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INVESTMENT POTENTIAL IN RETAIL

SECTOR OF INDIA

Prepared For:

Prepared By: ,
IMRB International
February, 2009

PREFACE

Thai-Indian business relations have improved considerably over the past decade.
Thailand and India are close to concluding a Free Trade Agreement (FTA) covering trade
in goods by 2010. The Free Trade Agreement between Thailand and India is expected to
improve trade relations between the two countries further. The FTA covering trade in
goods would lead to long term mutual benefits in trade and investment and the
partnership would be expanded further to cover technology knowledge and expertise

India's primary imports from Thailand are machinery, electronic appliances, textiles,
plastic material, transport equipment, vegetable oil and latex. The major items of imports
under FTA are polycarbonate, cathode-ray tubes, color-TVs, air conditioners and
Aluminum products. Thailand‘s main imports from India are jewelry, gemstones, steel,
pharmaceuticals and ferrous metal ores.

India's trade with Thailand could touch USD 7 billion by 2010-11 propelled by a
doubling in transaction under Free Trade Agreement (FTA). The EHS was implemented
on September 1, 2004, under which tariffs on 82 items were to be phased out by
September 1, 2006 by both the sides.

The trade between Thailand and India is estimated to be US $ 7 billion by 2010-11 from
US $ 2.2 billion in 2005-06.

The total trade of 82 items under Early Harvest Scheme (EHS) of the FTA was increased
by over 140 percent to about US $ 358.63 million in 2005-06 from US $ 149 million in
2003-04. The share of these 82 items in India-Thailand trade increased from 10.34
percent in 2003-04 to 15.68 percent in 2005-06.

Thailand‘s export to India of the identified 82 EHS items was increased from US $ 84.64
million to US $ 275 million during the period from 2003 – 04 to 2005 – 06. During the
same time, India‘s export to Thailand of these items increased from US $ 64.28 million to
US $ 83.03 million during the same period.

INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 2

In 2007, Thailand‘s export for these 82 items was US $ 406.31 million. Due the FTA
between two countries, Thailand is able to manage the trade surplus of US $ 598 in 2007
in bilateral trade between Thailand and India.

With significant potential for growth of business between the two countries, the Ministry
of Commerce, Thailand and Royal Thai Embassy would like to understand the
investment potential in the following two sectors:-

1. Retail in India (with focus on Apparels & Fashion Accessories, Footwear, Food &
Grocery, Furniture & Furnishing, Personal Care, and Consumer Durables as
product verticals)

2. Logistics in India

In order to understand the trade potential across the above categories, the Ministry of
Commerce, Thailand and Royal Thai Embassy has commissioned Business and Industrial
Research Division (BIRD) of IMRB International to avail its research based consultancy
services.

Report for both the product categories are being submitted separately in two different
modules.

The following report ‘Investment Opportunities in Retail Sector of India’ is based on
the study conducted in Retail sector of India.

INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 3

................... LIFESTYLE RETAILING ........1........................28 3.......................................39 INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 4 .......5...............................................................4...............................................4...2....................................................6.22 2........................2..................................18 2........................................................21 2........ Food Outlets as part of Modern Retail ............................ Airport Retailing ....................36 4..................5........ Supermarkets ...... Food & Beverage based Servicing Retail in India ..........32 3.............................. Online..................................1.....................................................27 3........4...........................1.4...................34 3............................................4.. EXECUTIVE SUMMARY........26 3....................................3.......4.............. RETAIL SECTOR IN INDIA .....3........................... TABLE OF CONTENT 1................................................ EMERGENCE OF MODERN (ORGANIZED) RETAIL IN INDIA ......29 3..34 3..................2............................................................22 2... Hypermarkets..............................................2....32 3.............4.........2............................................................ 8 2....... Apparel and Fashion Stores ........30 3... Category-wise Penetration of Organized Retail ................................................... CASH AND CARRY STORES ........................................... INDIA: A PREFERRED RETAIL DESTINATION ................ Telephone and Catalogue Buying ............. SIZE AND GROWTH OF RETAIL IN INDIA ..............................................1.........................................3..1................................................................. VALUE RETAILING ......................4..............4............... Departmental Stores .......................................................................... Shopping Malls .................................23 2............................2................................34 3................................................................................................................................................................28 3...........................3.............................2... KEY GROWTH DRIVERS FOR MODERN RETAIL IN INDIA ...................... MODERN RETAIL STORE FORMATS .....4..................4...........................................29 3................... DOMESTIC PLAYERS NOT FAR BEHIND .16 2......2............................................3........................ PREMIUM LIFESTYLE RETAILING ..............38 4.............................................................................................38 4.2............................................................. Organized Retail as Part of Total Retail ....17 2...................................16 2..............4...... Product Category-wise Break-up of Organized Retail ......................................4.....4...........................................................................1....................... OTHER RETAIL FORMATS .............................................................33 3................................................................................................ Specialty Stores......................... Product Category-wise Break-up of Retail Market .....................................4.....3........... Discount Stores/ factory outlets ...................................................21 2...............28 3............. GLOBAL RETAILERS ENTRY THROUGH CASH & CARRY FORMAT ....................24 3.............1..................................

......1..................................2......1.......... A COMPARISON BETWEEN APPARELS....1..........................................................3..............7........ LEADING RETAIL COMPANIES OF INDIA ................................ RENT STRUCTURE IN RETAIL ............................................................ PROFITABILITY ACROSS VERTICALS .......................................................1....1.......56 6.............................................................................58 8..................53 6...........1.......... ANCHOR TENANTS VERSUS VANILLA RETAILERS .......1..... FOOD & GROCERY AND HOME APPLIANCES .......................... Fixed Lease Rental Model ................................................6...............................2.........................................................56 6.............2....................5...................................54 6......................1.........2..........41 5................... Level I: Suppliers ...............................................................................................................................46 5..............................1.............58 7.......53 6..................................................2......................... EXCESS SUPPLY OF RETAIL SPACE IN PIPELINE ..............................................61 8................... Revenue Sharing Model ....................................................................................... PREVALENT RENTAL MODELS IN INDIA ...1.......................................48 5..........................4.............54 6......... THE ROAD AHEAD ...................................................................... Level III: Retail Stores ..............................................40 5.................................................................2.........42 5............ Level III: Outlets .............70 INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 5 ................................................................................1.................3.....1. INDIAN RETAIL MARKET ANALYSIS BASED ON NINE FORCES MODEL ....47 5....... Level II: Storage and Distribution ...................................55 6........................................8..................................................62 9....... LOGISTIC FACILITIES FOR RETAIL INDUSTRY IN INDIA ................................................................................................................................................. SUPPLY CHAIN INSIGHTS ...........53 6..........4...3........2....48 5................ SUPPLY CHAIN FOR FOOD & BEVERAGE SERVICING RETAIL IN INDIA ............................................53 6............40 5......50 5..3.................. SUPPLY CHAIN MODEL FOR MODERN RETAIL OUTLETS ......70 9....................................................................................................................1............................................................57 7.. Methods of Procurement.................................. STRENGTHS AND WEAKNESSES OF KEY ORGANIZED PLAYERS ......................... INDIAN RETAIL INDUSTRY ANALYSIS ...... Level II: Distribution ..........................................................................49 5......51 5..................1.....5............................... Level 1: Product Sourcing .................... Cost of Logistics in Indian Retail .................52 6............. ECONOMIC SLOWDOWN AND CHANGES IN STRATEGIES OF RETAILERS...............1.......... MAJOR COMPONENTS OF OCCUPANCY COSTS IN INDIA .........................2........53 6...... CHANGING RENTAL MODELS ............... INCREASE IN LEASE RENTAL ...3......................

..................................5...........................78 9........................8...............................................99 12..................................................................... CASH-AND-CARRY OPERATION..... OTHER FACTORS RELATED TO THAILAND...........................................................................9........3............................................................... Economic/ International Shifts ..............................................................................................3....................1..............................................................................................97 11.............7.....................1... FOOTWEAR ............... CRITICAL SUCCESS FACTORS IN RETAIL .............................. Threat of New Entrants (High) ...................4.....................................................................3.......98 12....... RETAILERS’ PERCEPTION ABOUT THAI IMPORTS..............80 9.....................89 10...................................................................................... PLASTIC GOODS ......................77 9. MAJOR CONSTRAINTS FOR MODERN RETAIL IN INDIA ........................74 9...........94 10...................6...........................76 9............... Bargaining Power of Suppliers........ APPARELS ...1................................................ PROPOSED ENTRY STRATEGY .............................2..................................79 9....................97 11......1..........................85 9.................................................5....2..................... TEST MARKETING .........74 9............................1............................................................101 12.......1............................................................8......1.............80 9......................................... Government (Legal and Political Shifts) .............................................................. Bargaining Power of Buyers (High) ...........................................94 10......3.............81 9.....................92 10.................................92 10. LEVEL OF ATTRACTIVENESS VERSUS SUITABILITY FOR THAI INVESTORS .......................1....... PROCESSED FOOD ....................... HOME DÉCOR ITEMS & ELECTRIC GOODS .....2......4................ CONCLUSIONS AND RECOMMENDATIONS ............................................ PHASE I ............................. PERSONAL CARE ITEMS...102 INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 6 ...............................92 10.....................7...........2...... EMERGING TRENDS IN THE INDIAN RETAIL INDUSTRY ............................................................................................ Technological Shifts ...4....70 9.................. Threat of Substitutes (High)............................................................ MANUFACTURING AND SOURCING.........................................................97 11......................................1..................................................................93 10...................................................1................6..............................93 10....................... Competitive Rivalry (Medium)......................................3.......................................................96 11..2.................................................................................................1................... 9.................................1............... FRANCHISING ............ Social Shifts .................................................................. FURNITURE....................................................................................................... POSSIBLE WAYS FOR ENTRY OF FOREIGN RETAILERS IN INDIA ...1...........................4.........................99 12.............................97 11.........................................96 10..........................................

.................................................................. CITY-WISE RENTAL TRENDS ................109 12.........................................................104 12........... ANNEXURE II .......................3....105 12............. ANNEXURE 1 ...... Test Marketing ...........................................1........................................................................................................ REFERENCES ....................................................................................2..1...................2..........................................102 12...................................113 2... PHASE II .......................3..................113 1............................................130 3... Single Brand Outlets .................... Look Out for Joint Ventures/ Franchisees/ 3 PL..................... COMPANY PROFILES IN RETAIL ......................5.......111 12....................... Entering Theme / Specialty Malls ................................................................3....................................112 1.............................................1..................................5....................110 12............................ Establishing Manufacturing Base in Select Product Categories ...................108 12...........................4..........103 12...........................137 INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 7 ............................................. PHASE III.................................................4......130 2.................5.....................4................................................2............................................................4............1..................................1............................. 12............ As Suppliers ................6............................ RECOMMENDATIONS ON FOCUS WITHIN EACH IDENTIFIED PRODUCT CATEGORY ...............111 12................................... Cash and Carry Stores .....................................................................

1. EXECUTIVE SUMMARY

1.1 Retail Sector in India

Retail business contributes around 11 percent of country‘s GDP and is the second largest
sector in India, only after agriculture. Retailing as a sector is witnessing revolution in
India. Modern retail has entered India as seen in sprawling shopping centres, multi-
storeyed malls and huge complexes that offer shopping, entertainment and food all under
one roof. Though at present, around 94-95% of India‘s retail market is unorganized, as
compared to unorganized retail, organized retail is experiencing much higher growth and
throwing open opportunities for new entrants to come and grow.

 India: A Preferred Retail Destination

For three years in a row (2005-07), India has been ranked as the top retail destination
globally by a study from A T Kearney that measured retail investment attractiveness for
30 emerging markets in the world.

 Key Growth Drivers for Modern Retail in India:

Higher disposable income coupled with favourable demographic changes (Increase in
working women population, rise in nuclear family, largest young population and higher
growth in urban and sub-urban population), changes in consumer needs, attitudes and
behaviour, and increased credit friendliness are some of the key growth drivers for
modern retail in India.

 Size and Growth of Retail in India

Retail sales in India have grown from $US 230 billion in 2003-04 to $US 330 billion in
2007-08. Organized retail at present accounts for only around 5-6% of the total retailing
in India. However, growth experienced by organized retail (more than 35% against an
overall retail growth of around 11% in 2006-07) is much higher as compared to
unorganized retail within India. The graphs below depict the product category-wise
break-up of total and organized retail.

INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 8

THE INDIAN RETAIL PIE (INDIA) 2007- 08 THE ORGANIZED RETAIL PIE (INDIA) 2007-08
( M ar ket Siz e: $U S 19 .4 2 b iliio n)
( M a r k e t S i z e : $ US 3 3 0 bi l l i on)
Books, Music &
Ent ert ainment
Books, Music & Out -of -Home Gif t s Ent ert ainment
3.4%
Gif t s Foot wear Food Services 2.8% 3.1%
Jwellery Wat ches
1.2% 1.2% 7.3%
5.2% 0.3%
Out -of -Home
Healt h & Beaut y Food & Grocery
Food Services Clot hing,
Services, 0.3% 11.5%
5.4% 9.9%
Pharma Clot hing,

3.7% 38.1%
Furnit ure &
Consumer
Ut ensils
Durables Jwellery
6.4%
4.3% 2.9%
Food & Mobile, &
Gr o c e r y Mobile& Services Foot wear
59.5% Furnit ure & Services 3.5% Consumer Wat ches
9.9%
Ut ensils 2.0% Durables 2.7%
3.4% 9.1% Pharma Beaut y Services
2.0% 0.8%

Source: F &R Research

Coming to the category-wise share of organized retail out of total retail, timewear and
footwear are the categories with maximum organized retail (almost 50% of total retail in
each category). ‗Clothing & Textile‘ stands third with more than 20% of the trade in
organized retail.

1.2 Modern Retail Store Formats

Indian Retailers are experimenting with various modern retail formats customized to
customer categories and product mix. Following is a snapshot of various formats that
exist in India at present.
Modern Retail Store Formats

Premium Lifestyle Lifestyle based Value based Specialty Other Retail Destination
based Retailing Retailing Retailing Stores Formats Malls

Key product Departmental Supermarket Discount stores
categories with Stores
luxury brands:
Airport retailing
 Apparel Apparel and Hypermarket
 Jwellery Fashion Stores
 Time wear Online/ telephonic &
 Accessories catalogue buying
 Furniture

Food & grocery Clothing Footwear Jwellery, Furniture &
Accessories Furnishing
Other Retail
Formats
Books & Stationery Pharmaceutical
Electrical & Beauty &
Electronic Health Care
Music & Equipments
Entertainment

INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 9

This section discusses in details each of the above mentioned formats, average store
space under each format, preferred store locations and key players and their principal
fascia operating under these formats.

 Cash and Carry Stores
As Government of India has allowed 100% FDI in cash and carry format, many foreign
companies are choosing to enter the market through this format. Amidst the increasing
interest from foreign players, domestic retailers have also been entering this format in
India.

1.3 Supply Chain of Modern Retail in India

Distribution Centre (Owned by
Company‘s Franchisee or its
Logistic Partner) Franchised Stores

Companies Manufacturing Branded
Products Company-owned
Company‘s In-house
Inventory outlets

Local Manufacturers supplying to a
single retail company for selling under
private labels Departmental stores

Distribution Centres or Warehouses
owned by Retail Company or by its Specialty Stores
Local Manufacturers supplying to more
Logistic Partners
than one retailing company for selling
under private labels
Hypermarket

Importer / Retail Supermarket
Products from other
company‘ Import
Partners
countries  These may be central or
regional distribution centres Other formats
Retail Company‘s own depending upon the structure
procurement office in adopted by the retailer
other countries
 Retailer may have common or
separate warehousing
arrange-ments for its different
retail formats

Level I: Sourcing Level II: Storage Level III: Retail Stores
& Distribution

INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 10

many retailers have changed their business strategies to mitigate the negative impacts and consolidate their position.g: Trent in tier II cities developer.g. Though mall developers have been chasing for fixed lease rentals. of late the retailers are bargaining hard for revenue sharing rental model.The section discusses in details each of the three levels of supply chain alongwith details on standard methods of procurement and margins enjoyed in case of select product categories. Sub-letting  Selling of space by retailers to other brands (mostly happens as part of Concessionaire model)  E.: Pantaloon is learnt to have signed such an agreement with a  E. many large players with national footprint have opted to develop in-house logistic systems. The diagram below depicts the rental models that are likely to be used more frequently in Indian retail sector in future. Revenue Sharing Model  A minimum guarantee on rental and/or percentage share of the revenue whichever is higher  E.: Shopper‘s Stop sub-lets some space of its store to brands like FCUK and CK.g: Inorbit mall in Mumbai ‗Select City Walk‘ mall in Delhi Zero Rent System Franchisee Route  Retailer exempt from paying  ‗License‘ granted by a company rental charges during the initial The Road years of operation. Ahead… to a person or group allowing them to use/ sell certain products  E. Slump in real estate sector and excess supply of mall space in pipeline has also forced real estate developers to either cut down on rentals or adopt ‗revenue sharing based rental‘ or any other rental models. According to industry sources. Given the increasing competition in retail industry. level of satisfaction of retailers with their logistic partners is mostly low in India and that speaks of the poor level of logistic services. high lease rentals and the sudden economic slowdown.g.4 Rent Structure in Retail Two types of rental models are prevalent in India – fixed lease rental model and revenue sharing model. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 11 . 1.  Logistic facilities for retail industry in India While some of the modern retailers in India have been outsourcing their logistics needs to specialist service providers.

