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Section C, Group 3
The Indian Retail Story: ............................................................................................................... 3 Porter’s Five Forces Model For The Indian Retail Industry: ........................................... 5 Future Group: .................................................................................................................................. 6 SWOT Analysis Of The Future Group: ...................................................................................... 8 BCG Matrix: ....................................................................................................................................... 9 GE Matrix: ........................................................................................................................................ 13 Linking competitive strategy to portfolio: ........................................................................... 19 Recommendations: ...................................................................................................................... 20 References: ..................................................................................................................................... 21
The retail industry is one of the largest sectors with a market size of USD 425 million and a CAGR of 6.8 since ’98. The organized retail penetration is around 6% and has a growth potential of around 20% by 2020. The apparel segment claims the largest segment in the retail pie followed by food and grocery. Beauty and health segment brings up the rear. There is huge potential as far as organized retail is concerned and the economic projections suggest a double-‐digit growth in this sector. The grocery segment is by far the most attractive in the world and it is said that hypermarkets would have the largest share of retail space in the years to come. If we look at PEST analysis of the nation, India has huge market potential, moderate economic and political risk. The net sale is also high; India ranks third after China and Brazil. The journey of Indian Retail in India began in pre-‐ 1990s when manufacturers began to open their own outlets to serve customers. Then came the early 90s when retailers began to understand the extent of untapped potential for the market in the country and the base was apparel segment. This was the scenario for 15 years till investments began to be made in this industry by corporate and food and general merchandise category found prominence. The existing players went for a repositioning strategy to target a wider market. The status quo is basically intense rivalry among local players, competition from the international arena, a few players producing bulk of revenue and expansion into the rural areas. Breakup Of The Retail Pie:
As we can see from the retail pie chart above, textiles occupy the major share of revenues in the retail segment with a share of as much as 38.10%. Food follows next
with a market share of 11.50%. Consumer durables, footwear are also major segments in the retail sector. Health and beauty brings in least in terms of revenues with a share of 0.8%.
EXCLUSIVE BRAND RETAIL SHOPS
EXCLUSIVE BRAND RETAIL SHOPS
CONVERGENCE RETAIL OUTLETS
As we can see from the retail pie chart above, textiles occupy the major share of revenues in the retail segment with a share of as much as 38.10%. Food follows next with a market share of 11.50%. Consumer durables, footwear are also major segments in the retail sector. Health and beauty brings in least in terms of revenues with a share of 0.8%. Mono or exclusive brand retail shops are manufacturer owned or franchised out, for a given brand all the product variants are available. Multi branded retail shops have many brands available and range of products for each brand and customers have a lot of choice in this case to select from a wide range of products and brands. Convergence retail outlets are more of a one-‐stop shop for customers and carries products ranging from consumer to electronic products spanning IT and communication. Further segregation of retail can be made as under: -‐ Departmental stores: -‐ Major players under this category are Pantaloons, Shopper’s Stop and Reliance Retail. Hypermarkets: -‐ Pantaloons is again the clear leader in this category with 145 Big Bazaar stores followed by Spencer’s, Aditya Birla Retail etc. Supermarkets: -‐ Prominent players are Aditya Birla Retail with more than 500 stores and Reliance Fresh, KB Fair Price Shop etc. Specialty Stores: -‐ Titan has the lion’s share in this segment. Cash and Carry Stores: -‐ The pioneer in this segment was Metro operating in the tier-‐1 cities, Bharti Wal-‐Mart has followed suit with its first store being set up in Punjab. Most of the retailers in India have adopted strategies for sales maximization. They have cashed in on the price sensitivity of customers in order to do so. Discounts: -‐ Off-‐season sales are common and a major factor for attracting customers and bolstering sales. Dip in Prices: -‐ a sort of price was among competitors by offering a best price without any markdowns.
Value added Services: -‐ innovative ideas like happy hours while shopping which target the consumer psyche are gaining popularity Partnerships: -‐ tie-‐ups with service providers; a manufacturer etc. to ensure attention a product gets is converted to purchase. Factors that have helped retail grow in India are the rising purchasing power among consumers and growing awareness and brand consciousness, availability of credit at easy terms and increase in consumer class. If we were to look at foreign investments in retail in India, as part of liberalization, 51% FDI was allowed in retail in ’91 and extended to single brand retail in ’06. A landmark decision is pending with the awaited approval of 100% FDI in multi brand retailing which may a major impact on the local retailers. If we look from the tax structure point of view, CST has made way for GST; removal of excise duty would lead to better cash flows; from consumers’ point of view, goods would be available at lower costs. Tax reduction on goods purchased for resale would significantly reduce the inventory costs of distribution. The supply chain would get revamped with tax applications at all points.
