This action might not be possible to undo. Are you sure you want to continue?
May - 2010 INDUSTRY OVERVIEW The Indian retail market, which is the fifth largest retail destination globally, has been ranked as the most attractive emerging market for investment in the retail sector by AT Kearney's eighth annual Global Retail Development Index (GRDI), in 2009. As per a study conducted by the Indian Council for Research on International Economic Relations (ICRIER), the retail sector is expected to contribute to 22 per cent of India's GDP by 2010. With rising consumer demand and greater disposable income, the US$ 400 billion Indian retail sector is clocking an annual growth rate of 30 per cent. It is projected to grow to US$ 700 billion by 2010, according to a report by global consultancy Northbridge Capital. The organised business is expected to be 20 per cent of the total market by then. In 2008, the share of organised retail was 7.5 per cent or US$ 300 million of the total retail market. A McKinsey report, 'The rise of Indian Consumer Market', estimates that the Indian consumer market is likely to grow four times by 2025. Commercial real estate services company, CB Richard Ellis' findings state that India's retail market has moved up to the 39th most preferred retail destination in the world in 2009, up from 44 last year. India continues to be among the most attractive countries for global retailers. Foreign direct investment (FDI) inflows as on September 2009, in single-brand retail trading, stood at approximately US$ 47.43 million, according to the Department of Industrial Policy and Promotion (DIPP). India's overall retail sector is expected to rise to US$ 833 billion by 2013 and to US$ 1.3 trillion by 2018, at a compound annual growth rate (CAGR) of 10 per cent. As a democratic country with high growth rates, consumer spending has risen sharply as the youth population (more than 33 percent of the country is below the age of 15) has seen a significant increase in its disposable income. Consumer spending rose an impressive 75 per cent in the past four years alone. Also, organised retail, which is pegged at around US$ 8.14 billion, is expected to grow at a CAGR of 40 per cent to touch US$ 107 billion by 2013. The organised retail sector, which currently accounts for around 5 per cent of the Indian retail market, is all set to witness maximum number of large format malls and branded retail stores in South India, followed by North, West and the East in the next two years. Tier II cities like Noida, Amritsar, Kochi and Gurgaon, are emerging as the favoured destinations for the retail sector with their huge growth potential.
grow at a CAGR of 42% to reach US $70bn and capture 10.3% of the total retail in India by 2011.
Further, this sector is expected to invest around US$ 503.2 million in retail technology service solutions in the current financial year. This could go further up to US$ 1.26 billion in the next four to five years, at a CAGR of 40 per cent. Moreover, many new apparel brands such as Zara, the fashion label owned by Inditex SA of Spain, UK garment chain Topshop, the Marc Ecko clothing line promoted by the US entrepreneur of the same name and the Japanese casual wear brand Uniqlo are preparing to open outlets in India. Buoyed by improved consumer spending, sales of listed retailers increased by 12 per cent in the September 2009 quarter compared with the same period in 2008. Australia's Retail Food Group is planning to enter the Indian market in 2010. It has ambitious investment plans which aim to clock revenue of US$ 87 million from the country within five years from start of operations. British retail major Marks & Spencer (M&S) is looking at scaling up its India operations and plans to open at least 50 more outlets in the country over the next few years.