Bharti-Walmart is expected to set new standards for supply chain and back end logistics management and has aggressive growth plans in cash and carry format. However. Specialist Knowledge requirement is addressable through right recruitment. followed by food & grocery and home appliances. Subhiksha is India's largest supermarket.1 Indian Retail Market Analysis based on Nine Forces Model  Threat of New Entrants is high. Smaller ticket size in case of food & grocery. training and technology support. Subhiksha is only next to Pantaloon Retail (figures from 2007-08). Cost of developing & training manpower and wage inflation in case of Home Appliances higher as compared to Apparels and Food & Grocery. there are FDI related restrictions. and Store space largest in case of Home Appliances followed by Apparels and then Food & Grocery 1. Reliance and Aditya Birla have forayed into the retail market only in 2006. Retailing doesn‘t require huge capital investments into owning machineries and other assets.7. Key reasons for higher gross margins in case of Apparels among the three verticals are: Scope for higher share of private labels in case of Apparels. Food & Grocery and Home Appliances concludes that apparels enjoy maximum gross margins. In terms of turnover. however. they are poised to grow big and expand aggressively. for a foreign player. Distribution Channel are largely standardized and replicable by new entrants. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 12 . Shoppers‘ Stop and Lifestyle are leading in Departmental store format.5 Profitability across Verticals A comparison between Apparels.6 Leading Retail Companies of India Pantaloon Retail is at present the largest retail company in terms of turnover. pharmacy and telecom retail chain.7 Indian Retail Industry Analysis 1.1. New entrants can differentiate themselves in multiple ways. whereas Vishal Retail leads in terms of presence and penetration across in India. required technology can be obtained by any new entrant. 1.

g. and other outlets as part of unorganized retail.. and Stringent Government Regulations are some of the key constraints faced by modern retail in India. Government regulations related to licenses.  Competitive rivalry can be perceived as medium because of medium to low industry concentration ratio. Inadequate Human Resources.7. Threat of substitutes is high.2 Major Constraints for Modern Retail in India Poor physical infrastructure coupled with lack of 3 PL players. High lease rentals. pricing etc. revenue sharing).  Bargaining power of real estate suppliers can be perceived as high to medium. Recent real estate slowdown has given modern retailers power to bargain for lower rentals or adoption of alternate lease models (e. more cases of market entry through INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 13 . Bargaining power of vendors varies from product to product and depends hugely upon whether a product is branded or unbranded and whether the relationship with supplier is formalized or not. quality. 1. permits and taxation require further simplification. Neighbourhood mom & pop stores. high price sensitivity among Indian buyers and availability of close substitute in form of unorganized retail. technological and international/ economic shifts. presence of untapped market with room for new players to enter and grow.  Bargaining power of buyers is high in case of modern retail largely because of increased level of awareness among buyers on brands. concentration of players in few pockets. all are close substitutes of various Modern retail formats. and low exit barriers  Government of India allows FDI in retail under two categories: Up to 100 per cent in cash-and-carry (wholesale) retail and Up to 51 per cent in single brand retail. Please refer to the section for further details on social. Absence of cold chain and proper storage.3 Emerging Trends in the Indian Retail Industry Key emerging trends in the Indian retail industry are aggressive future plans of leading retailers with higher focus on value retailing.7. 1. Cost of substitution is also not high in this case.

inorganic route. Apparel comes out as the most attractive from Thai Investors‘ point of view. Personal Care and Plasticware are the other high potential categories for Thailand. Footwear. increased share of goods under private labels and advent of self service outlets. focus on tier II & lower cities. women and kids  Female footwear (specially the stiletto heel sandals). Knowledge & Information stands for Knowledge about customers‘ tastes & preferences and Information is with regard to Efficient Supply Chain and Inventory Management through Proper Information System.9 Possible ways for entry of Foreign Retailers in India Franchising. Test Marketing.8 Retailers’ Perception about Thai Imports Apparels. women and kids. Furniture. Cash and Carry Format. cosmetics & health care products) Plasticware  All types of plasticwares (including plastic containers) Furniture  Rubber-wood/ Parawood based furniture INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 14 . furniture. and personal care items are some of the product categories in which Thai imports are being preferred by retailers in India 1. tie-up with global retailers.7.10 Conclusions and Recommendations Among all product categories. 1. footwears. home décor items. Merchandize. Thai manufacturers need to keep higher Footwear quality standards for female footwears Personal Care  Various available range of products (skin care. and Manufacturing & Sourcing are the possible routes through which International players can enter India 1. 1.4 Critical Success Factors in Retail Three most critical success factors for modern retail in India are: Location.  Recommendations on Focus within Each Identified Product Category Product Categories Category-wise Focus  All types of denim based apparels for men. and Knowledge & Information. Other fashion and casual Apparel apparels for men. plastic goods including kids‘ toys.

Supply of fresh items such as lettuce leaf  Thai manufacturers need to change the product packaging in following ways: no shrimps or Processed & Fresh Food fishes drawn on the packets. it is being proposed that Thai investors explore the business opportunities as suppliers to Indian retailers. Thai Investors may plan to develop Thai Specialty Malls. Thai Manufacturers may plan to enter India through the route of Test Marketing. In the meantime they should be at constant look out for suitable business partners in India for opening of single brand outlets in various product categories. Phase III: 4th Year onwards To stay profitable in long term.Home Décor  Artificial flowers. cooking instructions and other details to be in clear font. Also. vases. In case of a few brands within select product categories. should plan to start Cash and Carry business in India. rather than continuing to import. paintings. By the time phase III is entered. some of the leading Thai retailers. Also. Consumer Durables. Theme malls would have grown big on popularity. preferably with past experience in the same categories.  Sauces. wall hangings etc. establishing local manufacturing base. is a much desired step for select product categories. electric lamps. Ketch-ups. the branded products manufacturers of Thailand should then immediately focus on opening of single brand outlets. Spices based pastes. and Processed food. this would be the time to decide about putting up manufacturing facilities for the products that were Test Marketed during Phase II. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 15 . such as Personal Care Items. lamp shades. and few ready to cook items (preferably vegetarian). Green and red labels standing for vegetarian. and non-vegetarian items respectively to be put clearly on the packets Food & Beverage Outlets  Fast food Outlets and Coffee Chains  Proposed Entry Strategy : Thai Entrepreneurs should plan to invest in Indian Retail Market in three phases that are briefed below: Phase I: 1st Year During the first year. Phase II: 2nd and 3rd Year Once the partner companies have been identified and the formal agreements have happened.

India's retail market is expected to grow tremendously in next few years. Retail business contributes around 11 percent of country‘s GDP. ushering in a revolution in shopping. RETAIL SECTOR IN INDIA With a population fast approaching 1. Window of Opportunity Analysis (based on GRDI rankings for 1995-2006) Source: A T Kearney 2. and has been in peaking stage in 2006.1. According to AT Kearney.2.2 billion and an economy that is likely to double in size by 2015. The Indian retailing sector is at an INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 16 . Retailing as a sector is witnessing revolution in India. India seems destined to become one of the largest consumer markets in the world over the next decade. The whole concept of shopping has altered in terms of format and consumer buying behavior. Modern retail has entered India as seen in sprawling shopping centres. From employment perspective. Emergence of Modern (Organized) Retail in India Retailing in India is gradually inching its way to becoming the next boom industry. multi-storeyed malls and huge complexes that offer shopping. only behind agriculture. retail is already the second largest sector in India. The Windows of Opportunity shows that Modern Retailing in India was at opening stage in 1995. entertainment and food all under one roof.

organized retail is experiencing much higher growth and throwing open opportunities for new entrants to come and grow. however. 2007 ranking Country 2006 ranking 1 India 1 2 Russia 2 3 China 5 4 Vietnam 3 5 Ukraine 4 6 Chile 6 7 Latvia 7 8 Malaysia 14 Source: A. This is evident from the number of retailers across the globe that have already forayed into India‘s retail market or planning to do so soon. For three years in a row (2005-07).2. India has been ranked as the top retail destination globally. Kearney. 2007 The same study. India: A Preferred Retail Destination With markets in most of the developed countries reaching the stage of saturation. as compared to unorganized retail. 2. Though at present. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 17 .T. These issues have been discussed under ‗Major Constraints for Modern Retail in India‘. India has emerged as one of the most preferred destination for global retailers. around 94-95% of India‘s retail market is unorganized. also identifies few key issues that stand in the way of India‘s retail industry reaching its full potential. ahead of Russia and China by a study that measured retail investment attractiveness for 30 emerging markets in the world.inflexion point where the growth of organised retail and growth in the consumption by Indians is going to adopt a higher growth trajectory. June.

000 per annum) is expected to reach 48% by 2009-10 from 20% in 1995-96.3. working women‘ propensity for spending is higher by 1. During the last few years in India.2 Demographic Changes  Higher Level of Working Women According to census 2001. CHANGING INCOME DISTRIBUTION (Incom e figures in '000 per annum at 2001-02 prices.57 in 1991 and is INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 18 .3 times as compared to Indian housewives.3. This would lead to a higher retail spending as the buying behaviour of working women differs from that of housewives because of low availability of time. Also. households in '000 num bers) 10000+ 5001-10000 100% 2001-5000 1001-2000 501-1000 201-500 91-200 0% < 90 1995-96 2001-02 2005-06 2009-10* Source: NCAER 2.36 in 2001 from 5. nuclear family as a percentage of total household population has increased.1 Higher Disposable Income and Economic Prosperity Disposable income of Indian consumers has increased steadily. The proportion of major consuming class (with income above Rs 90. The average household size has reduced to 5. Key Growth Drivers for Modern Retail in India 2. working women population has increased to 26% in 2001 as compared to 22% in 1991.3. 2.  Rise in Nuclear Family The per capita consumption increases in case of a nuclear family.

in the last 4-5 years. UK. attitudes and behaviour. food and grocery items. huge sub-urban agglomerates are developing and expanding at a huge scale.3.  Also. Rising income levels. Indian markets have witnessed a strong shift towards branded products. Approximately 60% of the Indian population is below 30 years of age. Indians are willing to try new things and look different. Attitudes and Behaviour The growth of modern retail is linked to consumer needs. Japan etc.02 by 2011. purchasing and shopping habits have been inculcated and are increasing day by day. the working population with purchasing power.4 percent between 2000 and 2015. 2. This trend is expected to continue and urbanization is likely to grow at 2. education and global exposure have contributed to the evolution of the Indian middle class. Thus. India has the largest ‗young‘ population in terms of sheer size and this young segment is the major driver of consumption as they have the ability (disposable income) and willingness to spend. The composition of the Indian population is shifting towards the age group of 20-49 i. This would further increase the consumption and in turn.  Baby Boomer Effect India has the lowest median age of 24 as compared to developed countries like USA.e. Around urban centres. the retail industry. which has increased spending on health and beauty products apart from apparels. growth in organized retailing is likely to be concentrated in urban and semi-urban areas.  Higher Growth in Urban and Sub-Urban Population Over the last 10 years (1990-2000).expected to decline further to 5. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 19 . As a result.3 Changes in Consumer Needs.7 percent.  Today. Over the next 10 years. urbanization has increased at a rate of 2.

With the acceptance of and the increase in the number of electronic data converter machines installed in retailing outlets. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 20 .3. has also led to an increase in total spending on shopping and eating out.2. In fact the ease of payments (ability to spend without cash) due to the use of credit and debit cards.4 Increased Credit Friendliness The use of plastic money (credit and debit cards) has increased significantly in the last 3- 4 years. credit and debit cards will provide further fillip to organised retail.

Product Category-wise Break-up of Retail Market Out of the total market size in retail.7% Co nsumer Durables & Ho me A ppliances 4.4% Source: F &R Research Source: Images F & R Research INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 21 . A ccesso ries & Services 2. Food & Grocery is the dominant category (valued at $US 196.4% Health & B eauty Services 0.2% 5.0% Food & Grocery 59.9% Out-o f-Ho me Fo o d Jwellery Watches Fo o twear (Catering) Services 5.1.57 billion in 2007-08).08 (Market Size: $ US 330 billion) Entertainment 3. Size and Growth of Retail in India Indian Retail Market has experienced enormous growth during the last few years. 2.4.3% P harmaceuticals 3.4% Clo thing.5% Furniture. Textile & Fashio n B o o ks.47 billion in 2007-08) followed by Clothing. Furnishings & Utensils 3.2% 0.3% 1. Textile & Fashion Accessories (valued at $US 32. Retail sales in India have grown from $US 230 billion in 2003-04 to $US 330 billion in 2007- 08.3% M o bile. M usic & Gifts A ccesso ries 1.4.2% 9. 2. THE INDIAN RETAIL PIE (INDIA) 2007.

8 % Source: F &R Research Source: F &R Research INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 22 . Product Category-wise Break-up of Organized Retail In the organized retail segment.42 biliion) B o o k s . T e xt ile & 11.1% F urnit ure .H o m e F o o d ( C a t e ring) S e rv ic e s 7 .3.4. At present. Owing to high growth rate. However.1% O ut . growth GROWTH OF TOTAL AND ORGANIZED RETAIL MARKET IN INDIA experienced by organized retail (more than 500 40 (Unorganized + Organized) 35% against an overall retail growth of 330 (in $ US billion) Organized Retail 298 (in $US billion) Retail Market 231 256 around 11% in 2006-07) is much higher as 14 19 7 9 compared to unorganized retail within 0 0 India.8 % 3 .7 % 2 .5 % F a s hio n A c c e s s o rie s 3 8 .o f . A c c e s s o rie s & S e rv ic e s 3 .1% Wa t c he s P ha rm a c e ut ic a ls 2 .4 % M o bile .9 % J we lle ry H o m e A pplia nc e s 2 .5 % F o o t we a r C o ns um e r D ura ble s & 9 . F urnis hings & Ut e ns ils 6 . the category-wise shares are very different from the THE ORGANIZED RETAIL PIE (INDIA) 2007-08 (Market Size: $US 19. M us ic & G if t s E nt e rt a inm e nt 2 . 2004 2005 2006 2007 organized retailing has finally emerged Source: F &R Research from the shadows of unorganized retailing and is contributing significantly to the growth of Indian retail sector.4. it accounts for only around 5-6% of the total retailing in India. 2.2.3 % F o o d & G ro c e ry C lo t hing.9 % 9 . Organized Retail as Part of Total Retail Organized retail happens to be a very small part of total retail market in India. 2.0 % H e a lt h & B e a ut y S e rv ic e s 0 .

‗Clothing & Textile‘ stands third with more than 20% of the trade in organized retail. timewear and footwear are the categories with maximum organized retail (almost 50% of total retail in each category).4. 2. Ou e. CATEGORY-WISE SHARE OF ORGANIZED RETAIL OUT OF TOTAL RETAIL IN INDIA 100% 2007 2006 2005 2004 50% 40% 30% 20% 10% 0% ll ing es y s r ery als fts t es era en les er s ea ce s tch sil ice Gi vic oth tic oc ell tw nm rvi Ov ab en Wa eu rv Gr & Jw er oo Cl Se ur tai Ut Se sic dS ac F rD & ter ty s& arm Mu od & oo au e En um es o i ng Be eF s.4. Category-wise Penetration of Organized Retail Coming to the category-wise share of organized retail out of total retail. itu bil rn Mo Fu Source: F &R Research INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 23 .overall retail picture. Textile & Fashion Accessories is the largest category followed by Food & Grocery. Footwear and Consumer Durables happen to be the third and fourth largest categories followed by Consumer Durables in organized retail at present. Ph F ori ns ok ish om h& ss Co Bo rn f-H ce alt Fu Ac t-o He re. Clothing.

All key players have major expansion plans in the coming few years.25% even under the present situation of economic slowdown. 2. (in US $ billion) This is roughly 8. is planning to spend Rs 120-150 crore for expansion during next year to take its number of cafes to around 1.5. Organized food outlets are expected to grow at the rate of 20 . out of which about US $ 1. the company plans to add 40-60 outlets each year nationally and also intends to invest Rs 400 Crores over the next three years (that is 2009-2011).28 billion is SIZE OF F & B (SERVICING) RETAIL accounted for by the organized sector. With an aim to achieve 30-35 per growth per annum.56 billion in 2007.000 from the current 700. part of the Bangalore-based Amalgamated Bean Coffee Trading Company Limited (ABCTCL). Dec 23. India currently has more than 1000 fast 0 0 food restaurants and coffee joints as 2004 2005 2006 2007 part of modern retail and there exists Total F&B (Servicing) Retail Organized F&B (Servicing) Retail huge potential for more number of Source: Business Standard similar outlets to come in different parts and different cities of India.9 percent of the market being organized in the previous year. 2008) INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 24 .  Cafe Coffee Day. Cafe Coffee day is also working towards creating more formats like selling coffees through dine-ins (for lunch and dinner) and coffee pubs for youths to hang out in strategic locations. (Source: Business Standard.2 percent of the 18 3 market being organised as compared to Organized Segment Total Market just 6.4. Food & Beverage based Servicing Retail in India The Indian F&B services sector is estimated to be worth US $ 15.  Mc Donald‘s has 160 restaurants in India at present (in 2008).

2008)  Over the past 10 years. Yum plans to scale up Pizza Hut to 175 by 2010 and also add 15-20 new restaurants every year. the company had 140 Pizza Huts in 35 cities and 33 KFCs in nine cities. As of the first quarter 2008 earnings. (Source: Business Wire) INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 25 . 17 Nov. Yum! has become the largest and fastest growing restaurant company in India. (Company Sources. The company has announced an investment of Rs220-230 crore in India over the next three years for expanding its retail fast-food chain and manufacturing capacities. Domino‘s intends to increase its outlets to 250 by March 2009 from the present number of 230.

Modern Retail Store Formats Premium Lifestyle based Value based Specialty Other Retail Destination Lifestyle based Retailing Retailing Stores Formats Malls Retailing Discount Departmental stores Stores Supermarket Airport Apparel and Hypermarket retailing Fashion Stores Online/ Key product telephonic categories with & catalogue luxury brands: buying  Apparel  Jwellery  Timewear Food & Clothing Footwear Jwellery. MODERN RETAIL STORE FORMATS Indian Retailers are experimenting with various modern retail formats customized to customer categories and product mix. 3. Magazine Electrical & Electronic Beauty & Health & Stationery Equipments Care Pharmaceutical Music & Entertainment INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 26 . Furniture &  Accessories grocery Watches/ Furnishing  Furniture Accessories Other Retail Formats Books.

Promod. Fcuk. Corum 4 Furniture Baker and Henredon. Cartier.000 sq ft & 75. Rado. Jimmy Choo. Zales and Harry Winston 3 Watches Seiko. Premium Lifestyle Retailing The premium lifestyle retailing caters to the affluent by providing them the high-end luxury brands/ services. status and pride in owning expensive items. Chanel. Daks. Calvin Klein. Nine West. Given the constant rise in affluence with the GDP growth and boom in capital markets in the last few years. Ralph Lauren. apparel. electronics. Breguet. main challenges for the sustenance of these luxury brands are high import duty structures and lack of appropriate real estate.000 sq ft  Major concentration of Premium Lifestyle based Retail outlets are in some select locations of the top 4-5 cities of India such as South Mumbai.1. Dolce and Gabbana to enter the country and the already present brands such as Gucci. 1 Clothing Crocodile. Verticals Luxury Brands Gucci. key product categories are accessories. Tag Heuer. Christian Dior. South Delhi. Fendi. Saville Row. Following section deals in detail with these broad categories and sub-categories within them: 3. Gas and S Oliver 2 Jwellery Tiffany. Jwellery and Furniture. Bernhardt and McGuire INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 27 . La Perla. Armani. However. Tommy Hilfiger and Hugo Boss to expand their operations  Average size of retail outlets in this category ranges between 20. Under premium lifestyle based retailing. Trussardi. many retailers are looking at tapping this segment. No. Opening up of FDI up to 51 percent in single brand retailing coupled with the boom in luxury retailing has led international luxury brands such as Loius Vitton. Omega. Chennai and Bangalore S. The brands in this category have a unique appeal and touch upon psychological needs such as esteem.

Major Players Pantaloon. appliances. organized into different departments such as clothing.2. and higher aspiration.000 sq ft  These stores are targeted primarily at high end consumers. Lifestyle Retailing Higher disposable income. Departmental Stores Departmental stores are large stores having a wide variety of products. increasing urbanization and changing mindset of Indian consumers Two popular formats under this category are: Departmental stores and Apparel and Fashion stores 3.1.2. Upper Middle and Middle class Indian customers are willing to pay more for a brand or better product that keeps him/her up-to-date and in style. toys. Indiabulls Retail (Piramyd) 3. increased level of awareness. 3.  Average size of apparel and fashion stores in India is 20. trinkets and home décor items. Major growth drivers for Lifestyle retailing are: rising lifestyle aspirations. all this has influenced the consumption pattern of the Indian consumers. houseware. Ebony.2. catering to varied consumer needs. primarily SEC A & B INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 28 . Apparel and Fashion Stores These are stores with prime focus on apparel and will a small percentage of their mix being fashion accessories. among others. where the ticket size is larger in spite of a footfall lower than other store types. These may be multi-brand stores or exclusive showrooms.2. Lifestyle (Landmark Group). The Upper. Shoppers‘ Stop. These stores target primarily the SEC A. They offer value in terms of being a one-stop shop with different brands in each category. accessories and cosmetics. furniture. international exposure.