Rivalry among competitors is moderate with limited number of competing firms, similar size of the players and the high growth rate. Threat of new entrants is moderate to high with international players entering the market and domestic giants looking to start retail chains. Organized retail is at a nascent stage and attempts are being made to increase its proportion to 9-‐10% which presents an opportunity for new players. New layers bring in new capacity; desire to gain market share and substantial resources. The barriers to entry are in the form of government regulations regarding FDI limiting foreign investments. An additional barrier is the difficulty to achieve economies of scale given the diverse nature and size of the market. Small players may be barred from entering this market due to lack of experience and resources. Financially strong retailers can avoid barriers to a large extent. The economies of scales achieved by existing players are moderate. The switching costs aren’t high; there is no particular cost advantage to incumbents. The product differentiation isn’t high and there is expected retaliation from the existing players in the industry. The accumulated capital investments required are moderate. Bargaining power of suppliers is low with large number of suppliers with undifferentiated products. In addition, some of them are willing to integrate forward. The substitute for suppliers is moderate, switching costs are moderate, low threat of forward integration and supplier products are differentiated. Bargaining power of buyers as individuals is less, propensity to pay is low, but buyers are price sensitive, so as whole, if high quality goods were demanded at affordable prices, the retailers would have to oblige. As there is no high buyer concentration, the products are undifferentiated. Though there is no threat of buyers going for backward integration, buyers have full information, which makes meeting the buyer needs a difficult task. Threat of substitutes is high with the possibility of finding a similar item in another store. Another source of threat could be from the unorganized retail segment where cheaper versions of the product are available. Unorganized retail caters to the needs of both the middle income and the bottom of pyramid group, thus gaining lot of importance. Only few can afford real luxury items; so threat from this sector is very high. The Porter’s analysis shows that the retail industry is one of the most fragmented industries with only 6% organized retail which means there is almost 94% of market yet to be explored. Since India is a cost driven market, retailers are required to bring in cost efficiency to improve their processes to gain market share. Consumer protection laws are very strong in India, which gives advantage to the buyer. In areas where retailers are concentrated, the rivalry is strong; where it is fragmented, inter firm rivalry isn’t that high. On the whole, the Indian retail Industry is attractive.
Future Group is one of the biggest retail players in India with its business in retail such as Pantaloons, Big Bazaar, Food Bazaar, Ezone, Home Town, and Central etc. Future group
employs about 35,000 employees and about 220 million customers walk in to their stores every year. Their business is mainly classified into Lifestyle retail, Value retail, and Digital. Home/Furniture/Electronics: Home Town: This comes under the home furnishing category of the retail industry. These stores sell furniture, bath and sanitary ware, modular kitchens, electronics, electrical, furnishing and accessories etc. They also provide service of skilled technicians. Ezone: These stores are typically of size 12000sq feet. All kinds of latest electronic instruments are available here at best prices. The Liberation Zone offers personal products like computers, laptops, handy cams, MP 3 players and mobile phones. Entertainment products such as Plasma / LCD, Flat TVs, Home Theatre systems, DVD players, and Stereo systems are displayed in the Experience Zone. In the Home Zone segment, one gets to pick electronic goods of his or her choice including Refrigerators, Air-Conditioners. Fashion/Apparel: Pantaloons: This retail store of Future Group where cosmetics and apparels of different brands including their private labels are sold. Pantaloons’ is the market leader in apparel retail. Apparels of different kinds such as men’s wear, women’s wear, kid’s wear, and spouts wear are available. Pantaloons’ is present in almost all large cities of India. Central: This is the first of its kind type of mall launched in 2004 in India. This shopping mall has every kind of thing that a customer needs. It has apparels, cosmetics, food courts, dining restaurants, multiplex theaters, gaming zones etc. It is like a fun club and shopping mall at the same time. Brand Factory: It is the place where all kinds of apparel brands are brought together and are sold at attractive prices and discounts. These stores are fully air conditioned with a size varying of about 70,000sq feet to 150,000 sq feet. These stores are present in all big cities of the country. These stores offer a peculiar type of shopping named brand plus bargain kind of shopping. Planet Sports: These stores have all kinds of sportswear and equipment. These stores are the India’s largest multi-brand sports and lifestyle brands. It is one of the most preferred destinations for sports lovers as well as avid sports professionals; Planet Sports has become a one-stop destination for the latest global trends in the sports and lifestyle segment. Big Bazaar: Big bazaar is one of the largest hypermarkets, which caters every need of a customer. Every kind of retail item is available in these stores. Normally these stores are the largest in size when compared all others stores in the Future group portfolio. Apparels, sports equipment, stationery, home decorating materials etc. are available at best prices. Mostly 70% of the products sold here are their private label brands. Electronics/Ecommerce: Future Bazaar: In e-commerce business Future Group has an online shopping website called futurebazaar.com. All kinds of retail items are sold here. The business from this category is very less but it is growing very well in pace with the e-commerce growth.