Retail chain Suvidhaa Infoserve plans to open 1. A large young working population with median age of 24 years. 'Booming Retail Sector in India'. Pantaloon Retail India (PRIL) is planning to invest US$ 77. POLICY INITIATIVES 100 per cent FDI is allowed in cash-and-carry wholesale formats. multi-storeyed malls and huge complexes offer shopping. Wills Lifestyle plans to expand its operations by opening 100 new stores in the next three years. increasing its total network to 275 stores. Organised retailing of mobile handset and accessories is expected to reach close to US$ 990 million by 2010. Big Bazaar. The Indian population is witnessing a significant change in its demographics. the next phase of growth is expected to come from rural markets. Watch maker. Pantaloon Retail is also looking to hive off its value retail chain. cosmetics and footwear. Timex India. entertainment and food all under one roof. plans to spend US$ 86.5 billion Landmark Group. 100 would be family concept stores.RISE AND SHINE Retailing in India is gradually inching its way toward becoming the next boom industry. Number of shopping malls is expected to increase at a CAGR of more than 18. is looking at increasing its presence in the country by adding another 52 stores by March 2011 at an investment of US$ 1. which would include women and children's wear.9 per cent from 2007 to 2015. . along with increasing working-women population and emerging opportunities in the services sector are going to be the key growth drivers of the organized retail sector in India. Lifestyle International. the third party logistics market is forecasted to reach US$ 20 billion by 2011. It currently has 16 outlets.4 million sq ft retail space at its existing operations. The whole concept of shopping has altered in terms of format and consumer buying behavior. It also plans to concentrate on online buyers.000 strong network in the next two to three years. ushering in a revolution in shopping in India.3 million taking its total store count to 120. At present. part of the Dubai-based US$ 1.62 million to add 100 outlets across the country in two years to sell branded footwear. Driven by the expanding retail market.000-1.400. which may eventually go for an initial public offer (IPO).200 new outlets every month across the country and is eyeing a 100. Reliance Footprint. nuclear families in urban areas.Koutons Retail India plans to open 200 stores in FY11 in addition to its existing 1. Rural market is projected to dominate the retail industry landscape in India by 2012 with total market share of above 50%. plans to have over 50 stores across India by 2012–13. the Mumbai-based firm has 18. INDIAN ORGANISED RETAIL . part of Reliance Retail. The Indian retailing sector is at an inflexion point where the growth of organized retailing and growth in the consumption by the Indian population is going to take a higher growth trajectory. besides 15 Home Centres that sell home furnishing goods.88 million this fiscal to add up to 2. According to a new market research report by RNCOS titled.000 convenient neighbourhood stores called 'Suvidhaa Point' across the country in over 20 states and over 400 cities. These will include 35 Lifestyle stores for retailing apparel. Franchisee arrangements are also permitted in retail trade. into a separate subsidiary. organised retail market in India is expected to reach US$ 50 billion by 2011. ROAD AHEAD According to industry experts. PRIL proposes to open 155 Big Bazaar stores by 2014. Modern retail has entered India as seen in sprawling shopping centres. 51 per cent FDI is allowed in single-brand retailing. Of the 200 stores.
the Retail industry. they can get customers. constituting roughly 13 per cent of the total retail market.300 crore) has overtaken jewellery (Rs 69.5 per cent share. driving higher consumption and consequently. with a 5. there is lot of room for the Indian organised Retail segment to grow. India is the fourth largest economy and is all set to become the third largest by 2013.It was argued that the best period for Retail in India will be between 2009-13. The organised retail is set to grow at 40% hereon to touch US $70bn and capture around 10. The game has just begun for organised retail in India. and organised retail market share would reach 10%. Apparel and fashion accessories is the largest category with 38.400 crore) to become the third largest retail category.000 crore in 2007 with annual growth of about 10.9 per cent share at Rs 131. Interestingly. the share of organised Retail in 2007 was estimated to be only 5.5 per cent of the organised retail market at Rs 9. Though the global economy is witnessing a slowdown. followed by clothing and accessories with a 9.5% p.000 crore). Currently.000 crore .30. valued at Rs 29.000 crore.300 crore.500 crore) is the fifth largest retail category followed by health and pharmaceuticals (Rs 48. furnishings & Kitchenware retail in the order.400 crore). which means that organised retail would be twice as big as the size of the Mobile Telecom industry in India.9 per cent. especially in view of the fact that major global players and Indian corporate houses are seen entering the fray in a big way. with the economy now expected to maintain its growth at over 8 to 9 per cent and average salaries being hiked by about 15 per cent.800 crore.100 crore). consumer durables with 9. furnishings & kitchenware (Rs 45. footwear with 9.750 crore. Industry experts also highlighted that organised retail in India is booming and is set to grow at 42% to touch US $70bn by 2011.000 crore (at constant prices) by 2010.330.44bn Indian organised Retail sector is still at a nascent stage with barely 5% share in the total retail market. out-of-home food (catering) services (Rs 71. furniture.500 crore). Thus. which was Rs 78.9 per cent of the organised retail market share at Rs 7. Brazil (36%).600 crore). In the overall retail pie food and grocery was the dominant category with 59.600 crore) and timewear and eyewear (Rs 4. there will be lot more consumption. The Indian market is becoming bolder by the day.4 per cent market share – this largely reflects the massive employment opportunities to youngsters in the services sector and accompanying changes in consumer lifestyles.200 crore).. It is estimated that there would be around 300 million middle class consumers in India by 2013. followed by food and grocery accounting for 11. footwear (Rs16. the picture is different altogether. organised retail captures about 52% of total retail sales with developed nations like the