in detail with these broad categories and sub-categories within them: 3. Premium Lifestyle Retailing The premium lifestyle retailing caters to the affluent by providing them the high-end luxury brands/ services. However. Daks. Bernhardt and McGuire INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 27 . main challenges for the sustenance of these luxury brands are high import duty structures and lack of appropriate real estate. South Delhi. Saville Row. Chennai and Bangalore S. Dolce and Gabbana to enter the country and the already present brands such as Gucci. Given the constant rise in affluence with the GDP growth and boom in capital markets in the last few years.000 sq ft & 75. Jimmy Choo. key product categories are accessories. Tag Heuer. Under premium lifestyle based retailing. apparel. Omega.1. Trussardi. Tommy Hilfiger and Hugo Boss to expand their operations Average size of retail outlets in this category ranges between 20. The brands in this category have a unique appeal and touch upon psychological needs such as esteem. many retailers are looking at tapping this segment. Fendi. No. Armani. Promod. Cartier. Jwellery and Furniture. Breguet. Gas and S Oliver Tiffany. Crocodile. Zales and Harry Winston Seiko. Chanel. Nine West. Ralph Lauren. La Perla. Opening up of FDI up to 51 percent in single brand retailing coupled with the boom in luxury retailing has led international luxury brands such as Loius Vitton. Calvin Klein.
Departmental Stores Departmental stores are large stores having a wide variety of products. increased level of awareness. accessories and cosmetics. appliances. The Upper. Apparel and Fashion Stores These are stores with prime focus on apparel and will a small percentage of their mix being fashion accessories.3. They offer value in terms of being a one-stop shop with different brands in each category. toys. increasing urbanization and changing mindset of Indian consumers Two popular formats under this category are: Departmental stores and Apparel and Fashion stores 3. trinkets and home décor items. Lifestyle Retailing Higher disposable income.2. among others.2. all this has influenced the consumption pattern of the Indian consumers. Shoppers‘ Stop. primarily SEC A & B INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 28 .2. Ebony. Major Players Pantaloon.1. Major growth drivers for Lifestyle retailing are: rising lifestyle aspirations. houseware. and higher aspiration. where the ticket size is larger in spite of a footfall lower than other store types.2. catering to varied consumer needs. Average size of apparel and fashion stores in India is 20. international exposure.000 sq ft These stores are targeted primarily at high end consumers. These may be multi-brand stores or exclusive showrooms. organized into different departments such as clothing. Upper Middle and Middle class Indian customers are willing to pay more for a brand or better product that keeps him/her up-to-date and in style. These stores target primarily the SEC A. Indiabulls Retail (Piramyd) 3. furniture. Lifestyle (Landmark Group).
This segment sees the presence of more international players than most other retail segments.000 sq ft as well INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 29 . better variety and a convenient and improved shopping experience. Arvind brands. Provogue. Lifestyle (Max retail).3. The basic appeal of supermarkets is the availability of broad selection of goods of multiple brands as well as store‘s private labels under a single roof at relatively low prices (possible on account of ‘Economy of Scale’ and ‘Efficient Warehousing and Merchandizing’).000 to 10.1.Major Players Pantaloon. Fab India.3. which is fairly organized. Madura Garments. Value retailing Value retailing covers stores offering lower prices. Supermarkets primarily cater to nearby residential areas and therefore throw a direct competition to neighbourhood grocery stores and fresh fruits & vegetables retail mandis. It is larger in size and has a wider selection than a traditional grocery store but is smaller than a hypermarket or superstore. Average size of supermarkets ranges from 3. Globus. The concept of ‗Value retailing‘ is catching up fast among middle class urban families. Westside. 3. Guess. Shoppers‘‘ stop. is profitable in comparison to other product segments. Many of the superstores have discount and promotional offers on various products at different points of time in a year. Supermarkets A supermarket is a self-service one stop shopping store offering a wide variety of food and household merchandise. The popular formats under this category are: Supermarkets and Hypermarkets 3. organized into sections. and Koutons The apparel segment. Raymonds. It is based on the concepts of ‗Value for Money‘ and ‗Ways to Convenient Shopping‘.000 sq ft and in some cases it is upto 25.
The result is a very large retail facility with an enormous range of products catering to a spectrum of segments such as food and grocery. A higher share of food and grocery would mean lower margins. books & stationery and other household items. Patna. Daily and Super (RPG Group). consumer durables. Average size of hypermarkets ranges from 50. FMCG.) Key Players at National Level Food Bazaar (Future Group). entertainment & leisure. Namdhari‘s Fresh. furniture & furnishing. Hypermarkets are becoming popular among consumers because products are available at prices lower by 5% to upto 50% than the regular market price. in few cases the space might be split into two or more floors as well. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 30 .000 sq ft or more.3. Consumers are fine traveling little far to shop in hypermarkets because of the price advantage they get. Hypermarkets Hypermarket is a large outlet which combines the format of a supermarket and a department store. There is an increasing focus on opening such outlets in Tier II cities (such as Ludhiana. Retail outlets prefer to have their hypermarkets on one floor. Generally. Hypermarkets offer lot of discount and promotional offers to promote sales. Nilgiris. Spencer -Fresh. On the other hand. apparel and furniture could increase margins. they are located in the outskirts of cities or as anchors in shopping malls. volumes and supply chain management. However.2. Supermarkets of various Retail Companies are now present in many pockets of top 6-7 cities of India catering to the daily requirements of nearby residential areas. and Chandigarh etc. Margins depend on the product mix. More (Aditya Birla Retail). Indiabulls‘ Mart and Indiabulls‘ Megastore (Piramyd retail) Modern Retail Players with presence in some specific regions and planning to grow big Spinach (including Sabka Bazaar).000 to 70. apparel & accessories. MK Retail. Subhiksha . Marginfree. Easyday 3. Reliance Fresh (Reliance). Big Apple.
Star Bazaar (Trent – Retail Arm of Tata) Subhiksha . 1% Sugar & Salt. Most of the Retail Outlets that are present as supermarkets are now foraying into hypermarket format as well. 12% Business break up of Vishalmart O t he rs . 8% Cereals. 30% Pulses. 4 2 % E le c t ro nic s . There is an increasing focus on opening hypermarkets in Tier II cities. F urnis hing & O t he rs 14 % Business break up of Aditya Retail in Staples Category Spices & Dry Fruits. 30% FM CG 22% A ppa re l 59% Edible Oil. F urnit ure . Reliance Hypermarket (Reliance). 20% N o n.a ppa re l 18 % Source: Primary Data INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 31 . 2 5 % C lo t hing 30% F o o d B a za a r 40% Lugga ge & O t he r It e m s . 17 % Ut e ns ils & Steel It e m s . Retail companies like Vishal Megamart and Big Bazaar are already operating their hypermarkets in various tier II cities in India. Key Players at National Level Big Bazaar (Future Group). 16 % P la s t ic It e m s . Indiabulls‘ Mart & Megastore (Piramyd retail) Business Break up of Big Bazaar (Pantaloon Retail) Break up of General Merchandise (Pantaloon Retail) G e ne ra l M e rc ha ndis e 16 % F M C G_F o o d 13 % F M C G _ N o nfo o d 12 % S t a ple s 12 % F ruit s & V e ge t a ble s 2% Liv e Kit c he n 1% F o o t we a r. Spencer -Hyper (RPG Group).
4. Magazine & INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 32 . Jwellery & Time wear & related accessories. Specialty Stores Specialty stores are category specific stores and are meant to cater to some specific needs of consumers. Entertainment. e-zone.000 sq ft Verticals Food & Grocery Key Players and their Principal Fascia Pantaloon (Brew bar. A specialty store offers different brands of any specified category under one roof. Mobile Handsets & Accessories & Services. Brand Factory. Furniture & Furnishing.3. Personal Care (Beauty & Health Care).4. Footwear. Brio) Pantaloon (All. Furniture Bazaar. Navaras) Shoppers‘ Stop (Arcelia) Pantaloon (Collection-i. Electrical & Electronic Equipments. Fashion Station. Got It) Tata Trent (Croma) Reliance Retail (Reliance Digital) Videocon (Next) Pantaloon (Depot) Clothing Footwear Jwellery & Watches/ Accessories Furniture & Furnishing Electrical & Electronic Equipments Books. Home Town) Shoppers‘ Stop (Home Stop) Pantaloon (Electronics bazaar. Top 10) Shoppers‘ Stop (Mother Care) Reliance Retail (Reliance Trendz) Pantaloon (Shoe Factory) Reliance Retail(Reliance Footprint) Pantaloon (Blue Sky. Specialty store can be dedicated to any of the following categories – Food & grocery.000 – 10. Café Bollywood. Apparel. Pharmaceuticals. Other Retail Formats 3. Chamosa) Shoppers‘ Stop (Desi Café. Average space for a Specialty Store ranges between 8. and Others. Books & Stationery. Consumer Durables (including home appliances).1.
Manufacturers have their factory outlets.2. Star Sitara. M Bazaar. Turmeric) Shoppers‘ Stop (MAC Cosmetics) Reliance Retail (Reliance Wellness) Pantaloon (Bowling Co. Accessories & Services 3. Staples and Dollar stores INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 33 .Stationery Personal Care (Beauty & Health Care) Shoppers‘ Stop (Crossword) Pantaloon (Health Village. Arvind Brands Liberty Shoes and Pantaloon Retail (JV between two parties) Globus Landmark group JV of Pantaloon with Planet M. Ltd.. Name of Store The Loot Megamart Shoe Factory Globus Factory Outlet Maxretail Brand Factory Key Players Jay Retailing and Merchandizing Pvt. Discount outlets help manufacturers and retailers to dispose of the excess or unsold stock while consumers get the benefit of branded products at affordable prices. Discount Stores/ factory outlets These are sales outlets offering goods at a discounted price. M-port) Spencer‘s Retail (RPG‘s Cellucom) Subhiksha (Subhiksha Mobile) Essar Group (Mobile Store) Music & Entertainment Mobile Handsets. Sports Bar) Shoppers‘ Stop (Time Zone) Videocon (Planet M) Pantaloon (Gen M. Globus. Tulsi.4. In general. Goods sold by discount stores are generally the unsold or excess stock or slightly defective pieces. F123.
rediff and ebay are some of the popular portals for online purchase Pantaloons have ventured into e-tailing through their portal futurebazaar. 3.com Shopper‘s Stop has tied up with the UK based Home Retail group to develop the Agros format of catalogue retailing in India 3. elevator and escalators. because of major losses faced by Alpha Retail. However. Shopper‘s Stop has tied up with Nuance from Switzerland whereas Tata‘s Consumer Durable and Electronic Retail Company – Croma has tied up with Woolworth‘s to set up retail stores at airports. Telephone and Catalogue Buying These are some other retail formats and are in their take off stage in India. These are sophisticated versions of old shopping centres with huge space. There are challenges in growth of these retail formats because of the ‗touch and feel‘ based buying culture in India.4. Pantaloon Retail has recently divested from the company and the tie-up has ended. the recent economic slowdown has impacted many of the retailers‘ plans in Airport retailing. Pantaloon Retail had tied up with UK‘s Alpha Retail. Retailers are now capitalizing on the increasing traffic at Indian airports. parking space. and entertainment (cine-multiplex and gaming zones) all together make it a One Stop INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 34 .4. Shopping Malls They are enclosures having different formats for retailers.4. However. Airport Retailing Airport retailing is a new concept in India.5.3. Indiatimes. A variety of shops (departmental stores. air-conditioned ambience. both value and lifestyle based. hypermarkets.3. Online. all under one roof.4. food court. and specialty stores). Domestic players are tying up with global retailers having relevant experience in airport retailing in other countries.
the other segment feels that Indian market is still not mature enough and it is a bit early to introduce this concept here. 44% Zone. 24% South East Zone. shopping malls have anchor tenants.destination. Pantaloon Retail (India). but the Retailers Association of India (RAI) expects to push specialty malls constituting nearly 10 per cent of the total malls in India. 39% East Zone. It is an initiative of Pantaloon Retail. 35% 28% North Zone. ‘Central’ is a first of its kind seamless mall in India. Specialty malls for luxury goods and premium lifestyle segment is expected to catch up in India. 9% South Zone. there are only few specialty malls in India. Mostly. Dedicated entirely to the Jwellery collection. the mall houses some of the big brands in the Jwellery business in India as well as abroad. At present. who cover large areas in the mall and are important from the point of attracting footfalls. In India. and Vashi. there is a new culture towards Specialty malls (also known as Theme Malls) – catering to specific needs of customers. There are divided opinions about success of specialty malls in India – while one segment feels that Specialty malls are a step towards adding value to retailing in India. 14% Source: Images F & R Research INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 35 . The first specialty mall was the Gold Souk in Gurgaon.4 mn sq ft) West Zone. North West Zone. DISTRIBUTION OF MALL SPACE ACROSS ZONES IN INDIA (2011)* (Total Supply: 236 mn sq ft) DISTRIBUTION OF MALL SPACE ACROSS ZONES IN INDIA (2007) (Total Supply: 47. 7% Zone. is expanding its retail chain ‘Central’ by setting up new mall stores in metro cities like Mumbai and Bangalore and tier-II and tier-III cities like Ahmedabad. Nashik.
Example: .Jumboking .6. They may be chains based on a particular concept or theme.4. Food Outlets as part of Modern Retail Multi-cuisine Restaurant Chains These are restaurant chains with wide range of menu catering to different cuisines. In some cases. concepts and brands.KFC .Ohri‘s . Fast food chains would also fall in this category. there may be more food items to offer.Haldiram‘s Specialty Restaurant Chains These are restaurant chains with focus on a single cuisine or with some specialty to offer. coffee or other hot beverage remains at the core.Papa John‘s Hot Beverage/ Coffee Chains These are outlets with coffee or other hot beverage in different flavours and varieties as their major offerings. Alongside. Major categories in which modern food & beverage outlets can be put basis front end formats are discussed below.Blue foods . Food courts may have food stalls belonging to various cuisines.Subway .Pizza Hut .Mocha . Example: .Café Coffee Day .Indijoe Some regional Indian chains that are growing fast: .Mc Donald‘s .Yo! China .Costa Coffee Food Courts These are areas where counters of multiple food vendors are present with a common space for self-serve dining. Food Outlets as part of Modern Retail Home-grown as well as international restaurant chains present in both high street locations and malls represent the organised food and beverages (F&B) services retail sector. In some cases they may be standalone development as well. most of these modern restaurant chains have both types of arrangements – home delivery as well as on the spot consumption option.Nirula‘s . they generally serve some some snacks or bakery items.Barista . INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 36 . Example: .3.Pizza Corner . While some of the specialty restaurant chains are based only on take away or home delivery format and don‘t have any seating arrangements. however. Coffee chains may also present as part of food courts. Food courts are mostly found as part of shopping malls.
acts as master franchisee and in turn further extends franchises to different subfranchisees INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 37 . there are many traditional and regional Indian restaurants that are now expanding their presence in different parts of India and growing as Chain restaurants. Mughlai. Vasanta Bhavan Modern restaurant chains in India compete against the traditional vegetarian and nonvegetarian restaurants and food stalls which constitute almost 92-93% of the total food & beverage servicing segment in India. Domino's entered India in 1996 through a franchise agreement with Vam Bhartia Corp. McDonald's Restaurants are owned and managed by Vikram Bakshi‘s Connaught Plaza Restaurants Private Limited. Hyderabadi Biryani House. Example: Sarvana Bhavan. Gujarati. and Hyderabadi. Example: Mc Donald's India is a joint-venture company managed by Indians. However. Hardcastle Restaurants Private Limited owns and manages McDonald's restaurants. Punjabi. The pizza franchise soon expanded itself in India and now has the KFC brand beneath its umbrella. their supply chain models are not exactly on same lines as modern restaurant chains. In Northern and Eastern India. Bengali. Entry and Operating Format Most of the modern food outlets are either franchised or company-owned. In Western and Southern India. Almost all the outlets of Mc Donalds are company owned. Karim‘s. Most of the global food chains have entered India either through franchise route or through JVs with any existing Indian players.Apart from the above mentioned categories. An international company can get into JVs with different local players for opening and operating outlets in different parts of India. Vam Bharti Corp. Some of the traditional cuisines of India are: Kashmiri. Rajasthani. Pizza Hut has entered Indian market through Franchise route in 1996.
CASH AND CARRY STORES Targeted at and open only to business customers . Global retailers plan to use the opportunity to set up wholesale stores in India to understand the market. Bharti-Walmart is expected to roll out its first store in Punjab (One of the North Indian States of India) between April and June. Wholesale cash-and-carry operations would provide small retailers and business owners a wide range of products at the wholesale prices. b2b customers get products of assured quality throughout the year at less than market price. In its original form. 4. German wholesale major Metro Cash and Carry has already forayed into Indian market and is taking its stores to Mumbai. When the restrictions on the retail industry are lifted. cash-and-carry outlets allow only authenticated bulk buyers to transact business. 2009.a part of which is passed on to b2b customers. Volume purchase and removal of middlemen result in substantial cost reduction . international retailers will be in a prime position to easily convert their 'Cash and Carry' stores into highly profitable supermarkets and hypermarkets. dispensing with middlemen like wholesalers and stockiest. restaurants. Unlike hypermarkets where any consumer can walk-in and buy goods.e. NCR and Punjab. They also establish their own brands .asking producers to manufacture as per their product and packaging specifications. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 38 . Opening of 'Cash and Carry' stores throughout the country shall provide a golden opportunity to these global retailers to make in-roads into India. So.cash and carry scheme focuses on small-wholesale customers who buy in bulk and pay in cash. Kolkatta. owners of cash and carry outlets (i. large retail chains) buy from producers directly at very high volume.4. many foreign companies are choosing to enter the market through this format. Global Retailers Entry through Cash & Carry Format As Government of India has allowed 100% FDI in cash and carry format. Medium-sized businesses such as retail stores. caterers. exporters etc can buy from cash-and-carry outlets at prices much cheaper than market rate. hotels.1.