Food/Grocery: Food Bazaar: Food Bazaar is the largest player in food category of retail industry. In these stores, food grains, packaged food, fruits etc. are sold at low prices. The qualities of products that are sold are very high. The procurement process is very difficult for these stores. These are second largest in store space next to Big Bazaar. Fairprice: KB’s Fair Price are neighborhood stores spread across an average area of 1,000 to 1,500 sq. ft. These are simple but modern, self-service ration shops. These stores retail only 300 essential products at simply the lowest prices in town. These are no frills stores and are not air-conditioned.
SWOT Analysis Of The Future Group:
SWOT analysis for a particular business gives us the main strengths and weakness of the firm and lets us to analyze the situation and increase our opportunity to improve. The following diagram briefly describes the quick SWOT analysis of the Future Group.
• Pantaloon dominant player • Acquisitions • Balanced portfolio • Brilliant value chain
• Non retail portfolio is still part of the group
• Private label • Stay at home • Growth of Indian retail
• Food Indlation • Lease rentals • Intense Competiition
STRENGTHS: Future group is a well-known player in the retail industry. The industry is well dominated by this group to a great extent. Pantaloon, which is a part of future group, is a market leader in the retail industry. It is very well established and strong player. Also this group is very good in acquisitions, which are constantly increasing their strength. The Future Group is in different parts of retail such as apparels, food, home furnishing and even electronics and e 8
commerce business. This diversified portfolio of business, which they are holding, is helping them in fighting the business and market risk in each segment. They have great learning and experience curve and so they have a very good value chain and supply chain procedures, which are really hard for the competitors to copy. WEAKNESS: Their e-commerce business is still very small and its growth is also being very slow. There is not much presence of the futurebazaar in online market place. Still ebay and flipkart are doing better in these segments. The presence of Future Group in non-retail segments like financial services is also weakness as they are not able to do so well in this segment. These non-retail parts are not so much useful for the Future Group to diversify their market risk. These weak links require more allocation of the company’s resources. OPPORTUNITIES: The name retail itself indicates the meaning of huge opportunity and growth. In a country like India where there is a high growth in population and rapid change in people’s life style and income levels, retail in India gives huge opportunity for growth and innovative products. Future Group can still work and improve on their private label brands. Private label brands, which they sell, are relatively cheap when compared to its competitors. They can introduce more and more private labels in the market, as price consciousness is high among Indian consumers. This will give them huge extra profits. They also have a great opportunity in developing their e-business, which they do through futurebazaar. The use of Internet is growing in India at a rapid growth and the willingness of the customer to buy a product through Internet has grown to a high point and is still growing above. So pushing the customers for e-commerce will increase their sales to a great extent and increase the profit many fold, as the transaction cost is very less in e-commerce business. THREATS: As the industry is growing there is always the threat of competition and there are always threats from the market environment such as inflation and recession. Food segment is one of the segments, which is facing these problems. The prices of items like fruits, grains and onions are increasing day by day which is decreasing the competitive advantage of Future Group (Big Bazaar) against its competitors. There are also a lot of competitors from local vendors in food category and it’s growing. Portfolio Analysis:
Due to the lack of data about the various store formats, we look at Future Group’s business as fourfold 1. Home, which includes furniture and Ezone 2. Electronic, which is their E-commerce business 3. Apparel 4. Food 9
To come up with the BCG growth-share matrix, the relative market shares and market growth rates for each of the businesses were taken and rated on a scale of 1-10. SBU/CATEGORY HOME ELECTRONIC GROWTH RATE 17.5%(7) 18.4%(8) MARKET SHARE 11% 1.6% 25% 30% RANKING MS 1 6 1 1 RS SALES/ SQFT 5850 10425 17975 19950
APPAREL/FASHIION 10.4%(4) FOOD/GROCERY 11.5%(5)
