RETAIL MANAGEMENT

ASSIGNMENT

Ques1. Study the Global Retail Development Report (2014) entitled Full
Steam ahead for global retailers by A.T. Kearney and does the following:

a) Give an account of the framework on which the report is based.

b) Compare Indias position with top three ranked countries.
c) Give reasons on why India has apparently slipped in the rankings.

1. Give an account of the framework on which the report is based.

Ans. The framework on which the report is based is the Global Retail condition
of 30 developing countries of the world. A.T. Kearney has provided the Global
Retail Development Index to support his findings and study and has rated
different countries which are hot favorite and which are not on the basis of
MARKET ATTRACTIVENESS, COUNTRY RISK, MARKET SATURATION
AND TIME PRESSURE. According to him Global retailers in developing
markets were true pioneers: either they held the deed to a beautiful tract of land
and a future of growth, or their best-laid plans moldered in a foreign grave. It
was a true risk-reward play: global expansion could bring tremendous growth
and benefit, or surprising failure and disaster.
Today's global retailers get it. They have become more strategic in their
expansion and in avoiding the operational pitfalls of entries into developing
markets. Using e-commerce, they are pressure-testing demand in new markets
to reduce risk, and they are taking advantage of financial vehicles such as credit
cards and cash-on-delivery to help increase demand.
The overall theme of A.T. Kearney's 2014 Global Retail Development Index
is continued expansion. Yes, there were some notable contractions in the past
yearWal-Mart pruned its portfolio in China and Brazil, and Tesco's more
cautious approach to China included some store closings and a new joint
venturebut for the most part retailers are continuing their push into
developing markets.
The GRDI ranks the top 30 developing countries for retail investment based on
several macroeconomic and retail-specific variables (see figure 1). In particular,

we focus not only on the most successful developing markets today, but also
those that offer the most potential down the road (see appendix: About the
Global Retail Development Index, figure 1).
One of the GRDI's recurring themes is the "window of opportunity" for
investing in physical retail in developing markets. Ideally, markets pass through
four stages of retail development (opening, peaking, declining, and closing) as
they evolve from emerging to mature markets, a process that typically spans
five to 10 years. The underlying hypothesis is that the retail window opens
when the population becomes wealthier, when logistics start improving, when
ownership regulations become more friendly to international firms, and when
the country's various economic, political, and social risks settle down to
acceptable levels. The window begins to close when shoppers get so
sophisticated that more than basic retail investment is required (in terms of
formats and assortments); when logistics are strong enough across the board to
no longer serve as a competitive differentiator; when regulations are stable
enough that "daring" is no longer necessary in expansion strategies (although a
little daring is always needed); and when risks to persons, property, and
principles are low. (See figure 2 in appendix)
2. Compare Indias position with top three ranked countries.
Ans. According to the GRDI index the top three ranked countries are:
#CHILE
#CHINA
#URUGUAY
India is ranked 20th in the index.
The reason for these countries to be on the top three positions is:
Chile: The GRDI's new leader. Years of economic and political stability have
helped Chile build one of Latin America's most sophisticated retail

environments. Chile's GDP grew 4.4 percent in 2013 and is expected to grow at
roughly that rate through 2016. Physical infrastructure investments and a
business-friendly regulatory environment also indicate that retail growth will
continue into the future. After steadily rising in the GRDI rankings for several
years, Chile is the top-ranked country for the first time.
Consumers with more money to spend are supporting modern retail expansion.
Retail sales were $98.52 billion in 2013, and over the next four years sales are
expected to increase a total of 13 percent. Additionally, grocery retail sales per
capita represent only 28 percent of retail sales, the lowest rate in Latin America,
indicating Chileans' growing appetite for nonessential items and aspirational
purchases. Chile also has one of the world's more developed e-commerce
markets. Seven out of 10 Chileans who use the Internet in Chile made two to six
online purchases in 2013, with the average household spending $158 per year
online.
The past year brought several major investments in new and existing shopping
centers. U.S.-based architectural design firm tvsdesign partnered with Chilean
mall chain Mall Plaza (owned by local retail giant Falabella) to design and build
capital city Santiago's new Mall Plaza Egaa in late 2013. Three additional Mall
Plaza centers (Antofagasta, Oeste, and Los Dominicos) are expected to open in
2014, bringing a combined 241,500 square meters of new space. In parallel,
Grupo Arauco and Aurus, a Chilean asset manager, have partnered to invest $36
million in developing the 29,000 square-meter Arauco Quilicura mall in
Santiago along with other shopping centers around the country.
Chile's many strong local retailers continue investing in organic growth across
the region. Falabella announced plans to invest $3.51 billion across Latin
America through 2015, with 215 new stores and 16 new shopping centers. Some
international brands are partnering with domestic retailers to enter Chile,
including UK supermarket chain Waitrose, which agreed to supply products to
Chilean grocer Unimarc.

