THE INDIA RETAIL SECTOR REPORT 2013

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Contents
Introduction Talent Pool Availability How Michael Page Can Help 3 5 6

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THE INDIA RETAIL SECTOR

Introduction
The Indian retail market is estimated to exceed US$ 750 billion by 2015, according to the India Retail Report 2013 (IRIS Research), presenting a strong potential for foreign retailers planning to enter India. Until 2011, the Indian Central Government denied Foreign Direct Investment (FDI) in multi-brand retail, forbidding foreign groups from any ownership in supermarkets, convenience stores or other retail outlets. Even single-brand retail was limited to 51% ownership and a bureaucratic process. In late 2012, the Government of India passed a Foreign Direct Investment policy which allows foreign retailers to own up to 51 per cent in multi-brand retail and 100% in single brand retail. It is expected that these stores will now have full access to over 200 million urban consumers in India, approximately 47% of which are below the age of 30 with high levels of consumption. According to A T Kearneys Global Retail Development Index (GRDI) 2012, India is the 5th most favorable destination for international retailers (Fig 1). Of the total Indian retail market, 8% constitutes the organised retail segment which is estimated to grow at a rate of almost 30% by 2015, and hence at a much faster pace than the overall retail market which is forecast to grow by 16% in the same period. Clothing & Apparel make up almost a third of the organized retail segment, followed by Food & Grocery and Consumer Electronics. India currently has a small penetration within the organized retail segment as compared to other emerging markets such as China, which has a penetration of more than 20% within organised retail according to the Global Retail Index report by the World Retail Conference.

Country Brazil Chile China Uruguay India Georgia United Arab Emirates Oman Mongolia Peru

2012 Rank 1 2 3 4 5 6 7 8 9 10

2011 Rank 1 2 6 3 4 Unranked 8 Unranked Unranked 7

Change 0 0 +3 -1 -1 N/A +1 N/A N/A -3

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Sources: Euromoney, Population Data Bureau, International Monetary Fund, World Bank, World Economoic Forum, Economist Intelligence Unit, Planet Retail: A.T. Kearney analyst.

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Share of Different Retail Verticals in Modern Retail

Pharmacy 2% Mobile & Telecom 11% Consumer Electronics 8% Entertainment & Gaming 3% Leisure 2% Home & Interior* 5% Fashion Accessories 1% Food Service 7% Footwear 4% Food & Grocery 2% Jewellery 6% Eyewear 1% Timewear 2% The modern retail is close to 8% of the total retail market. The pie-graph shows how each category of modern retail fares against total modern retail. Beauty & Personal Care* 3% Fitness 1% Clothing & Apparel 33%

The new FDI policy implies greater autonomy in functioning for foreign single-brand retail players who can now own 100% of their Indian stores, up from the previous cap of 51% with only the stipulation that they will have to source 30% of their goods from small and medium-sized Indian suppliers.

The new policy allows a maximum 51% ownership for the multi brand retail sector subject to the following conditions: Each Indian state government has the option to accept or reject the implementation of this policy. Retailers can only set up in cities with a population of more than 1 million (total of 53 cities in India) provided they have the approval from the respective state governments. The figure below shows state wise acceptance of this new policy. Currently 18 cities are eligible for multi brand retailers to enter under this new policy. Multi-brand retailers must have a minimum investment of US$100 million with at least half of the amount invested in back end infrastructure. They will have to source 30% of their goods from small and medium-sized Indian suppliers. E-commerce is not allowed as an alternate channel as it can serve the customer beyond the physical location of the store.
INDICATIVE MAP OF STATES AND THEIR CONSENT STATUS

STATES IN FAVOUR 1. Andhra Pradesh 2. Assam 3. Delhi 4. Haryana 5. Jammu&Kashmir 6. Maharashtra 7. Manipur 8. Rajasthan 9. Uttarakhand 10. Daman & Diu and Dadra and Nagar Haveli States against FDI States undecided States in favour of FDI

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Talent Pool Availability

The introduction of the FDI in retail policy will impact the availability of talent. Many institutes have now introduced specialised post graduate degrees in retail management; i.e approximately 6,000 qualified professionals with expertise in the field of retail management are being trained every year. Until now, retailers have sponsored courses in some of the top B-schools to attract talent at a junior level as shown in fig. 4 below, while hiring at a mid to senior level has primarily been from competitors.

Name Of Retailer Pantaloon Kirloskar group RPG group Future group Birla group Garware group

Institutes with Sponsored Retail Courses L.N Welingkar KIAMS RPG institute of retail management IGNOU Bimtech Garware institute of management

We believe that the current trends and the rapid growth of the market will create an acute shortage of talent at the mid to senior level, creating high demand for candidates that are experienced in setting up large retail chains as well as candidates with international exposure. This increase in demand is likely to drive up salaries. The figure below illustrates the inflation rate in India over the last 5 years;, consequently average annual increase in salary will be between 12-18% in the retail sector as a result of skill shortages spurred by the entry of new foreign players. In addition, salary increases are likely to go up by 20-25%. On a sectoral basis, demand is likely to be highest for candidates with experience within Clothing & Apparel followed by the Food & Grocery sectors which constitute the highest part of the organised retail market as well as the areas where foreign retailers are likely to enter the fastest.

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How Michael Page Can Help

Michael Page India has over 75 specialist consultants working on mid to senior level roles in four disciplines across offices in Mumbai and Delhi NCR. These disciplines include: Sales, Marketing & Retail Finance & Accounting Human Resources Financial Services Michael Pages Mumbai office recruits for clients based in South and Western India while our Delhi NCR office recruits for clients based in North and Eastern India. Our specialist approach allows us to have a strong understanding of each discipline in which we operate and the companies and individuals within it. This enables us to facilitate the perfect match between parties in the most targeted and reactive manner. Our clients in India range from large multinationals and Indian conglomerates to small and medium sized companies. We have assisted a number of organisations in their strategic hiring for their entry into the India market. Our team of expert consultants can assist you in better understanding how to navigate through the particularities of the Indian market and attract the best talent for your organisation. For more information, please contact: Alf Harris Regional Director 5th Floor, 2 North Avenue, Maker Maxity Bandra-Kurla Complex, Bandra (E) Mumbai 400051 Ph: +91 22 4236 3300 alfharris@michaelpage.co.in Nilay Khandelwal Director 10th Floor, Building 8C, DLF Phase-11 DLF Cyber City, Gurgaon, Haryana 122002 Ph: +91 124 452 5500 nilaykhandelwal@michaelpage.co.in

Retail

Specialists in retail service recruitment

www.michaelpage.co.in