Lifestyle (Max retail). It is based on the concepts of ‗Value for Money‘ and ‗Ways to Convenient Shopping‘. Arvind brands.1.000 to 10. Provogue. Shoppers‘‘ stop. Globus.  Average size of supermarkets ranges from 3. and Koutons The apparel segment. Fab India. Value retailing Value retailing covers stores offering lower prices. Raymonds.000 sq ft as well INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 29 . 3.3. which is fairly organized.000 sq ft and in some cases it is upto 25. Supermarkets primarily cater to nearby residential areas and therefore throw a direct competition to neighbourhood grocery stores and fresh fruits & vegetables retail mandis. is profitable in comparison to other product segments. Major Players Pantaloon. Madura Garments. organized into sections. Guess. The concept of ‗Value retailing‘ is catching up fast among middle class urban families. This segment sees the presence of more international players than most other retail segments. The popular formats under this category are: Supermarkets and Hypermarkets 3. better variety and a convenient and improved shopping experience. Many of the superstores have discount and promotional offers on various products at different points of time in a year. Supermarkets A supermarket is a self-service one stop shopping store offering a wide variety of food and household merchandise. It is larger in size and has a wider selection than a traditional grocery store but is smaller than a hypermarket or superstore. Westside.3. The basic appeal of supermarkets is the availability of broad selection of goods of multiple brands as well as store‘s private labels under a single roof at relatively low prices (possible on account of ‘Economy of Scale’ and ‘Efficient Warehousing and Merchandizing’).

Hypermarkets Hypermarket is a large outlet which combines the format of a supermarket and a department store. On the other hand. Consumers are fine traveling little far to shop in hypermarkets because of the price advantage they get. books & stationery and other household items. Namdhari‘s Fresh. Indiabulls‘ Mart and Indiabulls‘ Megastore (Piramyd retail) Modern Retail Players with presence in some specific regions and planning to grow big Spinach (including Sabka Bazaar).000 to 70. There is an increasing focus on opening such outlets in Tier II cities (such as Ludhiana.000 sq ft or more. and Chandigarh etc.3. Big Apple. Nilgiris. More (Aditya Birla Retail).2. Spencer -Fresh. Generally. furniture & furnishing. Margins depend on the product mix. Easyday 3. Subhiksha . FMCG. they are located in the outskirts of cities or as anchors in shopping malls. Reliance Fresh (Reliance). Patna. Retail outlets prefer to have their hypermarkets on one floor. apparel & accessories. in few cases the space might be split into two or more floors as well. A higher share of food and grocery would mean lower margins. volumes and supply chain management. The result is a very large retail facility with an enormous range of products catering to a spectrum of segments such as food and grocery. apparel and furniture could increase margins.  Supermarkets of various Retail Companies are now present in many pockets of top 6-7 cities of India catering to the daily requirements of nearby residential areas. consumer durables.) Key Players at National Level Food Bazaar (Future Group). Daily and Super (RPG Group).  Average size of hypermarkets ranges from 50. Hypermarkets are becoming popular among consumers because products are available at prices lower by 5% to upto 50% than the regular market price. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 30 . entertainment & leisure. However. Hypermarkets offer lot of discount and promotional offers to promote sales. Marginfree. MK Retail.

20% Source: Primary Data INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 31 . F urnit ure . 4 2 % 30% 40% 12 % It e m s . Key Players at National Level Big Bazaar (Future Group). 17 % S t a ple s Ut e ns ils F ruit s & 12 % & Steel V e ge t a ble s 2% It e m s . Spencer -Hyper (RPG Group). 16 % Lugga ge & F M C G _ N o n. Indiabulls‘ Mart & Megastore (Piramyd retail) Business Break up of Big Bazaar (Pantaloon Retail) Break up of General Merchandise (Pantaloon Retail) G e ne ra l M e rc ha ndis e 16 % F M C G_F o o d 13 % F o o t we a r. Liv e Kit c he n F urnis hing & 1% O t he rs 14 % Business break up of Aditya Retail in Staples Business break up of Vishalmart Category Spices & Dry Fruits. 8% 22% A ppa re l 59% N o n. Star Bazaar (Trent – Retail Arm of Tata) Subhiksha . 1% 12% Cereals. Retail companies like Vishal Megamart and Big Bazaar are already operating their hypermarkets in various tier II cities in India. 2 5 % E le c t ro nic s .a ppa re l Edible Oil.  There is an increasing focus on opening hypermarkets in Tier II cities. 30% 18 % Pulses. O t he r C lo t hing F o o d B a za a r fo o d P la s t ic It e m s . 30% FM CG Sugar & Salt. Most of the Retail Outlets that are present as supermarkets are now foraying into hypermarket format as well. O t he rs . Reliance Hypermarket (Reliance).

Personal Care (Beauty & Health Care).1. e-zone. Fashion Station.000 sq ft Verticals Key Players and their Principal Fascia  Pantaloon (Brew bar.000 – 10. Brand Factory. Mobile Handsets & Accessories & Services. Top 10) Clothing  Shoppers‘ Stop (Mother Care)  Reliance Retail (Reliance Trendz)  Pantaloon (Shoe Factory) Footwear  Reliance Retail(Reliance Footprint) Jwellery & Watches/  Pantaloon (Blue Sky. Other Retail Formats 3. A specialty store offers different brands of any specified category under one roof.  Average space for a Specialty Store ranges between 8. Entertainment. Books & Stationery. Home Town) Furniture & Furnishing  Shoppers‘ Stop (Home Stop)  Pantaloon (Electronics bazaar. Specialty Stores Specialty stores are category specific stores and are meant to cater to some specific needs of consumers.4. Footwear. Furniture & Furnishing. Got It) Electrical & Electronic  Tata Trent (Croma) Equipments  Reliance Retail (Reliance Digital)  Videocon (Next) Books. Apparel.4. Brio)  Pantaloon (All. Consumer Durables (including home appliances). Electrical & Electronic Equipments. and Others. Magazine &  Pantaloon (Depot) INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 32 . Chamosa) Food & Grocery  Shoppers‘ Stop (Desi Café. Furniture Bazaar. 3. Specialty store can be dedicated to any of the following categories – Food & grocery. Pharmaceuticals. Navaras) Accessories  Shoppers‘ Stop (Arcelia)  Pantaloon (Collection-i. Jwellery & Time wear & related accessories. Café Bollywood.

 Spencer‘s Retail (RPG‘s Cellucom) Accessories & Services  Subhiksha (Subhiksha Mobile)  Essar Group (Mobile Store) 3. Discount outlets help manufacturers and retailers to dispose of the excess or unsold stock while consumers get the benefit of branded products at affordable prices. M Bazaar. Star Sitara. Sports Bar) Music & Entertainment  Shoppers‘ Stop (Time Zone)  Videocon (Planet M)  Pantaloon (Gen M.2.. Name of Store Key Players The Loot Jay Retailing and Merchandizing Pvt. Goods sold by discount stores are generally the unsold or excess stock or slightly defective pieces. In general. Turmeric) Personal Care (Beauty &  Shoppers‘ Stop (MAC Cosmetics) Health Care)  Reliance Retail (Reliance Wellness)  Pantaloon (Bowling Co. Megamart Arvind Brands Shoe Factory Liberty Shoes and Pantaloon Retail (JV between two parties) Globus Factory Outlet Globus Maxretail Landmark group Brand Factory JV of Pantaloon with Planet M. M-port) Mobile Handsets. Discount Stores/ factory outlets These are sales outlets offering goods at a discounted price. Tulsi. Staples and Dollar stores INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 33 . Manufacturers have their factory outlets. F123. Ltd. Stationery  Shoppers‘ Stop (Crossword)  Pantaloon (Health Village.4. Globus.

There are challenges in growth of these retail formats because of the ‗touch and feel‘ based buying culture in India. Domestic players are tying up with global retailers having relevant experience in airport retailing in other countries.4. air-conditioned ambience. Retailers are now capitalizing on the increasing traffic at Indian airports. because of major losses faced by Alpha Retail. 3. Telephone and Catalogue Buying These are some other retail formats and are in their take off stage in India. Pantaloon Retail had tied up with UK‘s Alpha Retail. Online. all under one roof. and specialty stores).4. and entertainment (cine-multiplex and gaming zones) all together make it a One Stop INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 34 . elevator and escalators. These are sophisticated versions of old shopping centres with huge space.  Indiatimes.4. Shopper‘s Stop has tied up with Nuance from Switzerland whereas Tata‘s Consumer Durable and Electronic Retail Company – Croma has tied up with Woolworth‘s to set up retail stores at airports.com  Shopper‘s Stop has tied up with the UK based Home Retail group to develop the Agros format of catalogue retailing in India 3. 3. Shopping Malls They are enclosures having different formats for retailers. parking space. A variety of shops (departmental stores. Pantaloon Retail has recently divested from the company and the tie-up has ended.5. the recent economic slowdown has impacted many of the retailers‘ plans in Airport retailing.3. food court. Airport Retailing Airport retailing is a new concept in India. hypermarkets.4. However. However. rediff and ebay are some of the popular portals for online purchase  Pantaloons have ventured into e-tailing through their portal futurebazaar. both value and lifestyle based.

South 9% South Zone. there are only few specialty malls in India.4 mn sq ft) (Total Supply: 236 mn sq ft) West Zone. Dedicated entirely to the Jwellery collection.  The first specialty mall was the Gold Souk in Gurgaon. shopping malls have anchor tenants. the mall houses some of the big brands in the Jwellery business in India as well as abroad. At present. DISTRIBUTION OF MALL SPACE DISTRIBUTION OF MALL SPACE ACROSS ZONES IN INDIA (2007) ACROSS ZONES IN INDIA (2011)* (Total Supply: 47. there is a new culture towards Specialty malls (also known as Theme Malls) – catering to specific needs of customers. There are divided opinions about success of specialty malls in India – while one segment feels that Specialty malls are a step towards adding value to retailing in India. 7% Source: Images F & R Research INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 35 . the other segment feels that Indian market is still not mature enough and it is a bit early to introduce this concept here. Nashik. Specialty malls for luxury goods and premium lifestyle segment is expected to catch up in India. In India. 14% East Zone. and Vashi. ‘Central’ is a first of its kind seamless mall in India. is expanding its retail chain ‘Central’ by setting up new mall stores in metro cities like Mumbai and Bangalore and tier-II and tier-III cities like Ahmedabad. Mostly.destination. 44% Zone. 39% East Zone. 35% North Zone. but the Retailers Association of India (RAI) expects to push specialty malls constituting nearly 10 per cent of the total malls in India. who cover large areas in the mall and are important from the point of attracting footfalls. 24% Zone. It is an initiative of Pantaloon Retail. Pantaloon Retail (India). North 28% West Zone.

4. self-serve dining. Food courts may have .Yo! China . In in this category. Major categories in which modern food & beverage outlets can be put basis front end formats are discussed below.Barista Coffee chains may . 3. They may be as their major common space for Example: chains based on a offerings. most of these modern restaurant chains have both types of arrangements – home delivery as well as on the spot consumption option. . however.Subway Example: to various cuisines.6. While some of the specialty restaurant chains are based only on take away or home delivery format and don‘t have any seating arrangements.Papa John‘s .Costa Coffee food courts. cases. some specialty to flavours and varieties present with a offer. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 36 .Jumboking . Food Outlets as part of Modern Retail Multi-cuisine Specialty Hot Beverage/ Food Courts Restaurant Chains Restaurant Chains Coffee Chains These are restaurant These are restaurant These are outlets with These are areas where chains with wide range chains with focus on a coffee or other hot counters of multiple of menu catering to single cuisine or with beverage in different food vendors are different cuisines.Ohri‘s particular concept or they generally serve courts are mostly . Food .Haldiram‘s .Pizza Corner . Food Outlets as part of Modern Retail Home-grown as well as international restaurant chains present in both high street locations and malls represent the organised food and beverages (F&B) services retail sector.Mocha also present as part of .Indijoe chains would also fall bakery items. In some shopping malls.Blue foods theme. growing fast: . there may be some cases they may Some regional Indian more food items to be standalone chains that are Example: offer. coffee development as well.Nirula‘s .Pizza Hut remains at the core.KFC food stalls belonging .Café Coffee Day concepts and brands. Alongside.Mc Donald‘s or other hot beverage . Fast food some some snacks or found as part of . .

In Northern and Eastern India. Example: Mc Donald's India is a joint-venture company managed by Indians. Pizza Hut has entered Indian market through Franchise route in 1996. and Hyderabadi. An international company can get into JVs with different local players for opening and operating outlets in different parts of India. Gujarati. Punjabi. Some of the traditional cuisines of India are: Kashmiri. Apart from the above mentioned categories. Mughlai. Bengali. acts as master franchisee and in turn further extends franchises to different sub- franchisees INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 37 . Hyderabadi Biryani House. In Western and Southern India. there are many traditional and regional Indian restaurants that are now expanding their presence in different parts of India and growing as Chain restaurants. Hardcastle Restaurants Private Limited owns and manages McDonald's restaurants. However. Domino's entered India in 1996 through a franchise agreement with Vam Bhartia Corp. Vasanta Bhavan Modern restaurant chains in India compete against the traditional vegetarian and non- vegetarian restaurants and food stalls which constitute almost 92-93% of the total food & beverage servicing segment in India. Almost all the outlets of Mc Donalds are company owned. Rajasthani. McDonald's Restaurants are owned and managed by Vikram Bakshi‘s Connaught Plaza Restaurants Private Limited. Karim‘s. Vam Bharti Corp.  Entry and Operating Format Most of the modern food outlets are either franchised or company-owned. their supply chain models are not exactly on same lines as modern restaurant chains. Example: Sarvana Bhavan. The pizza franchise soon expanded itself in India and now has the KFC brand beneath its umbrella. Most of the global food chains have entered India either through franchise route or through JVs with any existing Indian players.

Medium-sized businesses such as retail stores. Unlike hypermarkets where any consumer can walk-in and buy goods. When the restrictions on the retail industry are lifted. Opening of 'Cash and Carry' stores throughout the country shall provide a golden opportunity to these global retailers to make in-roads into India. many foreign companies are choosing to enter the market through this format. They also establish their own brands . In its original form. large retail chains) buy from producers directly at very high volume. caterers. NCR and Punjab. Kolkatta. Volume purchase and removal of middlemen result in substantial cost reduction .  Bharti-Walmart is expected to roll out its first store in Punjab (One of the North Indian States of India) between April and June. exporters etc can buy from cash-and-carry outlets at prices much cheaper than market rate. 2009. 4. dispensing with middlemen like wholesalers and stockiest. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 38 . Global Retailers Entry through Cash & Carry Format As Government of India has allowed 100% FDI in cash and carry format.a part of which is passed on to b2b customers. So.  German wholesale major Metro Cash and Carry has already forayed into Indian market and is taking its stores to Mumbai.4. international retailers will be in a prime position to easily convert their 'Cash and Carry' stores into highly profitable supermarkets and hypermarkets.asking producers to manufacture as per their product and packaging specifications. hotels. Wholesale cash-and-carry operations would provide small retailers and business owners a wide range of products at the wholesale prices. cash-and-carry outlets allow only authenticated bulk buyers to transact business.e. b2b customers get products of assured quality throughout the year at less than market price.1. Global retailers plan to use the opportunity to set up wholesale stores in India to understand the market.cash and carry scheme focuses on small-wholesale customers who buy in bulk and pay in cash. restaurants. CASH AND CARRY STORES Targeted at and open only to business customers . owners of cash and carry outlets (i.

 Costco. Tesco has tied-up with Trent Ltd. the retail arm of the Tata group. Sabka Bazaar and Home Store retail formats. Domestic Players Not Far Behind  Amidst the increasing interest from foreign players.  Wadhawan Food Retail. Pantaloon is exploring the options to foray into cash and carry business. one of the largest retail chains of US has also shown interest in joining the bandwagon  Australian retail giant Woolworths is in discussion with Future Group (Pantaloon Retail) for an equal equity joint venture for entry into Cash and Carry format in India 4. domestic retailers have not been left behind.  Reliance is also planning to launch its B2B format INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 39 . Also. 2008) to develop a wholesale cash-and-carry business in India. Videocon Industries has floated a separate subsidiary company for its cash and carry retailing business — Bolld Cash & Carry. is also eyeing the cash and carry format.  While Bharti has already stuck a deal with Wal-mart. to help develop the Indian company‘s Star Bazaar hypermarkets. which owns Spinach. French Retailer Carrefour has announced its entry in cash and carry segment of India in 2009  Britain‘s largest retailer Tesco Plc announced its investment (in August.2.

1. Supply Chain Model for Modern Retail Outlets The given supply chain model exists across various product verticals with slight modifications Distribution Centre (Owned by Company‘s Franchisee or its Logistic Franchised Partner) Stores Companies Manufacturing Branded Products Company‘s In-house Company- Inventory owned outlets Local Manufacturers supplying to a single retail company for selling under Departmental private labels Stores Distribution Centres or Specialty Local Manufacturers Warehouses owned by Stores supplying to more than one Retail company or by its retailing company for selling Logistic Partners under private labels Hypermarket Importer / Retail Supermarket Products from company‘ Import other countries Partners  These may be central or regional distribution Other formats Retail centres depending Company‘s own upon the structure procurement adopted by the retailer office in other countries  Retailer may have common or separate warehousing arrange- ments for its different retail formats Level I: Level II: Storage Level III: Sourcing & Distribution Retail Stores INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 40 . SUPPLY CHAIN INSIGHTS 5. 5.

retailers don‘t import directly from manufacturing points in other countries. From the distribution centres. footwear etc. lifestyle and food habits. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 41 . consumer durables.  Sourcing from importers: In many cases. Retailers in India need to maintain in their retail outlets some products and brands that are locally popular in the regions where the retail stores are present. Taste and preferences of buyers vary from region to region. This method is mostly adopted for countries from where large volume imports are happening on regular basis. rather source the products from already existing importers present in India. Level 1: Product Sourcing Modern retailers in India largely procure branded products in various categories (apparels. electrical & electronic equipments. Procurement of these locally popular products are done only in the specific regions with the procured goods mostly moving to the specific regional warehouse or in some cases directly to the specific retail stores. India is a country of diverse culture. In case of private label items also sourcing is done directly from manufacturing points and the lots are sent to distribution centres. There are two ways in which retailers usually import goods from other countries:  Maintaining their own offices in other countries: The offices act as procurement points (from manufacturing units). 5. quality check points and they take care of shipment of procured goods to India. Procurement is done centrally for all the retail outlets. furniture and furnishing items. This method is adopted if volume of procurement is neither huge nor on regular basis. the lots are further distributed across various retail outlets.) directly from companies‘ factories and send the procured lots to their distribution centres.1.1.

vendor shares the risk of non-sale of any merchandize items along with the retailer. Apparels Procurement Model Remarks All procurements from local manufacturers are Private labels 100% outright on outright basis (make to order basis) New brands/ Consignment is Retailers avoid taking risk with new or less less known preferred (however. consignment is Established Concessionaire (In some a preferred way. Managing the inventory of its product is entirely the vendor‘s responsibility. retailer rents out some space of its store to a vendor.  Concessionaire: Under this model. The vendor is in charge of managing the provided space to display and sell its products.1.  Consignment: Under this method of procurement. it may be Outright preferable for brand vendors as well. Methods of Procurement There are three ways of getting supplies from vendors in case of retail stores:  Outright: Under this method of procurement. Product Category-wise Standard Methods of Procurement & Margins  Apparels  Mode of Procurement: In Apparels.1. Alongwith retailer.1.2. 5. model of procurement varies depending upon the source and product labels.2. this is brands cases. In case as well) a supplied stock is not selling in any retail INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 42 . 6. a retailer places an order with any vendor and buys the entire ordered merchandize from the vendor. it known brands brands may be Outright as well) Consignment or  In case of established brands. the vendor takes it back and tries to clear the stock through some other channels. Inventory management and risk of sale/non-sale of the merchandise is entirely on the retailer. In case any merchandize doesn‘t sell.