The sizes of the bubbles are indicative of the sales/sqft in rupees. Growth rate: The home business, which includes furniture and consumer durables, is one of the fastest growing segments in India. The market is highly fragmented and has a lot of opportunity. It gets a rating of 7/10.The E-commerce business has huge growth prospects and is one of the fastest growth sectors making up the Indian retail pie. It is still constrained by the lack of Internet penetration in India and so gets a rating of 8/10. The Apparel fashion has huge market size but has been around for a long time. The growth rate is respectable but less than home or electronic. So, it gets a rating of 4/10. The Food grocery business has the same behavior as apparel and gets a rating of 5/10. Relative market share: The home segment is highly fragmented but future group has the market share amongst the competition, which gives it the rating of 9/10. In the E-commerce space the company is doing ok but has a lot of scope for improvement. They have an abysmal market share and are ranked 6th overall. This gives them a rating of 5/10. In the apparel category because of there huge size they are the market leaders with a market share of 25%. This gives them a rating of 10 w.r.t to the competition. They are the kings of the food category with a market share of 30%. The competition is catching up and so they get a rating of 9/10. This completes the X and Y-axis for the BCG matrix. Sales/Sqft: The food business has the maximum sales/Sqft and hence has the biggest radius. Then comes the apparel business, which is also generating a lot of cash per square feet. The third largest circle is the E-commerce business followed by the home business.
Dogs: Fortunately for Future Group there are no dogs in their portfolio. They had forayed into books and music (depot). Lack of opportunities forced them to deprioritize this business.
Question marks: The E-commerce business has the highest potential for growth. Future group should ake this a high priority sector and make it a star. With the Indian retail sector space would be a huge issue in the future. This category is highly fragmented with a variety of players operating in a myriad of categories. Future group is doing the right thing by investing in this space. Mr. Kishore Biyani talks about E-commerce being the next big thing to hit the retail sector. They have implemented nuFuture Connected Commerce, which they hope, would help them make E-commerce a mainstay of their business. It has the potential to contribute over 15% to the business. They want to increase their market share to 15% and create a digital backbone that will run seamlessly across every facet of daily Indian life. Transformations have started happening on the futurebazaar.com, which includes increasing the number of SKUs. They have also experimented with Chaupati, a phone-based commerce start-up and One Mobile: an e-commerce format for mobile phones. Stars: The Home segment is their star. The sector has huge growth potential and Future group is trying its best to convert it into a star by investing a lot in different store formats. Between now and 2014, an estimated 360000 families would have moved into a new house in one of the hundreds of modern residential complexes that are coming up in the key 12 urban areas in the country spending close to Rs.18000 Crores. This would be the growth driver for the sector. Future group plans to cater to different clusters right from consumers who are looking for furniture to people looking for end-to-end solutions. They have invested in a lot of store formats; Home Town, their flagship stores are spread across 1.15million Sqft. This caters to furniture needs. Home Town Express: close to the city, follows the CCD express model. HT Design & Build, end-to-end consulting services. They have also started to collaborate with developers to furnish homes (example: Lavasa). On the consumer durables side of the business they have increased the number of SKUs and floor space to capture the market. The success of their e-commerce platform would increase their market penetration. Food: Future group is the king of this category. This cash cow would help them invest in other sectors and help them diversify and build other businesses. The highest proportion of sales comes from this business. They have to milk the cow and maintain their market position. They have decided to invest in their store formats and increase the presence of existing formats. Future Group looks at India as India-1 and India-2. India-1 is a customer who shops for something that’s up in the value chain and has more money to spend on aspirational products. India-2 is the customer who shops at the local grocer. They have opened 26 new food bazaar outlets for India-1 where they would be upgrading the product portfolio in tune with the growing aspirations of the Indian Bourgeois. For India-2 they have opened 214 KB’s fairprice, which are no frill stores like local unorganized sector outlets. On the supply chain they have specialized subsidiaries for procurement and a Wal-Mart kind of food distribution center. They have also experimented with Food hall, which caters to the elite connoisseur. They are braising themselves for the entry of foreign players and to protect their market share. Apparel: This sector is of utmost importance to the Future Group. It has a lion’s share of the market because of the diverse portfolio of formats. They have formats like Pantaloons,
Central, and Big Bazaar, Ethnicity etcetera. Pantaloons focuses on their in house brands while Central is higher up the ladder. Brand factory is their format based on the discount store model. They are investing a lot to hold on to their market position and are reaping the benefits. This business has the highest floor space allotted to it. They have increased focus on in store brands to drive margins up. One of the major problems with this segment is the volatility in cotton prices. Due to the space crunch they are trying to move to an e-commerce platform. With increasing presence they would be able to arm-twist national brands like WalMart does in the foreign markets. They have introduced a lot of loyalty programs to hold on to consumer and milk the cow.