Pantaloon is exploring the options to foray into cash and carry business. to help develop the Indian company‘s Star Bazaar hypermarkets. domestic retailers have not been left behind. Domestic Players Not Far Behind Amidst the increasing interest from foreign players. Tesco has tied-up with Trent Ltd. Videocon Industries has floated a separate subsidiary company for its cash and carry retailing business — Bolld Cash & Carry. one of the largest retail chains of US has also shown interest in joining the bandwagon Australian retail giant Woolworths is in discussion with Future Group (Pantaloon Retail) for an equal equity joint venture for entry into Cash and Carry format in India 4. Sabka Bazaar and Home Store retail formats. While Bharti has already stuck a deal with Wal-mart. Costco. is also eyeing the cash and carry format. Reliance is also planning to launch its B2B format INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 39 . French Retailer Carrefour has announced its entry in cash and carry segment of India in 2009 Britain‘s largest retailer Tesco Plc announced its investment (in August. which owns Spinach. Wadhawan Food Retail.2. Also. the retail arm of the Tata group. 2008) to develop a wholesale cash-and-carry business in India.
5. SUPPLY CHAIN INSIGHTS 5. Supply Chain Model for Modern Retail Outlets The given supply chain model exists across various product verticals with slight modifications Distribution Centre (Owned by Company‘s Franchisee or its Logistic Partner) Companies Manufacturing Branded Products Local Manufacturers supplying to a single retail company for selling under private labels Local Manufacturers supplying to more than one retailing company for selling under private labels Importer / Retail company‘ Import Partners Retail Company‘s own procurement office in other countries Distribution Centres or Warehouses owned by Retail company or by its Logistic Partners Franchised Stores Company‘s In-house Inventory Companyowned outlets Departmental Stores Specialty Stores Hypermarket Supermarket These may be central or regional distribution centres depending upon the structure adopted by the retailer Retailer may have common or separate warehousing arrangements for its different retail formats Products from other countries Other formats Level I: Sourcing Level II: Storage & Distribution Level III: Retail Stores 40 INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA .1.
5. Procurement is done centrally for all the retail outlets. rather source the products from already existing importers present in India. retailers don‘t import directly from manufacturing points in other countries. Level 1: Product Sourcing Modern retailers in India largely procure branded products in various categories (apparels. India is a country of diverse culture. In case of private label items also sourcing is done directly from manufacturing points and the lots are sent to distribution centres.) directly from companies‘ factories and send the procured lots to their distribution centres. From the distribution centres. Retailers in India need to maintain in their retail outlets some products and brands that are locally popular in the regions where the retail stores are present. Sourcing from importers: In many cases. footwear etc. furniture and furnishing items. the lots are further distributed across various retail outlets. There are two ways in which retailers usually import goods from other countries: Maintaining their own offices in other countries: The offices act as procurement points (from manufacturing units). Procurement of these locally popular products are done only in the specific regions with the procured goods mostly moving to the specific regional warehouse or in some cases directly to the specific retail stores. Taste and preferences of buyers vary from region to region. electrical & electronic equipments. consumer durables. quality check points and they take care of shipment of procured goods to India.1. This method is adopted if volume of procurement is neither huge nor on regular basis.1. lifestyle and food habits. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 41 . This method is mostly adopted for countries from where large volume imports are happening on regular basis.
1. Concessionaire: Under this model. this is preferable for brand vendors as well.2.1.2. Product Category-wise Standard Methods of Procurement & Margins Apparels Mode of Procurement: In Apparels. In case a supplied stock is not selling in any retail Concessionaire (In some cases. retailer rents out some space of its store to a vendor. consignment is a preferred way.5. The vendor is in charge of managing the provided space to display and sell its products. it may be Outright as well) INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 42 . Inventory management and risk of sale/non-sale of the merchandise is entirely on the retailer. In case any merchandize doesn‘t sell. vendor shares the risk of non-sale of any merchandize items along with the retailer. model of procurement varies depending upon the source and product labels. Managing the inventory of its product is entirely the vendor‘s responsibility. 6. Methods of Procurement There are three ways of getting supplies from vendors in case of retail stores: Outright: Under this method of procurement. Apparels Private labels New brands/ less known brands Procurement Model 100% outright Consignment is preferred (however. the vendor takes it back and tries to clear the stock through some other channels. a retailer places an order with any vendor and buys the entire ordered merchandize from the vendor. Consignment: Under this method of procurement.1. Alongwith retailer. it may be Outright as well) Consignment Established brands Remarks All procurements from local manufacturers are on outright basis (make to order basis) Retailers avoid taking risk with new or less known brands or In case of established brands.
margins on apparels in Indian retail vary depending upon whether it is a private label product or a brand within brands.store.60% (Stores with small ticket size avoid keeping big brands and their product mix has very high share of private labels) INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 43 . Retailers prefer Concessionaire model as they don‘t need to maintain any inventory of vendor‘s supplies. Example: Brands FCUK and CK operate in Shopper‘s Stop stores under Concessionaire model. This helps in placing of fresh stock. it varies from one retailer to another depending upon the ticket size and mark up policy of the retailers Mark up on Product Apparels Stores with big ticket size (Example: Shopper’s Stop) Private labels 250% .60% Brands (25% markup indicates that the brand is very strong and 60% markup indicates that the brand is new or less popular) Stores with small ticket size (Example: Vishalmart) 80 – 100% 20% . then the vendor takes the stock back and tries selling it through other channels. Imports 100% outright All imports in apparels are largely based on supply orders or Outright Margins on Apparels: As found during the study.350% 25% . markup varies depending upon the popularity of the brand and the brand‘s market share Also.
they follow the ‗consignment‘ based procurement. Margins on Furniture: Both for wooden as well as metal furniture. Soft furnishing Mode of procurement: For a non-manufacturer multi-brand retailer in furnishing segment. Margins on Consumer Durables: On branded products. In other words. Furniture and Furnishing Furniture Mode of procurement: For a non-manufacturer retailer in furniture segment.50%. are enjoying margins in between 30% . most retailers have an arrangement with brand manufacturers to take back the unsold inventory. ‗Outright‘ buy and ‗Concessionaire‘ model are the two main modes of operation. In case of consignment based sourcing. money is paid to the vendor only on the final purchase of the product from the retail stores. the share of private labels is the range of 35-40% for large retailers. the retailers enjoy a margin of 10-14%. around 90% of the furniture procurement happens on ‗Outright‘ basis whereas only the balance 10% is on vendor ‗consignment‘ basis. In case of private labels. Private labels in soft furnishings provide retailers a higher (gross) margin of 35-40% as compared to 25-30 % in case of national level brands. Consumer Durables Method of procurement: In case of consumer durables. Margin on soft furnishing: In soft furnishing vertical. due to fast changing technology. the margin lies in the region of 15 20% INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 44 . Indian retailers in general.
Footwear Mode of procurement Footwear Private labels Brands Imports Margins on Footwear Footwear Private labels Brands (such as Red Tape.) Margin 50-100% 30-40% Mode of Procurement 100% outright Consignment 100% outright Food and Grocery Method of procurement: In food and grocery. More etc. Lee Cooper etc. almost all the procurement in case of both branded as well as private labels happens on ‗Outright‘ basis.) Branded Private Labels 10-15% 15-25% Discount stores (such as Subhiksha) 2-3% 5-7% INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 45 . Margins on Food & Grocery Product Margin Food & Grocery Modern stores (such as Big Bazaar.
1. Fresh food: In case of fresh and highly perishable food items (example: dairy items) retailers generally maintain very little or no inventory. as apparel stocks in general are churned around five times a year. Product Specific Insights into Inventory Management ‘Apparels’ as a category require huge investment towards inventory management. most retailers have an arrangement with brand manufacturers to take back unsold inventory. Furniture are prone to lot of damages while transporting. This is largely because of INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 46 . Due to fast changing technology. 6. there is a growing trend towards larger and consolidated warehouses. Level II: Storage and Distribution Most of the leading retailers or their logistic partners in India have been maintaining regional warehouses or distribution centres (DCs) at state level.5. Shift from Regional to Central Warehouses/ Distribution Centres Now. Supply chain management in case of furniture is a challenge in India given the constraint of poor physical infrastructure. it is cheaper to have distribution centres in each state than pay CST for inter-state movement of goods.2. for stocking and movement of their goods. With CST going away. With Central Sales Tax (CST) in place. it is no longer pertinent to have a warehouse or DC in each state. with the introduction of VAT system. Central sales tax (CST) is being phased out. requires comparatively lesser investment in inventory. Retailers or their logistic partners are now encouraged to consolidate their warehouses/ distribution centres at a few strategic locations in India.1. with the introduction of VAT and phasing out of CST. Also.3. With warehouses/ DCs becoming larger the processes. infrastructure and technology has to be more sophisticated.2. There is a growing trend towards having few consolidated and larger warehouses or DCs. Retailing in ‗Consumer Durables and other Electrical & Electronic Equipments‘. However. to make various types of furniture available at the selling point at the right time requires very intelligent inventory management.
The extent to which they can shorten the chain also depends on the state legislation for procurement 5. players such as Reliance. Subhiksha. commission agent at the APMC and themselves. In some states.absence of well developed chain of cold storages and cold storage based logistic facilities.1.4. Level III: Retail Stores (Please refer to section for details on modern retail store formats in India) INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 47 . further shortening the chain. Fruits and Vegetables: Most organized retailers follow a three-tier system of operation compromising the farmer. and Pantaloon directly source the produce from the farm gate.
5. some sauces etc. Suppliers may be different for Non-Vegetarian and Vegetarian products depending upon their capabilities.Serve Food Outlet 1 Suppliers of semi finished/ semi cooked products Distribution Centres/ Warehouses Food Outlet 2 Suppliers of processed food ingredients It can be company owned or outsourced to any logistic player Food Outlet 3 Suppliers of Beverages (Directly to the Outlets) Level I: Suppliers Level II: Distributors Level III: Restaurant Chain Outlets 5. Supply Chain for Food & Beverage Servicing Retail in India Imports (including fruits and vegetables) Items that are either not available or in shortage within India e.1. All the specifications for raw materials and standards for the products to be supplied by these suppliers are provided by the concerned restaurant chain management.2. Cook – Assemble .2. Level I: Suppliers Suppliers of semi-cooked/ semi-finished products: They are the manufacturers of semi-cooked or semi-finished food products. Typically a growing restaurant chain has 4 to 5 suppliers for semi cooked and finished INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 48 .g: Lettuce leaf.
5. Frozen dimsums Few examples of finished food products: Burger buns. Some special sauces may also be imported Suppliers of imported items (including vegetables & fruits) They supply imported vegetables. Pastries etc A few examples of semi cooked suppliers: Vista foods. These act as nodal hubs or storage houses and facilitate easy supply to outlets. These are generally different for various regions Suppliers of beverages These are generally the big players in the market. In contrast to other suppliers they supply directly at the outlet level as they have wide distribution network of their own across India. Breads. These are generally located in cities having considerable number of outlets. and other sauces. The concerned restaurant chain management provides demand projections and negotiates with the vendors/ suppliers for prices accordingly. Prices may be negotiated yearly or half yearly. These may be company owned or outsourced to a distributor. Frozen veg patty for burgers. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 49 . Level II: Distribution Warehouses or distribution centres are put at strategic locations.2. Suppliers of processed food Ingredients and other dry products These generally include suppliers of Pastes (of spices and flavour). For example: lettuce etc according to the specifications provided by the parent company. Generally the distributors are Franchisee‘s with multiple outlets. Ketchups.2. Chatta foods.food products located at different places all across India. Innovate foods etc. Few examples of semi cooked food product: Frozen chicken tikka.
The outlets have a kitchen or an assembly area from where the finished food products are served hot to the customers. salt etc can be procured at the outlet level. Typical inventory at the outlet level (for frozen products) may vary from 2 to 5 days depending upon the outlet sales. Some franchisees may be having multiple outlets. Some non core things like seasonal vegetables. This reduces the variation in taste as the human element in cooking is reduced to the extent possible. There is a small refrigerated store room present at the outlets to store the semi finished/cooked products. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 50 . Level III: Outlets The outlets can either be company owned or owned by the franchisees. Typically a distributor maintains inventory for 3 to 7 days. This may vary from location to location.Supply of semi finished food products from manufacturer to the distributor is outsourced to cold chain service providers. The idea is to minimize the cooking at the outlet level. 5.3. For a big chain these are generally the ones who have a PAN India network. Supply from distributor to the outlets is either done by the distributors themselves using their own vans or outsourced to a logistics/cold chain service provider.2.
These logistic partners in many cases are ‗Integrated players with Warehousing Facilities‘. Logistic Facilities for Retail Industry in India While some of the modern retailers in India have been outsourcing their logistics needs to specialist service providers.have opted to develop in-house logistic systems. Reliance. The existing logistics partners of modern retailers are in most of the cases not proper 3 PL players. According to industry sources.3. Birla. level of satisfaction of retailers with their logistic partners is mostly low and that speaks of the poor level of logistic services. 20 March 2007 INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 51 . and RPG. The key market players in the Indian logistics industry can be broadly classified into the following three segments: Pure Transporters 72% Involved only in the physical movement of goods Highly unorganised Larger transporters serve as freight consolidators and form part of organised segment - Integrated Transporters with Warehousing 26% - Larger transporters with sufficient scale to diversify their operations to include total logistics management Facilities 3 PLs Offer complete value chain of logistics management Provide value added services Typically MNCs with experience in handling 2% international logistics Source: DHL Asia Pacific Customer Conference. Future Group. many large players with national footprint – including Bharti.5.
while in India it is as high as 7-10%. 3 PL market is still at a nascent stage in India.Major reasons for leading modern retailers in India to develop their own logistic services Lack of 3 PL players with adequate business understanding Poor level of services from most of the existing logistic services suppliers High costs involved 5.Managing Director. and electronics. . which operates on wafer thin margins of 2-3% globally. with most use occurring in automotive.1. makes it imperative for retailers to internalize most operations and cut costs. IT hardware. in near future simply due to the highly fragmented nature and lack of national as well as international logistics providers in the country‖ .Frost and Sullivan ―Unlike the mature western markets. The higher cost for an industry. Frost and Sullivan INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 52 . There is relatively low penetration in pharmaceuticals and fastmoving consumer goods and one of the important reasons for this is ‗strained profit margins‘. retail growth in India is expected to be dominated by large retailers owning the logistics rather than outsourcing it to third and fourth party logistic providers. Cost of Logistics in Indian Retail Globally the logistics cost component of the total retail price is 4 -5%.3.
Fixed Lease Rental Model The most traditional model in India is the fixed rental model. However.2. mostly mall developers are responsible for the management of entire mall. real estate builders were more into the practice of selling out mall spaces to retailers. whichever is higher 6.1. wherein the retailers pays a fixed sum of money (as mentioned in the lease agreement) to the mall developer 6.1. Prevalent Rental Models in India Two types of rental models are prevalent in India – fixed lease rental model and revenue sharing model 6. Common Area Maintenance: In India.1.1. 6. elevators and escalators. This model requires the retailer to pay either a Percentage of revenue or Combination of rent and percentage of revenue Payment of a minimum guarantee and/or proportion of revenue. Revenue Sharing Model Also known as the ‗turnover model‘. Major Components of Occupancy Costs in India Lease rentals: Lease rentals are the occupancy cost that retailers have to pay to the mall developer on a monthly basis.2. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 53 . this is a progressive model built on the ‗sharing of risks and rewards strategy‘. RENT STRUCTURE IN RETAIL During the initial years of modern retail in India (that is during late 1990s and early 2000s).6. Major constituents of CAM charges are the air conditioning and electricity charges for the main area. this practice has become less prevalent now and renting out is the norm of the day.
get discounts on lease rental. now has to be charges off in the current year itself. The immediate fallout of strong demand for retail has been the increase in rental rates across most large cities. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 54 . Increase in Lease Rental The growth in organized retail penetration in India over the past 5 years led to major expansion plans being announced by existing players and cash-rich conglomerates such as Reliance.. that is. etc. The remainder. Service Tax: A service tax of 12.3. 6. Anchor tenants.cleaning and maintenance charges and parking charges. etc. They are termed as ‗anchors‘ because they are the major crowd pullers in any mall. which was previously allowed to be carried forward indefinitely. where supply of retail space has been limited. Till recent time.4. hoardings. CAM charges have been in the range of 20-25 percent of the lease rentals. Service tax on input costs like lease rentals is allowed to be set off against service tax on output costs like costs of advertisements. Following are the comparisons between Anchor tenant and Vanilla retailers Parameters Rental (% revenue) Rent differential in absolute terms Lease tenure Anchor Tenants 6 – 10 per cent 1/3 rd lower than the market value Long term lease arrangement (9-18 years) Vanilla Retailers Above 12 per cent (This figure varies depending upon the cities) Charged as per market value Short term lease arrangement (3 – 5 years) Source: Crisil and Primary Data 6. being the crowd puller and also because of occupying the largest space in any mall. They also enjoy other benefits such as special area for promotion and advertisings. the unabsorbed loss. Bharti and Birlas.36% is levied on renting of immovable property. Anchor Tenants versus Vanilla Retailers Anchor tenants may be defined as the stores occupying largest space in a mall or shopping complex.