60% 20% .  Retailers prefer Concessionaire model as they don‘t need to maintain any inventory of vendor‘s supplies. This helps in placing of fresh stock. it varies from one retailer to another depending upon the ticket size and mark up policy of the retailers Mark up on Product Apparels Stores with big ticket size Stores with small ticket size (Example: Shopper’s Stop) (Example: Vishalmart) Private labels 250% . store.350% 80 – 100% 25% . Example: Brands FCUK and CK operate in Shopper‘s Stop stores under Concessionaire model. markup varies depending upon the popularity of the brand and the brand‘s market share  Also. All imports in apparels are largely based on Imports 100% outright supply orders or Outright  Margins on Apparels: As found during the study. then the vendor takes the stock back and tries selling it through other channels. margins on apparels in Indian retail vary depending upon  whether it is a private label product or a brand  within brands.60% (25% markup indicates that the (Stores with small ticket size avoid Brands brand is very strong and 60% keeping big brands and their product markup indicates that the brand is mix has very high share of private new or less popular) labels) INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 43 .

they follow the ‗consignment‘ based procurement. money is paid to the vendor only on the final purchase of the product from the retail stores. Private labels in soft furnishings provide retailers a higher (gross) margin of 35-40% as compared to 25-30 % in case of national level brands. the retailers enjoy a margin of 10-14%. the margin lies in the region of 15 - 20% INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 44 . In other words. most retailers have an arrangement with brand manufacturers to take back the unsold inventory.  Soft furnishing  Mode of procurement: For a non-manufacturer multi-brand retailer in furnishing segment. In case of private labels. around 90% of the furniture procurement happens on ‗Outright‘ basis whereas only the balance 10% is on vendor ‗consignment‘ basis.  Margin on soft furnishing: In soft furnishing vertical. In case of consignment based sourcing.  Margins on Consumer Durables: On branded products. Furniture and Furnishing  Furniture  Mode of procurement: For a non-manufacturer retailer in furniture segment. ‗Outright‘ buy and ‗Concessionaire‘ model are the two main modes of operation.50%.  Margins on Furniture: Both for wooden as well as metal furniture. are enjoying margins in between 30% . Indian retailers in general. due to fast changing technology.  Consumer Durables  Method of procurement: In case of consumer durables. the share of private labels is the range of 35-40% for large retailers.

 Footwear  Mode of procurement Footwear Mode of Procurement Private labels 100% outright Brands Consignment Imports 100% outright  Margins on Footwear Footwear Margin Private labels 50-100% Brands (such as Red Tape.) Subhiksha) Branded 10-15% 2-3% Private Labels 15-25% 5-7% INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 45 .) 30-40%  Food and Grocery  Method of procurement: In food and grocery. Lee Cooper etc. almost all the procurement in case of both branded as well as private labels happens on ‗Outright‘ basis.  Margins on Food & Grocery Product Margin Food & Grocery Modern stores (such as Discount stores (such as Big Bazaar. More etc.

There is a growing trend towards having few consolidated and larger warehouses or DCs. 5. for stocking and movement of their goods. 6. Due to fast changing technology.1. requires comparatively lesser investment in inventory. with the introduction of VAT and phasing out of CST.  Supply chain management in case of furniture is a challenge in India given the constraint of poor physical infrastructure. Furniture are prone to lot of damages while transporting. Also.2.  Retailing in ‗Consumer Durables and other Electrical & Electronic Equipments‘. With Central Sales Tax (CST) in place. it is cheaper to have distribution centres in each state than pay CST for inter-state movement of goods. With warehouses/ DCs becoming larger the processes. Retailers or their logistic partners are now encouraged to consolidate their warehouses/ distribution centres at a few strategic locations in India. most retailers have an arrangement with brand manufacturers to take back unsold inventory. With CST going away.1. However. Shift from Regional to Central Warehouses/ Distribution Centres Now. as apparel stocks in general are churned around five times a year. Central sales tax (CST) is being phased out. infrastructure and technology has to be more sophisticated. This is largely because of INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 46 .3. it is no longer pertinent to have a warehouse or DC in each state. Level II: Storage and Distribution Most of the leading retailers or their logistic partners in India have been maintaining regional warehouses or distribution centres (DCs) at state level.  Fresh food: In case of fresh and highly perishable food items (example: dairy items) retailers generally maintain very little or no inventory. to make various types of furniture available at the selling point at the right time requires very intelligent inventory management.2. Product Specific Insights into Inventory Management  ‘Apparels’ as a category require huge investment towards inventory management. there is a growing trend towards larger and consolidated warehouses. with the introduction of VAT system.

further shortening the chain. absence of well developed chain of cold storages and cold storage based logistic facilities. players such as Reliance.1. The extent to which they can shorten the chain also depends on the state legislation for procurement 5. Subhiksha.4. commission agent at the APMC and themselves.  Fruits and Vegetables: Most organized retailers follow a three-tier system of operation compromising the farmer. In some states. and Pantaloon directly source the produce from the farm gate. Level III: Retail Stores (Please refer to section for details on modern retail store formats in India) INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 47 .

Typically a growing restaurant chain has 4 to 5 suppliers for semi cooked and finished INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 48 .2.2. some sauces etc. Level I: Suppliers  Suppliers of semi-cooked/ semi-finished products: They are the manufacturers of semi-cooked or semi-finished food products. All the specifications for raw materials and standards for the products to be supplied by these suppliers are provided by the concerned restaurant chain management. Supply Chain for Food & Beverage Servicing Retail in India Imports (including fruits and vegetables) Items that are either not Cook – Assemble . 5.Serve available or in shortage within India e. Suppliers of semi finished/ Distribution semi cooked products Centres/ Food Outlet 2 Warehouses Suppliers of processed food ingredients It can be company Food Outlet 3 owned or outsourced to any logistic player Suppliers of Beverages (Directly to the Outlets) Level I: Suppliers Level II: Distributors Level III: Restaurant Chain Outlets 5.g: Lettuce Food Outlet 1 leaf.1. Suppliers may be different for Non-Vegetarian and Vegetarian products depending upon their capabilities.

In contrast to other suppliers they supply directly at the outlet level as they have wide distribution network of their own across India. Chatta foods. 5. Generally the distributors are Franchisee‘s with multiple outlets. These act as nodal hubs or storage houses and facilitate easy supply to outlets. Pastries etc  A few examples of semi cooked suppliers: Vista foods. Frozen dimsums  Few examples of finished food products: Burger buns. Prices may be negotiated yearly or half yearly. Breads. Level II: Distribution Warehouses or distribution centres are put at strategic locations. Some special sauces may also be imported  Suppliers of imported items (including vegetables & fruits) They supply imported vegetables. These are generally different for various regions  Suppliers of beverages These are generally the big players in the market.2. Ketchups.food products located at different places all across India.2. Frozen veg patty for burgers.  Suppliers of processed food Ingredients and other dry products These generally include suppliers of Pastes (of spices and flavour).  Few examples of semi cooked food product: Frozen chicken tikka. For example: lettuce etc according to the specifications provided by the parent company. The concerned restaurant chain management provides demand projections and negotiates with the vendors/ suppliers for prices accordingly. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 49 . Innovate foods etc. These may be company owned or outsourced to a distributor. and other sauces. These are generally located in cities having considerable number of outlets.

Supply from distributor to the outlets is either done by the distributors themselves using their own vans or outsourced to a logistics/cold chain service provider. salt etc can be procured at the outlet level.2.Supply of semi finished food products from manufacturer to the distributor is outsourced to cold chain service providers. Some franchisees may be having multiple outlets. There is a small refrigerated store room present at the outlets to store the semi finished/cooked products. 5. Typically a distributor maintains inventory for 3 to 7 days. This reduces the variation in taste as the human element in cooking is reduced to the extent possible. The idea is to minimize the cooking at the outlet level. The outlets have a kitchen or an assembly area from where the finished food products are served hot to the customers. This may vary from location to location. Typical inventory at the outlet level (for frozen products) may vary from 2 to 5 days depending upon the outlet sales. Level III: Outlets The outlets can either be company owned or owned by the franchisees. Some non core things like seasonal vegetables. For a big chain these are generally the ones who have a PAN India network.3. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 50 .

Offer complete value chain of logistics management 3 PLs . Reliance. Logistic Facilities for Retail Industry in India While some of the modern retailers in India have been outsourcing their logistics needs to specialist service providers. and RPG. Provide value added services . many large players with national footprint – including Bharti. Larger transporters with sufficient scale to diversify their Warehousing operations to include total logistics management 26% Facilities . level of satisfaction of retailers with their logistic partners is mostly low and that speaks of the poor level of logistic services. Future Group. 20 March 2007 INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 51 . According to industry sources. Typically MNCs with experience in handling 2% international logistics Source: DHL Asia Pacific Customer Conference. The existing logistics partners of modern retailers are in most of the cases not proper 3 PL players.3. Birla. Involved only in the physical movement of goods . Larger transporters serve as freight consolidators and 72% form part of organised segment Integrated Transporters with . The key market players in the Indian logistics industry can be broadly classified into the following three segments: .have opted to develop in-house logistic systems. 5. Highly unorganised Pure Transporters . These logistic partners in many cases are ‗Integrated players with Warehousing Facilities‘.

with most use occurring in automotive.3.Frost and Sullivan ―Unlike the mature western markets. in near future simply due to the highly fragmented nature and lack of national as well as international logistics providers in the country‖ . 3 PL market is still at a nascent stage in India. Frost and Sullivan INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 52 . There is relatively low penetration in pharmaceuticals and fast- moving consumer goods and one of the important reasons for this is ‗strained profit margins‘. makes it imperative for retailers to internalize most operations and cut costs. while in India it is as high as 7-10%. . IT hardware. Major reasons for leading modern retailers in India to develop their own logistic services  Lack of 3 PL players with adequate business understanding  Poor level of services from most of the existing logistic services suppliers  High costs involved 5.1. which operates on wafer thin margins of 2-3% globally. retail growth in India is expected to be dominated by large retailers owning the logistics rather than outsourcing it to third and fourth party logistic providers.Managing Director. and electronics. The higher cost for an industry. Cost of Logistics in Indian Retail Globally the logistics cost component of the total retail price is 4 -5%.

Prevalent Rental Models in India Two types of rental models are prevalent in India – fixed lease rental model and revenue sharing model 6.2. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 53 . real estate builders were more into the practice of selling out mall spaces to retailers.2. wherein the retailers pays a fixed sum of money (as mentioned in the lease agreement) to the mall developer 6. 6.6. this practice has become less prevalent now and renting out is the norm of the day. Major Components of Occupancy Costs in India  Lease rentals: Lease rentals are the occupancy cost that retailers have to pay to the mall developer on a monthly basis.1. Revenue Sharing Model Also known as the ‗turnover model‘. However.1. Major constituents of CAM charges are the air conditioning and electricity charges for the main area. this is a progressive model built on the ‗sharing of risks and rewards strategy‘.1. elevators and escalators.1. whichever is higher 6. Fixed Lease Rental Model The most traditional model in India is the fixed rental model.  Common Area Maintenance: In India. mostly mall developers are responsible for the management of entire mall. RENT STRUCTURE IN RETAIL During the initial years of modern retail in India (that is during late 1990s and early 2000s). This model requires the retailer to pay either a  Percentage of revenue or  Combination of rent and percentage of revenue  Payment of a minimum guarantee and/or proportion of revenue.

etc. the unabsorbed loss. Increase in Lease Rental The growth in organized retail penetration in India over the past 5 years led to major expansion plans being announced by existing players and cash-rich conglomerates such as Reliance. get discounts on lease rental. 6. Service tax on input costs like lease rentals is allowed to be set off against service tax on output costs like costs of advertisements. Anchor Tenants versus Vanilla Retailers Anchor tenants may be defined as the stores occupying largest space in a mall or shopping complex. The remainder. The immediate fallout of strong demand for retail has been the increase in rental rates across most large cities. now has to be charges off in the current year itself. being the crowd puller and also because of occupying the largest space in any mall.36% is levied on renting of immovable property.. Following are the comparisons between Anchor tenant and Vanilla retailers Parameters Anchor Tenants Vanilla Retailers Above 12 per cent (This figure Rental (% revenue) 6 – 10 per cent varies depending upon the cities) Rent differential in 1/3 rd lower than the Charged as per market value absolute terms market value Long term lease Short term lease arrangement (3 Lease tenure arrangement (9-18 years) – 5 years) Source: Crisil and Primary Data 6. They also enjoy other benefits such as special area for promotion and advertisings. Till recent time. Anchor tenants. etc. They are termed as ‗anchors‘ because they are the major crowd pullers in any mall.  Service Tax: A service tax of 12. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 54 . CAM charges have been in the range of 20-25 percent of the lease rentals. Bharti and Birlas. that is. hoardings. which was previously allowed to be carried forward indefinitely.3.4. cleaning and maintenance charges and parking charges. where supply of retail space has been limited.

their EBITDA margin has been negatively impacted. Though. Given the increasing competition in retail industry. Retailers have started correcting their future plans in light of this recent economic crisis.5. the expenditure on daily need items (such as food & grocery. With the suddenly disturbed economy. Economic Slowdown and Changes in Strategies of Retailers India‘s economy has also been adversely impacted because of the current meltdown in global market. As revenue growth has not kept pace with this increase in cost. furniture etc. are on hold for many. the bigger expenses such as buying of home appliances. A O‘s Indiabulls Retail Moved out from major cities to small towns Globus Shut two stores in Bangalore Shut Shop Etam Shut shops in Ahmedabad. Change in Strategy Retailers Initiatives Croma Downsizing Reduction in average store size Crossword Levi Strauss Mall exit and movement to smaller towns Mc Donald‘s. The escalation in lease rental cost has led to cost pressure for many retailers. Adidas. 6. consumers have gone conservative and are spending with care. many retailers have changed their business strategies to mitigate the negative impacts and consolidate their position. issues of high lease rentals and the sudden economic slowdown. FMCG etc.) are not found to be impacted till now. Surat and Delhi Slowing down expansion in metros and focusing Cotton by Centuary on smaller towns Slowing expansion Adidas Slowing down its expansion plans Raymonds Slowing down expansion of ‗F&G‘ format Focus on other Aditya Birla Retail ‗More‘ and shifting focus on the ‗apparels‘ verticals vertical INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 55 . KFC Re-location Mall exit and movement to hi-street Nike.

Crisil Report. the change in the regulatory environment. They have realized that occupancy rates have to be made more affordable and are now being forced to either cut down on rentals considerably or adopt ‗revenue sharing rental model‘ or any other rental models. 6. is aiding an increase in supply of retail real estate space.7. have now become a cause of worry for mall owners as well. Concentrating more on Big Bazaar and KB‘s Fair Increased focus on Price Stores value formats and Pantaloon Retail Also. But as the market has slowed down. However. mall owners had been chasing the retailers for ‗fixed lease rental‘. and rising investments in real estate companies and projects. when real estate was booming.6. Excess of retail space supply coupled with the recent economic slowdown. That time. retailers are under pressure of making profits and hence are finding it difficult to sustain the ‗high fixed rental rates‘. and Business Standard 6. Retailers have slowed down their growth plans and many of the mall spaces that were planned to be occupied are left vacant. even for retailers engaging the space with brands was the top most priority and thus flat rates were being charged. Changing Rental Models Till some time back. diversified small convenience store formats low cost models called Big Bazaar Best Deals. and home solutions venture Home Town Increasing revenue Cross sell other brands through existing exclusive Arvind Brands from existing stores outlets and widening the product range Source: Primary Research. rural retail venture Aadhar. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 56 . Excess Supply of Retail Space in Pipeline Lease rentals increased due to limited supply of retail space and increase in number of retailers. which allows 100 percent FDI in construction.

8. Sub-letting  Selling of space by retailers to other brands (mostly happens as part of Concessionnaire model)  Example: Shopper‘s Stop sub-lets some space of its store to brands like FCUK and CK. The Road Ahead Revenue Sharing Model  A minimum guarantee on rental and/or percentage share of the revenue whichever is higher  Example: Inorbit mall in Mumbai ‗Select City Walk‘ mall in Delhi Zero Rent System Franchisee Route  Retailer exempt from paying  ‗License‘ granted by a company rental charges during the initial The Road to a person or group allowing years of operation. them to use/ sell certain products Ahead…  Example: Pantaloon is learnt to  Example: Trent in tier II cities have signed such an agreement with a developer. 6. Source: Crisil & Primary Survey Please refer to Annexure II for rental trends in top Indian cities during the second quarter of 2008. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 57 .

Margins on products brands do not exist. Food & Grocery and Home Appliances Gross margins across all verticals are determined by the share of private labels and extent of commoditization of products. Besides. especially in staples can be the only etc. Accordingly. share of private labels for low and wastages are high. Spinach constitute 75% of appliances constitute only and Subhiksha. branded goods. Almost all organized these goods. apparels enjoy maximum gross margins. Private from others in terms of considerable preference for labels in processed foods and style. labels. As share of private labels and to enormous potential for the average ticket size of have an edge over branded players to differentiate products is quite high. players can the white and brown goods. players have increased the retailers have tried to constitute more than 10% of proportion of private introduce private labels in the the products in food& labels in their total product kitchen and small appliances. Organized Private labels. While private labels Though kitchen and small such as Pantaloon. design. This restricts the scope fresh produce. the focus commoditisable vertical. household appliance retailer has been on increasing the which means there exists have multi-brand outlets. at present. PROFITABILITY ACROSS VERTICALS 7. A comparison between Apparels. followed by food & grocery and home appliances. grocery category for players mix. differentiator through which Share of succeed if they are able to Also. lack of expertise limits retailers can attract more private identify gaps and enter provision of after-sales buyers and increase its label into areas where national services in case of private conversion rate. Thus. such as fruits apparels offer maximum of increasing the share the and vegetables are typically scope for private labels. fabric. Parameters Apparel Home Appliances Food & Grocery Apparels is the most At present. there is FMCG producers. cut.1. almost all In food & grocery. There is a INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 58 . 7.