New store formats, particularly outside of Santiago, are also opening up

opportunities. Low-budget stores, small boutiques, and corner stores are
growing in rapidly expanding suburban areas where speed and convenience are
crucial.
Uruguay: Steady growth continues. GDP growth of more than 5 percent per
year for the past five years in Uruguay has translated into higher purchasing
power, increased domestic demand, and dynamic retail activity. Its free-market
policies and political and economic stability have helped it become a solid retail
oasis while some of its neighbors struggle. Foreign investors are treated the
same as domestic investors under the law, and there generally are no ownership
limits. With risk relatively low and market potential high, Uruguay has one of
the GRDI's most attractive markets and is ranked 3rd for the second straight
year.
China: Continued retail growth. Even with less-bullish economic growth, China
remains impossible for retailers to ignore. Retail sales in the world's most
populous country increased 13 percent in 2013 (to $2.6 trillion), and consumer
confidence rose. Looking ahead, urbanization, increasing disposable incomes,
and a loosening of the birth-control policy are expected to fuel future growth.
China moves up two spots into second place, its highest ranking since it was
first in the 2010 GRDI.
Hypermarkets and supermarketsparticularly multinationalsare facing
flattening revenue growth and surging costs as labor costs grow by more than 15
percent per year and rents in some locations rise 10 percent per year. Foreign
retailers feel the pinch more acutely because many of their stores are in the
center of cities where rents are rising fastest. Meanwhile, local players such as
China Resources Enterprise and Beijing Hualian Group are learning quickly and
growing rapidly.
In response, many retailers closed underperforming stores or engaged in M&A.
Tesco, facing flat revenue growth and plummeting profits, announced in 2013 a

joint venture with China Resources Enterprise (with Tesco owning 20 percent)
to manage both groups' stores in China. Retailers that closed stores in 2013
include Walmart (14 stores), Tesco (three), and Lotus (two), and Metro Group
announced that its Media Markt chain would exit China.
Department stores are struggling as well, their profits slipping as their offerings
don't stand out to buyers. Store totals dropped by more than 4 percent, and total
revenue growths were minimal. Still, luxury department stores Galeries
Lafayette and Lane Crawford returned to China in 2013 after absences.
On the other hand, convenience stores are entering a high-growth phase (a 10
percent increase in store totals), drawing customers with long opening hours,
proximity, and value-added services such as utility bill payments. Many retailers
in this sector have also built scale: Thirty percent have more than 1,000 stores,
and 40 percent have between 300 and 1,000.
Mall construction continued last year, led by national mall chains, with total
area growing by 20 percent and store numbers increasing by 10 percent.
Consumers prefer malls over department stores because malls offer shopping,
food, and entertainment in one location. Mall restaurants have expanded,
proving resilient in the face of e-commerce.
The tightening of the anti-corruption policy hampered luxury goods sales,
which just a few years ago was one of China's most dynamic sectors. Luxury
sales fell 2 percent last year, with luxury watches and men's appareloncepopular giftsmost affected. Second-tier "light-luxury" brands, on the other
hand, are growing. With the upheaval, the remaining luxury brands are
renovating existing stores and seeking to secure current business rather than
open new stores.
China's e-commerce market is growing significantly and now accounts for 8
percent of all retail. In 2013 it grew 42 percent year-over-year to $305 billion,
and the country claimed the top spot in the Global Retail E-Commerce Index.
Singles' Day, the annual online shopping fest in China, drew a record-breaking