) are not found to be impacted till now. the expenditure on daily need items (such as food & grocery. A O‘s Indiabulls Retail Shut Shop Globus Etam Cotton by Centuary Slowing expansion Adidas Raymonds Focus on other verticals Initiatives Reduction in average store size Mall exit and movement to smaller towns Mall exit and movement to hi-street Moved out from major cities to small towns Shut two stores in Bangalore Shut shops in Ahmedabad. Given the increasing competition in retail industry. many retailers have changed their business strategies to mitigate the negative impacts and consolidate their position. KFC Re-location Nike. Adidas. Economic Slowdown and Changes in Strategies of Retailers India‘s economy has also been adversely impacted because of the current meltdown in global market. FMCG etc.The escalation in lease rental cost has led to cost pressure for many retailers. As revenue growth has not kept pace with this increase in cost. Though. Retailers have started correcting their future plans in light of this recent economic crisis. issues of high lease rentals and the sudden economic slowdown.5. the bigger expenses such as buying of home appliances. 6. Change in Strategy Downsizing Retailers Croma Crossword Levi Strauss Mc Donald‘s. furniture etc. consumers have gone conservative and are spending with care. their EBITDA margin has been negatively impacted. are on hold for many. Surat and Delhi Slowing down expansion in metros and focusing on smaller towns Slowing down its expansion plans Slowing down expansion of ‗F&G‘ format Aditya Birla Retail ‗More‘ and shifting focus on the ‗apparels‘ vertical INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 55 . With the suddenly disturbed economy.
Excess of retail space supply coupled with the recent economic slowdown. However. Crisil Report. mall owners had been chasing the retailers for ‗fixed lease rental‘. the change in the regulatory environment. They have realized that occupancy rates have to be made more affordable and are now being forced to either cut down on rentals considerably or adopt ‗revenue sharing rental model‘ or any other rental models. But as the market has slowed down. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 56 . 6.7. and rising investments in real estate companies and projects. retailers are under pressure of making profits and hence are finding it difficult to sustain the ‗high fixed rental rates‘. Changing Rental Models Till some time back. Excess Supply of Retail Space in Pipeline Lease rentals increased due to limited supply of retail space and increase in number of retailers. Retailers have slowed down their growth plans and many of the mall spaces that were planned to be occupied are left vacant. and Business Standard 6. when real estate was booming. rural retail venture Aadhar. which allows 100 percent FDI in construction. That time. diversified small convenience store formats called Big Bazaar Best Deals. have now become a cause of worry for mall owners as well.Concentrating more on Big Bazaar and KB‘s Fair Increased focus on value formats and low cost models Pantaloon Retail Price Stores Also. and home solutions venture Home Town Increasing revenue from existing stores Arvind Brands Cross sell other brands through existing exclusive outlets and widening the product range Source: Primary Research.6. is aiding an increase in supply of retail real estate space. even for retailers engaging the space with brands was the top most priority and thus flat rates were being charged.
8. Sub-letting Selling of space by retailers to other brands (mostly happens as part of Concessionnaire model) Example: Shopper‘s Stop sub-lets some space of its store to brands like FCUK and CK.6. Example: Pantaloon is learnt to have signed such an agreement with a developer. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 57 . Source: Crisil & Primary Survey Franchisee Route ‗License‘ granted by a company to a person or group allowing them to use/ sell certain products The Road Ahead… Example: Trent in tier II cities Please refer to Annexure II for rental trends in top Indian cities during the second quarter of 2008. The Road Ahead Revenue Sharing Model A minimum guarantee on rental and/or percentage share of the revenue whichever is higher Example: Inorbit mall in Mumbai ‗Select City Walk‘ mall in Delhi Zero Rent System Retailer exempt from paying rental charges during the initial years of operation.
PROFITABILITY ACROSS VERTICALS 7.7. A comparison between Apparels. fabric. Almost all organized these goods. apparels enjoy maximum gross margins. Besides. tried to constitute more than 10% of products in food& players have increased the retailers proportion of private introduce private labels in the the labels in their total product kitchen and small appliances. This restricts the scope fresh produce. Spinach constitute 75% of appliances constitute only and Subhiksha. As share of private labels and to enormous players to potential for the average ticket size of have an edge over branded producers. labels. the focus commoditisable vertical. Margins on brands do not exist. design. such as fruits apparels offer maximum of increasing the share the and vegetables are typically scope for private labels. household appliance retailer has been on increasing the which means there exists have multi-brand outlets. Thus. grocery category for players mix. almost Food & Grocery all In food & grocery. players can the white and brown goods. lack of expertise limits retailers can attract more identify gaps and enter provision of after-sales buyers and increase its into areas where national services in case of private conversion rate. While private labels Though kitchen and small such as Pantaloon. Accordingly. differentiator through which Share of private label products succeed if they are able to Also. branded goods. have Organized Private labels. cut. especially in staples can be the only etc.1. Private differentiate products is quite high. Food & Grocery and Home Appliances Gross margins across all verticals are determined by the share of private labels and extent of commoditization of products. share of private labels for low and wastages are high. followed by food & grocery and home appliances. there is FMCG from others in terms of considerable preference for labels in processed foods and style. Parameters Apparels Apparel is the most At Home Appliances present. at present. There is a INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 58 .
music buyers within a catchment of for different usages and systems occasions. decision in case of household Manpower Training and Wage Inflation prices. stole. retailers generally retailers have come up with Retailers stock a wide operate multi-brand outlets. it is as low as 20 their ticket size is not very increasing the share. store sizes are Household appliances entail convenience for their food in general larger than food the largest store size owing to and grocery requirements. Items such as home theatre. segment. of different 3-5 kms. accessories such as sock. customers. Store space addition. In this Kirana Household against stores. & grocery but comparable the need for displaying a Competing or smaller as compared to variety of models. Consumers still prefer In apparels. Customers informed in are case well Salesmen play a key role in of helping the consumers‘ Customers are well informed in case of food & grocery and are sure about their buying decisions. brands and different models dedicated only to food & they generally also stock within the same brands are grocery is generally smaller. They don‘t need much guidance from salesmen. utility etc. local modern appliances. handbags etc. belts. per cent in case of large. displayed to offer a wide range Some of the retail stores are caps. Wage inflations are lowest in this category among the three categories. and they appliances. stores in the vicinity so as to Average Store Size variety of casual. The sales force don‘t need much guidance of needs to be aware of various to product options. wage inflations are technology lower in this category as products. formal. apparels regarding quality. Also. of selection to potential bigger as the floor space is also occupied by home care and personal care items. Laptops. Shoppers‘ Stop. In etc. compared to Household developing training INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 59 . be accessible and cater to traditional and ethnic wear plasma TVs. features and salesmen‘s make their purchase should be constantly updated with the fast in The and changing various costs of decisions.Pantaloon‘s revenues from 30% of their total products and growing trend towards apparels.
Apparels require higher investment towards Investment in inventory in case of household appliances is lower as compared to apparels. Profitability account of higher share of private labels and other factors. However. Source: Crisil and Primary Data INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 60 . high wastages due to perishable nature of products. because of small ticket size. because of other factors. more than Despite this. gross margins in this vertical are lower than Apparels to other two inventory as stocks are churned Gross Margins/ out around 5 times a year.appliances. high gross margin on have an arrangement with brand manufacturers to take back unsold inventory. Gross margins in case of household appliances are mostly lowest among the three compensate the initially high overhead costs. wage inflation witnessed by this industry is on a higher scale as compared verticals. Due to fast changing technology. However. manpower in this vertical are therefore higher as compared to other two verticals. most retailers Investment in inventory is lowest and stock turns are highest in case of food and grocery (among the three verticals). As a result. Household appliances industry also faces relatively higher manpower compared to attrition other as two verticals. lower margins and other factors.
1 $US = 45 INR) India Bulls Retail Trent (Tata) Spencer's (RPG Group) Vishal Retail Lifestyle India (Landmark Group) Shopper's Stop(Raheja Group) Subhiksha Pantaloon Retail 0 44 159 182 225 250 269 512 1202 1500 2007-08 Source: Company Sources INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 61 . Hero Group. and others) as part of modern retailing in India. Apart from the above listed companies. Annual Turnover of Leading Retail Companies in India (in $US million.8. LEADING RETAIL COMPANIES OF INDIA Key players operating as part of modern retail in India are: Please refer to Annexure I for detailed profile of some of these companies. there are many regionally strong players and a few upcoming players (such as Mahindra Retail.
and supply chain) One of the biggest advantages with Pantaloon retail is its in-house logistic INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 62 . Destination Malls. Pantaloon retail had to recently divest from Airport retailing ‗Value and Lifestyle Supermarkets. Discount Stores. Weaknesses Pantaloon retail doesn‘t have much to offer in luxury and premium segments Because of market slowdown and losses incurred.1. However. the company holds high bargaining power with brands (Reputed Chocolate brand – Cadbury‘s and Snacks brand – Frito-Lay Lays have been refused space in Pantaloon Retail Stores because of issues like pricing.8. the company is working towards developing more of private labels in all product categories with an aim to enjoy higher margins As India‘s largest retail player. E-tailing & others) Very strong in segments‘ Adopting very aggressive marketing strategy and experiencing high growth in business (CAGR of around 69% over FY 2006-08) Product mix of Pantaloon retail has higher share of Brands against Private labels. Strengths and Weaknesses of Key Organized Players Companies Strengths Pantaloon Retail India‘s leading retailer (highest turnover among all modern retail players) Operates in almost all types of modern retail format (Hypermarkets. Specialty Stores.
team. Vishalmart outlets are generally not opened as part of any shopping malls. vendors/ supply namely ‗Shopper‘s Stop‘ formats of Raheja Group are INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 63 . They have to struggle to ensure tighter margins on products and are on constant look out for committed partners. They are rather present as standalone stores mostly in some ‗not so prime locations‘ – requiring the customers to travel extra to reach Vishal Stores Except for hypermarkets and recent venturing into apparel based specialty stores. Future group has ‗logistics‘ as one of its separate business line in the name of ‗Future logistics‘. Home Stop. recently ventured into specialty store format with ‗Fashion Mart‘ as exclusive apparel stores Vishal retail is innovating with franchise model for its specialty store ‗Fashion Mart‘ Product mix in case of Vishal Stores has very high share of private labels – — They already have 400 FMCG products under their label and are in the process of adding more — Company has 100% private labels in apparels (Vishal retail manufactures 15% of its apparels and sources the balance from other manufacturers and sell under private labels) Shopper‘s Stop (Raheja Company‘s departmental strength store lies format in its Shopper‘s Stop. Hypercity and other retail To save on rentals/ cost of real estate. Future logistics manages logistic for the retail formats of Pantaloon Vishal Retail Strongest player as far as presence in different cities is concerned (present in 104 cities across 24 States & UTs of India) It differentiates itself in terms of its low cost offerings and its target customers focuses on Middle class and below Strong in hypermarket format. the company is not present in any other retail formats Vishal retail doesn‘t have a very smooth supply chain and vendors management system in place.
present mostly in Metros and select Tier I cities. Mother Care. the hypermarket format of Raheja Group till now has not been able to mark its presence much against stores like Big Bazaar. airport retailing and others The company operates in ‗Premium lifestyle and Lifestyle‘ domains and has a strong customer base in 35 years plus business and senior executive classes Shopper‘s Stop and the other retail formats are present in prime locations of Metros. Hypercity is not positioned as a value store for masses Company‘s private labels are a small percentage of its entire range of merchandize (80-85% brands labels) and 15-20% private Many of the retail related initiatives of Trent such as Star Bazaar. Brio. Crossword. They are generally present as anchors in shopping malls As per industry sources. Tier I and very few Tier II cities. The product mix in case of apparel retailing is 95% private labels and balance as brands Trent‘s most popular retail format is ‗Westside‘ which is a lifestyle based apparel and accessories store – Westside is very famous for its ethnic collection Recent initiatives in form of ‗Fashion presence in Tier II cities and below Hypercity. they don‘t have specialty stores (Homestop. MAC. Fashion Yatra etc are in initial stages and are still to establish themselves as popular stores INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 64 . Shopper Stop & its other retail formats have highest ticket size and conversions rates Company‘s strength also lies in its strong supply chain and logistic managementthey operate on advanced ERP system and focus on fast and efficient movement of merchandize Trent (Tata) Trent is very strong in apparels. Desi Café). Except for a few cases.Group Retail) The group operates in other retail formats and are aiming at growing big in all these formats– hypermarket (Hypercity). Unlike Bigbazaar.
not as high as Shopper‘s Stop The group has limited presence with outlets in top 10-12 cities within India They are not or present in partnered with UK retailer supermarket format hypermarket INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 65 . Tier I and select Tier II cities and in big malls mostly as anchor tenants Lifestyle stores also work on large ticket size and higher conversion rates. Star Bazaar are targeting at Tier II cities For efficient back end operations and supply chain management. As compared to Shopper‘s Stop. a specialty store in consumer durables and electronic items. is one of its kind and at present very few other retail stores on similar concept are present in India – one of them being ‗Next‘ Trent has also started its initiatives in ‗Value based retailing‘ through its hypermarket format namely ‗Star Bazaar‘. Lifestyle is more focused on ‗Youth and Fashion‘ ‗Home Centre‘ stores are catching up on popularity and are growing big way Lifestyle stores are present out of prime locations in Metros. Trent has recently ‗Tesco‘ Lifestyle India (Landmark Group) Lifestyle India stores compete closely against Shopper‘s Stop and other similar concepts in India. however.Yatra‘ aims at value for money apparel & accessories Trent owns ‗Landmark‘ which is India‘s largest books. stationery and music retail Croma.
Spencer‘s stores compete very closely against neighbourhood ‗Kirana stores‘ and therefore they are forced to run on tight margins Reliance Retail Reliance retail has slowed down on growth plans because of recent economic crisis Reliance Fresh has been facing issues related to supply chain management and merchandizing Most of the initiative of Reliance in retail are very new and their success or failure depends on multiple factors supermarket. furniture. consumer durables. hypermarket. India‘s biggest private sector company with high capital investment potential and huge risk appetite Reliance retail has forayed into Product mix of Spencer Stores (even in case of hypermarkets) have very high share of food & grocery items and fresh fruits & vegetables – all these are low ticket items. IT products. automotive. food & grocery including fresh fruits and vegetables. healthcare. and specialty store formats in various product categories – clothing. Jwellery. They have also entered into business to business format – ‘Ranger Farms’ — As per company sources. footwear. the hypermarket of Reliance namely ‗Mart‘ will be very huge stores (First Mart store is being opened in a space INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 66 .Spencer‘s (RPG Group) Spencer‘s stores are among the oldest retail chain initiatives in India and over the years they have earned high trust of its customers The company has very strong presence in super and hypermarket formats in India and are established as ‗Good value for money outlets‘ They are present in more than 65 Indian cities (including tier II cities and below) and are available in two mini-supermarket formats as well (Spencer‘s daily and Spencer‘s express) The biggest strength of ‗Reliance Retail‘ lies in the fact that it is a part of Reliance Industries. time wear.
lower middle class and below‘ It has multi-locational presence with more Subhiksha being a discount store runs on very tight margins and are profitable only because of ‗economies of scale‘ They often face supply chain and merchandizing related problems INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 67 . pharmacy and telecom retail chain Subhiksha is recognized as ‗Discount Stores‘ targeting at ‗middle. Reliance already has retail outlets of VIMAL (company‘s flagship brand) Recent economic slowdown has impacted the growth plans of the company Aditya Retail will face tough competition from Reliance and Bharti Retail across India Aditya Birla Retail Aditya Birla retail has ventured into two formats – Supermarket and Hypermarket and at present plans to grow bigger and stronger in these two formats only Aditya retail also comes with an inherent advantage of being a part of ‗Birla Group of Companies‘ and therefore with a capacity for huge investment and higher risk appetite The company aims at differentiating itself as a ‗spend friendly store‘ with much superior shopping experience The company has huge growth plans in retail Subhiksha Subhiksha is India's largest supermarket.of 230. Reliance comes with an advantage of being a textile manufacturing company.000 sq ft) Reliance retail has very aggressive growth plans and the company has employed huge number of people to implement these plans Unlike many other retail companies.
cold chain infrastructure. They still have to capitalize on their strengths and meet out the constraints to earn success in their plans. The company is facing some vendor related problems as well started operating any stores till now. Entry of Wal-Mart would create new benchmarks for supply chain management in India and the benefits would be passed on to the consumers INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 68 . The company may face stiff competition while trying to establish itself in Indian retail market Entry of Indiabulls into retail has unfortunately been at a time of economic slowdown and it had to face losses on acquisition of ‗Piramyd Retail‘. GPS for truck and trailer tracking. and fuel management systems.than 1000 stores in over 90 cities across 9 States Indiabulls‘ Retail Indiabulls‘ Retail has acquired Piramyd retail to mark its foray into retail business. — They are differentiating themselves from Shopper‘s Stop and Lifestyle (Landmark Group) by not targeting the ‗Premium and lifestyle segments‘ of society Indiabulls‘ is positioning itself differently by also venturing into a chain of wholesale stores BhartiWalmart Retail Bharti Wal-Mart Private Limited will bring Bharti-Walmart modern supply chain and back-end has still not Indiabulls' entry into retail comes after big groups like Reliance. Aditya Birla. logistics expertise to India. Their focus is on ‗Middle and Lower Middle classes‘. bringing WalMart‘s global best practices in such areas as just-in-time inventory. Indiabulls‘ retail targets at opening value lifestyle based departmental stores and convenience stores. RPG and Future Group have already got a head start and are busy consolidating. This acquisition gives Indiabulls‘ an infrastructure and an established system to start with. retail information systems.