Items such as home theatre. retailers generally retailers have come up with Retailers stock a wide operate multi-brand outlets. Pantaloon‘s revenues from 30% of their total products and growing trend towards apparels. decisions. per cent in case of large. music buyers within a catchment of for different usages and systems etc. & grocery but comparable the need for displaying a Competing against local or smaller as compared to variety of models. utility etc. displayed to offer a wide range Some of the retail stores are caps. compared to Household developing and training INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 59 . They don‘t salesmen‘s guidance to product options. store sizes are Household appliances entail convenience for their food in general larger than food the largest store size owing to and grocery requirements. decision in case of household in case of food & grocery prices. accessories such as sock. stole. brands and different models dedicated only to food & they generally also stock within the same brands are grocery is generally smaller. with the fast changing Wage inflations are lowest in Also. of different 3-5 kms. stores in the vicinity so as to Average variety of casual. modern Household appliances. be accessible and cater to Store Size traditional and ethnic wear plasma TVs. wage inflations are technology in various this category among the three lower in this category as products. formal. The sales force Manpower and are sure about their don‘t need much of needs to be aware of various Training buying decisions. Customers are well Salesmen play a key role in informed in case of helping the consumers‘ Customers are well informed apparels regarding quality. In this Kirana stores. Laptops. Consumers still prefer In apparels. of selection to potential bigger as the floor space is handbags etc. it is as low as 20 their ticket size is not very increasing the share. also occupied by home care and personal care items. features and and Wage need much guidance from make their purchase should be constantly updated Inflation salesmen. The costs of categories. Store space occasions. belts. In addition. Shoppers‘ Stop. segment. customers. and they appliances.

appliances. lower Despite this. private labels and other nature of products. most retailers Gross times a year. However. Due to fast changing churned out around 5 grocery (among the three technology. However. because of other factors. wage inflation witnessed by this industry is on a higher scale as compared to other two verticals. high brand manufacturers to take Profitability account of higher share of wastages due to perishable back unsold inventory. Gross margins in case compensate the initially gross margins in this vertical of household appliances are high overhead costs. manpower in this vertical are therefore higher as compared to other two verticals. Investment in inventory in Apparels require higher Investment in inventory is case of household appliances investment towards lowest and stock turns are is lower as compared to inventory as stocks are highest in case of food and apparels. are lower than Apparels mostly lowest among the three Source: Crisil and Primary Data INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 60 . more than margins and other factors. because have an arrangement with Margins/ high gross margin on of small ticket size. verticals). factors. Household appliances industry also faces relatively higher manpower attrition as compared to other two verticals. As a result.

8. Apart from the above listed companies. and others) as part of modern retailing in India. 1 $US = 45 INR) India Bulls Retail 44 159 Trent (Tata) 182 Spencer's (RPG Group) 2007-08 Vishal Retail 225 250 Lifestyle India (Landmark Group) Shopper's Stop(Raheja Group) 269 512 Subhiksha Pantaloon Retail 1202 0 1500 Source: Company Sources INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 61 . Annual Turnover of Leading Retail Companies in India (in $US million. LEADING RETAIL COMPANIES OF INDIA Key players operating as part of modern retail in India are: Please refer to Annexure I for detailed profile of some of these companies. there are many regionally strong players and a few upcoming players (such as Mahindra Retail. Hero Group.

Specialty Stores. Destination Malls. However.1. Discount and losses incurred. E-tailing & retail had to recently divest from others) Airport retailing  Very strong in ‗Value and Lifestyle segments‘  Adopting very aggressive marketing strategy and experiencing high growth in business (CAGR of around 69% over FY 2006-08)  Product mix of Pantaloon retail has higher share of Brands against Private labels. the company is working towards developing more of private labels in all product categories with an aim to enjoy higher margins  As India‘s largest retail player. Pantaloon Stores.  Because of market slowdown Supermarkets. Strengths and Weaknesses of Key Organized Players Companies Strengths Weaknesses Pantaloon  India‘s leading retailer (highest turnover  Pantaloon retail doesn‘t have Retail among all modern retail players) much to offer in luxury and  Operates in almost all types of modern premium segments retail format (Hypermarkets. and supply chain)  One of the biggest advantages with Pantaloon retail is its in-house logistic INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 62 . 8. the company holds high bargaining power with brands (Reputed Chocolate brand – Cadbury‘s and Snacks brand – Frito-Lay Lays have been refused space in Pantaloon Retail Stores because of issues like pricing.

Future group has ‗logistics‘ as one of its separate business line in the name of ‗Future logistics‘. recently customers to travel extra to reach ventured into specialty store format with Vishal Stores ‗Fashion Mart‘ as exclusive apparel stores  Except for hypermarkets and  Vishal retail is innovating with franchise recent venturing into apparel model for its specialty store ‗Fashion based specialty stores. They are  It differentiates itself in terms of its low rather present as standalone cost offerings and its target customers . Vishalmart outlets are 104 cities across 24 States & UTs of generally not opened as part of India) any shopping malls. team. Stop departmental store format namely Hypercity and other retail (Raheja ‗Shopper‘s Stop‘ formats of Raheja Group are INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 63 . sell under private labels) Shopper‘s  Company‘s strength lies in its  Shopper‘s Stop. Home Stop. stores mostly in some ‗not so focuses on Middle class and below prime locations‘ – requiring the  Strong in hypermarket format. the Mart‘ company is not present in any  Product mix in case of Vishal Stores has other retail formats very high share of private labels –  Vishal retail doesn‘t have a very — They already have 400 FMCG products smooth supply chain and vendors under their label and are in the process management system in place. Future logistics manages logistic for the retail formats of Pantaloon Vishal  Strongest player as far as presence in  To save on rentals/ cost of real Retail different cities is concerned (present in estate. of adding more They have to struggle to ensure — Company has 100% private labels in tighter margins on products and apparels (Vishal retail manufactures are on constant look out for 15% of its apparels and sources the committed vendors/ supply balance from other manufacturers and partners.

Tier I and very few Tier II cities.  Shopper‘s Stop and the other retail Hypercity is not positioned as a formats are present in prime locations of value store for masses Metros. Fashion Yatra etc are in  Trent‘s most popular retail format is initial stages and are still to ‗Westside‘ which is a lifestyle based establish themselves as popular apparel and accessories store – Westside is stores very famous for its ethnic collection  Recent initiatives in form of ‗Fashion INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 64 . Desi Café). they don‘t have specialty stores (Homestop. few cases.  Company‘s private labels are a They are generally present as anchors in small percentage of its entire shopping malls range of merchandize (80-85%  As per industry sources. The  Many of the retail related (Tata) product mix in case of apparel retailing is initiatives of Trent such as Star 95% private labels and balance as brands Bazaar. MAC.Group  The group operates in other retail formats present mostly in Metros and Retail) and are aiming at growing big in all these select Tier I cities. the hypermarket  The company operates in ‗Premium format of Raheja Group till now lifestyle and Lifestyle‘ domains and has a has not been able to mark its strong customer base in 35 years plus presence much against stores like business and senior executive classes Big Bazaar. below airport retailing and others  Hypercity. presence in Tier II cities and Mother Care. Brio. Unlike Bigbazaar. Except for a formats– hypermarket (Hypercity). Crossword. Shopper Stop & brands and 15-20% private its other retail formats have highest ticket labels) size and conversions rates  Company‘s strength also lies in its strong supply chain and logistic management- they operate on advanced ERP system and focus on fast and efficient movement of merchandize Trent  Trent is very strong in apparels.

stationery and music retail  Croma. not as high as Shopper‘s Stop INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 65 . Tier I and select Tier II cities and in big malls mostly as anchor tenants  Lifestyle stores also work on large ticket size and higher conversion rates. Trent has recently partnered with UK retailer ‗Tesco‘ Lifestyle  Lifestyle India stores compete closely  The group has limited presence India against Shopper‘s Stop and other similar with outlets in top 10-12 cities (Landmark concepts in India. As compared to within India Group) Shopper‘s Stop. Yatra‘ aims at value for money apparel & accessories  Trent owns ‗Landmark‘ which is India‘s largest books. however. Star Bazaar are targeting at Tier II cities  For efficient back end operations and supply chain management. a specialty store in consumer durables and electronic items. is one of its kind and at present very few other retail stores on similar concept are present in India – one of them being ‗Next‘  Trent has also started its initiatives in ‗Value based retailing‘ through its hypermarket format namely ‗Star Bazaar‘. Lifestyle is more focused  They are not present in on ‗Youth and Fashion‘ supermarket or hypermarket  ‗Home Centre‘ stores are catching up on format popularity and are growing big way  Lifestyle stores are present out of prime locations in Metros.

the hypermarket of Reliance namely ‗Mart‘ will be very huge stores (First Mart store is being opened in a space INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 66 . consumer success or failure depends on durables. India‘s biggest private sector recent economic crisis company with high capital investment  Reliance Fresh has been facing potential and huge risk appetite issues related to supply chain  Reliance retail has forayed into management and merchandizing supermarket. time wear. multiple factors IT products. and specialty  Most of the initiative of Reliance store formats in various product categories in retail are very new and their – clothing. furniture. food & grocery including fresh fruits and vegetables. They have also entered into business to business format – ‘Ranger Farms’ — As per company sources. hypermarket. footwear. automotive. Jwellery.Spencer‘s  Spencer‘s stores are among the oldest  Product mix of Spencer Stores (RPG retail chain initiatives in India and over the (even in case of hypermarkets) Group) years they have earned high trust of its have very high share of food & customers grocery items and fresh fruits &  The company has very strong presence in vegetables – all these are low super and hypermarket formats in India ticket items. and are established as ‗Good value for  Spencer‘s stores compete very money outlets‘ closely against neighbourhood  They are present in more than 65 Indian ‗Kirana stores‘ and therefore they cities (including tier II cities and below) are forced to run on tight margins and are available in two mini-supermarket formats as well (Spencer‘s daily and Spencer‘s express) Reliance  The biggest strength of ‗Reliance Retail‘  Reliance retail has slowed down Retail lies in the fact that it is a part of Reliance on growth plans because of Industries. healthcare.

000 sq ft)  Reliance retail has very aggressive growth plans and the company has employed huge number of people to implement these plans  Unlike many other retail companies. Reliance comes with an advantage of being a textile manufacturing company. Reliance already has retail outlets of VIMAL (company‘s flagship brand) across India Aditya  Aditya Birla retail has ventured into two  Recent economic slowdown has Birla Retail formats – Supermarket and Hypermarket impacted the growth plans of the and at present plans to grow bigger and company stronger in these two formats only  Aditya Retail will face tough  Aditya retail also comes with an inherent competition from Reliance and advantage of being a part of ‗Birla Group Bharti Retail of Companies‘ and therefore with a capacity for huge investment and higher risk appetite  The company aims at differentiating itself as a ‗spend friendly store‘ with much superior shopping experience  The company has huge growth plans in retail Subhiksha  Subhiksha is India's largest supermarket. lower middle ‗economies of scale‘ class and below‘  They often face supply chain and  It has multi-locational presence with more merchandizing related problems INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 67 .  Subhiksha being a discount store pharmacy and telecom retail chain runs on very tight margins and  Subhiksha is recognized as ‗Discount are profitable only because of Stores‘ targeting at ‗middle. of 230.

This acquisition gives Indiabulls‘ an Aditya Birla. cold chain infrastructure. and fuel management systems. market — They are differentiating themselves  Entry of Indiabulls into retail has from Shopper‘s Stop and Lifestyle unfortunately been at a time of (Landmark Group) by not targeting the economic slowdown and it had to ‗Premium and lifestyle segments‘ of face losses on acquisition of society ‗Piramyd Retail‘.  Bharti Wal-Mart Private Limited will bring  Bharti-Walmart has still not Walmart modern supply chain and back-end started operating any stores till Retail logistics expertise to India. after big groups like Reliance. bringing Wal. GPS for their plans. start and are busy consolidating. They still have to capitalize Mart‘s global best practices in such areas on their strengths and meet out as just-in-time inventory. now. RPG and Future infrastructure and an established system to Group have already got a head start with.  Indiabulls‘ is positioning itself differently  The company is facing some by also venturing into a chain of wholesale vendor related problems as well stores Bharti. truck and trailer tracking. retail information the constraints to earn success in systems.  Entry of Wal-Mart would create new benchmarks for supply chain management in India and the benefits would be passed on to the consumers INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 68 .  Indiabulls‘ retail targets at opening value The company may face stiff lifestyle based departmental stores and competition while trying to convenience stores. Their focus is on establish itself in Indian retail ‗Middle and Lower Middle classes‘. than 1000 stores in over 90 cities across 9 States Indiabulls‘  Indiabulls‘ Retail has acquired Piramyd  Indiabulls' entry into retail comes Retail retail to mark its foray into retail business.

India‘s first special skills training centre aimed at bridging the shortage of skilled workers for cash-and-carry and organized retail formats. Thus Bharti retail format will also reap the benefits out of this business tie-up  Bharti Wal-Mart in a Public Private Partnership (PPP) with the Government of Punjab has recently started a Training Centre in Amritsar (Punjab).  While Wal-Mart brings with it global expertise in supply chain and logistics. This is all the more relevant as Bharti-Walmart is planning to open its first cash and carry outlet in Punjab during April – June. Bharti has a better understanding of the local market  Bharti Enterprises‘ 100% subsidiary Bharti Retail. has entered into a franchise agreement with Wal-Mart which will provide technical support to Bharti Retail. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 69 . 2009. This is a smart move by Bharti- Walmart to build human capital and would pay off in long terms significantly.

9. Threat of New Entrants (High)  Time and Cost of Entry: Can be a constraint as new entrant should be capable of managing high operating costs.1. INDIAN RETAIL INDUSTRY ANALYSIS 9.1. Large operating costs are on account of:  High lease rental for retail space in urban India INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 70 . However. maintaining inventory of goods and managing the supply chain requires moderate initial investment and large operating cost. Opening and operating the retail stores. need further  Multi-level marketing – another  Many technology related improvement substitute improvements underway  Restricted FDI in retail  Cost of substitution is low  Multi-taxation and licensing 9. Indian Retail Market Analysis based on Nine Forces Model Social/ Consumer Shifts Threat of New Entrants (High) International/ Economic  Opposition from small traders/  Doesn‘t require buying of assets Shifts shopkeepers  Low technology protection  India fast emerging as a major  Changing outlook of Indian  Products & services differentiation destination for global retail consumers possible in many ways giants  Distribution channels replicable  Huge untapped market & high growth rate Bargaining Power of Suppliers Competitive Rivalry (Medium) Bargaining Power of Buyers (High)  Medium to low industry  Many players  High to Medium for retail spaces concentration ratio  Availability of substitutes  Medium to Low for products &  Scope for many players to grow  High price sensitivity services  Low Exit Barriers  Informed buyers  Concentration in few pockets  Concentration of modern retail in leading to competition few pockets Threat of Substitute Products & Services (High) Government (Political/ Legal Technological Shifts Shifts)  Unorganized retail-closest substitute  Liberalized. exiting this business is not very difficult  Entering the modern retail market in India is cost intensive.1.

Therefore. cost of logistics etc. For new entrants. it is difficult to attain economies of scale in the initial phases with less number of stores and lower volume of sales. retailing doesn‘t require huge capital investments into owning machineries and other assets.  Large work force that requires to be hired to manage and operate a modern retail business  However. at the right time. any new entrant would require having strong finances to wait for these many years before starting to earn from its retail initiative  Economies of scale: Important and difficult to attain in initial phases by a new entrant  Margins in retail sector in India is reducing because of increasing overhead costs (high lease rental. ‗economies of scale‘ has become very important to become profitable in this business. for the right customer. exiting this business at any point of time is not very difficult  For any new retail store. Therefore. at the right price – to the right location.  Technology Protection: Not a constraint as the required technology can be obtained by a new entrant as well  Moving the right merchandise.) are required to be invested INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 71 . etc.  Because of reducing margins. Retailing can be done in rented spaces (both for retail stores as well as for warehousing) with outsourced logistics. unlike any manufacturing units. it takes around 3-5 years to breakeven. An ERP system for logistics and warehousing coupled with front end IT support (for fast billing. high component of wages and salaries. in the right quantity requires real time optimization of product flow and proper integration of front and back end operations.) and growing competition among organized players. updating store stocks. and already existing competition from huge unorganized retail segment.

into by any new retail player. This is because the manufacturers would be in a position to enjoy higher margins for their in-house manufactured products. However. training and technology support  Efficient back end (inventory and supply chain) and front end management (retail store) requires skill.  Companies with well managed logistic teams are bound to have cost as well as operational advantages over other retail companies. addressable through right recruitment.  Cost benefits: Manufacturers & Companies with well managed logistic teams can manage cost benefits  Existing manufacturers of any products would have an advantage in retailing of those products. hiring right kind of people and adequate training of workforces aided by technology may adequately serve this requirement. For example: Pantaloon Retail India Ltd. Retailers may differentiate themselves in terms of having specialty stores dedicated to any specific product type or service. Future Group has ‘Future Logistics’ as one of its business verticals.  Specialist Knowledge: Not a constraint. Pantaloon retail gets an advantage because of this. third party logistics is in its nascent stage and it‘s difficult to find right logistic partners with sufficient knowledge of the retailer‘s business. For example: Godrej as a retailer in furniture segment has an advantage in terms of margins because it is also into manufacturing of furniture. is a part of Future Group.  Products & Services Differentiation: New entrants can differentiate themselves in multiple ways  Retailing as a concept is not limited to any specific products or services. However. any retail player can possess the required technology provided the player is ready to invest in it. knowledge and experience. They may at the same time operate in INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 72 . This is because in India.

However. hypermarket. consumer durables etc. there may be many retailer specific vendors (one vendor dedicated to only one retailer). the distribution models adopted are standardized and replicable. What varies is the bargaining on margins depending upon the strength of brands and the strength of retail players. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 73 . Retailers may differentiate themselves in terms of their target customers.  In case of unbranded supplies (to be sold under private labels) few of the vendors may be common for many retailers. For most of the product categories such as apparels. furniture. For any new entrant in Indian retail market.  Distribution Channel: Largely standardized and replicable by new entrants  Distribution channels are largely standardized in modern retail formats. in each modern retail formats within India. developing a set of dedicated vendors is a slight challenge and may take some time and efforts. their business strategy and their ticket size. however.  However. fruits & vegetables. there operate only a few players and enough scope exists for new players to enter and operate. From this point of view. within some specific formats such as hypermarket or supermarket products and services offerings can be differentiated only to a limited extent. any new entrant in retail market has multiple options. the distribution channels are little different (largely on account of perishable nature of these items) and may vary from one player to another.  Access to Vendors: Developing a set of dedicated vendors can be a challenge for a new entrant  For branded products.  At present. supermarket or departmental store formats. sourcing points are common for all players. in case of some specific product types such as fresh food.

Threat of Substitutes (High)  Neighbourhood mom & pop stores.2. fruit & vegetable vendors. electronic equipments.3. Bargaining Power of Suppliers (High to Medium for retail spaces. standalone shops selling readymade garments.1. With the advent of modern retailing in India.1. However. all are close substitutes of various Modern retail formats. Medium to Low for products and services) INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 74 . the so called unorganized retail is also challenged to improve and get more structured.  Multi level marketing (also known as network marketing) is another format of selling that can act as a substitute to modern retail formats to some extent and in some specific product categories  Different modern retail formats can act as substitutes to each other as well (intra- segment substitution).  Cost of substitution: As most of the modern as well as unorganized retail spaces are operating on lease only. cluster of shops and other outlets as part of unorganized retail. This increases the threat of substitution even more. therefore cost of substitution would not be high. consumer durables. For example: A hypermarket can substitute a supermarket or a specialty store and vice-versa. Other Barriers to Entry  Barriers related to Foreign Direct Investment and government clearances/ licensing have been discussed under ‗Government Shifts‘  Some Social barriers have also been discussed as part of Social/ Consumer Shifts 9. multi-level marketing for any product category would consume lot of time and efforts to develop and grow. 9.