US. On a global platform.a. Consumer durables (Rs 57. The $25.8 per cent.4 per cent in 2007. mobiles and accessories (Rs 27.1 per cent of the market share. the lowest compared to peers in the BRIC countries viz. the presence of the global players will not impact the domestic players too much as size of the Retail industry is set to grow. Hence. if Retailers play their cards right. leisure retail (Rs 16. when the Retail industry will expand and consolidation would set in with most of the top global retailers having a presence in India. But this modern retail segment grew at the rate of 42. and is expected to maintain a faster growth rate over the next three years. Russia (33%) and China (20%). UK..1 per cent market share at the fourth place (Rs 7. The consumer spending is ultimately pushing the economy into a growth-and-liberalisation mode. Of this. Moreover. which would reach 24% by 2025. In the organised retail segment. Total retail sales in India are estimated to grow at a CAGR of 10% to $680bn by the end of 2011 increasing from to $511bn at the end of 2008.800 crore). Germany and France constituting 80% or more of total Retail sales. health and beauty care services (Rs 4. leaving Japan behind. Even at the going rate. . valued at Rs 792. GLIMPSES FROM INDIA RETAIL REPORT As per the Images F&R Research estimates for India Retail Report the Indian Retail market stood at Rs 1. entertainment (Rs 45.400 crore) in the order. Also argued that the Indian market is unlike the US where the market is already saturated. organised retail is expected to touch Rs 2. the Indian economy is set to grow at 7.300 crore. make profits and all concerned in the entire value chain can grow by leaps and bounds.3% of the total Indian Retail industry market share by the end of 2011. and out-of-home food (catering) services and furniture.
the overall food & grocery retail market grew slightly higher at 2.9 per cent in 2006. Growth in the health and beauty care category has been remarkable in 2007.9 per cent in 2007.3 per cent in 2007 as compared to a 2. The second fastest growing organised retail category is that of entertainment (53.6%) over the previous year. growth in organised retail was higher in 2007 (16. the overall market growth was higher in 2007 (9. the fastest growth was recorded in the tiny heath & beauty care services category (Rs 660 crore).8%). At constant prices.1% respectively) as compared to 2007 (37% and 25%). The organised segment also grew faster at 29. the other two prominent categories being out-of-home food (catering) services where growth was 25.1 per cent of the total food & grocery retail market. both of which achieved 55. though the organised segment growth in 2007 (57.9%) and footwear (48.000 crore. pharmaceuticals and specialised clinical services – all at one place. Another category that merits special mention is furnishings and furniture retail. Popularity of mobile phones is to a large extent responsible for the dampening of the overall market growth in this category while the renewed enthusiasm in the organised segment is on account of the fillip from luxury brands and offerings that are positioned more as a hi-end lifestyle statement than on the functionality aspect of the product.1 per cent in the previous year. have been consistently positive since 2004: while the overall market grew 12. growth in the fashion & accessories retail category. followed by the mobile phones & accessories and the food & grocery retail categories.3 per cent growth. both in the overall market and the organised retail segment.2 per cent growth in 2007.4%) are the most organised of all retail categories.5 per cent. Valued at Rs 9. Footwear retail.500 crore category calls for better attention from organised players. this organised market constitutes barely 1.2 per cent annual growth in the previous two years. But the organised retail segment in this category is simmering in the true sense – a 50 per cent growth in 2007 as compared to 42. The overall market growth in the timewear category has declined from 10. where the overall market grew at seven per cent in 2007 as compared to just 3.7 per cent in 2007 as compared to 23. At constant prices.4 per cent respectively for the two years.2%) but growth in organised retail was slightly at a lower pace in 2007 (31%) as compared to the previous year. has grown faster year after year but growth in 2007 was especially remarkable: the overall market grew 12 per cent in 2007 as against a 9. The demand is stupendous but organised players have hardly much to boast of in terms of innovative concepts and global standards when it comes to providing the customers with an experience that is superior and radically different from what the unorganised segment offers.7 per cent in 2006 and further down to 8. The global brands have actually turned the heat on.7 per cent in 2005 to 9. the overall market as well as its organised segment. A closer study of the retail growth story at constant prices shows that in both these categories growth of organised retail was higher in 2006 (41. which grew at the rate of 65 per cent in 2007 over the previous year – again a reflection of rise in services sector employment that demands proper grooming.7% and 26.2 per cent in 2006 – thanks to the housing sector boom.3%) categories was utilised by the unorganised retailers because organised players could not keep up to the desired growth momentum. Much of the stupendous growth opportunity in catering services (25. This category needs to be positioned as a “wellness” category that provides individualised services to customers with synergies of health & beauty care.1%). and lot more fireworks can be expected this year and the years ahead.7 per cent of the market. the organised segment grew 35. Consumer durables and the mobile phone & accessories categories have both grown faster in 2007 as compared to 2006.8 per cent in 2007. Apparel and fashion accessories retail comes next with the organised segment controlling 22. .3 per cent and 36.2 per cent growth in 2006 while the organised segment grew 42.Timewear (48. however.6%) as compared to the previous year (9.5%) was slightly lower as compared to 2006 (59. music & gifts leisure category which achieved 23.6%) as compared to 2006 (14.In jewellery retail. but this Rs 45. and the domestic brands too appear to have accepted the challenge in the true spirit.1 per cent and books. In the organised retail segment.1%) and leisure retail (23.8%). However.The mobile & accessories retail market has shown fastest growth in 2007 (25.