While Wal-Mart brings with it global expertise in supply chain and logistics. has entered into a franchise agreement with Wal-Mart which will provide technical support to Bharti Retail. India‘s first special skills training centre aimed at bridging the shortage of skilled workers for cash-and-carry and organized retail formats. Bharti has a better understanding of the local market Bharti Enterprises‘ 100% subsidiary Bharti Retail. 2009. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 69 . Thus Bharti retail format will also reap the benefits out of this business tie-up Bharti Wal-Mart in a Public Private Partnership (PPP) with the Government of Punjab has recently started a Training Centre in Amritsar (Punjab). This is a smart move by BhartiWalmart to build human capital and would pay off in long terms significantly. This is all the more relevant as Bharti-Walmart is planning to open its first cash and carry outlet in Punjab during April – June.
However. exiting this business is not very difficult Entering the modern retail market in India is cost intensive. need further improvement Restricted FDI in retail Multi-taxation and licensing Technological Shifts Unorganized retail-closest substitute Multi-level marketing – another substitute Cost of substitution is low Many technology related improvements underway 9. maintaining inventory of goods and managing the supply chain requires moderate initial investment and large operating cost. Threat of New Entrants (High) Time and Cost of Entry: Can be a constraint as new entrant should be capable of managing high operating costs.1. Large operating costs are on account of: High lease rental for retail space in urban India INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 70 . INDIAN RETAIL INDUSTRY ANALYSIS 9. Indian Retail Market Analysis based on Nine Forces Model Social/ Consumer Shifts Opposition from small traders/ shopkeepers Changing outlook of Indian consumers Threat of New Entrants (High) Doesn‘t require buying of assets Low technology protection Products & services differentiation possible in many ways Distribution channels replicable Huge untapped market & high growth rate International/ Economic Shifts India fast emerging as a major destination for global retail giants Bargaining Power of Suppliers High to Medium for retail spaces Medium to Low for products & services Competitive Rivalry (Medium) Medium to low industry concentration ratio Scope for many players to grow Low Exit Barriers Bargaining Power of Buyers (High) Many players Availability of substitutes High price sensitivity Informed buyers Concentration of modern retail in few pockets Concentration in few pockets leading to competition Threat of Substitute Products & Services (High) Government (Political/ Legal Shifts) Liberalized. Opening and operating the retail stores.1.1.9.
and already existing competition from huge unorganized retail segment. Because of reducing margins. in the right quantity requires real time optimization of product flow and proper integration of front and back end operations. Therefore. Large work force that requires to be hired to manage and operate a modern retail business However.) and growing competition among organized players. Therefore. Technology Protection: Not a constraint as the required technology can be obtained by a new entrant as well Moving the right merchandise. unlike any manufacturing units. for the right customer. exiting this business at any point of time is not very difficult For any new retail store. ‗economies of scale‘ has become very important to become profitable in this business. it takes around 3-5 years to breakeven. retailing doesn‘t require huge capital investments into owning machineries and other assets. at the right price – to the right location.) are required to be invested INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 71 . updating store stocks. For new entrants. An ERP system for logistics and warehousing coupled with front end IT support (for fast billing. at the right time. Retailing can be done in rented spaces (both for retail stores as well as for warehousing) with outsourced logistics. etc. high component of wages and salaries. any new entrant would require having strong finances to wait for these many years before starting to earn from its retail initiative Economies of scale: Important and difficult to attain in initial phases by a new entrant Margins in retail sector in India is reducing because of increasing overhead costs (high lease rental. cost of logistics etc. it is difficult to attain economies of scale in the initial phases with less number of stores and lower volume of sales.
any retail player can possess the required technology provided the player is ready to invest in it. knowledge and experience. hiring right kind of people and adequate training of workforces aided by technology may adequately serve this requirement. However. Cost benefits: Manufacturers & Companies with well managed logistic teams can manage cost benefits Existing manufacturers of any products would have an advantage in retailing of those products. training and technology support Efficient back end (inventory and supply chain) and front end management (retail store) requires skill.into by any new retail player. Pantaloon retail gets an advantage because of this. is a part of Future Group. Companies with well managed logistic teams are bound to have cost as well as operational advantages over other retail companies. For example: Pantaloon Retail India Ltd. Future Group has ‘Future Logistics’ as one of its business verticals. This is because the manufacturers would be in a position to enjoy higher margins for their in-house manufactured products. Specialist Knowledge: Not a constraint. addressable through right recruitment. However. Products & Services Differentiation: New entrants can differentiate themselves in multiple ways Retailing as a concept is not limited to any specific products or services. This is because in India. third party logistics is in its nascent stage and it‘s difficult to find right logistic partners with sufficient knowledge of the retailer‘s business. They may at the same time operate in INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 72 . Retailers may differentiate themselves in terms of having specialty stores dedicated to any specific product type or service. For example: Godrej as a retailer in furniture segment has an advantage in terms of margins because it is also into manufacturing of furniture.
in each modern retail formats within India. However. consumer durables etc. sourcing points are common for all players. However. developing a set of dedicated vendors is a slight challenge and may take some time and efforts. furniture. For most of the product categories such as apparels. From this point of view. For any new entrant in Indian retail market. in case of some specific product types such as fresh food. any new entrant in retail market has multiple options. however. Access to Vendors: Developing a set of dedicated vendors can be a challenge for a new entrant For branded products. Retailers may differentiate themselves in terms of their target customers. within some specific formats such as hypermarket or supermarket products and services offerings can be differentiated only to a limited extent. In case of unbranded supplies (to be sold under private labels) few of the vendors may be common for many retailers. there operate only a few players and enough scope exists for new players to enter and operate. fruits & vegetables. the distribution channels are little different (largely on account of perishable nature of these items) and may vary from one player to another. the distribution models adopted are standardized and replicable. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 73 . supermarket or departmental store formats. their business strategy and their ticket size. Distribution Channel: Largely standardized and replicable by new entrants Distribution channels are largely standardized in modern retail formats. there may be many retailer specific vendors (one vendor dedicated to only one retailer). At present. What varies is the bargaining on margins depending upon the strength of brands and the strength of retail players.hypermarket.
1. Threat of Substitutes (High) Neighbourhood mom & pop stores. Cost of substitution: As most of the modern as well as unorganized retail spaces are operating on lease only.1. Other Barriers to Entry Barriers related to Foreign Direct Investment and government clearances/ licensing have been discussed under ‗Government Shifts‘ Some Social barriers have also been discussed as part of Social/ Consumer Shifts 9. Medium to Low for products and services) INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 74 . 9. However. With the advent of modern retailing in India.2. This increases the threat of substitution even more. standalone shops selling readymade garments. consumer durables. Multi level marketing (also known as network marketing) is another format of selling that can act as a substitute to modern retail formats to some extent and in some specific product categories Different modern retail formats can act as substitutes to each other as well (intrasegment substitution). Bargaining Power of Suppliers (High to Medium for retail spaces. fruit & vegetable vendors. electronic equipments. therefore cost of substitution would not be high. For example: A hypermarket can substitute a supermarket or a specialty store and vice-versa. the so called unorganized retail is also challenged to improve and get more structured.3. all are close substitutes of various Modern retail formats. multi-level marketing for any product category would consume lot of time and efforts to develop and grow. cluster of shops and other outlets as part of unorganized retail.
real estate was booming and the modern retail space rentals were touching sky. there is a growing trend towards formalizing the relationship with suppliers in terms of joint venture or partnership. bigger size of orders (economies of scale) and long term relationship make supplies to organized retailers profitable. From this consideration. In modern retail. there exist many suppliers and multiple sourcing options. One factor that adds to the bargaining power of suppliers is the option of supplying to unorganized retail shops. which account for around 94-95% of the total retail market value in India. Also. However. Margins enjoyed by suppliers in case of supplies to unorganized stores are higher as compared to organized ones. real estate developers started with multiple projects and now there seems to be excess of retail space supply in pipeline. Availability and affordability of spaces have stayed as critical issues for modern retailers. Suppliers of Products/Services Bargaining power of vendors varies from product to product and depends hugely upon whether a product is branded or unbranded and whether the relationship with supplier is formalized or not. Builders have been in a strong position to bargain for higher lease rental. speculating the high growth potential for modern retail in India. Formalizing of supply INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 75 . However. bargaining power of suppliers is low except in cases of very established brands. the recent slowdown is now forcing builders/ real estate developers to reduce the lease rentals to some extent. For most of the product categories. Branded products suppliers are in a better position to bargain as compared to local/unbranded products suppliers. Suppliers of Retail Space Before the recent economic slowdown hit Indian market. All this is gradually giving modern retailers some power to bargain against Real estate developers for lower rentals or adoption of alternate lease models such as revenue sharing.
This restricts suppliers from lobbying against any modern retailer or from erratic and unexpected behaviour.4.relationship makes it a binding upon suppliers to supply to the undersigned retailer for a certain period at the decided margins and agreed upon terms and conditions. Bargaining Power of Buyers (High) Bargaining power of buyers is high in case of modern retail. This has led to higher competition between players to catch more buyers. entry of more and more new players and increasing options among buyers to choose for various product and services Availability of Substitutes Presence of large unorganized retail sector with numerous players offering products at competitive prices and other benefits such as neighbourhood location of shops are a close substitute for modern retail and therefore a reason for higher bargaining power of buyers Increased Buyer Information Increased level of awareness among consumers on brands. Also. it can be said that bargaining power of suppliers remains medium to low for most of the product categories in case of modern retail. only the middle class and above are being largely targeted. Modern Retail Concentrated in Few Pockets Modern retail at present is largely limited to top cities of India and very few tier II cities. and prices etc. Altogether.1. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 76 . quality. 9. across different products is another major reason for their higher bargaining Higher Price Sensitivity Various market surveys suggest that Indian buyers are very particular about ‗Good value for money‘ and this factor influences volume as well as frequency of purchase from any retail store. This is largely on account of Many Existing and New Players Presence of multiple players as part of modern retail.
Reliance retail.5. Low Exit Barriers In modern retail. All this INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 77 .1. the prevalent practice is to take retail space on lease. Vishal retail. Raheja Group. however none of them can be said to be enjoying significant market share at present. better services such as free home delivery etc. regular discounts and offers. improved shopping experience. Bharti-Wal-Mart and a few others are being seen as big players with huge potential and aggressive plans in retail sector. Competitive Rivalry (Medium) Medium to Low Industry Concentration Ratio Modern retail industry is in its initial stages in India. there exists enough room for new players to enter and grow. Space for Existence and Growth of Large Number of Players Modern retail in India has just taken off and by value it is only 5-6% of the total retail market in India at present. Aditya retail. Even the warehouses are on lease. There are no other huge capital investments as well. 9. It is expected to grow at a rate of 25-30% or more annually even during the prevailing phase of economic slowdown. It will take a few more years for the market to mature and for clear cut trends on market share to emerge. modern retail has been growing at a high rate. In terms of penetration. As far as the size of untapped market is concerned. In last few years many players have entered the market. at present the industry concentration ratio is medium to low and therefore not a situation of high competitive rivalry. The size of tapped market is a very small proportion of total market potential. The present level of competition exists because all the players are operating in few urban pockets only.All this is resulting into higher gains of buyers in terms of better prices. Though the existing base is small. Landmark Group. it is concentrated mostly in metro cities and select tier I & tier II cities. Infact. the existing players welcome competition because they feel that increased competition might help in maturing the buyers and in creating a benchmark for further improvements in modern retail within India. In other words. Future group.
‗Single Brand‘ product-retailing would cover only products which are branded during manufacturing.g. As they are all trying to grow and grab business in the same geographies. wherein stores sell large volumes of products to the retailers and not directly to consumers. Loius Vuitton and others). Products should be sold under the same brand internationally. The government has taken this stance with the objective to attract investments in production and marketing.6. The cash-and-carry format is a business to business model. FDI in Indian Retail The government of India allows FDI in retail under the following two categories: Up to 100 per cent in cash-and-carry (wholesale) retail by global retail chains (e. encouraging increased sourcing of goods from India. Metro AG. Nike.g. Government (Legal and Political Shifts) Indian Government has liberalized its policies in many ways over the years to incentivize growth of Modern Retail in India. improving the availability of such goods for the consumers. Up to 51 per cent in single brand retail (e.1. it is leading to relatively higher competition among players.results in lower exit barriers. However. with prior government approval and under certain conditions: Products to be sold should be of a ‗Single Brand‘ only. 9. FDI up to 51% has been allowed in retail trade of ‗Single Brand‘ products. This also helps in reducing the level of competitive rivalry as a non-performing player might exit the market without much loss. Shoprite. and enhancing INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 78 . and Wal-Mart). Lee Cooper. Concentration of Players in Metros and Tier I Cities Modern retail at present is limited to top metros and tier I cities. there is an increasing pressure for further relaxation.
there have been protests. Taxation etc. (Need to be simplified further) At present.competitiveness of Indian enterprises through access to global designs. backed by some of the political parties. this delays the opening of stores and increases cost.1. According to retailers. Many of the small traders. 9. many states have still not implemented VAT fully and therefore differential sales tax system still continues across different states. Entry of large companies as part of modern retail in India is feared to cause exit of the smaller stores that account for around 95% of the country‘s estimated 12 million retail outlets in India. wholesalers and vendors are of the belief that Indian government should stop large corporations from entering the retail segment until it puts in place a national policy that is agreeable to all the stakeholders. product specific licenses. However. All this act as constraints for the retailers in adopting uniform prices for same products in different states. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 79 .7. retailers in India need to obtain licenses and permits such as basic trading licenses. Introduction of VAT is a favourable step from Government of India to remove double taxation and to bring uniformity in taxes across states. technologies and management practices Government Regulations on Licensing. pollution clearances etc for every retail outlet (even if it‘s a chain store). Social Shifts Opposition from Small Traders and Shopkeepers Retail is the second-largest employer in the country. in some of the Indian states such as Uttar Pradesh. shopkeepers. However. Multi-point octroi/entry tax collection is also leads to differential taxing. these protests are slowly dying out because of growing realization basis several studies that India‘s market is big enough to accommodate modern retail alongside the small shops and kirana stores that will continue to flourish. Analysts see an element of political opportunism behind these protests. In recent past. West Bengal and Kerela that led to closing down of some modern retail outlets in these regions.
especially establishment of chains of cold storage for storing fruits. As some major markets globally show signs of saturation. vegetables and other highly perishable food items. The lack of consolidation and modern retail concepts in India present great opportunities for global retailers. India has certainly emerged as the preferred market for big retailers. Changing attitude of Indian consumers Please refer to section on ‗Growth Drivers for Modern Retail in India‘ for details on this topic 9. There is a need for higher level of adoption of improved technologies. Material handling equipments usage also has gone higher. All the above mentioned technology related initiatives are in their initial stages and have been adopted by leading players. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 80 . are also required and are gradually being established. Economic/ International Shifts India is fast emerging as a major destination for global retail giants to meet the needs of a growing breed of middle-class Indians with more disposable income to spend on consumer goods. 9. Efficient supply chain management in turn is resulting in smaller inventory and real time flow of goods.188.8.131.52. Improved technology for goods storage. Technological Shifts Many technology related improvements underway Modern retail in India is experiencing higher usage of ERP systems and other IT infrastructure for efficient material handling at back and front end of retail supply chain.
coupled with lack of third party logistic providers makes operations difficult. rail and communication infrastructure).2.9. especially for the food industry. and transportation methods (suitable vehicles and containers) leads to a high wastage and increased transaction and product costs. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 81 . Poor infrastructure (road. Absence of cold chains and proper storage. Major Constraints for Modern Retail in India Multiple Legislative Laws ul t Un Co iple m T ifo p a rm lic xa a Pr te tio ic s n in g M n eo g sur Risin s Pre ins: rg ost C Ma Key Constraints te qua s ade source In Re an Hum AP M Re C Ac for ts Re Sti ms : l Fe quir l ed w St ate in s Re Av al Es a Aff ilabi tate: ord lity ab ilit & y ply Sup in Cha etl Bot ks ec n The major roadblocks or constraints for Modern retail in India have been identified as follows: Supply Chain Bottlenecks: Distribution and logistics are major bottlenecks for the Indian industry.
but its port system isn‘t well utilized. while 180 minor ports go virtually unutilized. India has a long coastline.000 TEU containerships. which increases operating costs and reduces efficiency. with properties not being delivered on time. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 82 . Unavailability of government land. compared to China‘s 9 percent. but carry 40 percent of the traffic. Over-burdened ports.000 kilometers are express highways. Limited physical infrastructure. In addition to constraining India‘s growth in offshore production. Off the highways. As a result. The poor condition of roads translates directly to shorter vehicle lifespan. India invests less than 4 percent of its GDP in infrastructure. Real Estate: Availability and Affordability The availability of real estate is a critical issue that would influence the rate of growth and profit margins of retailers. this makes it difficult for manufacturers hoping to import. This is one reason the average speed in India is 20 miles per hour. Seventy percent of the seaborne trade is handled by 2 of its 12 major ports. India has one of the largest road networks in the world. yet less than half of the roads are paved and less than 2. As of now. which make up 25 percent of today‘s shipping volume. Even within its large ports. India can‘t support 6. zoning restrictions and lack of clear ownership titles further add to the problems Delays in delivery of malls are the other constraints that retailers are facing. rather than produce products for Indian consumers. firms can only run trucks smaller than 20 feet. Many projects are running 6-12 months behind schedule. Many of the secondary ports have infrastructure problems that aren‘t a quick fix. compared to the West‘s 60 miles per hour. turnaround time far lags other global ports with vessels taking up to 3½ days to debark. These national highways account for less than 2 percent of the total road network.