Builders have been in a strong position to bargain for higher lease rental. bargaining power of suppliers is low except in cases of very established brands. However.  In modern retail. speculating the high growth potential for modern retail in India. there is a growing trend towards formalizing the relationship with suppliers in terms of joint venture or partnership. Availability and affordability of spaces have stayed as critical issues for modern retailers. real estate was booming and the modern retail space rentals were touching sky. Also.  Branded products suppliers are in a better position to bargain as compared to local/unbranded products suppliers. the recent slowdown is now forcing builders/ real estate developers to reduce the lease rentals to some extent.  One factor that adds to the bargaining power of suppliers is the option of supplying to unorganized retail shops. which account for around 94-95% of the total retail market value in India.  For most of the product categories. there exist many suppliers and multiple sourcing options. Formalizing of supply INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 75 . Suppliers of Retail Space Before the recent economic slowdown hit Indian market. However.  Suppliers of Products/Services Bargaining power of vendors varies from product to product and depends hugely upon whether a product is branded or unbranded and whether the relationship with supplier is formalized or not. From this consideration. All this is gradually giving modern retailers some power to bargain against Real estate developers for lower rentals or adoption of alternate lease models such as revenue sharing. real estate developers started with multiple projects and now there seems to be excess of retail space supply in pipeline. Margins enjoyed by suppliers in case of supplies to unorganized stores are higher as compared to organized ones. bigger size of orders (economies of scale) and long term relationship make supplies to organized retailers profitable.

INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 76 . across different products is another major reason for their higher bargaining  Higher Price Sensitivity Various market surveys suggest that Indian buyers are very particular about ‗Good value for money‘ and this factor influences volume as well as frequency of purchase from any retail store. This restricts suppliers from lobbying against any modern retailer or from erratic and unexpected behaviour. relationship makes it a binding upon suppliers to supply to the undersigned retailer for a certain period at the decided margins and agreed upon terms and conditions. Altogether.4. Bargaining Power of Buyers (High) Bargaining power of buyers is high in case of modern retail. only the middle class and above are being largely targeted.1. entry of more and more new players and increasing options among buyers to choose for various product and services  Availability of Substitutes Presence of large unorganized retail sector with numerous players offering products at competitive prices and other benefits such as neighbourhood location of shops are a close substitute for modern retail and therefore a reason for higher bargaining power of buyers  Increased Buyer Information Increased level of awareness among consumers on brands. it can be said that bargaining power of suppliers remains medium to low for most of the product categories in case of modern retail. and prices etc.  Modern Retail Concentrated in Few Pockets Modern retail at present is largely limited to top cities of India and very few tier II cities. This is largely on account of  Many Existing and New Players Presence of multiple players as part of modern retail. quality. This has led to higher competition between players to catch more buyers. Also. 9.

it is concentrated mostly in metro cities and select tier I & tier II cities. Reliance retail. Competitive Rivalry (Medium)  Medium to Low Industry Concentration Ratio Modern retail industry is in its initial stages in India. Even the warehouses are on lease.  Low Exit Barriers In modern retail. Though the existing base is small. In last few years many players have entered the market. The size of tapped market is a very small proportion of total market potential. Future group. at present the industry concentration ratio is medium to low and therefore not a situation of high competitive rivalry. In terms of penetration. It will take a few more years for the market to mature and for clear cut trends on market share to emerge. Aditya retail. It is expected to grow at a rate of 25-30% or more annually even during the prevailing phase of economic slowdown. Landmark Group. Vishal retail. In other words. 9. the prevalent practice is to take retail space on lease. however none of them can be said to be enjoying significant market share at present. there exists enough room for new players to enter and grow. Infact. The present level of competition exists because all the players are operating in few urban pockets only. improved shopping experience. modern retail has been growing at a high rate. Raheja Group. As far as the size of untapped market is concerned. Bharti-Wal-Mart and a few others are being seen as big players with huge potential and aggressive plans in retail sector.All this is resulting into higher gains of buyers in terms of better prices. All this INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 77 . the existing players welcome competition because they feel that increased competition might help in maturing the buyers and in creating a benchmark for further improvements in modern retail within India.  Space for Existence and Growth of Large Number of Players Modern retail in India has just taken off and by value it is only 5-6% of the total retail market in India at present. There are no other huge capital investments as well. regular discounts and offers.1. better services such as free home delivery etc.5.

The cash-and-carry format is a business to business model. it is leading to relatively higher competition among players.  FDI in Indian Retail The government of India allows FDI in retail under the following two categories:  Up to 100 per cent in cash-and-carry (wholesale) retail by global retail chains (e.  Products should be sold under the same brand internationally. However. and Wal-Mart).g. This also helps in reducing the level of competitive rivalry as a non-performing player might exit the market without much loss. encouraging increased sourcing of goods from India.6. Loius Vuitton and others). As they are all trying to grow and grab business in the same geographies.g. there is an increasing pressure for further relaxation.  Up to 51 per cent in single brand retail (e. Metro AG. Shoprite. improving the availability of such goods for the consumers. Government (Legal and Political Shifts) Indian Government has liberalized its policies in many ways over the years to incentivize growth of Modern Retail in India. Nike. and enhancing INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 78 .results in lower exit barriers. Lee Cooper.  ‗Single Brand‘ product-retailing would cover only products which are branded during manufacturing. 9.  The government has taken this stance with the objective to attract investments in production and marketing.1. FDI up to 51% has been allowed in retail trade of ‗Single Brand‘ products. wherein stores sell large volumes of products to the retailers and not directly to consumers.  Concentration of Players in Metros and Tier I Cities Modern retail at present is limited to top metros and tier I cities. with prior government approval and under certain conditions:  Products to be sold should be of a ‗Single Brand‘ only.

According to retailers. However. this delays the opening of stores and increases cost. Multi-point octroi/entry tax collection is also leads to differential taxing. technologies and management practices  Government Regulations on Licensing.7. Many of the small traders.  Introduction of VAT is a favourable step from Government of India to remove double taxation and to bring uniformity in taxes across states. West Bengal and Kerela that led to closing down of some modern retail outlets in these regions. Taxation etc. 9. Entry of large companies as part of modern retail in India is feared to cause exit of the smaller stores that account for around 95% of the country‘s estimated 12 million retail outlets in India. many states have still not implemented VAT fully and therefore differential sales tax system still continues across different states. there have been protests. (Need to be simplified further)  At present. product specific licenses. However. in some of the Indian states such as Uttar Pradesh. Social Shifts  Opposition from Small Traders and Shopkeepers Retail is the second-largest employer in the country.1. shopkeepers. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 79 . retailers in India need to obtain licenses and permits such as basic trading licenses. In recent past. Analysts see an element of political opportunism behind these protests. competitiveness of Indian enterprises through access to global designs. backed by some of the political parties. wholesalers and vendors are of the belief that Indian government should stop large corporations from entering the retail segment until it puts in place a national policy that is agreeable to all the stakeholders. pollution clearances etc for every retail outlet (even if it‘s a chain store). these protests are slowly dying out because of growing realization basis several studies that India‘s market is big enough to accommodate modern retail alongside the small shops and kirana stores that will continue to flourish. All this act as constraints for the retailers in adopting uniform prices for same products in different states.

 Changing attitude of Indian consumers Please refer to section on ‗Growth Drivers for Modern Retail in India‘ for details on this topic 9. Material handling equipments usage also has gone higher. All the above mentioned technology related initiatives are in their initial stages and have been adopted by leading players.1. As some major markets globally show signs of saturation.9. vegetables and other highly perishable food items. Efficient supply chain management in turn is resulting in smaller inventory and real time flow of goods.1. There is a need for higher level of adoption of improved technologies. Technological Shifts Many technology related improvements underway Modern retail in India is experiencing higher usage of ERP systems and other IT infrastructure for efficient material handling at back and front end of retail supply chain. especially establishment of chains of cold storage for storing fruits. are also required and are gradually being established. Improved technology for goods storage. The lack of consolidation and modern retail concepts in India present great opportunities for global retailers.8. India has certainly emerged as the preferred market for big retailers. 9. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 80 . Economic/ International Shifts India is fast emerging as a major destination for global retail giants to meet the needs of a growing breed of middle-class Indians with more disposable income to spend on consumer goods.

coupled with lack of third party logistic providers makes operations difficult. especially for the food industry. 9.  Absence of cold chains and proper storage.2. and transportation methods (suitable vehicles and containers) leads to a high wastage and increased transaction and product costs.  Poor infrastructure (road. Major Constraints for Modern Retail in India Multiple Legislative M Laws ul t Un Co iple m ifo p Ta rm lic xa a Pr te tio on re sing ic s n ss u i in g Pre ins: R rg ost Ma C Key Constraints ate ad equ urces In eso an R Re H u m Av al Es a Aff ilabi tate: ord lity ab AP ilit & M y Re C Ac for ts ply Re Sti ms : Sup in Fe quir l l Cha e- tl w St ed Bot ks ate in n c e s The major roadblocks or constraints for Modern retail in India have been identified as follows:  Supply Chain Bottlenecks: Distribution and logistics are major bottlenecks for the Indian industry. rail and communication infrastructure). INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 81 .

India has a long coastline. with properties not being delivered on time.000 TEU containerships. but carry 40 percent of the traffic. firms can only run trucks smaller than 20 feet. Seventy percent of the seaborne trade is handled by 2 of its 12 major ports.000 kilometers are express highways. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 82 . turnaround time far lags other global ports with vessels taking up to 3½ days to debark. zoning restrictions and lack of clear ownership titles further add to the problems  Delays in delivery of malls are the other constraints that retailers are facing. yet less than half of the roads are paved and less than 2. Unavailability of government land. The poor condition of roads translates directly to shorter vehicle lifespan. India invests less than 4 percent of its GDP in infrastructure. As a result. Limited physical infrastructure. which make up 25 percent of today‘s shipping volume. Many projects are running 6-12 months behind schedule. compared to the West‘s 60 miles per hour. but its port system isn‘t well utilized. Even within its large ports.  Real Estate: Availability and Affordability  The availability of real estate is a critical issue that would influence the rate of growth and profit margins of retailers. Many of the secondary ports have infrastructure problems that aren‘t a quick fix. while 180 minor ports go virtually unutilized. India can‘t support 6. India has one of the largest road networks in the world. compared to China‘s 9 percent. As of now. This is one reason the average speed in India is 20 miles per hour. These national highways account for less than 2 percent of the total road network. rather than produce products for Indian consumers. Off the highways. In addition to constraining India‘s growth in offshore production.  Over-burdened ports. this makes it difficult for manufacturers hoping to import. which increases operating costs and reduces efficiency.

sales tax (state). lease rentals have been accounting for 7-8% of revenues of retailers. Manpower expenses have been accounting for 6-7% of total revenues of retailers  Multiple Legislative Laws Multiple licenses and clearances required for setting up and operating a retail store add to the impediments faced by the organized retail industry. besides reducing contact points. While most states have abolished octroi. entry taxes for inter-state sales and octroi.36% with effect from 2007-08 is another cost component for retailers  Employee costs: Training costs constitute a huge component of total employee costs of retailers. They include the CST. Maharashtra and Gujarat. both at store and managerial levels.  Inadequate Human Resources Growing concern about paucity of trained personnel. it still exists for some large city markets in Karnataka. Rental values at prime locations are very high. is evident in the sector. Pressure on Margins: Rising Costs: Already prevailing thin margins of retailers are facing further pressure from the following:  Lease rentals: On an average. the problem is likely to worsen. depending upon the area of operation and procurement. There is a need for government to reduce the licenses requirements from the current 37-45 licenses to moderate levels. The introduction and implementation of value added tax has resolved this problem for retailers to some extent. With the advent of foreign players. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 83 . and the type of goods sold. Multiple taxation makes it difficult for retailers to maintain similar prices across geographies.  Multiple Taxation Complicates Uniform Pricing The retail industry attracts a variety of taxes from both Central and State governments. Imposition of service tax @ 12. They reduce the flexibility of operations. hinder fast expansion and increase the overall cost.

Retailers are increasing salary levels and offering employee stock options to contain the
high attrition rates. Seeing this as an opportunity, various institutes have begun to offer
courses specializing in retail segment

 APMC Act: Reforms Still Required in Few States

APMC act in its original form restricted any organized retailer from sourcing directly
from farmers. However, growing need for change in the mode of operation of the current
system by inviting investments and competition from the private sector, has led to
drafting of new Model APMC Act, 2003. Based on new recommended model, some
states now are amending their individual state APMC acts and are allowing direct
procurement by retailers from farm gates. Recommended amendments, however, have
not been introduced in all states and also the reforms in some ways are not adequate for
direct and hassle free sourcing from farmers.

INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 84

9.3. Emerging Trends in the Indian Retail Industry

Focus on Tier
II & Lower
Cities
I
Go ncr
od eas -
s ed
un S ying
La de ha sT l
be r P re ant loba
tr G
ls riv of
at En ith ers
w w y
e Ne up Pla

Emerging
Trends in the
Indian Retail
Industry

ail In
R et or
g
ice Ma anic
e rv ets rk Ro
S l
lf- Out et u
Se En te f
try or
Aggressive
Growth Plans
with Due
Corrections
on Account
of Economic
Slowdown

 Aggressive Future Plans with Due Corrections on Account of Economic
Slowdown

Most of the modern retailers in India have aggressive growth plans. In light of present
economic slowdown, these retailers have corrected down their targets, reduced their pace
and have started investing carefully; however, they continue to be ambitious, optimistic
and are planning big.

INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 85

Future Plans of Some of the Leading Retailers
By 2011, Future Group (Pantaloon Retail) plans to have 300 stores expecting revenues of
Rs 13,000 crore. It plans to reach 24 million sq feet of retail space by June 2011, up from
8.6 million sq feet right now. The Group has maintained its pace while expanding its reach
despite the sluggish growth in the economy presently.
Shopper's Stop plans to invest Rs 1,000 crore for expanding its existing store space of 1.3
million square feet to 2.7 million square feet and move from 25 stores at present to 50 stores
over the next 3-4 years (by 2012-13).
Tata Group's retail arm Trent, which operates Westside, plans to add 8-10 stores every year.
Currently, it has 31 stores in India
Spencer's Retail, which closed down and relocated 56 of its unviable stores recently, will set
up 300 more stores till 2010 for an investment of Rs 500 crore. Currently, Spencer's has 700
stores, commanding a retail space of 2.5 million, which will see addition of another 1.3
million sq ft by 2010.

Apart from the measures discussed in section, few other strategies adopted by retailers to
beat Economic slowdown:

 Cost cutting by focusing on improving employee productivity, cutting down on
raises of senior employees, reducing spends on advertising and communication,
recruitments, etc.

 Focusing on value and discount retail formats

 Planning to add to their number of stores by capitalizing on the prevailing lower
lease rentals on account of slowdown in real estate sector

 Increased focus on consolidation of already existing stores and targeting to earn
higher profits through them

INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 86

Because of lack of any retail related experience. many of these companies have marked their foray in retail sector through acquisition of some already existing smaller retail companies.  Two-wheeler manufacturer. there is a growing trend towards tying up with global retailers to share their knowledge. Inorganic Route for Market Entry Lucrative opportunities in Indian retail sector have encouraged many companies with different backgrounds to enter the sector.  New Entrants Tying-up with Global Retailers As many Indian companies with no prior experience in retail are entering the sector. Hero Group has entered the Indian retail industry through lifestyle and home décor stores called OMA. retailers have started focusing on tier II and lower cities and towns to make an early mover advantage and acquire big gains in long term. the company has entered into supply arrangements with Danish firm. with INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 87 . experience and expertise. Thailand government‘s Royale Porceliel and UK‘s DK Living  For efficient back end operations and supply chain management. Villa Collection. the South India based chain of stores  Indiabulls entered the retail market by acquiring piramyd retail  Reliance retail started its first acquisition by buying out the retail wing of Adani. Also. Adani group had forayed into retail by acquiring a leading supermarket store V Ravjis in 2000. Tata Trent has partnered with UK retailer ‗Tesco‘  Focus on Tier II & Lower Cities/ Towns Though the top metro and tier I cities would continue to be the centres for retail business during the next few years.  Aditya Birla forayed into retail by acquiring Trinethra. Towards this.

As the competition is increasing and profit margins are getting smaller. We aim at increasing our private label products in our stores. Deploying self-service cash transaction kiosks might be a good cost-cutting exercise for retailers. 60% of retail market is FMCG (food and non-food) and that business has been in hand of 7-8 players. Our competition is with the Levers and the P & Gs of the world. and others have showed significant interest in installing self-service billing counters and check-out kiosks within their hypermarkets and other retail formats. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 88 . there is a growing effort by retailers to have more and more products of various quality and grades under private labels. Share of private label goods are generally very high in case of apparels and FMCG. this will solve the issue of long customer queues at billing counters. Their strength has been through the Kirana Stores that are selling these products.increasing focus on ‗Value retailing‘. tier II and lower towns and cities become potential market for modern retailers. Tata‘s Trent. Retail majors like Reliance Retail. Pantaloon Retail. -.As stated by one of the senior officials of Vishal Retail  Self-Service Retail Outlets The global economic downturn has opened up opportunities for self-service cash transaction and check-out kiosks at retail stores in India.  Increased Share of Goods under Private Labels Retailers enjoy far lesser margin in branded products as compared to private label products. Also. Supermarket and Hypermarket Retailers are to some extent competing against FMCG brands. as it will enable pruning of employees and cashiers might be then shifted on the shop floor.