India was compared with its arch rival China on the Four P's . which led to higher profits and better standards of living in China. health & beauty care services. entertainment. home solutions. 5. According to analysts. 7. book and music retail chain. China is moving faster but the marginal increase of the total effect in India is more than the marginal increase in China at this point of time. The major challenges for the organized sector include: Taxation laws that favor small retailers. and Rs 100 crores on Citymax 3 star hotel chain. Indian retailers need to emulate worldwide retail practices such as accuracy in financial reporting. Problems of supply chain and logistics. Pantaloon Retail has 450 stores across the country and revenue of over Rs.'politics' which is hampering the growth of retail industry due to inept policies. 2. Trouser Town. e-tailing. The company has investment plans to the tune of Rs 8000 – 9000 crores till 2010.A CHALLENGE The retail industry in India is growing at a significant pace. INDIA. REI Six Ten Retail Limited Landmark Group invested Rs. 20 billion and is expected to touch 30 million by 2010. in order to aid growth of the Retail industry in India. Segments include Food & grocery.000 crores ($20 billion) by 2009-10. Different structure of sales tax in different states. 6. and revise policies pertaining to FDI. consumer electronics. Multi-point octroi collection. Louis Phillipe. India needs to circumvent challenges that come in form of these 4Ps that China was able to do. for this industry to thrive. Westside. it operates lifestyle retail chain. shoes. Retailers need to use the latest techniques to enhance the consumer's shopping experience. they have multiple formats and their sale is expected to be Rs 90. undoubtedly. Limited land available at prime locations. Trent is a subsidiary of the Tata group. CHINA .75 billion which is expected to cross US$100 million mark by 2010. books. Industry experts also discussed whether central and state governments could be more flexible in easing the taxes imposed on the retailers. music & gifts. increased levels of corporate governance and greater accountability among employees. Van Heusen and Peter England.KEY PLAYERS IN INDIAN RETAIL SECTOR AV Birla Group has a strong presence in apparel retail and owns renowned brands like Allen Solly. music and gifts. consumer electronic chain etc.NEW ARCH RIVALS? The Indian organized retail segment is currently growing faster than the retail revolution in China. the lifestyle retail chain registered a turnover of Rs 3. Reliance has more than 300 Reliance Fresh stores. If retail growth is compared in the two countries. K Raheja Corp Group has a turnover of Rs 6. 4. there are several problems faced by the industry. Segments include books. entertainment etc.India has long been . apparel. development issues of 'property' and supply of 'products'. SECTOR KEY PLAYERS Binayak Tex Processors Limited Store One Retail India Limited Shopper`s Stop Limited Pantaloon Retail (India) Limited Trent Limited Vishal Retail Limited Brandhouse Retails Limited 8. RETAIL IN INDIA . However. Lifestyle International is their international brand business. High cost of real estate. 300 crores to expand Max chain. cost of retention and hiring of good talented 'people'. Lack of trained workforce. 3.58 mn in 2006 1.