While most states have abolished octroi. lease rentals have been accounting for 7-8% of revenues of retailers. both at store and managerial levels. it still exists for some large city markets in Karnataka. the problem is likely to worsen. depending upon the area of operation and procurement. Rental values at prime locations are very high. hinder fast expansion and increase the overall cost. Manpower expenses have been accounting for 6-7% of total revenues of retailers Multiple Legislative Laws Multiple licenses and clearances required for setting up and operating a retail store add to the impediments faced by the organized retail industry. The introduction and implementation of value added tax has resolved this problem for retailers to some extent. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 83 . With the advent of foreign players. is evident in the sector. besides reducing contact points. sales tax (state). Maharashtra and Gujarat. Pressure on Margins: Rising Costs: Already prevailing thin margins of retailers are facing further pressure from the following: Lease rentals: On an average. Multiple Taxation Complicates Uniform Pricing The retail industry attracts a variety of taxes from both Central and State governments. Imposition of service tax @ 12. Multiple taxation makes it difficult for retailers to maintain similar prices across geographies.36% with effect from 2007-08 is another cost component for retailers Employee costs: Training costs constitute a huge component of total employee costs of retailers. entry taxes for inter-state sales and octroi. They include the CST. and the type of goods sold. There is a need for government to reduce the licenses requirements from the current 37-45 licenses to moderate levels. Inadequate Human Resources Growing concern about paucity of trained personnel. They reduce the flexibility of operations.
Retailers are increasing salary levels and offering employee stock options to contain the high attrition rates. Seeing this as an opportunity, various institutes have begun to offer courses specializing in retail segment APMC Act: Reforms Still Required in Few States APMC act in its original form restricted any organized retailer from sourcing directly from farmers. However, growing need for change in the mode of operation of the current system by inviting investments and competition from the private sector, has led to drafting of new Model APMC Act, 2003. Based on new recommended model, some states now are amending their individual state APMC acts and are allowing direct procurement by retailers from farm gates. Recommended amendments, however, have not been introduced in all states and also the reforms in some ways are not adequate for direct and hassle free sourcing from farmers.
INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA
9.3. Emerging Trends in the Indian Retail Industry
Focus on Tier II & Lower Cities
I Go ncr od eas s ed un S La de ha be r P re ls riv of at e
gyin T l a ts an Glob tr En ith rs ew p w laye N u P
Emerging Trends in the Indian Retail Industry
l tai Re e vic er tlets S lf- Ou Se
In or g Ma anic rk Ro et u En te f try or
Aggressive Growth Plans with Due Corrections on Account of Economic Slowdown
Aggressive Future Plans with Due Corrections on Account of Economic Slowdown Most of the modern retailers in India have aggressive growth plans. In light of present economic slowdown, these retailers have corrected down their targets, reduced their pace and have started investing carefully; however, they continue to be ambitious, optimistic and are planning big.
INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA
Future Plans of Some of the Leading Retailers By 2011, Future Group (Pantaloon Retail) plans to have 300 stores expecting revenues of Rs 13,000 crore. It plans to reach 24 million sq feet of retail space by June 2011, up from 8.6 million sq feet right now. The Group has maintained its pace while expanding its reach despite the sluggish growth in the economy presently. Shopper's Stop plans to invest Rs 1,000 crore for expanding its existing store space of 1.3 million square feet to 2.7 million square feet and move from 25 stores at present to 50 stores over the next 3-4 years (by 2012-13). Tata Group's retail arm Trent, which operates Westside, plans to add 8-10 stores every year. Currently, it has 31 stores in India Spencer's Retail, which closed down and relocated 56 of its unviable stores recently, will set up 300 more stores till 2010 for an investment of Rs 500 crore. Currently, Spencer's has 700 stores, commanding a retail space of 2.5 million, which will see addition of another 1.3 million sq ft by 2010.
Apart from the measures discussed in section, few other strategies adopted by retailers to beat Economic slowdown: Cost cutting by focusing on improving employee productivity, cutting down on raises of senior employees, reducing spends on advertising and communication, recruitments, etc. Focusing on value and discount retail formats Planning to add to their number of stores by capitalizing on the prevailing lower lease rentals on account of slowdown in real estate sector Increased focus on consolidation of already existing stores and targeting to earn higher profits through them
INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA
the South India based chain of stores Indiabulls entered the retail market by acquiring piramyd retail Reliance retail started its first acquisition by buying out the retail wing of Adani. the company has entered into supply arrangements with Danish firm. Inorganic Route for Market Entry Lucrative opportunities in Indian retail sector have encouraged many companies with different backgrounds to enter the sector. Hero Group has entered the Indian retail industry through lifestyle and home décor stores called OMA. Tata Trent has partnered with UK retailer ‗Tesco‘ Focus on Tier II & Lower Cities/ Towns Though the top metro and tier I cities would continue to be the centres for retail business during the next few years. with INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 87 . New Entrants Tying-up with Global Retailers As many Indian companies with no prior experience in retail are entering the sector. Thailand government‘s Royale Porceliel and UK‘s DK Living For efficient back end operations and supply chain management. Also. Two-wheeler manufacturer. Towards this. there is a growing trend towards tying up with global retailers to share their knowledge. retailers have started focusing on tier II and lower cities and towns to make an early mover advantage and acquire big gains in long term. many of these companies have marked their foray in retail sector through acquisition of some already existing smaller retail companies. experience and expertise. Because of lack of any retail related experience. Villa Collection. Adani group had forayed into retail by acquiring a leading supermarket store V Ravjis in 2000. Aditya Birla forayed into retail by acquiring Trinethra.
We aim at increasing our private label products in our stores. Pantaloon Retail. Retail majors like Reliance Retail. Tata‘s Trent. tier II and lower towns and cities become potential market for modern retailers. this will solve the issue of long customer queues at billing counters. Increased Share of Goods under Private Labels Retailers enjoy far lesser margin in branded products as compared to private label products. Supermarket and Hypermarket Retailers are to some extent competing against FMCG brands. Also. as it will enable pruning of employees and cashiers might be then shifted on the shop floor. Our competition is with the Levers and the P & Gs of the world.As stated by one of the senior officials of Vishal Retail Self-Service Retail Outlets The global economic downturn has opened up opportunities for self-service cash transaction and check-out kiosks at retail stores in India. 60% of retail market is FMCG (food and non-food) and that business has been in hand of 7-8 players. and others have showed significant interest in installing self-service billing counters and check-out kiosks within their hypermarkets and other retail formats.increasing focus on ‗Value retailing‘. Deploying self-service cash transaction kiosks might be a good cost-cutting exercise for retailers. As the competition is increasing and profit margins are getting smaller. Their strength has been through the Kirana Stores that are selling these products. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 88 . Share of private label goods are generally very high in case of apparels and FMCG. -. there is a growing effort by retailers to have more and more products of various quality and grades under private labels.
various critical success factors have evolved over a period of time Location Well placed stores with high visibility and easy access. Specialty stores may also do well near other shopping stores. Merchandise expected to be sold Expected image/brand Retail space and storage area Superstores need to be Specialty goods are more unique than most products and customers generally Geography (location) Merchandize Source: David Oliver. Kurt Salmon AssociatesUK Furniture. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 89 . Therefore. Durables & Consumer Upscale located near residential areas rather than in a shopping mall or in commercial areas to allow easy access to customers for their daily need items.4. The retailer has to ensure proximity to his/her source as well as customers. Poor infrastructure EVOLUTION OF CRITICAL SUCCESS FACTORS Knowledge & Information (particularly. roads and ports) leads to inefficiency in the supply chain.9. clothing are examples of higher prices items and for these items customers will want to compare prices won't mind traveling out of the way to purchase these types of products. have potential to attract higher footfall. Critical Success Factors in Retail For modern retail industry in India. Partner. retailers will do well to locate their store near similar stores. it is important to consider the following parameters Types of customers Visualizing the building. which impacts profitability. before making a purchase. Location is a key factor in India for yet another reason. In deciding the location of a retail store.
In addition to a good location. now Merchandize has also evolved as a key success factor. Proper inventory management becomes all the more critical in India because of poor physical infrastructure conditions in most of the regions. Apart from the above three factors. location of store has started becoming less of a constraint in India. age groups and various economic classes within India. other critical success factors for successful retailing in India are: INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 90 . gender.With the arrival of improved technology and betterment in infrastructure. Real Time Inventory Management through Proper Information System Efficient inventory management is key to successful retailing and it can be achieved through proper Information system in place backed by technology such ERP system. and other IT infrastructure. It is very important for retailers to understand the variations in tastes and preferences across geography. Review of past performance Strategic Planning Channel Sales Budgeting Category Level Margin Planning Range Planning Space Planning Knowledge and Information Knowledge about Customer Tastes and Preferences India is a country of people belonging to different cultures and lifestyles. Merchandize Merchandize panning is critical to meet the sales target and achieve higher margins by ensuring optimal inventory levels.
are very critical for successful retailing. Proper store layout is important To guide the customer around the store and entice increased purchases To create balance between sales and shopping space To create effective merchandise presentation Keeping Pace with Technology One key differentiator between the successful and not-so-successful retailers is primarily technology. Customer knowledge management through CRM software. web technologies. Three important aspects considered for product placements in retail stores are ‗Eye Level Shopping‘. and other supporting IT infrastructure. Physical Layout: It is an important component in creating a vibrant retail experience Loyalty Programmes in Retail Pantaloons Green Card Program Shoppers‘ Stop First Citizens Club Globus Globus Privilege Club Westside Club Westside Crossword Book Rewards Program Planet M M-xtasy World for customers. RFID based tracking. investing in CRM. Customer Satisfaction and Retention By making available to the customers the desired products. and supply chain management (both back and front end) through ERP system. Building Traffic: By working on the concept of ‗More of the Right People for More Time‘. Proper Product Display/ Placement With an idea to achieve high visibility of shelves. and running loyalty programmes. ‗Timing of Shopping‘ and ‗Spontaneous Purchase‘. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 91 .
For example: In 2007-08. from Thailand. Thailand manufacturers have very good understanding of denim wash and they are good at stitching and packaging as well. plastic containers and other plastic based products from Thailand. ladies‘ as well as in kids categories. personal care items and some other items. Thailand is very strong in readymade denim garments (Jeans.) and other fashion apparels in men‘s. ―Thailand is famous for washed denim. plastic utensils. plastic goods of Thailand are high on quality and relatively cheaper.Head Merchandiser for Apparels in One of the leading Departmental Stores in India Many of the leading retailers such as Shopper‘s Stop (Raheja group). plastic goods including kids‘ toys. The quality of Thai denim is better than that of brands like Lee & Levi‘s‖ . T-shirts. 10. Apparels According to Indian retailers. and Lifestyle (Landmark Group) are already sourcing denims and other fashion apparels from Thailand. Vishal Retail. kid‘s toys. and Shirts etc. According to industry sources. already sourcing or planning to source apparels. RETAILERS’ PERCEPTION ABOUT THAI IMPORTS Some of the leading retailers in India are. Shopper’s Stop sourced two containers of men’s and ladies’ readymade denim garments from Thailand. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 92 . furniture. processed food. in limited quantities. footwears. Plastic Goods Plastic containers. However. quantities of imports are very low at present. at present. home décor items & electric goods. water bottles. 10. Example: Big bazaar (part of Pantaloon group) at present imports around 1/3 rd of its plastic ware.10. Pantaloon retail (Future group). and other plastic based general merchandize items are also being imported from Thailand in limited quantities by some of the leading retail players.2.1.
4. flower vases. Cane. Artificial flowers. quality and reasonably priced as well. According to some of the leading retailers dealing in furniture.5% Indian Manufacturers. Example: Vishalmart. has discontinued keeping artificial flowers in its stores as they didn‘t sell much. MDF Furniture). 5% China(Glass Furniture & Sofa). However.10. 1. which targets at lower middle buyers in India. display paintings. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 93 . Thailand furniture are perceived as high end stuff with good quality and finish. electric lamps and lamp shades are some of the products already being imported by a few modern retailers in India.3. 25% Thailand (Rubber/ Parawood Furniture). Particel Board. Chiangmai and Bangkok Break up of Supplies to Pantaloon Retail in Furniture Segment (2007-08) Malaysia (Rubber Wood Furniture). 3. 10. these product categories don‘t contribute much to the value based retailing in India (hypermarket and supermarkets) at present. They are perceived as good in style. Furniture Rubber wood. 15% Indonesia (Synthetic Ratan. at present only a select retailers procure from Thailand and that too in lower volumes. Value and volume of imports from China and Malaysia are higher in furniture segment than Thailand. Home Décor Items & Electric Goods Thailand home décor items are very popular in India. based furniture of Thailand are in demand in India.5% are the two major sourcing hubs for furniture in Thailand. also known as parawood. 50% Denmark & Italy. However.
not upto mark on our quality parameters.6. Footwear Major sourcing for footwear retailing is happening from within India. Apart from ladies' footwears. Most of the Chinese cuisines have been Indianized and that is one big reason for their wide level acceptance among Indians. Thailand manufactured ladies‘ footwears have a typical style and look and stiletto sandals happen to be one of Thailand‘s specialties with huge potential to sell in Indian markets. mid as well as low end. Thailand footwears are rated low on quality and this is one factor that discourages imports from Thailand. hardly 1-2 retailers in India are importing Thailand footwears and that too in very small volumes. such as shoe sole.As stated by the Merchandiser of one of the leading footwear retailers in India - 10. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 94 . ―We have visited Thailand and explored the footwear market there. However. According to these retailers. Processed Food According to some of the modern retailers. Men‘s footwears are okay in quality. However. excellent finish and potentially high appeal for Indian buyers. Thai cuisines are tangy and spicy and therefore hold fair chances to be accepted by Indians at large. However. Thailand can be a preferred sourcing hub for ladies‘ footwears. At present. female footwears carry great style. some of the Indian retailers also appear to be interested in sourcing Q & Q sole sheets and some other footwear accessories. Thai cuisines are picking up fast in India. however. Imports are happening largely from China and in small volumes from Italy and Brazil. retailers in India appear to be interested in procuring more of footwears from Thailand. This process will be gradual and take sometime.high end. On the other hand. in case we get into sourcing from Thailand. appearance-wise not very appealing for Indian buyers. at present the base is very very small and that is why even high growth rate is not adding much volume till now.‖ . We checked all kinds of footwear over there. however.5.10. According to some of the leading retailers. We would need to get a lot of things changed. Thai food would also require to be tuned to Indian taste.
In case of some Thailand based packaged food.As stated by Senior Research Manager. However. white and red labels on the food packets standing for vegetarian. some important factors that may influence the acceptability and popularity of processed or ‗ready to cook‘ Thai cuisines in India are: Packaging: Thai food packets mostly have lot of shrimps drawn on them (even in case of vegetarian items). All this alienate Indian buyers. Thai noodles will have a tougher challenge in establishing itself in Indian market. ―Indians straightaway compare any noodles with Nestle‘s Maggi. largely because of high popularity of seafood in Thailand. Product labels and other relevant information and instructions on the food packets. White and Red Dots: Around 70% of world‘s vegetarians are Indians.As identified during the study. Thailand pastes and sauces are growing in popularity among Indians. Green.‖ . Even the non-vegetarian Indians are very selective about what they may consume. Clearly mentioned cooking instructions become very critical for less known food items. Thai fonts are very different and not very clear for Indians. And now with an evolved Indian taste for Indianized version of Chinese noodles. Indian buyers are very particular about green. Food Bazaar INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 95 . Thai noodles are different and Indians don‘t have a taste for that. Also. the specific instructions on quantities of various add-ons are missing and that discourages buyers from buying them. Cooking Instructions: Most of the Indian consumers are not very experimenting and many refrain from retrying any dish in case it doesn‘t appeal to them in first trial. even if printed in English language are not very clear because of the typical Thai font type used. This is another critical factor for selling of packaged food in India. eggetarian and non-vegetarian food types respectively.