Industry attractiveness: The parameters on which we measured the Industry attractiveness and their relative weightages are given below. INDUSTRY ATTRACTIVENESS MARKET SIZE MARKET GROWTH RATE INDUSTRY PM AMOUNT OF COMPETITION PRIVATE LABEL ACCEPTABILITY SUPPLY CHAIN REQUIREMENTS WEIGHTAGE 0.3 0.2 0.2 0.1 0.1 0.1
The weights were assigned based on the relative importance of the parameter for the industry. ATTRACTIVENESS RATINGS 1 Extremely Unattractive 5 Industry Average 9 Extremely Attractive Market size: WEIGHTAGE HOME ELECTRONIC APPAREL/FASHION MARK ET SIZE 0.3 7 $5.4 Billion 6 $4.5 Billion 8 $9.1 Billion FOOD 9 306.1 billion
Market growth rate: WEIGHTAGE HOME ELECTRONIC APPAREL/FASHION GROW 0.2 8 8 6 FOOD 7 13
TH RATE Industry profit margin:
WEI HOME GHT AGE 0.2 8 10%- consumer durables 35+ furniture
ELECTRONIC APPAREL/FASHION 4 8% 8 35-40%
FOOD 6 15-17%
Amount of competition WEIGHTAGE HOME ELECTRONIC APPAREL/FASHION Amount of Compet ition 0.1 4 4 3 FOOD 5
The ratings have been given of these parameters. The Home market is highly fragmented with a number of small players also offering discounts. The E-commerce business is one of the most competitive spaces to be in with a lot of players. The competition in the Apparel segment is the most intense with a number of players fighting for consumers. The competition in the food segment is not as severe as the apparel segment. Private label acceptability: WEIGHTAGE HOME ELECTRONIC APPAREL/FASHION Private label 0.1 7 5 8 FOOD 7
The ratings have been given of these parameters. Consumers are willing to accept in house brands when it comes to food and apparel. They might not buy products online if it’s not from a reputed brand. The home segment is all about private labels. Supply chain requirements: WEIGHTAGE HOME ELECTRONIC APPAREL/FASHION Supply chain require ment 0.1 6 9 7 FOOD 4
The ratings have been given of these parameters. The Supply chain requirements of food segment are high, as it has to pass through the government system and FMCG distribution chains. Hence, attractiveness is low. The E-commerce system doesn’t have may supply chain distribution requirements compared to the other segments. So, based on this parameter we can safely assume that the attractiveness is high. The apparel segment doesn’t impose too many restrictions on the Supply chain and so has a decent rating. The Home segment is dependent on skilled labour manufacturing furniture, which is a little tough on the supply chain. But, the consumer durables market makes up for it. It gets a rating of 6. The final index value and size of SBUs in given below. INDUSTRY ATTRACTIVENESS MARKET SIZE MARKET GROWTH RATE INDUSTRY PM AMOUNT OF COMPETITION PRIVATE LABEL ACCEPTABILITY SUPPLY CHAIN REQUIREMENTS RELATIVE SIZE OF THE SBU IN THE INDUSTRY-RANKS INDEX VALUE Business strength: BUSINESS STRENGTH RATING 1 Extremely Weak 5 Industry Average 9 Extremely Strong representing industry best practice The parameters and weights are given below BUSINESS STENGTH RELATIVE MARKET SHARE PRICE COMPETITIVENESS PRODUCT QUALITY CUSTOMER AND MARKET KNOWLEDGE WEIGHTAGE 0.25 0.25 0.15 0.15 WEIGHTS 0.3 0.2 0.2 0.1 0.1 0.1 HOME ELECTRONIC APPAREL 7 8 8 4 7 6 6 8 4 4 5 9 8 6 8 3 8 7 FOOD 9 7 6 5 7 4
SALES EFFECTIVENESS GEOGRAPHIC ADVANTAGES Relative market share: WEIGHTAGE Relative market share 0.25
HOME ELECTRONIC APPAREL 6 4 8