Therefore.  Merchandise expected to be sold Source: David Oliver. The retailer has to ensure proximity to his/her source as well as Merchandize customers. various critical success factors have evolved over a period of time  Location Well placed stores with high visibility and easy access. have potential to attract higher footfall. stores may also do well near before making a purchase. Kurt Salmon AssociatesUK  Expected image/brand  Retail space and storage area Superstores need to be Specialty goods are more Furniture. Poor infrastructure EVOLUTION OF CRITICAL SUCCESS FACTORS (particularly. Critical Success Factors in Retail For modern retail industry in India. other shopping stores. Specialty want to compare prices need items.4. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 89 . Consumer located near residential areas unique than most products Durables & Upscale rather than in a shopping and customers generally clothing are examples of mall or in commercial areas won't mind traveling out of higher prices items and for to allow easy access to the way to purchase these these items customers will customers for their daily types of products. which Information impacts profitability. it is important to consider the following Geography parameters (location)  Types of customers  Visualizing the building. Location is a key factor in India for yet another reason. roads and ports) leads to Knowledge & inefficiency in the supply chain. retailers will do well to locate their store near similar stores. 9. Partner. In deciding the location of a retail store.

location of store has started becoming less of a constraint in India. Proper inventory management becomes all the more critical in India because of poor physical infrastructure conditions in most of the regions. In addition to a good location. It is very important for retailers to understand the variations in tastes and preferences across geography. now Merchandize has also evolved as a key success factor.  Merchandize Merchandize panning is critical to meet the sales target and achieve higher margins by ensuring optimal inventory levels. age groups and various economic classes within India. other critical success factors for successful retailing in India are: INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 90 .With the arrival of improved technology and betterment in infrastructure. Apart from the above three factors. gender.  Real Time Inventory Management through Proper Information System Efficient inventory management is key to successful retailing and it can be achieved through proper Information system in place backed by technology such ERP system. Review of past Strategic Channel Sales Category Level Range Space performance Planning Budgeting Margin Planning Planning Planning  Knowledge and Information  Knowledge about Customer Tastes and Preferences India is a country of people belonging to different cultures and lifestyles. and other IT infrastructure.

and Globus Globus Privilege Club running loyalty programmes.  Physical Layout: It is an important component in creating a vibrant retail experience for customers. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 91 . investing in CRM. and other supporting IT infrastructure.  Building Traffic: By working on the concept of ‗More of the Right People for More Time‘. Customer knowledge management through CRM software. are very critical for successful retailing. RFID based tracking. Proper store layout is important  To guide the customer around the store and entice increased purchases  To create balance between sales and shopping space  To create effective merchandise presentation  Keeping Pace with Technology One key differentiator between the successful and not-so-successful retailers is primarily technology. web technologies. Westside Club Westside Crossword Book Rewards Program Planet M M-xtasy World  Proper Product Display/ Placement With an idea to achieve high visibility of shelves. Three important aspects considered for product placements in retail stores are ‗Eye Level Shopping‘. and supply chain management (both back and front end) through ERP system. Customer Satisfaction and Retention Loyalty Programmes in Retail By making available to the customers the Pantaloons Green Card Program Shoppers‘ Stop First Citizens Club desired products. ‗Timing of Shopping‘ and ‗Spontaneous Purchase‘.

and Shirts etc. 10. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 92 . quantities of imports are very low at present. at present. ladies‘ as well as in kids categories.) and other fashion apparels in men‘s. 10. Apparels According to Indian retailers. from Thailand. Pantaloon retail (Future group).1. Example: Big bazaar (part of Pantaloon group) at present imports around 1/3 rd of its plastic ware. footwears. Thailand is very strong in readymade denim garments (Jeans. water bottles. plastic goods of Thailand are high on quality and relatively cheaper. ―Thailand is famous for washed denim. already sourcing or planning to source apparels. processed food. furniture. personal care items and some other items. 10. plastic utensils.Head Merchandiser for Apparels in One of the leading Departmental Stores in India Many of the leading retailers such as Shopper‘s Stop (Raheja group). kid‘s toys. plastic containers and other plastic based products from Thailand. and Lifestyle (Landmark Group) are already sourcing denims and other fashion apparels from Thailand. Plastic Goods Plastic containers. Shopper’s Stop sourced two containers of men’s and ladies’ readymade denim garments from Thailand. However. According to industry sources. T-shirts. The quality of Thai denim is better than that of brands like Lee & Levi‘s‖ . RETAILERS’ PERCEPTION ABOUT THAI IMPORTS Some of the leading retailers in India are. and other plastic based general merchandize items are also being imported from Thailand in limited quantities by some of the leading retail players. Vishal Retail. in limited quantities. home décor items & electric goods. For example: In 2007-08. Thailand manufacturers have very good understanding of denim wash and they are good at stitching and packaging as well.2. plastic goods including kids‘ toys.

3. also known as parawood. Furniture Rubber wood.5% 50% are the two major sourcing hubs for furniture in Thailand. 25% Thailand (Rubber/ Parawood Furniture). has discontinued keeping artificial flowers in its stores as they didn‘t sell much. Value and volume of imports from China and Malaysia are higher in furniture segment than Thailand. 10. 5% China(Glass Furniture & Sofa). However. at present only a select retailers procure from Thailand and that too in lower volumes.4.3. electric lamps and lamp shades are some of the products already being imported by a few modern retailers in India. quality and reasonably priced as well. Home Décor Items & Electric Goods Thailand home décor items are very popular in India. Artificial flowers. They are perceived as good in style. Particel Furniture). MDF Furniture). which targets at lower middle buyers in India. Thailand furniture are perceived as high end stuff with good quality and finish. Denmark & Italy. However. flower vases. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 93 .5% Indian Manufacturers. Chiangmai and Bangkok Break up of Supplies to Pantaloon Retail in Furniture Segment (2007-08) Indonesia (Synthetic Malaysia (Rubber Wood Ratan. display paintings. According to some of the leading retailers dealing in furniture. 15% Board. these product categories don‘t contribute much to the value based retailing in India (hypermarket and supermarkets) at present. 1. based furniture of Thailand are in demand in India. 10. Cane. Example: Vishalmart.

high end. Thai food would also require to be tuned to Indian taste. ―We have visited Thailand and explored the footwear market there. Thailand manufactured ladies‘ footwears have a typical style and look and stiletto sandals happen to be one of Thailand‘s specialties with huge potential to sell in Indian markets. Thai cuisines are tangy and spicy and therefore hold fair chances to be accepted by Indians at large. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 94 . such as shoe sole. in case we get into sourcing from Thailand. However. retailers in India appear to be interested in procuring more of footwears from Thailand. 10.5. some of the Indian retailers also appear to be interested in sourcing Q & Q sole sheets and some other footwear accessories. Thailand can be a preferred sourcing hub for ladies‘ footwears. On the other hand. Footwear Major sourcing for footwear retailing is happening from within India. hardly 1-2 retailers in India are importing Thailand footwears and that too in very small volumes. Men‘s footwears are okay in quality. However. According to some of the leading retailers. not upto mark on our quality parameters. Most of the Chinese cuisines have been Indianized and that is one big reason for their wide level acceptance among Indians. Processed Food According to some of the modern retailers. excellent finish and potentially high appeal for Indian buyers. We checked all kinds of footwear over there. Apart from ladies' footwears.As stated by the Merchandiser of one of the leading footwear retailers in India - 10. According to these retailers. Imports are happening largely from China and in small volumes from Italy and Brazil. female footwears carry great style. Thailand footwears are rated low on quality and this is one factor that discourages imports from Thailand. mid as well as low end. appearance-wise not very appealing for Indian buyers. however.6. However. This process will be gradual and take sometime. We would need to get a lot of things changed. however.‖ . at present the base is very very small and that is why even high growth rate is not adding much volume till now. Thai cuisines are picking up fast in India. At present.

All this alienate Indian buyers. Indian buyers are very particular about green. Clearly mentioned cooking instructions become very critical for less known food items. Thai noodles are different and Indians don‘t have a taste for that.As stated by Senior Research Manager.  Thailand pastes and sauces are growing in popularity among Indians. the specific instructions on quantities of various add-ons are missing and that discourages buyers from buying them. even if printed in English language are not very clear because of the typical Thai font type used. ―Indians straightaway compare any noodles with Nestle‘s Maggi. And now with an evolved Indian taste for Indianized version of Chinese noodles. largely because of high popularity of seafood in Thailand. eggetarian and non-vegetarian food types respectively. However. This is another critical factor for selling of packaged food in India. Even the non-vegetarian Indians are very selective about what they may consume.  Cooking Instructions: Most of the Indian consumers are not very experimenting and many refrain from retrying any dish in case it doesn‘t appeal to them in first trial. Thai noodles will have a tougher challenge in establishing itself in Indian market. Also. In case of some Thailand based packaged food. Thai fonts are very different and not very clear for Indians. White and Red Dots: Around 70% of world‘s vegetarians are Indians. white and red labels on the food packets standing for vegetarian.  Green. some important factors that may influence the acceptability and popularity of processed or ‗ready to cook‘ Thai cuisines in India are:  Packaging: Thai food packets mostly have lot of shrimps drawn on them (even in case of vegetarian items).‖ . Product labels and other relevant information and instructions on the food packets. Food Bazaar INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 95 .As identified during the study.

packs.8. Personal Care Items Many of the leading brands in personal care category have emerged from Thailand. Other factors related to Thailand  Importing from Thailand is more convenient as compared to countries like China because they speak in English and communication is smooth  Both Thai and Indian Currency fluctuate a lot against US dollar. This creates uncertainty about the actual payments to be made for import of various products. massage cream etc. Thailand is known to have high quality products in items such as soap. 10. face and body cream. aroma oil. what type of response does the other personal care products from Thailand get from Indian buyers is still to be seen. 10. Some of the leading retailers (such as Pantaloon Retail) in India are of late focusing on increasing their share of business under this category and are planning to import these items from Thailand in considerable volume. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 96 .7. except for the brands that are already popular in India. However.

as cost advantages as against high import costs would compel international players to source or manufacture their products in India. foreign players have entered India through this route. Since 100 per cent FDI is not allowed in India. International companies such as Levi‘s and Tommy Hilfiger source their products from domestic manufacturers like Arvind Mills. Nike and Marks & Spencer have entered India through this route. Manufacturing and sourcing Foreign players are allowed to enter India if they manufacture or source products locally. many existing franchisees may also enter into JVs with the franchisers with the opening up of FDI. With the opening of FDI. Franchising This is the most preferred mode through which foreign players have entered the Indian market. Mango. Lacoste. in return for a sum of money. to another.1. Sony and Samsung have manufacturing units in the country. operating system and ongoing support of the franchisee.11. Cash-and-carry operation Players are allowed to sell goods only for business purposes like hoteliers. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 97 . whereas Benetton. Pizza Hut. many franchisees may lose their franchising rights as franchisers may chose to change their mode of operation. the franchisee. Franchising entails granting of rights by one party. commercial organizations and retailers. On the contrary. 11. We feel the impact of opening up FDI on this route would be minimal. the franchiser. The franchiser invests his/her assets in a system to utilize the brand name. (Please refer to section for details on foreign players that have entered or planning to enter India through this route) 11. POSSIBLE WAYS FOR ENTRY OF FOREIGN RETAILERS IN INDIA International players can enter India through multiple routes: 11.2. and not for personal consumption.3.

Players may continue to enter India through this route even if FDI in retail is allowed.4. Oriflame and Nokia have entered India through this route. Test Marketing This route allows foreign players to test the demand for their products in India for 2 years before undertaking investment through setting up of manufacturing facilities in India. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 98 . 11. Players such as Amway. because they can test demand for their products before undertaking any major investment.

The market is expected to grow at more or less the same pace till it reaches the stage of maturity. most of them continue to be aggressive and plan huge investments with an intention to make early mover advantage and increase their presence pan India. Almost all modern retail formats in various product verticals are poised to grow fast during the next few years. Under the wake of present global slowdown. However. High growth rate is on account of existing lower penetration of organized retail and presence of huge untapped market. Fashion and coffee Accessories chains) Food & Grocery Theme Malls/ Consumer Specialty Malls Durables/ Home Appliances Low INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 99 . 12. 12. CONCLUSIONS AND RECOMMENDATIONS Organized retailing in India is at present in its initial stages and experiencing high growth. Level of Attractiveness versus Suitability for Thai Investors Low High Level of Attractiveness High Apparel Personal Care Stores Footwear. they can plan to enter organized retail in India under many product verticals. organized retail market in India has seen some corrections in entry and growth plans by the prospective and existing players. Home Plastic ware/ Décor Furniture & Kitchenware Furnishing Items Cash & Carry Stores Restaurant Chains (fast Suitability to Thai Investors/ Suppliers food outlets. As far as Thai entrepreneurs are concerned.1.

the share of these items as part of modern retail in India is comparatively lower. it is not possible for foreign players to enter any multibrand outlet formats (such as hypermarket. the category provides reasonable opportunity for Thailand to explore further.  Though Thailand has many things to offer under home décor category (artificial flowers.). There exists very high potential for Thailand in this category. supermarket. flower vases. value retailing has higher potential to grow in tier II and lower cities. specialty stores etc. Modern Retailers in India are of late focusing on growing their business in personal care category. for successful entry and expansion.) and therefore these options can‘t be considered by Thai Investors at present. Most of the sourcing in Food & grocery category happens from within India INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 100 . due to FDI restriction. electric lamps. However. However. However. there are not many processed and packed food items where exists high potential for Thai offerings at present.  Restaurant chains (especially the Fast food outlets and Coffee chains) are one the fastest growing categories of modern retail in India. lamp shades. except for some sauces and pastes. There is a growing opportunity for Thailand in this category. There exists high opportunity for Thailand based fast food outlets and coffee chains to foray into Indian market.  Thailand ranks high on personal care products. In terms of attractiveness. However.  Apparel as a category is among the highest on profitability and highly suitable for Thailand as well. They are spreading fast into tier II cities as well. Also. paintings and wall hangings etc. departmental stores. value retailing is the least impacted segment under the present situation of economic slowdown and all retailers have aggressive growth plans in supermarket and hypermarket formats. Value Retailing scores over Lifestyle Retailing and Premium Lifestyle Retailing.  Food & grocery stores are very high on attractiveness as far as modern retailing in India is concerned. they need to ensure that their offers are Indianized and suitable to Indian platter. Apart from metro and tier I cities.

12. Also. Proposed Entry Strategy Thai Entrepreneurs should plan to invest in Indian Retail Market in three phases as depicted below: Select Product Categories (under formal agreement) Theme or Specialty Malls through JVs/ Franchisees JV Partners/ Franchisees/ Based on Thai Products Manufacturing Base in Cash and Carry Stores Single Brand Outlets Logistic Parties Look Out for As Suppliers Thailand’s Entry Strategy Time Horizon: 1st Year 2 nd & 3rd Year 4 th Year Onwards Test Marketing in Select Phase I Phase II Phase III Product Categories INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 101 . However. many of these plans have been stalled in wake of global slowdown. and the study suggests that it would continue to happen the same way atleast for next few years.2.  Modern retailing in India is still not mature enough for wide acceptance of Theme malls or specialty malls. there has been a realization that it will take sometime before Indian buyers develop an orientation to shop from specialty malls. There have been big plans on part of real estate developers as well as leading retailers to come up with such malls in India.

partnership etc.  Supply of ‗made to order‘ goods is likely to happen under ‗Outright‘ model only. Thai manufacturers should focus on delivering as per the required specifications. Footwear.3. Unless and until the retailers are very sure of sale or get reasonably high margins. Personal Care (especially skin care items). Phase I During the first year. it is being proposed that Thai investors explore the business opportunities as suppliers to Indian retailers. Furniture and Furnishing.3. As Suppliers Product Categories Apparel & Fashion Accessories. In the meantime they should be at constant look out for suitable business partners in India for opening of single brand outlets in various product categories.  Frequent currency value fluctuation is another factor that discourages retailers in India from importing from Thailand Recommendations  Thai manufacturers/ suppliers should work on establishing formalized (through JVs.) and long term supply relationship with the existing retailers in India in the mentioned product categories.  To ensure supplies in large volumes. 12. they don‘t import goods in large volumes. Plasticware/ Kitchenware. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 102 . Processed and Fresh Food Items Concerns/ Constraints  One of the factors that discourage retailers in India from importing is (if any) that most of the sourcing happens on ‗Outright basis‘.  Thai manufacturers require taking retailers in India under confidence through proper mutual planning coupled with clarity on currency exchange value at which the supplies may take place even at any later point of time in future. 12. implementing strict quality check norms and on time delivery. Home Décor Items.1. To establish long term supply relationship for this type of supplies. Thai manufacturers should be ready to adopt consignment model of supply for select non-branded as well as branded goods and concessionaire model of supply for high end branded goods.

Furniture.2. After finalizing the JVs. it is preferable if the JV partners have their own well developed in-house logistic arrangements. This mode of operating is also known as to ‗Master franchisee and Sub-franchising model‘. North. Thai investors should select such Partners companies for partnership/ JVs within India that complement their strengths. Selected partners should  be knowledgeable about Indian customers  preferably have experience in retailing in the given product categories  preferably have presence in all the zones – South. Thai Investors franchisee & Sub should first get into JVs with Indian partners in each of the product franchising’ over categories (including food outlets). Preferring ‘Master  It is recommended that in place of direct franchising. Home Décor Items. Personal Care (especially skin care items). West and East within India  Under the present situation of lack of proper 3PL logistic players in India.3. It is only after a considerable number of company owned outlets are established that franchising option should be exercised. This INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 103 . Look Out for Joint Ventures/ Franchisees/ 3 PL Product Categories Apparel. Food Outlets Concerns/Constraints  Selecting the right JV partners or Franchisees in each of the product (if any) categories  Awareness about various laws of the land  Proper formalization of relationship on mutual agreement  Selecting the appropriate 3PL logistic party Recommendations Selecting the Right JV  In each of the product verticals. company ‘Direct Franchising’ owned single brand outlets should be opened. Plasticware/ Kitchenware. 12. Footwear.

 For food and beverage outlets. there is a need for cold chain based logistic and warehousing arrangements  Also. & Conditions  To ensure good deals. In this case also. Building in-house  In case the JV partners do not have well developed in-house logistics Logistic Facilities or team. for food and beverage outlets. Phase II Acting as suppliers would provide good insights about the type of demand that exists in India. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 104 . The logistic party may be common for more than one product category.  Once a few ‗joint venture company‘ owned outlets get established. 12. 1872. The Indian Contract act. suppliers of various semi- processed/ semi-cooked food items. Formal Agreements  All the agreements should preferably be formalized or legalized with and Clarity on Terms clear understanding of terms and conditions.4. 1882. variations in choice and preferences that prevail across different zones/regions. Thai investors must be well aware of various laws of the land including the property laws (such as Transfer of Property Act. 1908). and specific Thai goods (in various product categories) that have potential to sell within India. The Registration act. and processed food items need to be identified and tied-up with. approach will aid Thai investors in exercising better control over its outlets in initial phases and manage them in the desired manner. then the Thai investors alongwith their JV partners should look Selecting Appropriate out for proper 3 PL Players with required business knowledge in each 3 PL Party of the product categories. further expansion may be planned through franchisee route. it is recommended to have formalized agreements.

such as Personal Care Items. Footwear. of India. and Processed food. it will make the Thai suppliers more knowledgeable about the existing retailers in India. Thai Manufacturers may plan to enter India through the route of Test Marketing. store locations and type of lease agreement for opening of stores are some of the critical factors  Poor physical infrastructure coupled with lack of proper logistic and warehousing facilities are the other major concerns. Also. 12. Furniture Plasticware/ Kitchenware. Once the partner companies have been identified in different product categories. ‗Single Brand‘ outlets can be opened (if any) only for products which are branded during manufacturing and are sold under the same brand name internationally. Home Décor Items Concerns/Constraints  As specified by Govt. Consumer Durables and Home Appliances. the branded products manufacturers of Thailand should then immediately focus on opening of single brand outlets.1. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 105 . Single Brand Outlets  Single Brand Outlets in Non-food Categories Product Categories Apparel. While some of the branded products manufacturers of Thailand shall be busy opening Single brand outlets in Joint venture with Indian companies. In case of a few brands within select product categories. This condition would require to be strictly followed. and the formal agreements have happened. a few leading Thai retailers may plan to start Cash and Carry business in India.4. Personal Care (especially skin care items).  Target customers. Recommendations Identifying Target  Target customer base within India should be clearly identified for Customers each of the selected brands in each of the product categories before opening of single brand outlets.

be willing to invest in developing their in-house logistics and warehousing facilities.  In case any brand aims at premium/ high end customers. specific to some of the product categories have also been discussed in the later part of this section Recommended Rental  It is recommended that Thai investors should bargain with builders Model for lease agreement under ‗Revenue sharing model‘. The outlets may be stand alone stores located at not so prime streets or shopping malls in not so prime areas. They should also bargain for lower fixed rental component under revenue sharing model. the brand outlets may be opened as standalone stores in the vicinity of posh residential areas or as part of high end shopping malls. Focus on Building  Efficient supply chain management needs to be ensured through Efficient Supply Chain proper use of technology both at front and back end and through strong logistics and warehousing arrangements (either company owned or outsourced)  Thai investors should.  Store location related recommendations.Store Location  Store location should largely be decided based on target customers. if required. the first priority should be to have low rentals. it is preferable to open them as part of shopping malls with potential to attract high footfall or as standalone stores in High streets  For brands targeting at extremely value conscious customers (middle or lower middle income groups). INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 106 .  If the brands target at lifestyle category customers.