10. Some of the leading retailers (such as Pantaloon Retail) in India are of late focusing on increasing their share of business under this category and are planning to import these items from Thailand in considerable volume. Personal Care Items Many of the leading brands in personal care category have emerged from Thailand. Thailand is known to have high quality products in items such as soap.7. massage cream etc. face and body cream. 10. aroma oil. However. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 96 . what type of response does the other personal care products from Thailand get from Indian buyers is still to be seen. Other factors related to Thailand Importing from Thailand is more convenient as compared to countries like China because they speak in English and communication is smooth Both Thai and Indian Currency fluctuate a lot against US dollar. This creates uncertainty about the actual payments to be made for import of various products. packs. except for the brands that are already popular in India.8.
International companies such as Levi‘s and Tommy Hilfiger source their products from domestic manufacturers like Arvind Mills.11. Mango. On the contrary. The franchiser invests his/her assets in a system to utilize the brand name. and not for personal consumption.1. We feel the impact of opening up FDI on this route would be minimal. With the opening of FDI. Since 100 per cent FDI is not allowed in India. Franchising This is the most preferred mode through which foreign players have entered the Indian market. as cost advantages as against high import costs would compel international players to source or manufacture their products in India. commercial organizations and retailers. many existing franchisees may also enter into JVs with the franchisers with the opening up of FDI. Franchising entails granting of rights by one party. in return for a sum of money. 11. many franchisees may lose their franchising rights as franchisers may chose to change their mode of operation. POSSIBLE WAYS FOR ENTRY OF FOREIGN RETAILERS IN INDIA International players can enter India through multiple routes: 11. operating system and ongoing support of the franchisee. Pizza Hut. whereas Benetton. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 97 .3. to another. the franchisee. Manufacturing and sourcing Foreign players are allowed to enter India if they manufacture or source products locally.2. foreign players have entered India through this route. Nike and Marks & Spencer have entered India through this route. Cash-and-carry operation Players are allowed to sell goods only for business purposes like hoteliers. the franchiser. Lacoste. Sony and Samsung have manufacturing units in the country. (Please refer to section for details on foreign players that have entered or planning to enter India through this route) 11.
Players such as Amway.4. because they can test demand for their products before undertaking any major investment. Players may continue to enter India through this route even if FDI in retail is allowed. Oriflame and Nokia have entered India through this route. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 98 .11. Test Marketing This route allows foreign players to test the demand for their products in India for 2 years before undertaking investment through setting up of manufacturing facilities in India.
1. Under the wake of present global slowdown.12. Almost all modern retail formats in various product verticals are poised to grow fast during the next few years. 12. The market is expected to grow at more or less the same pace till it reaches the stage of maturity. Level of Attractiveness versus Suitability for Thai Investors Low Level of Attractiveness High Personal Care Home Décor Items Plastic ware/ Kitchenware Cash & Carry Stores Apparel Stores Footwear. CONCLUSIONS AND RECOMMENDATIONS Organized retailing in India is at present in its initial stages and experiencing high growth. they can plan to enter organized retail in India under many product verticals. Furniture & Furnishing Restaurant Chains (fast food outlets. most of them continue to be aggressive and plan huge investments with an intention to make early mover advantage and increase their presence pan India. and coffee chains) Food & Grocery High Suitability to Thai Investors/ Suppliers Fashion Accessories Theme Malls/ Specialty Malls Consumer Durables/ Home Appliances Low INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 99 . As far as Thai entrepreneurs are concerned. However. organized retail market in India has seen some corrections in entry and growth plans by the prospective and existing players. High growth rate is on account of existing lower penetration of organized retail and presence of huge untapped market.
). value retailing has higher potential to grow in tier II and lower cities. there are not many processed and packed food items where exists high potential for Thai offerings at present. paintings and wall hangings etc. for successful entry and expansion. However. Apparel as a category is among the highest on profitability and highly suitable for Thailand as well. However. they need to ensure that their offers are Indianized and suitable to Indian platter. Also. Thailand ranks high on personal care products. departmental stores. lamp shades. Apart from metro and tier I cities. Value Retailing scores over Lifestyle Retailing and Premium Lifestyle Retailing. flower vases. There exists high opportunity for Thailand based fast food outlets and coffee chains to foray into Indian market. There exists very high potential for Thailand in this category.) and therefore these options can‘t be considered by Thai Investors at present. Restaurant chains (especially the Fast food outlets and Coffee chains) are one the fastest growing categories of modern retail in India. Modern Retailers in India are of late focusing on growing their business in personal care category. specialty stores etc. the share of these items as part of modern retail in India is comparatively lower. supermarket. value retailing is the least impacted segment under the present situation of economic slowdown and all retailers have aggressive growth plans in supermarket and hypermarket formats. the category provides reasonable opportunity for Thailand to explore further. They are spreading fast into tier II cities as well. However. There is a growing opportunity for Thailand in this category. In terms of attractiveness. Food & grocery stores are very high on attractiveness as far as modern retailing in India is concerned. However. except for some sauces and pastes. electric lamps. Most of the sourcing in Food & grocery category happens from within India INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 100 . due to FDI restriction. Though Thailand has many things to offer under home décor category (artificial flowers. it is not possible for foreign players to enter any multibrand outlet formats (such as hypermarket.
and the study suggests that it would continue to happen the same way atleast for next few years. 12. Proposed Entry Strategy Thai Entrepreneurs should plan to invest in Indian Retail Market in three phases as depicted below: Manufacturing Base in Select Product Categories Look Out for JV Partners/ Franchisees/ Logistic Parties Thailand’s Entry Strategy Time Horizon: 1st Year Phase I 2 nd & 3rd Year Phase II 4 th Year Onwards Test Marketing in Select Product Categories Phase III INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA Theme or Specialty Malls Based on Thai Products As Suppliers (under formal agreement) Single Brand Outlets through JVs/ Franchisees Cash and Carry Stores 101 . However. Also. Modern retailing in India is still not mature enough for wide acceptance of Theme malls or specialty malls. there has been a realization that it will take sometime before Indian buyers develop an orientation to shop from specialty malls.2. many of these plans have been stalled in wake of global slowdown. There have been big plans on part of real estate developers as well as leading retailers to come up with such malls in India.
Footwear. Frequent currency value fluctuation is another factor that discourages retailers in India from importing from Thailand Recommendations Thai manufacturers/ suppliers should work on establishing formalized (through JVs. Processed and Fresh Food Items Concerns/ Constraints (if any) One of the factors that discourage retailers in India from importing is that most of the sourcing happens on ‗Outright basis‘.3. Furniture and Furnishing. implementing strict quality check norms and on time delivery.1. Home Décor Items. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 102 . Thai manufacturers require taking retailers in India under confidence through proper mutual planning coupled with clarity on currency exchange value at which the supplies may take place even at any later point of time in future.12. Phase I During the first year. they don‘t import goods in large volumes. Personal Care (especially skin care items). 12. partnership etc. As Suppliers Product Categories Apparel & Fashion Accessories. In the meantime they should be at constant look out for suitable business partners in India for opening of single brand outlets in various product categories.3. To ensure supplies in large volumes. Thai manufacturers should focus on delivering as per the required specifications. Unless and until the retailers are very sure of sale or get reasonably high margins. Supply of ‗made to order‘ goods is likely to happen under ‗Outright‘ model only. To establish long term supply relationship for this type of supplies.) and long term supply relationship with the existing retailers in India in the mentioned product categories. Plasticware/ Kitchenware. Thai manufacturers should be ready to adopt consignment model of supply for select non-branded as well as branded goods and concessionaire model of supply for high end branded goods. it is being proposed that Thai investors explore the business opportunities as suppliers to Indian retailers.
Furniture. Thai investors should select such companies for partnership/ JVs within India that complement their strengths.3. Look Out for Joint Ventures/ Franchisees/ 3 PL Product Categories Apparel. West and East within India Under the present situation of lack of proper 3PL logistic players in India. Selected partners should be knowledgeable about Indian customers preferably have experience in retailing in the given product categories preferably have presence in all the zones – South. Home Décor Items.12. Food Outlets Concerns/Constraints Selecting the right JV partners or Franchisees in each of the product (if any) categories Awareness about various laws of the land Proper formalization of relationship on mutual agreement Selecting the appropriate 3PL logistic party Recommendations Selecting the Right JV Partners In each of the product verticals. Personal Care (especially skin care items). it is preferable if the JV partners have their own well developed in-house logistic arrangements. Footwear. This INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 103 . company owned single brand outlets should be opened. This mode of operating is also known as to ‗Master franchisee and Sub-franchising model‘. After finalizing the JVs. Preferring ‘Master franchisee & Sub franchising’ over ‘Direct Franchising’ It is recommended that in place of direct franchising. Thai Investors should first get into JVs with Indian partners in each of the product categories (including food outlets). Plasticware/ Kitchenware. It is only after a considerable number of company owned outlets are established that franchising option should be exercised.2. North.
INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 104 . Formal Agreements and Clarity on Terms & Conditions All the agreements should preferably be formalized or legalized with clear understanding of terms and conditions. Phase II Acting as suppliers would provide good insights about the type of demand that exists in India. there is a need for cold chain based logistic and warehousing arrangements Also. then the Thai investors alongwith their JV partners should look out for proper 3 PL Players with required business knowledge in each of the product categories. To ensure good deals. Building in-house Logistic Facilities or Selecting Appropriate 3 PL Party In case the JV partners do not have well developed in-house logistics team. Once a few ‗joint venture company‘ owned outlets get established. and specific Thai goods (in various product categories) that have potential to sell within India. and processed food items need to be identified and tied-up with. 1908). Thai investors must be well aware of various laws of the land including the property laws (such as Transfer of Property Act. The Registration act. variations in choice and preferences that prevail across different zones/regions. 1872. The Indian Contract act. it is recommended to have formalized agreements. for food and beverage outlets. 12. In this case also. The logistic party may be common for more than one product category. For food and beverage outlets.4. further expansion may be planned through franchisee route. 1882.approach will aid Thai investors in exercising better control over its outlets in initial phases and manage them in the desired manner. suppliers of various semiprocessed/ semi-cooked food items.
it will make the Thai suppliers more knowledgeable about the existing retailers in India. ‗Single Brand‘ outlets can be opened only for products which are branded during manufacturing and are sold under the same brand name internationally. Home Décor Items Concerns/Constraints (if any) As specified by Govt. While some of the branded products manufacturers of Thailand shall be busy opening Single brand outlets in Joint venture with Indian companies. store locations and type of lease agreement for opening of stores are some of the critical factors Poor physical infrastructure coupled with lack of proper logistic and warehousing facilities are the other major concerns. and the formal agreements have happened. and Processed food.4. In case of a few brands within select product categories. This condition would require to be strictly followed. the branded products manufacturers of Thailand should then immediately focus on opening of single brand outlets. Target customers.1. Furniture Plasticware/ Kitchenware. Once the partner companies have been identified in different product categories. such as Personal Care Items. Personal Care (especially skin care items).Also. of India. Consumer Durables and Home Appliances. Single Brand Outlets Single Brand Outlets in Non-food Categories Product Categories Apparel. Footwear. 12. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 105 . a few leading Thai retailers may plan to start Cash and Carry business in India. Recommendations Identifying Target Customers Target customer base within India should be clearly identified for each of the selected brands in each of the product categories before opening of single brand outlets. Thai Manufacturers may plan to enter India through the route of Test Marketing.
Focus on Building Efficient Supply Chain Efficient supply chain management needs to be ensured through proper use of technology both at front and back end and through strong logistics and warehousing arrangements (either company owned or outsourced) Thai investors should. The outlets may be stand alone stores located at not so prime streets or shopping malls in not so prime areas. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 106 . the first priority should be to have low rentals. be willing to invest in developing their in-house logistics and warehousing facilities. the brand outlets may be opened as standalone stores in the vicinity of posh residential areas or as part of high end shopping malls. if required.Store Location Store location should largely be decided based on target customers. specific to some of the product categories have also been discussed in the later part of this section Recommended Rental Model It is recommended that Thai investors should bargain with builders for lease agreement under ‗Revenue sharing model‘. If the brands target at lifestyle category customers. In case any brand aims at premium/ high end customers. it is preferable to open them as part of shopping malls with potential to attract high footfall or as standalone stores in High streets For brands targeting at extremely value conscious customers (middle or lower middle income groups). They should also bargain for lower fixed rental component under revenue sharing model. Store location related recommendations.
a higher focus should be at serving Thai specialties through counters as part of food courts in shopping malls. and high streets. their Location and Geographical Spread It is recommended that during the initial phases. Indianization of Thai Cuisines Also. Initially. open fast food joints and coffee chains. townships. for Thai cuisines to be a hit in India. Preferred locations for these outlets would be near office complexes. Thai investors. Study findings suggest that at present Thai cuisines in their present form are not widely accepted in India. institutional areas. in JV with identified Indian players. it is required to Indianize them by adding flavours and spices that suits Indian taste buds. This should be on similar lines of Indianization of Chinese Cuisines which resulted in wide acceptance and huge popularity of these cuisines in India INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 107 . Thai specialty restaurant chains may be started only at very select locations of the top metropolitan cities of India. Later on they should be taken to lower tier cities as well. Single Brand Food & Beverage Outlets Product Category Concerns/Constraints (if any) Restaurant Chains & Coffee Shops Type of cuisines offered and their acceptance by Indians residing in different parts of the country is the first concern. These fast food outlets and coffee chains may be opened first in Metro and tier I cities. Lack of cold chain based proper logistics and warehousing facilities and the chances of high wastages are the other major concerns Recommendations Type of Food Outlets. shopping malls.
Thai investors should. Also. 12. should plan to enter India through Cash and Carry b2b sales format. when the restrictions on retail industry are lifted within India. No major concerns INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 108 . and by maintaining optimal level of inventory. having extensive arrangements for cold storages and temperature controlled fleet. Thai investors will be in a strong position to easily convert their 'Cash and Carry' stores into highly profitable supermarkets and hypermarkets. processed and fresh food items that would be sourced for various types of preparations. Cash and Carry Stores Product Categories All products that typically go into a Hypermarket (as sourcing of goods from within India is allowed under this format) Concerns/Constraints (if any) Recommendations Experience in Cash & Carry Format (preferable) Thai investors.2. preferably with similar experience. Opening of 'Cash and Carry' stores throughout the country shall provide a golden opportunity to Thai investors to understand the market and to make in-roads into India. be willing to invest in developing in-house logistic and cold storage chain facilities.4. if required.Minimizing Wastages through Efficient Supply Chain Management Thai investors need to focus at minimizing the wastages during supply and in inventory of the various semi processed/ semi-cooked. This can be done through proper use of technology both at front and back end of supply chain.
it is recommended that Thai investors enter Cash and Carry business in tie-up with any local Indian retailers or manufacturers. there is pressure to best utilize this time span to understand the market response and to estimate the actual demand for any given product. Also. Further the presence should be expanded to tier I and tier II cities. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 109 .Tying-up with Local Indian Players Recommended Thai investors would require to source goods in bulk directly from manufacturers across various product categories from within as well as from outside India including Thailand. Sourcing decisions need to be well informed. Consumer Durables (including Home Appliances). Logistics & Warehousing It is recommended that central warehousing (distribution centre) system is adopted for most of the product categories except for perishable food items. it is recommended that cash and carry stores are Stores opened in some prime market locations of all the four metropolitan cities. if required they should be ready to develop in-house logistics and inventory management capabilities. However.3. Thai investors may plan to outsource the logistics and warehousing activities by identifying the right 3PL or 4PL parties. 12. Geographical Spread of To start with. the business requires good local market understandings.4. and Processed food Concerns/ Constraint A major decision of whether to invest in manufacturing facility or not (if any) needs to be taken based on Test Marketing. To facilitate all this. Hence. Test Marketing Product Categories Personal Care Items. Test marketing is allowed for a maximum period of 2 years within India.
this would be the time to decide about putting up manufacturing facilities for the products that were Test Marketed during Phase II. is therefore a much desired step for select product categories.5. 12. by the time phase III is entered. competition would grow in modern retail market within India. North. East. Also. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 110 . Some of the processed food items could also be test marketed for their popularity in India It is recommended that a few wholly owned subsidiaries are established that will import items in the mentioned categories from Thailand for test marketing. rather than continuing to import. Theme malls would have grown big on popularity. Establishing local manufacturing base. Test marketing should be carried out in a way that it encompasses all the zones within IndiaSouth. it is important to cut down on cost of shipment and transportation. However. Manufacturing decision would remain non-impacted and advantageous even if the FDI route is cleared by Government of India in future. Phase III With the passage of time. It is very critical to understand the variations (if any) in demand across geographies. Thai Investors may plan to develop Thai Specialty Malls. To stay profitable in long term. West and Central.Recommendations It is recommended that Thai investors conduct test marketing for some of their innovative and new products in Personal care category and consumer durables (including Home appliances). Theme or specialty malls had started catching up in India when the recent real estate slowdown hit it negatively.