$5.7 billion in sales in 2013. Fast growth is expected as Internet use expands,
offerings improve, lower-tier cities start spending more online, online payment
safety improves, and logistics services expand.
Four important trends highlight Chinese e-commerce in 2014. First,
consolidation seems to be taking off, as bigger companies can use scale to fend
off competitors and manage cost increases. For example, online search player
Baidu acquired group-buying site Nuomi to expand its services to coupons.
Second, more retailers blurred the lines between online and offline. Traditional
retailer Wangfujing Department Store launched an online shopping site and app
and installed wireless Internet in its stores, allowing customers to compare
products offline and pay online. Third, mobile grew fasta 140 percent
increase from 2012and now represents 12 percent of all online sales. Lastly,
third-party logistics service providers are seeing continued profit decreases
from a peak of 30 percent in 2005 to roughly 5 percent in 2013as labor and
land costs rise. Chinese online buyers expect fast delivery, so this issue is
important, and is a main reason some e-commerce giants (such as Alibaba) are
building their own logistics platform.
India: Hope for a rebound. Economic growth has lagged the rates of the past
decade's boom times, but at 4.7 percent last year, it was an improvement from
2012. Retail is still hindered by high consumer price inflation, currency
fluctuations, high current account deficits, government debts, and strict foreign
direct investment policies that have long been an impediment to growth. India
drops six spots to 20th place, its lowest-ever ranking in the GRDI.
India remains an appealing long-term retail destination for several reasons,
starting with its demographicsa population of 1.2 billion people, half of
whom are younger than 30 and roughly one-third of whom live in cities.
Indians' disposable incomes are increasing, allowing them to spend more and try
new products, brands, and categories while spending a lower proportion on
food. Furthermore, the recent national election of the Bharatiya Janata Party,

which has promised more pro-business policies, has many experts feeling
positive about India's long-term GDP outlook and industry growth.
Migration from traditional stores to modern retail continues, but modern
formats account for only 8 percent of the total market. Concerns for the industry
include an opaque real estate market with high prices and low availability, high
borrowing costs, personnel shortages, expensive supply chains, and
unpredictable politics both locally and regionally. More retailers today are
focusing on improving operations and back-end processes to increase
profitability. Lean modelsin terms of size, capital spending, and operating
costsare gaining hold, and even incumbent retailers are reducing store sizes
and opening new stores only in carefully selected locations.
In 2013, the government permitted 51 percent FDI in multi-brand retail with
few caveats, but left implementation to individual states, a step that has made it
hard for new retailers to form unified strategies for the Indian market as a
whole. Still, foreign retailers are allowed 100 percent of single-brand stores, and
many opened outlets in 2013, including U.S. brands Stuart Weitzman, Michael
Kors, and Columbia Sportswear and German multinational Bosch (which sells
appliances, power tools, and security systems at its first branded store in India)
to name a few. Other retailers have indicated interest in opening single-branded
stores, including IKEA, Burger King, Gap, Skeyndor, H&M, Richemont,
AEON, and Swiss Military.
India's e-commerce market is expected to grow more than 50 percent in the next
five years, as its young population increases Internet access and speed. Cash-ondelivery options have been an important step to growth. Inventory management,
logistics planning, and resource availability are important hurdles for online
retail in India.
MARKET ATTRACTIVENESS, COUNTRY RISK, MARKET SATURATION
AND TIME PRESSURE of the top three countries is better than that of India.
(see figure 1 in appendix).

3. Give reasons on why India has apparently slipped in the rankings.

Ans. There are several reasons on why India has slipped from 14 th rank to 20th
rank in the current GRDI.
Retail in India is still hindered by
#high consumer price inflation,
#currency fluctuations,
#high current account deficits,
#government debts, and
#strict foreign direct investment policies
that have long been an impediment to growth.
Political parties intention are not clear some parties are in favor of FDI in retail
whereas some opposes it. Hence every company fears if the other political party
who is opposing the FDI in retail whether it is single brand or multibrand comes
into power then they have to pack their bags and has to quit India despite
making good amount of investment in India.
Concerns for the industry include an opaque real estate market with high prices
and low availability, high borrowing costs, personnel shortages, expensive
supply chains, and unpredictable politics both locally and regionally. More
retailers today are focusing on improving operations and back-end processes to
increase profitability. Lean modelsin terms of size, capital spending, and
operating costsare gaining hold, and even incumbent retailers are reducing
store sizes and opening new stores only in carefully selected locations.
In 2013, the government permitted 51 percent FDI in multi-brand retail with
few caveats, but left implementation to individual states, a step that has made it
hard for new retailers to form unified strategies for the Indian market as a
whole.
Red tapism in granting clearances, bribe system are some of the factors which
are hindering the growth of foreign firms to enter into the Indian retail market as

well as the local retailers are also gets affected by these hence resulting in down
falling of India from 14th place to 20th place.

