RETAIL SECTORS

Presented by :Purval, Rashmi, Sandeep, Joy Jayesh

Retail Sector

Evolution of Retail
Barter System was known as the first form of retail. As time passed currency was exchanged with goods and

services.
Hawkers carried out the first Retailing in Push Carts Followed by Kirana Stores .. Mom and Popup Stores Finally Manufacturing era necessitated the small stores and

Specialty stores
It was a seller market still than this point of time with the

limited no of brands available Barter chain Single brand franchise chain Standalone large store <_ Chain of large stores And Finally Malls

EVOLUTION OF RETAIL
Economist says that Boom Has Started of Retail due to more spending Capacity of Indians Emerging of retail started in brief in patterns like changing face of the Indian retail sector

Provide customers with 3 Vs i.e. Value, Variety and Volume.

What is Retail?

A retail is one who stocks the producers goods and is involved in the act of it to the individual consumer, at the Margin of Profit . As such retailing is the last link that connects the individual consumer with the manufacturing and distribution chain.

Selling Directly to consumer selling in smaller units / quantities the bulk.

Very high numbers near to neighborhood

Reorganized by the service levels

Retail Sector today is worth of 394 Billion Us $

Indian Consumption
Big PictureGDP 2005 -06 :-PictureGDP -$700 bn :PFC -$220 bn (30%) Investment -$480 bn (70%) 2012 -13 :- PictureGDP -$1200 bn : PFC -$600 bn (50%) Investment -$600 bn (50%)

Heterogeneous country
29 states,12 different languages, 72 festivals Internet era, not industrial Young country -60% below 30 years of age Multi-format, multi-level Within the city, not suburbanIndian RetailGround Realities

Consumption = Development

CREATIVE/ INNOVATIVE avenues for CONSUMERS to want to spend their money

BETTER INVESTMENT/ BUSINESS opportunities for our PARTNERS & INVESTORS

Different products involved in Retailing

Food Books & Magazines Fashion & Clothing Personal Care

Optical Consumer Electronics

Sport & Leisure Home Ware Footwear & Leather Toys & Games Jewellery & Watches Furniture Petrol

Manufacture rs

Whole seller

Organized Sector
Distributor

Retailer

Types of Retail Sectors

Unorganized Retailing Hawkers (Kirana) Weekly Markets Organized retailing Convenient / Departmental stores Factory outlets and discounts Market Supermarkets Wholesalers market Company and Franchises showroom

Disadvantages Of Retail Industry in India

Margins are low High property cost Poor Infrastructure Expertise in logistics Couple of firms in retail sector have turn over more than Rs 100 cr

Factors that attracted major industry players to enter the retail sector

Phenomenal success of certain players in retail sector Eg: Shoppers Stop Hype created by management consultants and media Phenomenal growth of service sector and down turn in manufacturing sector A good way to leverage existing property Eg: Primals started developing Crossroads after closing of Roche factory they have acquired on prime property in Mumbai

Cont

Globalization Success of organized retail sector in developed countries Changes in Consumer behavior and increase in their purchasing power. Ever green demand for basic things like food Negative working capital ; Companies buy on credit and sell for cash

Importance

Largest and fastest growing sector in India. Modern retailing forms one point stop for all shopping.

Consumer gets a large product variety of brands to choose from one roof.
First it was a sellers market and now its changing to buyers market. By 2010 Indian retail sector would be generating 10 million employment opportunities.

Retail Sector in India

Retail

Unorganized 97 %

Organized 3%

Some of the Key Players in Organised Retail

Analysis of Growth by ASSOCHAM

Organized retail growing at estimated 25% It is expected that retail in India could be worth US$ 175-200 billion by 2016. 2008-09 Total retails contribution to GDP is between 8% which would further jump up to nearly 12% in next few years. By 2010, retails contribution to national GDP in totality is likely to be 22%. 2008 Retail Growth rate 25-28%, Unorganized and organized retail size 300 billion US$

Opening 10 to 15 outlets by 2015, it plans to employ about 5,000 people selling groceries, consumer goods, fruits and vegetables. India's retail industry is worth $300bn (148bn) Eg: Bharti has invested 60 Billion with the largest retail Walmart (last year)

GROWTH OF INDIAN RETAIL SECTOR

Retail Sector contribution to GDP sector is 8%-10%.

Elasticity of Demand for Luxury and Necessities

3.5 3 2.5 2

Price

1.5 1 0.5 0 0 0.5 1 1.5 2 2.5 3 3.5

Demand

Government Policies

The retail industry in India is growing at a significant pace. However, there are several problems faced by the industry. The major challenges for the organized sector include:

Taxation laws that favor small retailers. Multi-point octroi collection. According to analysts, for this industry to thrive, Indian retailers need to emulate worldwide retail practices such as accuracy in financial reporting, increased levels of corporate governance and greater accountability among employees. Foreign Equity does not go beyond 51 percent. Additions to the product categories to be sold under single brand require fresh govt. approval.