This is based on the rankings in the relative segment. Future group is number one in home, food and apparel. The home market has a lot of small players and hence tit gets a point less. The E-commerce space is where they have to improve. They are currently 6th in a highly fragmented market. Price competitiveness: WEIGHTAGE Price competitiveness 0.25 HOME ELECTRONIC APPAREL 6 4 8 FOOD 8
This parameter measures how competitive the segment is against the industry per se. The prices offered. Future group has Brand Factory, which offers huge discounts, and hence, it gets a higher rating. KB’s Fair Price is highly price competitive and so gets a similar rating. Due to its lack of presence in the e-commerce space the business strength due to this parameter is quite less. They are able to compete with other players in the home segment but the competitiveness is limited because of the consumer durable business. Product quality: WEIGHTAGE Product quality 0.15 HOME ELECTRONIC APPAREL 8 6 8 FOOD 5
Source: Resurgent India Customer and market knowledge WEIGHTAGE Knowledge 0.15 HOME ELECTRONIC APPAREL 7 6 8 FOOD 9
Future Group has invested a lot in Futureinnoversity. This is their research wing, which does a lot of market research. Across all sectors their knowledge is pretty good. Their knowledge of the Indian market is top notch. The offers at Big bazaar and Central are very good compared to the competition. So, the apparel sector gets a high rating. The food sector gets a high score because they are launching new formats based on the consumer insights. The
Home segment also has a lot of consumer knowhow. The e-commerce sector needs a big push. Sales effectiveness: WEIGHTAGE Sales effectiveness 0.1 HOME ELECTRONIC APPAREL 7 6 9 FOOD 9
This is based on the no of sales offers in the market. Their effectiveness was discussed in the group and ratings given. Geographic advantages: WEIGHTAGE Geographic advantages 0.1 HOME ELECTRONIC APPAREL 4 8 8 FOOD 6
This rating has been given on the basis of the number of cities where they have a presence and floor space. Since, Electronic is virtual its advantage is only limited by the Internet penetration. Home business requires a lot of space and hence has a less score. The apparel and food business have the highest percentage of space and hence have good ratings. The final table is given below BUSINESS STENGTH RELATIVE MARKET SHARE PRICE COMPETITIVENESS PRODUCT QUALITY CUSTOMER AND MARKET KNOWLEDGE SALES EFFECTIVENESS GEOGRAPHIC ADVANTAGES INDEX VALUE WEIGHTAGE 0.25 0.25 0.15 0.15 0.1 0.1 HO ME 7 7 8 7 7 4 ELECTR ONIC 4 7 6 6 6 8 APPAREL 8 8 8 8 9 8 FOOD 8 5 5 9 9 6
Based on the values of Industry attractiveness and business strength, we have the following GE matrix.
Home: The GE matrix points to the fact that Future Group must invest in the home segment. One of the major problems facing the segment is that consumers come to the store look at the design and then get the final product made outside. They should reposition an offshoot of Hometown to cater to this market. They have all the other segments covered with Hometown Express and HT design studio. Another opportunity for growth would be the consumer durable business. This is a highly competitive marketplace where customers prefer to buy from purely electronic retail stores. They have to improve Ezone and give it more visibility. The customers are looking for end-to-end solutions. They should stock these SKUs in their stores.