Ques2. Study the report on E-Commerce Industry by PWC entitled

ecommerce in India accelerating growth and do the following:
I.

Give an outline of the factors that can lead to Indias growth in

the ecommerce industry

II.

What future does India have in the ecommerce industry as per

the report?

1. Give an outline of the factors that can lead to Indias growth in the
ecommerce industry
Ans. Localization of Internet content
Google India spokesperson says that web content search in Hindi has grown a
whopping 155 per cent in the past year, which is significantly higher than the
growth of content search in English. Hindi content searched through mobile
Internet grew at even higher rate of 300 per cent in the same period. Growth in
traffic in other languages, too, was impressive. With incremental growth in
mobile subscriber coming mostly from people who are comfortable with
languages other than English, online retailers see this emergent segment as new
growth driver.
Growth in cities beyond metros
About 20 per cent of Indias population lives in cities outside of metros. There
are several pointers that suggest this large group of city dwellers have
significant purchasing power. Consumer demand is rising rapidly even in small
towns and cities. The contribution of these cities in coming years is set to
become even bigger. In addition to the convenience, another factor that is
driving our sales in such cities is that many of the brands do not have footprint
in these areas. No physical retailer can have the kind of assortment of products
that we have, observes Praveen Sinha, co-founder of online retailer Jabong.
Growth of mobile commerce
Online retailers growing reach in non-metro cities is being driven by the rise in

usage of mobile internet in the country. According to Internet and Mobile

Association of India, the number of mobile internet users in the country stood at
173 million in December 2014. It is set to grow manifold by 2020. A
Confederation of Indian Industry report estimates that in the next six years, the
number of people accessing the internet through mobile is set to reach 600
million. This growth will be spurred by a sharp rise in smartphone adoption,
expected to reach 50 per cent penetration by 2020, says the report. Given the
increased mobile penetration and smartphone adoption in these areas, mobile is
certainly one of the major factors driving this trend, adds Khanna of
Snapdeal.com.
Growing usage of debit cards for cashless transaction
There has been a net addition of nearly 140 million debit cards in the country in
the past two years. What is more, the usage of debit cards at point of sale
terminals has seen a growth of 86 per cent in the same period. It indicates the
willingness to use debit cards for purposes other than withdrawing money at
ATMs has increased. With many online retailers still insisting on use of cards
for high value transactions, it is a welcome change. It will allow e-tailers to
reach out to many areas and many more customers in coming years.
Currently, cash on delivery constitutes nearly 70 per cent of all transactions for
online retailers. But online retailers say the usage of cards for online
transactions is steadily rising.
Growing investment in logistics and warehouses
Online retailers say they have extended their reach to 12,500-15,000 pin
codes out of nearly 100,000 pin codes in the country. There are also reports of
online retailers trying to tie up with India Post and petrol pump stations to reach

out to more customers. Expected aviation boom in small cities might also widen
the reach of online retailers in future. With estimated investment of nearly $2
billion in logistics and warehouses by 2020, the reach of online retailers to
deliver their products in remote locations is set to increase. There are many
companies set to invest in specialised logistic services with a view to facilitating
delivery of online retailers in coming years, observes Bahl of KPMG.
Other factors which also lead to Indias growth in ecommerce sector are: Govt. policies: favourable govt. policies in ecommerce retail sector
like 51% FDI in multibrand sector and 100% FDI in single brand sector.
Customer convenience: By providing Cash on delivery payment option
service to customers.
Replacement guarantee: 30 day replacement guarantee to the customers.
Reach: Enabling mobile-capable sites and supporting M-Commerce
services.
Location based services: Since customers these days are always on the
move, promoting the right product at the right time and location becomes
an integral aspect.
Multiple payment option: standard credit cards, debit cards and bank
payments option is there.
Right content: Getting the right content and targeting customers with
crisp and relevant information is of utmost importance to users on the
move.
Price comparison: Providers offering instant price comparison are highly
popular amongst the price conscious customers.
Shipment option: Low cost shipment is there. The convenience of
collecting orders post work while returning home is there.
Logistical challenges: In India, the geographical spread throws logistical
challenges. The kind of products being offered by providers is
determining the logistics planning.