International Retail: At a Glance

3% 8%

2%

9% 38%

13% 27%

USA India

EU Russia

Japan Others

China

Share of Organized Retail

Key Players

USA = US$ 2,350 Bn

UK = US$ 406 Bn

China = US$ 313 Bn

Highly evolved US market has WalMart taking only 8% market share UK market has Tesco with only 13.4% market share China market still does not have a clear leader

SWOT Analysis

Strength
Increasing demand driven by the countrys young working

population

Increase in per capita income which in turn increases the

household consumption

Create win-win situation for all links in value chain (

suppliers, producers, retailers and customers).

Improvement in the standard of living. Technology intensive industry

Weakness
Lack of expertise in Supply Chain Management Inadequate Infrastructure Stringent Labor Laws Lack of specialized professionals in Industry Lack of industry status.

Government Restrictions on FDI

Non-Availability of Government Land.

Opportunities

Change in consumer behavior pattern and increase in disposable income. It is estimated that 15 million people would be engaged in Retail and Retail support activities by 2010 Indian rural markets offer a sea of an opportunity for the retail sector. Upcoming international Players Healthy prospect for the fashion industry.

Threats

Indian taxation system favors small retail business.

Competition from unorganized Sector to the organized Sector. Middle class Psychology.

Increasing Real Estate prices

Factors which the new entrant into retail sector failed to verify

For FMCG giants the proposition of their sales through organized retail remains small Failed to learn from the failures in organized retailing like TVS groups Stop & Shop. Growth rate of small retailers. Trading Inefficiencies which forces the manufactures to increase the price

Cont .

Small retailers can compensate this by personalized services like credit and free home delivery. Unsupportive nature of few manufactures like not printing the bar codes, despite this being so important for retail logistics.

International retailers in India: Strategies

How they are present

Franchise International company gives name and technology to local partner. Gets royalty in return In case master franchise is appointed for region or country, he has right to appoint local franchisees Nike, Pizza Hut, Tommy Hilfiger, Marks and Spencer, Mango Manufacturing Company sets up Indian arm for production Bata India. It also has right to retail in India

International retailers in India: Strategies

How they are present

Distribution International company sets up local distribution office Supply products to Indian retailers to sell Also set up franchised outlets for brand Swarovski, Hugo Boss Wholesale trading Cash and Carry operations 100% FDI permitted Metro Cash n Carry

Why FDI?

Benefits of FDI

Improve competition Develop the market Greater level of exports due to increased sourcing by major players Sourcing by Wal-Mart from China improved multifold after FDI permitted in China Similar increase in sourcing observed for Metro in India Provides access to global markets for Indian producers

Why FDI?

Investment in technology

Benefits of FDI

Cold storage chains solve the perennial problem of wastage Greater investment in the food processing sector technology Better operations in production cycle and distribution Greater level of wages paid by international players usually More product variety Newer product categories Economies of scale to help lower consumer price Increased purchasing capacity of consumers

Better lifestyle

How FDI ?

FDI should be allowed in stages Initial stages: 26% FDI

2 yrs
2 yrs

Establishment Phase: 49% FDI

How FDI ?

Mature Phase: 100% FDI

2 yrs

FDI policy No incentives needed to attract FDI Market size and potential are sufficient inducers No need for costly tax breaks, import duty exemptions, land and power subsidies, and other enticements

Wal-Marts Productivity Loop

Consequences of Wal-Marts Productivity Loop

A.

B.

Step 1: Reduce Costs Squeeze suppliers 1. Extracts producer revenues 2. Relocated manufacturing overseas 3. Increase foreign debts Erodes Wages and Benefits 1. Low wages in a low-wage sector 2. Working off the clock 3. Skimps on benefits, e.g., health care

Consequences of Wal-Marts Productivity Loop

A.

B.

C.

D.

Step 2: Reduce Retail Prices Improves consumer living standards 1. Increases consumer purchasing power Displaces existing retailers 1. Drives out small chains and independent producers Displaces existing suppliers 1. Excludes local businesses from internal Wal-Mart supply systems Triggers retail price wars 1. Pressures industry rivals to imitate its operative behavior 2. Extends to national and global markets

Consequences of Wal-Marts Productivity Loop

Step 3: Increase Sales
A.

Increases efficiency of supply systems 1. Higher sales volume means greater economies of scale Facilitates additional consumer debt

B.

Kishore Biyani and Big Bazaar

Starts with his family business in textile. 1987 he launched frist ready-made trousers brand- Pantaloon. 1992 Pantaloon Fashion went public. Started manufacturing garments under two more brands John Miller and Bare. The business seems unviable due to high distribution cost and margins. 1997 opened his first store at Kolkata.