E-commerce: The E-commerce business is a laggard but has great potential as Internet penetration improves and consumers become more confident about using the Internet when purchasing products. In a crowded market space they should invest heavily to gain market share. One strategy could be to target Tier –III cities where people don’t have access to retail chains. They could strengthen the supply chain and offer these services to people who want to purchase products but have no avenues for purchase. By changing the value proposition they can get a huge chunk of the market. They could also create specialized storefronts for various categories and break the clutter. Food: They should maintain the market share by increasing floor space. They have to continue to expand the Aadhar retail chain as rural markets offer the next step and are untapped. They have divided India into two tiers and are trying to maintain the market share. KB’s Fair Price was one of the most innovative new formats to increase coverage in unorganized retail. They should focus a lot more on private labels. Their food distribution center model is following Wal-Mart’s model. Apparel: They should strive to maintain the market share. They should continue with the threepronged approach of Pantaloons for in-store brands, Central their hip and happening store and Brand factory as their discount store. This would help them cover a wide spectrum of customers. They should focus a lot more on in store brands, which offer them greater margins. They should make use of the advertising space available at their stores to generate more revenues.
1. Subsidiaries: One of the most important tenets of Future Group’s corporate strategy is the synergy they have with their retail focus. Future Supply Chain Solutions: This takes care of the entire supply chain requirements of Future group Future Brands: advises global and Indian companies on conceptual and operational brand challenges and helps them succeed in business through insights & knowledge-based brand solutions Future Media India Limited: a subsidiary of the Future Group, has been helping brands connect with their consumers in a consumption environment since Oct 2007. Just as the parent company, the Future Group, is leading the charge in Modern Retail, Future Media is the leading Out-Of-Home (OOH) media provider with a focus on the point of sales.
Future Space: This is the investment arm of the company, which pools in money for the infrastructure requirements. 2.Home Business: Future group sees customers looking for end-to-end solutions. They have stocking up their SKUs I line with this and also opened up a HT design Studio, which would be offering consulting services, which would help patrons in designing their homes. In order to save on space they have opened outlets designed on the CCD express format. These no frills services have been a huge success. They have increased the floor space of Hometown their flagship store. 3.Food: Food is one category future group is investing in heavily. They divide the consumer set into two segments; India-1, who are having the cash to splurge and have the propensity to move up the aspirational ladder and India-2 is the traditional customer who still prefers the traditional unorganized retail system. For India-1, they have food bazaar, which has started upgrading the portfolio of products. They have Food Hall which stocks products, which are for the connoisseurs. For India-2 they have Aadhar their rural retail value chain and KB’s fair price where they are looking to introduce customers to organized retail. They operate on wafer thin margins and are looking at a market penetration strategy. 4. Apparel: They follow a three-pronged approach and have Pantaloons for in-store brands, Central their hip and happening store and Brand factory as their discount store. They have recently opened Ethnicity which houses traditional Indian wear and are bullish on this segment for driving growth. With FabIndia gaining huge market share they are looking to take a bite of the cherry. They have also forayed into the shoe category with Shoe factory. They are trying to gain a competitive advantage by foraying into various categories. 5.E-commerce: This is one business model they have to build on. With a fragmented marketplace it’s extremely difficult to gain market share. Mr. Kishore Biyani talks about Ecommerce being the next big thing as India is running out of space for retail outlets. They have been tweaking with the concept of Future bazar for a long time but their efforts have not materialized. They hold only 1.6% of the market.
1. The Indian rural consumer is the next big prize and Future Group should continue the expansion of Aadhar retail chain. 2. They have to build on their E-commerce business and use it to supplement their existing operations. 3. Continue to invest in Home, Food and Apparel segments to hold market share. 4. Their success has been the different store formats, which cater to different segments. They should continue innovation on this front. 5. Hive off the non-core businesses from PRIL as soon as possible and make it a pure play retail player. This would increase the focus on retail. 20
6. Their forays into Mobile telephony- T24 and books and music- Depot and Shoe should be hived off. 7. Try out the cash and carry model. 8. Continue to use subsidiaries to support their core business. 9. Build a robust supply chain in the foods category before Wal-Mart saunters in. 10. As there is a crunch for floor space they should share space with other group companies. 11. Develop their in-house brands, as it will give them a lot of leverage.
1. www.marketlineinfo.com 2. www.Datamonotor.com 3. www.resurgentindia.com 4. PRIL Annual report 2010-11 5. www.ibef.org 6. Investopedia, the industry handbook on retail industry, Strategic Management and Business Policy by Thomas L Wheelen, J David Hunger 7. Deloitte report, Aranca Research 8. KPMG international 2011, Aranca Research 9. Technopak Advisors Pvt Ltd, Cushman & Wakefield Research
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