Manufacturing bases also need to be established for products with positive response during test marketing phase It is recommended that Thai investors foray into manufacturing in partnership/ JV with any existing local manufacturers within India. Plasticware/ Kitchenware. Recommendations It is recommended that Thai manufacturers plan to invest in setting up of manufacturing base in India only for those Thai products that generate huge demand in India such as Denim based Apparels. 12. Home Décor Items. Each of the shop spaces within these malls should then be occupied by single brand outlets across various product categories.5. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 111 .2. Personal Care Items. Some of the identified Food and beverage outlets of Thailand would also be allowed space in these malls. Once this concept gets popular in metro cities. Entering Theme / Specialty Malls Product Categories Apparel. there can be step by step expansion plans to tier I and lower cities. Home Décor Items Concerns/ Constraints (if any) Establishing manufacturing base requires huge capital investment Also establishing manufacturing base depends upon multiple factors such as allotment of land.). these would be malls dedicated to Thai products and Thai specialties. Furniture.12. various government incentives etc.1. Altogether. Consumer Durables. availability of finances. Processed Food (Sauces. Personal Care (especially skin care items). government clearances. pastes etc. Footwear. Establishing Manufacturing Base in Select Product Categories Product Categories Denim based Apparels.5. Food Outlets Recommendations It is recommended that Thai investors collectively take entire mall space on lease at select locations (preferably in main market areas) of the top metropolitan cities.
paintings. white and red labels standing for vegetarian. and few ready to cook items (preferably vegetarian). and health care products) All types of plastic wares (including plastic containers) Rubber-wood/ Parawood based furniture Artificial flowers.12. women and kids Female footwear (specially the stiletto heel sandals) Footwear There is a need for Thai manufacturers to keep higher quality standards for female footwears Personal Care Plasticware/ Kitchenware Furniture Home Décor Various available range of products (skin care and cosmetic items. Ketch-ups. eggetarian and non-vegetarian items respectively should be clearly put on the packets INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 112 . Supply of fresh items such as lettuce leaf Thai manufacturers need to change the product packaging in following ways: Processed and Fresh Food no shrimps or fishes should be drawn on the packets cooking instructions and other details should be in clear font Green. lamp shades. and Spices based pastes.6. electric lamps. Sauces. wall hangings etc. Recommendations on Focus within Each Identified Product Category Product Categories Apparel and Fashion Accessories Category-wise Focus All types of denim based apparels for men. flower vases. women and kids Other fashion and casual apparels for men.
Future Media Future Retail – Formats The Company‘s principal formats are Pantaloon. Future Space. and the mall concept ‗Central‘. Company Profiles in Retail 1. Food Bazaar Corporate Structure Pantaloon Retail Retail Operations Joint Ventures Subsidiaries and other ancillary business Big Bazaar Pantaloon Food Bazaar Central aLL Home Town Electronic Bazaar Ezone Furniture Bazaar Collection I Liberty (51%) Alpha (50%) Galaxy Entertainment (16%) Staples (50%) Blue Foods (50%) Talwalkars (50%) AxiomTelecom(50%) Generali (74%) Etam (50%) Lee Cooper (50%) Manipal Heath Services (50%) Aero Term Logistics (50%) Future Capital Future Media Futute Brands Future Logistics Future Knowledge Future Bazaar The future group operates through six group companies: Future Retail. malls. supermarkets. it has adopted a dual strategy of opening smaller versions in its flagship stores of Food Bazaar.1. Future Logistics. ANNEXURE 1 1. or Big Bazaar. and opening larger independent stores. It plans to have Pantaloon.1.1. Big Bazaar. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 113 . It is targeting a higher share of the customer‘s wallet by expanding its formats. Central. Future Brands. For most formats. hypermarkets. Future Capital. Big Bazaar and Food Bazaar operate as separate companies under the holding company. Big Bazaar. Future Retail. specialty retail Pantaloon. Food Bazaar. Central.1 Pantaloon Retail (India) Limited (The future Group) Year of Incorporation Ownership Retail Sector Activity Principal Fascia 1987 Public Limited Company Department stores.
retailing products at discounted prices.000 stock keeping units (SKUs) Line of Business Product Offering Lifestyle Garments.000-250. accessories. home care and personal products Value Food and Beverage.Table 2: Future Group – Formats Pantaloon Business Description Lifestyle store targeting middle and upper middle class Central Lifestyle seamless mall. housing 300 brands across different categories Big Bazaar A hypermarket targeted at the middle and lower income groups.000-1. consumer durables. accessories.00. consumer durables. Accessories Lifestyle Apparel.000 and above Value Food and Beverage. FMCG BB Wholesale Club A store managed by Food Bazaar catering to the needs of price sensitive consumers as well as small retailers by selling multi packs and bulk packs of a select range of FMCG goods at wholesale prices Value Food and Beverage. entertainment and recreation facilities Avg Store Area (sq ft) No of Stores (Dec 2007) 40 5 68 5 102 6 20. Footwear. apparel.000 and above 10. home care and personal products Value Food and Beverage. Big Bazaar Super Centre A format larger than the Big Bazaar stocking a larger number of SKUs Food Bazaar A supermarket aimed at replicating a local market simultaneously providing superior ambience and storing over 50.000 30. apparel.000 125.000 and above 8. FMCG Source: Company and Media reports INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 114 . accessories.00.000 1.
000 500-1.000 700-1. None n. footwear Books. Lee.Other Formats Brand Factory Depot Fashion station Business Description A chain of stores offering branded apparel at discounted prices ranging between 1525%. Louis Philippe. stationery and gifts. Arrow. stationery and music Labels Offered Diesel. aLL Blue Sky Top 10 Ethnic City INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 115 . Sunglasses and watches Apparel and accessories Apparel and accessories Value Lifestyle Value Lifestyle Lifestyle Lifestyle Lifestyle Stores that offer apparel and other accessories.000-10.a. 60.a. multimedia. Van Heusen Avg Store Area (sq ft) No of Stores (Dec 2007) Source: Company and Media reports 6 78 2 30 34 2 n. toys. Bossinni.000 500-2. accessories. Other Formats Table 3: Future Group . Stores catering to the working women population.a.000 7. n. n.000 n. Wrangler. A store catering to plus-size men and women Stores offering branded accessories like sunglasses and watches Stores catering to youngsters. Levi's. music. Pepe. toys. n. Espirit. Apparel and accessories Apparel and accessories n.a.a. Line of business Product Offering Apparel.a.a. A store that retails books.000-100.000 300-12.
25. Home Solutions Retail Limited With an investment of Rs 300 million. The company operates formats such as e-zone.000-10.000-10. Furniture Bazaar and Home Town under this venture. plumbing.000 1.000-30. PRIL set up its 100 percent subsidiary. Table 4: Home Solutions Retail Limited e-zone Business Description A format selling branded electronic goods and appliances targeted at the middle and upper middle class Electronics Bazaar A format selling branded electronic goods and appliances targeted at middle class and low income groups Line of business Avgas Store Area (sq ft) Source: Company and Media Reports 15.000 3. painting and interior decoration INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 116 . Home Solutions Retail (India) Ltd.000 Lifestyle Value Lifestyle Value Lifestyle Collection i Store selling home décor and furnishings Furniture Bazaar Stores selling furniture Home Town Stores selling home décor. Electronic Bazaar.50. furnishings and providing services such as electrical. Collection I.000 10.000-2.000 2.
baby care. The K Raheja group is a reputed player in the residential real estate business Table 5: Shopper's Stop Ltd Year of Incorporation Ownership Retail Sector Activity 1991 Public Limited Company Department stores.Formats Shopper‘s Stop Limited primarily caters to Sec A and B classes of society through its departmental stores. accessories Principal Fascia Shopper's Stop. music and books by Crossword and infant wear by Mother Care. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 117 .1. Brio's Arcelia Shopper’s Stop Limited. The group entered the retail business with the opening of its first department store at Adhere in Mumbai in 1991.2 Shopper’s Stop Profile Shopper‘s Stop Limited was established in 1991 by K Rhea group of companies. furnishings and leather products which are retailed through Shopper‘s Stop. cosmetics through MAC stores. cosmetics. home products. MAC. specialty . Home Stop.books. Crossword. F&B. Mother Care.1. It has gained a foothold in the market with a gamut of offerings such as apparel. accessories. footwear.
home accessories. infant wear. footwear Mother's to be apparel.000 3. UK to retail infant wear and apparel to expectant mothers Vertical Departmental store Product Offering Apparel. footwear. jeweler. music stationery and toys 3. sunglasses. magazines. n. in Mumbai.000 2 2 3 43 5 18 Home Furniture and Furnishings Furniture.a.Formats Shopper's Stop Business Description These are departmental store with strong focus on lifestyle retailing Mother Care Specialty stores operating under the franchisee of Mother Care Plc.000 8.000 n.00010. watches.000 n. bags Avg Store Area (sq ft) No of Stores (Dec 2007) Source: Company and Media Reports 23 13 50.000-6. accessories. Home Furnishings.a.Table 6: Shopper's Stop Limited .a. Cosmetics(Clinique and Estee Lauder) Arcelia Exclusive store for accessories Home Stop Premium home concept stores MAC The company has tied up with Estee Lauder and operates stores under the brand name. CD-ROMs. MAC. footwear. Indian food Coffee and Pastries Catering Catering Crossword These are the company's books and music retail stores Desi café A fast food concept within its stores named 'Desi Café' Brio These are Café Bistro's operated by the company within its outlets INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 118 .000-80. accessories. furnishings.000-8. Crockery and home appliances 30. It was launched in 2005 Cosmetics Books and Music Books. toys Baby care Specialty accessories Cosmetics.
Large catalogue stores: Spanning across 5. In India. Table 7: Hypercity Business Description Line of Business Avg store area (sq ft) Hypermarkets catering to middle and upper class markets Hypermarket 120. multi channel experience and IT support. where customers can see products and enjoy a demonstration.000 sq ft. garments and other consumer durables. in June 2007. the business model would involve display centres. Spread over 120.. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 119 . They enable customers to make purchase decisions by browsing through catalogues. to support this venture.000-10. Home retail Group will franchise the Argos concept to the joint venture company. Products will be home delivered from these stores. online.000 Source: Company and Media Reports HyperCity – Argos SSL and HyperCity Retail India Ltd have jointly signed a memorandum of understanding (MOU) with UK based Home retail group to develop the Argos format (catalogue retailing format) in India. There is also a special section in the store. The venture will be called HyperCITY – Argos. and call and collect counters that would cater to customers in a particular area. these stores enable customers to view products by browsing through catalogues. along with expertise in developing sales through the Internet. HyperCity stocks a wide range of products such as groceries. Call and collect stores: These stores span across 300-500 sq ft. Hypercity Retail (India ) Ltd The Raheja group made a foray into the food and grocery business through HyperCity Retail (India) Ltd in March 2007. a home and general merchandising retailer. The Argos format will provide the joint venture its brand catalogue. SSL has subscribed to a 51% stake in Gateway Multi Channel. Shopper‘s Stop has an option to buy 51 per cent stake in HyperCity Retail by 2009.000 sq ft. fresh foods. Home needs.
1.1.3 Reliance Retail Ltd
Profile Reliance Retail Ltd(RRl) is the wholly-owned subsidiary of Reliance Industries Limited, pioneered by Mukesh Ambani. The launch of ‗Reliance Fresh‘ at Hyderabad in October 2006 marked its direct entry in the retail sector. Prior to this it experimented by operating Mumbai-based Sahakari Bhandar in 2006. The company operates formats such as hypermarkets, supermarkets and convenience stores, along with specialty stores in apparels, consumer durables, wellness and healthcare, footwear and Jwellery. Table 8: Reliance Retail Limited Year of Incorporation Ownership Retail Sector Activity Principal fascia 2006 Private Limited Company Hypermarkets, supermarkets, convenience stores, specialty retail Reliance Fresh, Reliance Mart, Reliance Digital, Reliance Trendz, Reliance Footprint, Reliance Jwellery Source: Company and Media Reports
INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA
Reliance Retail Formats Table 9: Reliance Retail Formats Reliance Fresh Reliance Digital Reliance Mart Reliance Mini Mart Vertical Food & Grocery SpecialtyConsumer durables Line of Business Area 3,000-5,000 15,000-30,000 50,000-2,50,000 10,000-50,000 30,000 1,500-3,500 40,000-60,000 8,00010,000 Product Offering Fresh fruits, vegetables and dairy products Private Labels Reliance Street Electronic goods and household appliances none Reliance Select, Reliance Dairy, First Class, Spirit, Contra, Hero, DNM-X, Cyber Gear, Buzz, Sparsh, Networks, Netplay, Panda Source: Company and Media Reports Reliance Select, Reliance Dairy Pure Apparel, consumer durables, footwear Apparel, footwear Food & Grocery, Apparel Spirit, Contra, Hero, Cyber Gear, Buz, Sparsh, Networks, Netplay, Panda Pharmaceutica ls and medical services n.a. n.a. Viviana, Tosca, Mancini, Monza,Hi -Attitude None Furniture and furnishings Footwear 2,00020,000 Jwellery Value Lifestyle Value Value Lifestyle Hypermarket Supermarket Reliance Trendz SpecialtyApparel Reliance Wellness SpecialtyWellness Products Value Lifestyle Value Lifestyle Reliance Home Specialty Home Reliance Footprint SpecialtyFootwear Reliance Jewels SpecialtyJewels
INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA
Supply Chain RRL is launching captive cargo services by entering into a sales and buyback agreement of a ‘50 cargo aircraft‘ order with Boeing. This will facilitate transportation of fruits, flowers, and perishables to the company warehouses. State agri-distribution hubs: These hubs will act as collection centres in their respective states, routing the bulk produce to the central distribution hub in its SEZs, from where it can be exported as well as dispatched to various retail outlets across the country. Farm Supply Hubs: The Company is setting up 1,600 farm supply hubs across the country. These UBS will facilitate the purchase of farm produce and sale and provision of farm supplies such as fertilizers, seeds, fuel and credit to farmers. Farmers can also avail of the benefit of selling their produce in these hubs. Hubs will benefit the company by connecting farms and the unorganized retail through a distribution system. Creation of Retail Space RRL is following a twin model of expansion, which includes both owning and leasing retail space. It has acquired 1,260 properties for Reliance Fresh stores and Reliance Mart across the country. It is planning to lease out 100,000 acres of farmland at a fixed price in Pune to grow vegetables, flowers and produce. That apart, it is also acquiring properties across the country to set up captive vegetable and fruit mandis. Private Labels RRL is entering into exclusive agreements with textile companies such as Arvind Mills, Celebrity Fashions Ltd and Indus League Clothing Ltd to develop exclusive brands for its retail outlets.
Table 10: Exclusive Brands Name Spirit Contra Hero Cyber Gear Buzz Source : Media Reports Manufacturer Indian Terrain Indigo Nation Arvind Mills- Wrangler Vibe Private Ltd Blackberry
The company has other private labels which it currently retails through its hypermarkets as well as specialty store, Reliance Trendz. It plans to maintain the share of private labels at 35-40 percent.
INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA
It entered the retail sector in 1996 by setting up Food World Supermarkets inn a joint venture with Dairy Farm International prior to FDI restrictions were levied in India. hypermarkets. technology. Hypermarket): Music World. Music World (MW) was also retained under the group. The joint venture with Dairy Farm International (DFI) was called off in 2005. After the split: RPG retained 48 out of the 93 Food World (FW) stores under the brand. power and transmission. Table 12: RPG Enterprises.4 RPG Enterprises Profile One of India‘s large conglomerates. RPG Enterprises has business interests in retail. and remaining stores of FW were retained by Dairy Farm International. Books & Beyond Source : Media Reports INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 123 . tyres and life sciences. Fresh. supermarkets.1. specialty stores Spencer's . Super and Hyper. daily. Supermarket. It set up additional formats such as Spencer‘s-Express. entertainment.RPG Retail Year of Incorporation Ownership Retail Sector Activity Principal fascia 1996 Private Convenience Stores. Daily.(Express. Health and Glow (HG). Spencer‘s. The healthy and beauty chain. Fresh. The Company‘s shifted its headquarters from Chennai to Kolkata. The Company‘s retail business currently operates through the following three formats: Spencer‘s Retail.1. Music World and Books & Beyond.