 Legal challenges: There is a legal requirement of generating invoices for

online transactions.
Quick Service: Timely service provided by the company.
Quality: The product is also same as shown on the portal.
Customer care centre: A dedicated 24/7 customer care centre in case of
any queries or doubts.
2. What future does India have in the ecommerce industry as per the
report?
Ans. According to the report India has very bright future in the ecommerce
industry and it justifies it with the help of following:
According to the PwC report Future of India - The Winning Leap, emergence of
new technologies, especially mobile, in India has sparked a social change thats
difficult to quantify. While mobile, internet, and social media penetration and
growth can be quantified; describing the changes in social values and lifestyles
that have accompanied those trends is far more challenging. New technologies
such as virtual walls and virtual mirrors will further help improve the retail
customer experience, thereby encouraging greater consumption. Virtual mirrors
let shoppers try on clothes and accessories virtually before making buying
decisions. Virtual walls help customers scan barcodes for items on an electronic
wall using their mobile phones and place orders with retailers.
Tesco in South Korea was an early adopter of this technology. In India,
HomeShop18 has launched Indias first virtual-shopping wall. Scan N Shop at
New Delhis international airport uses a similar technological interface. A key
outcome of the technology revolution in India has been connectivity, which has
fuelled unprecedented access to information. Millions of people who had little
means to join the national discourse can now gain new insights into the world
around them. Farmers know crop prices. Consumers understand global
standards of product and service quality. Rural Indians recognise the differences

between the opportunities available to them and those available to their urban
counterparts. And citizens have a mass forum for expressing their political
opinions. The upshot of this connectivity revolution has been empowerment of
Indians.
The number of mobile subscribers in India jumped from 261 million in 20072008 to 910 million in 2013-2014. Along with telephony, internet penetration is
soaring in rural and urban India. Moreover, the number of rural internet users is
growing by 58% annually. Increases in the number of smartphones and 3G
subscriptions are further driving this growth. Indeed, the number of smartphone
users is expected to grow at a CAGR 91% from 2012 through 2016, jumping
from 29 million to 382 million. Similarly, the number of 3G subscribers could
expand at a CAGR of 84%from 23 million to 266 millionduring the same
period. Thanks to rising internet penetration, the gross number of online users in
India now exceeds the number of people who have completed primary
education. This shift emphasises the increasing relevance of Indias digital
economy.
The number of internet users soared from approximately 20 million in 2004 to
nearly 250 million in 2014. By contrast, the number of people who have studied
beyond the eighth standard is about 200 million, indicating that even
uneducated people Conclusion are accessing the internet. While increases in the
use of traditional options for gaining knowledge, such as education, may be
linear, the proliferation of knowledge through the use of new digital
technologies appears exponential. The eCommerce industry in India may
currently be behind its counterparts in a number of developed countries and
even some emerging markets. However, with Indias GDP growth pegged at
6.4% by the International Monetary Fund and the World Bank, it is expected to
grow rapidly.
Moreover, the Indian eCommerce industry has access to funds from within the
country and international investors. Overall, the eCommerce sector is maturing

and a number of serious players are entering the market. What differentiates the
Indian eCommerce market from that of a country like China is that while
market concentration in China is largely on account of Alibaba-owned Taobao
and Tmall (with these players holding a higher percentage of market share than
the top players in most of the other major markets), in India the market share is
divided amongst several ecommerce companies, each coming up with its own
business model. As a result, customers have a wide range of products and
services to choose from. In our view, there is humongous potential for
eCommerce companies owing to the growing internet user base and
advancements in technology. However, this will not be without its share of
challenges, be it operational, regulatory, or digital. How a company prepares
itself to meet these challenges will decide whether or not it succeeds.

APPENDIX