Cont

Store did a business worth Rs 100 million. 2001 he introduced the hypermarket concept adapted to Indian conditions in the form of Big Bazaar(Mumbai). For further expansion Biyani went for a loan of Rs 1.2 billion. Was able to pull out over1,00,000 people within 1st week of its operation.

Cont .

Gave the Indian customers the feel of local market place narrow lanes, crowded market place and customers bumping into each other and into commodities. He understood that Indian like the hustlebustle of the market place, which gives them a feeling that the goods are sold at a lower price. Exploited the Economics of scale. Tie up with manufactures to bring down the selling price of products.

Cont .

2002 Biyani started Food Bazaar within Big Bazaar. Focused on Farm To Plate concept in Food Bazaar (Farm next to the store). Sold In House products. Used traditional supply chain management. His principle was KIS Keep It Simple; ie not making the operations complex.

CONSUMPTION IDEAS INVESTMENT IDEAS

WHO? FUTURE RETAIL Everyone that constitutes consuming India WHERE? FUTURE SPACES Creating property & public retail infrastructure everywhere in India WHAT? FUTURE BRANDS Identify, mentor, invest and grow INDIA centric brands Plan HOW? FUTURE CAPITAL Property, Brands, Insurance & most importantly easy access to money for consumers

LINE OF BUSINESS

HEALTH, BEAUTY & WELLNESS FINANCIAL PRODUCTS FASHION HOME FOOD COMMUNICATIONS GENERALMERCHANDISE LEISURE &ENTERTAINMENTL

Pantaloon Retail (I) Limited

Fashion Pantaloons 25,000(sq.ft.) Lifestyle(format) Central 1,25,000(sq.ft.) Lifestyle Big Bazaar 50,000(sq.ft.) Value Fashion Station 15,000(sq.ft.) Value

FoodFood Bazaar 10,000(sq.ft.) Lifestyle & Value GMBig Bazaar 50,000(sq.ft.) Value Books & MusicDepot 1,000-6,000(sq.ft.) Lifestyle & Value

Type Health, Beauty & Wellness

Star & Sitara(Beauty Products) 1,0002,000(sq.ft.) Value Star & Sitara(Beauty Salons) 2,500(sq.ft.) Value Health Village 25,000(sq.ft.) Lifestyle & Value Communication :Gen M500-1,000 (sq.ft.) Lifestyle M Port 1,500-2,000(sq.ft.) Lifestyle M Bazaar 250-500(sq.ft.) Value

Electronic Goods & Consumer Appliances E-Zone 12,500 (sq.ft.) Lifestyle Electronics Bazaar 3,000-6,000 (sq.ft.) Value Furniture, Furnishings & Accents Collection I10,000 (sq.ft.) Lifestyle Furniture Bazaar3,000-6,000 (sq.ft.) Value Home Improvement Home Town1,25,000 (sq.ft.) Lifestyle & Value

Restaurants, Leisure & Entertainment Blue Foods (50:50) --Fine Dining Restaurants Galaxy Entertainment (15.73 % stake) Bowling Company 30,000Lifestyle F123-Arcade & Games 7,000-20,000 Lifestyle Sports Bar 2,500 Lifestyle Chamosa 100 Value Footwear Retailing Foot Mart Retail (I) LimitedLiberty Shoes (51:49)Shoe Factory 6,00015,000 Value

Fashion & SportswearPlanet Retail (49:51)Lifestyle KidswearRetailing GJ Future Fashions Limited (50:50) Gini& Jony1,500-5,000Lifestyle Health, Beauty & Wellness :ManipalHealth Systems ManipalCure & Care (50:50)Lifestyle & Value Talwarkars(50:50)

ONLINE RETAIL

Leveraging Future Groups presence across 70% of customers wallet. Objective is to create the experience of 26thJanuary on the net.Futurebazaar.comto focus on deals, gifting and trust. Beta testing underway

Subsidiary

73% HSRIL (Home) 74% FCH (Capital) 100% F/Media (OOH) 100% F/Bazaar (E-Tailing) 100% F/Logistics (SCM) 100% PFP (Sourcing) 100% Pantaloon Food Solutions (F&B)

Joint Ventures

49% Planet Retail 51% Liberty 50% GiniJony 50% Blue Foods 50% Talwalkar 50% Manipal 50% CapitalLand(REIT & MM) 50% Alpha GroupConsolidated

Conclusion

Huge Scope for Development Competitive Market Organized retail is fast growing at a rate of 30% YOY Greater opportunity for employment

Recession Strategy

Offering more & more special discounts. The Great Indian Shopping Festival.