Its retail business operates under the following formats: Destination Stores. home care and personal products and frozen foods Spencer's Hyper A hypermarket format offering products at low costs Centralized Purchase: Spencer‘s Retail runs a consolidated centre near Bangalore for the bulk purchase of fruits and vegetables directly from farmers. dairybakery products Spencer's Super A supermarket format with a larger basket of product offerings Value Fresh produce. Spencer‘s retail operates a chain of supermarkets across the country.000 Value Fresh produce. spanning 1 million sq ft.These are 300-600 sq ft stores located independently in malls or as shop in shops within large departmental stores.1. Specialty Stores Music world Music World started its operations in November 1997 by taking over Saregama.5 Spencer’s Retail Part of RPG group. stocking fresh produce Vertical Product Offering Value Fresh Produce.000 8. belonging to the Videocon Group. Express/Franchisee Stores. dairy and bakery products Spencer's Daily A format larger than the Express store with similar product offerings at discounted prices Value Fresh produce. dairybakery products.These stores.000-7. Its main competitor is Planet M. home care and personal products and frozen foods Avg Store Area (sq ft) No of Stores (Dec 2007) Source: Company and Media reports 66 231 11 12 1.1.000 sq ft. Spencer‘s Retail runs food and grocery outlets across the country under the following formats: Table 13: Spencer's Retail Formats Spencer's Express Business Description A convenience store format. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 124 .000 25. dairy-bakery products. FMCG. It has a network of 320 stores across 45 cities. FMCG. admeasuring more than 4. stock different types of music.000-15. This enables the Company to maintain low prices and offer discounts.000 4.
offering books.These are small gondolas. toys. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 125 . The first store was launched in 2007 at the Megacity Mall in Gurgaon. It also has a dedicated section for music and home videos from Music World. gifts and stationery. Unplugged. which are run as concessionaires in other departmental and large stores. Books & Beyond It is a new format conceptualized by the Company during the year. along with music and home videos.
one of India‘s large business conglomerates.000-30.1. The group also runs a chain of electronic and appliance store. toys. furnishings Area (sq ft) No of Stores (Dec 2007) Source: Company and Media Reports 60 25 29 INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 126 .6 The Tata Group Profile: Established in 1998.000 Books.‘ which operates 28 stores in major Indian cities.Music. music of A departmental store format primarily retailing apparel Lifestyle Star India Bazaar Hypermarket format of the company aimed at offering products at discounted prices Value Landmark Specialty store retailing books. It also runs a hypermarket. Landmark. and a specialty store retailing books and music called Landmark. Table 14: Tata Trent Ltd Year of Incorporation Ownership Retail Sector Activity Principal fascia Source : Media Reports 1998 Public Limited Company Apparel stores. etc Lifestyle artifacts. Star India Bazaar Corporate Structure of Tata Trent Tata Ltd Trent Ltd Westside Star India Bazaar Landmark Croma Infiniti Retail Ltd Tata Trent – Formats Table 15: Trent Ltd-Formats Westside Business Description Line Business Product Offering Apparel. FMCG.1. Hypermarket Westside. consumer durables Avg Store 15. It started its retail operations by acquiring the UK-based Littlewoods department store in Bangalore in 1998. under the group company. stationery.000-45. music. footwear. health and beauty products. gift items.000 50. Fresh fruit and vegetables.000 12. jeweler. specialty-Books. home products. staples. Croma. Its chain of stores is called ‗Westside. Infiniti Retail. Trent is part of the Tata Group. greeting cards. Star India Bazaar. home accessories.
which commenced operations with a single store in 1987. an Australian retailer. The store caters to the middle class through quality and mid-price segments. providing value for money along with fashion Table 16: Private Label Men's Wear Edward France Giovanni Spike Fashion Street Source: Company Reports Indian Wear Navya Kids Wear Tammy Infiniti Retail Croma The Company has initiated a new venture called ‗Infiniti Retail Ltd‘(a wholly-owned subsidiary of Tata Sons) by entering into a technical-cum-sourcing agreement with Woolworths. in 2006 for Rs 1. the company retails multi-brand consumer electronics and consumer durable store. now has 10 stores across the country. with their share being over 80 per cent. 085 million. a Chennai based books and music retail chain. Under this venture. Private Labels Private labels contribute to most of the revenue. The bookstore. Croma. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 127 .Trent acquired Landmark.
Subhiksha. Mobile Stores Subhiksha.7 Subhiksha Trading Services Profile Chennai based Subhiksha Trading Servcoces. The company operates in four areas: fruits and vegetables.000 sq ft and offer a discount of 8-10 per cent.1. coupled with low operating costs. the company has tied up with farmers to purchase their produce at current price levels under a preferred buying arrangement The company has set up a Centralised Processing Unit(CPU) at Nashik. Pharmacies.1. pharmacy. which involve retailing handsets and phone connections. Strategy In order to facilitate a strong supply chain. FMCG and telecom through three formats. particularly Tamilnadu. to make discounts possible. At Ahmedabad. New Format Subhiksha Mandi: This new format offers only fruits and vegetables. operates a chain of supermarketscum-pharmacies called ‗Subhiksha‘. It was established in March 1997 as a chain of 10 stores in Chennai by banker turned businessman. On an average. the company operates two new verticals. These stores offer low prices on branded mobile phones. pharmacy and telecom. Currently. Its average size is around 600 sq ft. as it sources 50 per cent of fruits and vegetables under Contract farming to meet the requirements of all its stores. Subhiksha Mobile Subhiksha is a food chain offering discounts in the range of 8-10 percent. Subhiksha stores span across 1. Initially its main operations were confined to South India. Subhiksha Pharmacy. It follows a bulk sourcing strategy. apart from retailing fruits and vegetables. the company operates 12 store in Delhi and plans the concept in Pune. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 128 .500-2. Table 17: Subhiksha Trading Services Ownership Retail Sector Activity Principal Fascia Source: Media reports Private Supermarkets. Subhiksha Pharmacy and the newly introduced Subhiksha Mobile. This chain primarily targets the middle and lower income population. a private limited company. Subhiksha Mobile: Subhiksha has started retailing mobiles through stores titled ‗Subhiksha Mobile‘. R Subramaniam.
It has tied up wit Apollo hospitals to set up pharmacies within its supermarkets. ‗Trinethra. It made a foray into the retail industry by acquiring south-based retail chain. it operates around 300 outlets across the country.1. cement. with a floor space of 70. and has established direct linkages with farmers and suppliers.1. textiles and insurance.8 Aditya Birla Retail Profile The Aditya Birla Group. It has a presence in over 20 countries. one of the largest Indian conglomerates. is valued at $24 billion.000 sq ft) and supermarkets (average 10. The company has launched two ‗More‘ hypermarkets in Baroda and Mysore.000 sq ft each. As part of its sourcing strategy. The acquisition of Trinethra has provided the company wit an employee base of 4. fertilizers.000 sq ft) in its portfolio. It would maintain a mix of hypermarkets (avwerage75. Trinethra.000 employees by 2012. bakery products and personal care products through its private labels. More and Select. processed foods. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 129 .‘ for Rs 1. It plans to hire between 10.000 and 15. the company has set up a sourcing centre for fresh farm products such as fruits and vegetables.000 people. Strategy Aditya Birla Retail acquired 170 stores of the south-based retail chain. Currently.5 billion in 2006 which is being rebranded to ‗More‘ by the Company. The chain is also covering categories such as groceries. The group has interests in varied sectors such as metals.
58 LEGEND: Market Rising Market Falling Market Stagnant Likely to Weaken Market Stagnant likely to Strengthen Market Stagnant INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 130 .19 9.11 16.26 12. M Block 1.74 24. ANNEXURE II 2.15 % Growth Measurement 3 Month 0% 0% 5% 24% 0% 2% 1 Year 12% 3% 23% 24% 0% 17% Short Term Trend Prime Mall Rents-2008 Location INR South Delhi West Delhi Noida Gurgaon 662 410 478 385 Rent /sq.88 18.1.5 9.1 Delhi Prime Main Street Rents-2008 Location INR Khan Market Connaught Place (Inner Circle) South Extension 1 & II Karol Bagh Basant Lok Greater Kailash I. EURU I = INR 66.26 18.335 800 1.05 12.78 % Growth Measurement 3 Month 0% 0% 0% 0% 1 Year 6% -4% 0% 16% Short Term Trend Exchange rate: USDI = INR 42.075 Rent /sq.88 25.1.18 5. 2008 (Source: India Retail Report.70.6 11. 2009) 2.71 12.85 8.ft/mth US$ 15.2.94 6. City-wise Rental Trends Following is the rental trend for top Indian cities during the second quarter of August-November.16 7.02 15.02 EURO 9.18 EURO 20.055 550 806 1.ft/mth US$ 31.
72 8.05 7.13 10. EURU I = INR 66.26 % Growth Measurement 3 Month 0% 0% 0% 0% 58% 0% 5% 1 Year 36% 35% 19% 18% 107% 4% NA Short Term Trend Exchange rate : USDI = INR 42.23 5.51 5.27 14.28 14.62 22.2 Mumbai Prime Main Street Rents-2008 Location INR Linking Road Kemps Corner/Breach Candy Colaba Causeway Lokhandwala Andheri Fort Fountain 1.02 8.76 % Growth Measurement 3 Month 0% 0% 0% 0% 0% 1 Year 123% 84% 195% 37% 91% Short Term Trend Prime Mall Rents-2008 Location INR Lower Parel Malad Link Road Andheri (W) Mulund Goregaon Vashi Ghatkopar 700 525 415 360 600 300 350 Rent /sq.58 LEGEND: Market Rising Market Falling Market Stagnant Likely to Weaken Market Stagnant likely to Strengthen Market Stagnant INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 131 .39 12.42 5.41 9.ft/mth US$ 16.01 4.43 14.70.ft/mth US$ 31.3 9.1.54 EURO 20.51 7.48 9.350 950 960 390 450 Rent /sq.86 6.2.25 22.2 EURO 10.89 6.
7 % Growth Measurement 3 Month 9% 0% 0% 0% 0% 1 Year 27% 75% NA 19% NA Short Term Trend Exchange rate : USDI = INR 42.62 5.2 5.1. EURU I = INR 66.27 5.36 5.9 8.71 5.ft/mth INR MG Road Bund Garden Kalyani Nagar Ganesh Khind Road Nagar Road 380 350 225 220 180 US$ 8.85 4.22 EURO 5.68 5.75 3 3.6 % Growth Measurement 3 Month 0% 5% 0% 11% 0% 0% 1 Year 33% 135% 55% 100% 54% NA Short Term Trend Prime Mall Rents-2008 Location Rent /sq.58 LEGEND: Market Rising Market Falling Market Stagnant Likely to Weaken Market Stagnant likely to Strengthen Market Stagnant INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 132 .ft/mth US$ 9.70.36 9.6 3.2.01 6.3 2.15 4.3 Pune Prime Main Street Rents-2008 Location INR MG Road JM Road FC Road Koregaon Road Aundh Bund Garden 400 400 240 250 200 240 Rent /sq.62 EURO 6.38 3.01 3.26 3.
04 2.46 2.4 Ahmedabad Prime Main Street Rents-2008 Location INR CG Road Law Garden Satellite Road SG Highway 190 130 105 90 Rent /sq.46 2.70. EURU I = INR 66.95 1.58 LEGEND: Market Rising Market Falling Market Stagnant Likely to Weaken Market Stagnant likely to Strengthen Market Stagnant INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 133 .11 EURO 2.45 3.58 1.58 1.68 3.35 % Growth Measurement 3 Month 0% 0% 0% 0% 1 Year 21% 13% 14% 20% Short Term Trend Prime Mall Rents-2008 Location INR Vastrapur SG Highway Drive-in Road Kankaria Lake 200 153 105 100 Rent /sq.5 % Growth Measurement 3 Month 0% 0% 0% 0% 1 Year 14% 20% 7% 18% Short Term Trend Exchange rate : USDI = INR 42.58 2.ft/mth US$ 4.3 1.1.ft/mth US$ 4.2.85 1.34 EURO 3 2.
30% 13% 6% NA NA NA Short Term Trend 240 375 250 250 260 135 185 300 140 Prime Mall Rents-2008 Location INR Koramangala Magrath Road Cunningham Road Mysore Road 485 368 225 165 Rent /sq.51 2.85 5.02 3.27 EURO 3.ft/mth US$ 5.75 3.62 8. Indiranagar Jaya Nagar 4 Block.28 5.33 7.75 3.03 2.38 2.50% 14% 10% 5.53 3.78 5.08 3.70.16 4.6 5.5 Bengaluru Prime Main Street Rents-2008 Location INR MG Road Brigade Road Commercial Street 100 Feet Road.ft/mth US$ 11.48 % Growth Measurement 3 Month 0% 0% 0% 0% 1 Year 0% 0% 0% 10% Short Term Trend Exchange Rate : USDI = INR 42.26 3.78 4.6 5.86 EURO 7. EURU I = INR 66.63 3.1 % Growth Measurement 3 Month 0% 7% 10% -6% -1% 2% 1% -6% 2% 1 Year 5.2.58 LEGEND: Market Rising Market Falling Market Stagnant Likely to Weaken Market Stagnant likely to Strengthen Market Stagnant INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 134 . 11 Main Sampige Road.91 2.35 8.1.85 6. Malleswaram Koramangala 80 Feet Road Vittal Mallya Road New BEL Road th th Rent /sq.
25 1.6 Hyderabad Prime Mall Rents-2008 Location Rent /sq.35 2.68 3.70.11 3.7 Chennai Prime Main Street Rents-2008 Location INR Nungambakkam High Road Khadar Nawaz Khan Road Cathedral Road – RK Salai Usman Road – South Usman Road – North Adyar Main Road Anna Nagar 2nd Avenue Purasavakkam High Road 160 200 150 140 100 150 150 90 Rent /sq.28 5.1 3.28 2.51 3.41 3 2.ft/mth INR CBD Suburbs 250 188 US$ 5.58 3.11 EURO 2.1 EURO 3.65 2.27 EURO 1.35 % Growth Measurement 3 Month 0% 0% 0% 4% 11% 0% 0% 0% 1 Year 60% 33% 33% NA NA 50% 41% 13% Short Term Trend Prime Mall Rents-2008 Location Rent /sq.25 2.85 4.75 4.25 2.38 % Growth Measurement 3 Month 0% 12% 0% 1 Year 5% 14% 34% Short Term Trend 2.ft/mth INR NTR Gardens Himayathnagar Banjara Hills Road No.75 2. EURU I = INR 66.1 1.1.58 Market Rising LEGEND: Market Falling Market Stagnant likely to Strengthen INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 135 .82 % Growth Measurement 3 Month -2% 0% 1 Year 33% 25% Short Term Trend Exchange Rate: USDI = INR 42.51 3.1.51 2.ft/mth US$ 3.1 110 140 225 US$ 2.2.
Market Stagnant Likely to Weaken Market Stagnant 2.85 6.9 Kolkatta Prime Main Street Rents-2008 Location Rent /sq.5 % Growth Measurement 3 Month 0% 0% 0% 0% 1 Year 15% 15% 27% 27% Short Term Trend Prime Mall Rents-2008 Location Rent /sq.07 % Growth Measurement 3 Month 6% 0% 57% 0% 1 Year 39% 24% 111% 24% Short Term Trend Exchange Rate: USDI = INR 42.70.71 4.51 2.58 LEGEND: Market Rising Market Falling Market Stagnant Likely to Weaken Market Stagnant likely to Strengthen Market Stagnant INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 136 .3 11.45 9.02 3.ft/mth INR South Kolkata Salt Lake Rajarhat Elgin Road 395 500 190 404 US$ 9.5 EURO 4.94 7.3 6.3 5.ft/mth INR Park Street Camac Street Elgin Road Theatre Road 268 268 233 233 US$ 6.5 3.1.5 5.02 4.5 EURO 5. EURU I = INR 66.
Pantaloon Retail India Ltd... Mumbai Processed Food – Buying & Merchandizing. Pantaloon Retail (India) Ltd. Aditya Birla Retail Ltd. References Primary Research – Expert Interviews List of Companies with whom Depth Interviews were conducted as part of Primary Research on this Study: Metro Shoes Ltd. Mumbai Odyssey India Ltd. Mumbai Staples – Buying & Merchandizing. Bangalore Furniture . Mumbai One or more than one interviews were conducted with each of the above mentioned companies to capture the required details. Ltd.. Connaught Plaza Restaurants Pvt. Pantaloon Retail (India) Ltd. Mumbai Vishal Retail Ltd.3. Chennai Landmark (Tata Group). Aditya Birla Retail Ltd.. (Raheja Group). Mumbai Durian.. Gurgaon Mohann‘s Estate Consultant – Retail. Mumbai Franchising Association of India.. Mumbai Godrej Interio. Mumbai Big Bazaar. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 137 . Mumbai Style Spa. New Delhi Mc Donald‘s India. New Delhi Café Coffee Day... Mumbai Home Stop (Raheja Group).. Mumbai General Merchandize. Mumbai Shoppers‘ Stop Ltd. Chennai Ansal properties & Infrastructure Ltd. Mumbai Food Bazaar..Home Solutions – Pantaloon Retail (India) Ltd..
Ltd. ICRIER Economic Survey of India and Technopak analysis. India‘s Store War. Advocates. Ministry of Commerce & Industry.. Department of Commerce. Soundararajan Nirupama. March 2008 The Logistic Challenges of Doing Business in India. January 2007 Press Release of India Retail Report 2007. March 2007. 2008 Joseph Mathew. May 2008. Gupta Manisha and Sahu Sanghamitra.. 2006-07 F&B (Servicing) Retail India in India. Ltd. January 2007 The Great Indian Retail Story. AT Kearney. 2007 IMAGES Malls in India Study. AT Kearney. CRISIL Research Pro. 2008 Investment in India . Feb 2008 Indian Food Retailing. Images F & R Research Hiscock Geoff. June 2007 The C Factor. Impact of Organized Retailing on the Unorganized Sector. Ernst & Young India. Solving the Supply Chain Puzzle in India. Food Forum India. Government of India.Secondary Research Sources The India Retail Story. Retail Revolution and the Battle for the Next 500 Million Shoppers.com).Apparel Retailing. Retail. Logistics Management.indiaretailing. 2008 Reports on Modern Retail in India. Cygnus Business Retailing & Research. Paras Kuhad and Associates. 2006-07 INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 138 . August 2008 Industry Monitor. 2007 India Retail Report 2007 (www.Overview. July 2007 Global Retail Development Index 2007. 2007 Industry Insight. DHL Retail in India – Getting organized to drive growth. Cygnus – Business Consulting & Research Pvt. Cygnus – Business Consulting & Research Pvt. India Retail Report 2009.
Census and Projections.Government of India. 2001 Retail Marketing Research – India. The Times of India & Others INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 139 . Research Wikis Retail FAQ. Propagent Lease Terminology. The Economic Times. REALTECH Real Estate Services Articles from India Real Estate Monitor Various News Updates and Study Articles on Retail Sector from The Hindu.