modernizing the supply chain and increasing product categories. Australia's Retail Food Group is planning to enter the Indian market in 2010. a division of Landmark Group. In China. the company has recorded a net profit of US$ 1. retail growth was led by the big cities and coastal areas while interiors are still devoid of it. Shoppers Stop has plans to invest Rs250 crore to open 15 new supermarkets in the coming three years. THE ROAD AHEAD Industry experts predict that the next phase of growth in the retail sector will emerge from the rural markets.4 million sq ft retail space. PRIL intends to set up 155 Big Bazaar stores by 2014. plans to have more than 50 stores across India by 2012–13. In India. It is firmly believed that if China can manage such growth. By 2012 the rural retail market is projected to have a total of more than 50 per cent market share.compared with China on almost every aspect of the growth story.88 million this fiscal to add up to existing 2. Recently. However. According to market research report by RNCOS the Indian organized retail market is estimated to reach US$ 50 billion by 2011. FUTURE TRENDS Lifestyle International. In 20 years they expect the India operations to be larger than the Australia operations. From there. has been welcomed by the industry.3 million taking its total store count to 120.2 million. RETAIL AND RECESSION The global economic slump has had its impact on the India retail sector.which are currently taking the franchisee route to open more stores in the country. India believes in inclusive growth by simultaneously developing smaller towns along with big cities. It has plans to clock US$ 87 million revenue in five years. Key takeaways from China included opening up the Retail sector. the government decided to allow 51 per cent FDI in single-brand retailing which. non-mortgage consumer debt is roughly 5% of GDP compared to 2% in China. . 2009. it should be borne in mind that the path to retail growth in India and China is different. The limited foreign direct investment allowed by the government in the retail industry will not have much impact on the Big Bazaars and Shopper's Stops but it will allow luxury brands like Marks & Spencer.9 per cent by 2015. raising its total network to 275 stores. India's private financial sector is better developed than in China and more geared towards meeting the needs of consumers than China's industry-oriented banking system. But. However. Timex India will open another 52 stores by March 2011 at an investment of US$ 1. most are of the view that its impact will be largely limited to attracting more luxury brands. Vishal Retail secured corporate debt restructuring (CDR) plan from its lenders while other players like the Reliance Retail run by Mukesh Ambani and Pantaloon led Kishore Biyani by went slow on expansion plans and even scaled down operations. during the last quarter a bit of confidence was restored as the economy showed signs of growth. The total number of shopping malls is expected to expand at a compound annual growth rate of over 18. In the first six months of the current fiscal ending September 30. the situation would improve as and when the sector reforms are ushered in and India gradually lifts FDI restrictions on the sector. Another important factor aiding growth of Indian organised Retail when compared to China is that Indian consumers benefit from a sizable market for consumer credit. it took China 16 years to increase the share of organised Retail to 20%. Louis Vuitton or Versace . India definitely has the potential to grow faster. Pantaloon Retail India (PRIL) plans to invest US$ 77. We believe that India is currently at a crossroad similar to where China was during 1992-96. One of the earliest players in the Indian retail scenario Subhiksha's operations came to a near standstill and required liquidity injection. Lastly.
The views expressed are those of analyst and the Company may or may not subscribe to all the views expressed therein. The intent of this document is not in recommendary nature. Amit Gupta Ms. in the United States or Canada or distributed or redistributed in Japan or to any resident thereof. which is already available in publicly accessible media or developed through analysis of Inter-Connected Stock Exchange of India Limited. no representation or warranty. . and persons into whose possession this document comes should inform themselves about. Canada. and nothing in this document should be construed as an advice to buy or sell or solicitation to buy or sell the securities of companies referred to in this document. for any purpose. in whole or in part. directly or indirectly. to any other person or published. or Japan or distributed. Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document (including the merits and risks involved). redistributed or passed on. and should consult its own advisors to determine the merits and risks of such an investment.com binalv@iseindia. special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information. effect or have effected an own account transaction in. directly or indirectly. This document is being supplied to you solely for your information and may not be reproduced. their directors and the employees may from time to time. any such restrictions. express or implied. completeness or fairness of the information and opinions contained in this document. is made as to the accuracy. and observe. Binal Vora Ms.com Disclosure by the Analyst: Analyst holding in the stock: Nil. Nothing in this document should be construed as investment or financial advice. agents or representatives shall be liable for any damages whether direct or indirect. DISCLAIMER: This document is provided for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. Accordingly. employees. This information is subject to change without any prior notice. This report has been prepared on the basis of information. The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and should not be treated as endorsement of the views expressed in the report. copied.S. The investment discussed or views expressed may not be suitable for all investors. not its directors. or deal as principal or agent in or for the securities mentioned in this document. Sandhya Tungatkar RESEARCH TEAM amitg@iseindia.Persons). incidental. The distribution of this document in other jurisdictions may be restricted by law. InterConnected Stock Exchange of India Limited its affiliates. The Company reserves the right to make modifications and alternations to this statement as may be required from time to time without any prior approval. Neither this document nor any copy of it may be taken or transmitted into the United State (to U. Inter-Connected Stock Exchange of India Limited has not independently verified all the information given in this document.Mr. Neither the Firm.com Sandhyat@iseindia.
This action might not be possible to undo. Are you sure you want to continue?
We've moved you to where you read on your other device.
Get the full title to continue reading from where you left off, or restart the preview.