Later on they should be taken to lower tier cities as well. and high streets. This should be on similar lines of Indianization of Chinese Cuisines which resulted in wide acceptance and huge popularity of these cuisines in India INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 107 . in their Location and JV with identified Indian players. Thai investors.  Thai specialty restaurant chains may be started only at very select locations of the top metropolitan cities of India.  It is recommended that during the initial phases. a higher focus should be at serving Thai specialties through counters as part of food courts in shopping malls. open fast food joints and coffee Geographical Spread chains. institutional areas. Initially. Preferred locations for these outlets would be near office complexes.  Lack of cold chain based proper logistics and warehousing facilities and the chances of high wastages are the other major concerns Recommendations Type of Food Outlets. townships. Indianization of Thai  Also.  These fast food outlets and coffee chains may be opened first in Metro and tier I cities. shopping malls.  Single Brand Food & Beverage Outlets Product Category Restaurant Chains & Coffee Shops Concerns/Constraints  Type of cuisines offered and their acceptance by Indians residing in (if any) different parts of the country is the first concern. it is required to Indianize Cuisines them by adding flavours and spices that suits Indian taste buds. for Thai cuisines to be a hit in India. Study findings suggest that at present Thai cuisines in their present form are not widely accepted in India.

Cash and Carry Stores Product Categories All products that typically go into a Hypermarket (as sourcing of goods from within India is allowed under this format) Concerns/Constraints No major concerns (if any) Recommendations Experience in Cash &  Thai investors. be willing to invest in developing in-house logistic and cold storage chain facilities. 12. having extensive arrangements for cold storages and temperature controlled fleet. and by maintaining optimal level of inventory. Also. when the restrictions on retail industry are lifted within India.Minimizing Wastages  Thai investors need to focus at minimizing the wastages during through Efficient supply and in inventory of the various semi processed/ semi-cooked. should plan to Carry Format enter India through Cash and Carry b2b sales format. Supply Chain processed and fresh food items that would be sourced for various Management types of preparations. preferably with similar experience. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 108 . (preferable) Opening of 'Cash and Carry' stores throughout the country shall provide a golden opportunity to Thai investors to understand the market and to make in-roads into India. Thai investors will be in a strong position to easily convert their 'Cash and Carry' stores into highly profitable supermarkets and hypermarkets. This can be done through proper use of technology both at front and back end of supply chain.4.2. if required. Thai investors should.

3. To facilitate all this. it is recommended that Thai investors enter Cash and Carry business in tie-up with any local Indian retailers or manufacturers. Geographical Spread of  To start with. Sourcing decisions need to be well informed.  Thai investors may plan to outsource the logistics and warehousing activities by identifying the right 3PL or 4PL parties. the business requires good local market understandings. it is recommended that cash and carry stores are Stores opened in some prime market locations of all the four metropolitan cities. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 109 . However. 12. Also. Further the presence should be expanded to tier I and tier II cities. there is pressure to best utilize this time span to understand the market response and to estimate the actual demand for any given product. Logistics &  It is recommended that central warehousing (distribution centre) Warehousing system is adopted for most of the product categories except for perishable food items. Hence.Tying-up with Local  Thai investors would require to source goods in bulk directly from Indian Players manufacturers across various product categories from within as well Recommended as from outside India including Thailand. Test marketing is allowed for a maximum period of 2 years within India.4. Test Marketing Product Categories Personal Care Items. Consumer Durables (including Home Appliances). if required they should be ready to develop in-house logistics and inventory management capabilities. and Processed food Concerns/ Constraint A major decision of whether to invest in manufacturing facility or not (if any) needs to be taken based on Test Marketing.

To stay profitable in long term. Theme malls would have grown big on popularity.5. Establishing local manufacturing base. However. Phase III With the passage of time. by the time phase III is entered. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 110 . East. Manufacturing decision would remain non-impacted and advantageous even if the FDI route is cleared by Government of India in future. 12.Recommendations  It is recommended that Thai investors conduct test marketing for some of their innovative and new products in Personal care category and consumer durables (including Home appliances). It is very critical to understand the variations (if any) in demand across geographies. it is important to cut down on cost of shipment and transportation. Also. is therefore a much desired step for select product categories. rather than continuing to import. Thai Investors may plan to develop Thai Specialty Malls. this would be the time to decide about putting up manufacturing facilities for the products that were Test Marketed during Phase II.  Test marketing should be carried out in a way that it encompasses all the zones within India- South. competition would grow in modern retail market within India. North. Theme or specialty malls had started catching up in India when the recent real estate slowdown hit it negatively. Some of the processed food items could also be test marketed for their popularity in India  It is recommended that a few wholly owned subsidiaries are established that will import items in the mentioned categories from Thailand for test marketing. West and Central.

Plasticware/ Kitchenware. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 111 . pastes etc. Entering Theme / Specialty Malls Product Categories Apparel. Footwear. Establishing Manufacturing Base in Select Product Categories Product Categories Denim based Apparels.5. Some of the identified Food and beverage outlets of Thailand would also be allowed space in these malls. government clearances.1. these would be malls dedicated to Thai products and Thai specialties. Recommendations  It is recommended that Thai manufacturers plan to invest in setting up of manufacturing base in India only for those Thai products that generate huge demand in India such as Denim based Apparels. Altogether. there can be step by step expansion plans to tier I and lower cities. Personal Care (especially skin care items). various government incentives etc. Each of the shop spaces within these malls should then be occupied by single brand outlets across various product categories. 12. Home Décor Items.  Once this concept gets popular in metro cities. Personal Care Items. Processed Food (Sauces. Consumer Durables.5. Food Outlets Recommendations  It is recommended that Thai investors collectively take entire mall space on lease at select locations (preferably in main market areas) of the top metropolitan cities.). 12.  Manufacturing bases also need to be established for products with positive response during test marketing phase  It is recommended that Thai investors foray into manufacturing in partnership/ JV with any existing local manufacturers within India. Furniture. Home Décor Items Concerns/ Constraints  Establishing manufacturing base requires huge capital investment (if any)  Also establishing manufacturing base depends upon multiple factors such as allotment of land. availability of finances.2.

women and kids Accessories  Other fashion and casual apparels for men. lamp shades. electric lamps. 12.  Sauces. Supply of fresh items such as lettuce leaf  Thai manufacturers need to change the product packaging in following ways: Processed and Fresh  no shrimps or fishes should be drawn on the packets Food  cooking instructions and other details should be in clear font  Green. and Spices based pastes. flower vases. paintings.6. women and kids  Female footwear (specially the stiletto heel sandals) Footwear  There is a need for Thai manufacturers to keep higher quality standards for female footwears  Various available range of products (skin care and cosmetic items. Home Décor wall hangings etc. and few ready to cook items (preferably vegetarian). Recommendations on Focus within Each Identified Product Category Product Categories Category-wise Focus Apparel and Fashion  All types of denim based apparels for men. eggetarian and non-vegetarian items respectively should be clearly put on the packets INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 112 . Ketch-ups. white and red labels standing for vegetarian. and Personal Care health care products) Plasticware/  All types of plastic wares (including plastic containers) Kitchenware Furniture  Rubber-wood/ Parawood based furniture  Artificial flowers.

and opening larger independent stores. Company Profiles in Retail 1. or Big Bazaar. Big Bazaar and Food Bazaar operate as separate companies under the holding company.1 Pantaloon Retail (India) Limited (The future Group) Year of Incorporation 1987 Ownership Public Limited Company Retail Sector Activity Department stores. Food Bazaar. ANNEXURE 1 1. Future Brands. Big Bazaar. Future Retail. it has adopted a dual strategy of opening smaller versions in its flagship stores of Food Bazaar. Future Capital. Big Bazaar. Future Space. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 113 .1. Future Media  Future Retail – Formats The Company‘s principal formats are Pantaloon. Future Logistics. supermarkets. and the mall concept ‗Central‘. Central. For most formats. hypermarkets. It is targeting a higher share of the customer‘s wallet by expanding its formats.1. It plans to have Pantaloon. malls. specialty retail Principal Fascia Pantaloon. Food Bazaar  Corporate Structure Pantaloon Retail Retail Operations Joint Ventures Subsidiaries and other ancillary business Future Capital Big Bazaar Home Town Future Media Liberty (51%) Futute Brands Pantaloon Electronic Bazaar Alpha (50%) Food Bazaar Ezone Future Logistics Galaxy Entertainment (16%) Future Knowledge Central Furniture Bazaar Staples (50%) aLL Collection I Future Bazaar Blue Foods (50%) Talwalkars (50%) AxiomTelecom(50%) Generali (74%) Etam (50%) Lee Cooper (50%) Manipal Heath Services (50%) Aero Term Logistics (50%) The future group operates through six group companies: Future Retail. Central.1.

Apparel.000 30.000 125. number of SKUs simultaneously well as small retailers by upper different retailing products providing superior selling multi packs and bulk middle class categories at discounted ambience and storing packs of a select range of prices.000 1.000-1. accessories. targeted at the the Big Bazaar at replicating a local Bazaar catering to the needs of targeting housing 300 middle and lower stocking a larger market price sensitive consumers as middle and brands across income groups. Food and Food and Beverage.000 and above 10. FMCG accessories. Table 2: Future Group – Formats Big Bazaar Super Pantaloon Central Big Bazaar Food Bazaar BB Wholesale Club Centre Business Lifestyle Lifestyle A hypermarket A format larger than A supermarket aimed A store managed by Food Description store seamless mall.000 and above No of Stores (Dec 2007) 40 5 68 5 102 6 Source: Company and Media reports INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 114 .00. FMCG Offering Accessories Footwear.000-250.000 and above 8. entertainment consumer durables. accessories. over 50. Beverage. Food and Beverage. consumer durables. apparel. Food and Beverage. home care and and recreation home care and personal products facilities personal products Avg Store Area (sq ft) 20.00. apparel.000 stock FMCG goods at wholesale keeping units (SKUs) prices Line of Business Lifestyle Lifestyle Value Value Value Value Product Garments.

a. multimedia.000 n. Espirit. Area (sq ft) No of 6 78 2 30 34 2 n. Apparel and Apparel Sunglasses and Apparel and Apparel and accessories Offering footwear stationery and accessories and watches accessories music accessories Labels Diesel. n.000 500-2. Line of Value Lifestyle Value Lifestyle Lifestyle Lifestyle Lifestyle business Product Apparel.a. Books. Levi's.a.a. and other plus-size accessories like population. Van Heusen Avg Store 60. Lee. Offered Wrangler. men and sunglasses and 25%.000-10.000 7.a.a.000 700-1. toys. n. Other Formats Table 3: Future Group . working women at discounted prices music. n. Bossinni. accessories. n.000 300-12. Pepe. accessories.000-100. Louis Philippe. ranging between 15.a. offer apparel catering to branded to youngsters.000 500-1. Arrow. stationery women watches and gifts. toys. Stores (Dec 2007) Source: Company and Media reports INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 115 .Other Formats Brand Factory Depot Fashion aLL Blue Sky Top 10 Ethnic City station Business A chain of stores A store that Stores that A store Stores offering Stores catering Stores catering to the Description offering branded apparel retails books. None n.

The company operates formats such as e-zone. Collection I.000 Store Area (sq ft) Source: Company and Media Reports INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 116 .000 2. painting and class and low income interior decoration groups Line of Lifestyle Value Lifestyle Value Lifestyle business Avgas 15.50. Table 4: Home Solutions Retail Limited e-zone Electronics Bazaar Collection i Furniture Bazaar Home Town Business A format selling branded A format selling Store selling Stores selling furniture Stores selling home décor.000 10.25.000-10. Furniture Bazaar and Home Town under this venture. Description electronic goods and appliances branded electronic home décor furnishings and providing targeted at the middle and goods and appliances and services such as electrical. PRIL set up its 100 percent subsidiary. Electronic Bazaar. Home Solutions Retail (India) Ltd.000-2.000 1. Home Solutions Retail Limited With an investment of Rs 300 million.000 3.000-10.000-30. upper middle class targeted at middle furnishings plumbing.

Crossword. cosmetics through MAC stores.1. Brio's Arcelia  Shopper’s Stop Limited.Formats Shopper‘s Stop Limited primarily caters to Sec A and B classes of society through its departmental stores.1. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 117 . The K Raheja group is a reputed player in the residential real estate business Table 5: Shopper's Stop Ltd Year of Incorporation 1991 Ownership Public Limited Company Retail Sector Activity Department stores. music and books by Crossword and infant wear by Mother Care. It has gained a foothold in the market with a gamut of offerings such as apparel. MAC. The group entered the retail business with the opening of its first department store at Adhere in Mumbai in 1991. Mother Care. accessories Principal Fascia Shopper's Stop. cosmetics. Home Stop. F&B.2 Shopper’s Stop  Profile Shopper‘s Stop Limited was established in 1991 by K Rhea group of companies. baby care.books. footwear. accessories. home products. furnishings and leather products which are retailed through Shopper‘s Stop. specialty .

infant wear. furnishings.a. and Estee Lauder) magazines.a. Home Mother's to be Cosmetics.000 3. toys footwear. Furniture.000 n.000-8. 3. It was Café' outlets mothers launched in 2005 Vertical Departmental Baby care Specialty Home Furniture Cosmetics Books and Catering Catering store accessories and Furnishings Music Product Apparel. 30.000-80. music watches. MAC. Crockery and stationery and bags home appliances toys Avg Store 50. home CD-ROMs. footwear footwear. Cosmetics(Clinique Books. accessories. apparel. jeweler.000 No of Stores 23 13 2 2 3 43 5 18 (Dec 2007) Source: Company and Media Reports INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 118 .000 8.Formats Shopper's Stop Mother Care Arcelia Home Stop MAC Crossword Desi café Brio Business These are Specialty stores Exclusive Premium home The company has tied These are the A fast food These are Café Description departmental operating under the store for concept stores up with Estee Lauder company's concept Bistro's store with strong franchisee of Mother accessories and operates stores books and within its operated by focus on lifestyle Care Plc.000-6.a. n.000 n. sunglasses. Indian food Coffee and Offering Furnishings. UK to under the brand music retail stores the company retailing retail infant wear and name. accessories. Pastries accessories. Area (sq ft) 10. in stores named 'Desi within its apparel to expectant Mumbai. Table 6: Shopper's Stop Limited .000.

 Large catalogue stores: Spanning across 5.000 sq ft. and call and collect counters that would cater to customers in a particular area. these stores enable customers to view products by browsing through catalogues. Home needs. the business model would involve display centres. to support this venture. where customers can see products and enjoy a demonstration. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 119 .. online.000 sq ft. a home and general merchandising retailer. The venture will be called HyperCITY – Argos.000 Source: Company and Media Reports HyperCity – Argos SSL and HyperCity Retail India Ltd have jointly signed a memorandum of understanding (MOU) with UK based Home retail group to develop the Argos format (catalogue retailing format) in India. Shopper‘s Stop has an option to buy 51 per cent stake in HyperCity Retail by 2009. multi channel experience and IT support. Products will be home delivered from these stores. fresh foods. In India.000-10. Hypercity Retail (India ) Ltd The Raheja group made a foray into the food and grocery business through HyperCity Retail (India) Ltd in March 2007. They enable customers to make purchase decisions by browsing through catalogues. Spread over 120. There is also a special section in the store.  Call and collect stores: These stores span across 300-500 sq ft. SSL has subscribed to a 51% stake in Gateway Multi Channel. HyperCity stocks a wide range of products such as groceries. Table 7: Hypercity Business Description Hypermarkets catering to middle and upper class markets Line of Business Hypermarket Avg store area (sq ft) 120. garments and other consumer durables. The Argos format will provide the joint venture its brand catalogue. in June 2007. Home retail Group will franchise the Argos concept to the joint venture company. along with expertise in developing sales through the Internet.

1.1.3 Reliance Retail Ltd

 Profile

Reliance Retail Ltd(RRl) is the wholly-owned subsidiary of Reliance Industries Limited, pioneered by Mukesh
Ambani. The launch of ‗Reliance Fresh‘ at Hyderabad in October 2006 marked its direct entry in the retail sector.
Prior to this it experimented by operating Mumbai-based Sahakari Bhandar in 2006. The company operates formats
such as hypermarkets, supermarkets and convenience stores, along with specialty stores in apparels, consumer
durables, wellness and healthcare, footwear and Jwellery.

Table 8: Reliance Retail Limited
Year of Incorporation 2006
Ownership Private Limited Company
Retail Sector Activity Hypermarkets, supermarkets, convenience stores, specialty retail
Principal fascia Reliance Fresh, Reliance Mart, Reliance Digital, Reliance Trendz,
Reliance Footprint, Reliance Jwellery
Source: Company and Media Reports

INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 120

 Reliance Retail Formats

Table 9: Reliance Retail Formats
Reliance Fresh Reliance Digital Reliance Mart Reliance Mini Reliance Reliance Reliance Reliance Reliance
Mart Trendz Wellness Home Footprint Jewels
Vertical Food & Specialty- Hypermarket Supermarket Specialty- Specialty- Specialty - Specialty- Specialty-
Grocery Consumer Apparel Wellness Home Footwear Jewels
durables Products
Line of Value Lifestyle Value Value Lifestyle Value Lifestyle Value Lifestyle
Business
Area 3,000-5,000 15,000-30,000 50,000-2,50,000 10,000-50,000 30,000 1,500-3,500 40,000-60,000 8,000- 2,000-
10,000 20,000
Product Fresh fruits, Electronic goods Apparel, consumer Apparel, Food & Pharmaceutica Furniture and Footwear Jwellery
Offering vegetables and and household durables, footwear footwear Grocery, ls and medical furnishings
dairy products appliances Apparel services
Private Reliance Street none Reliance Select, Reliance Spirit, Contra, n.a. n.a. Viviana, None
Labels Reliance Dairy, Select, Hero, Cyber Tosca,
First Class, Spirit, Reliance Dairy Gear, Buz, Mancini,
Contra, Hero, Pure Sparsh, Monza,Hi
DNM-X, Cyber Networks, -Attitude
Gear, Buzz, Sparsh, Netplay, Panda
Networks, Netplay,
Panda
Source: Company and Media Reports

INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 121

 Supply Chain
 RRL is launching captive cargo services by entering into a sales and buyback agreement of a ‘50
cargo aircraft‘ order with Boeing. This will facilitate transportation of fruits, flowers, and
perishables to the company warehouses.
 State agri-distribution hubs: These hubs will act as collection centres in their respective states,
routing the bulk produce to the central distribution hub in its SEZs, from where it can be exported
as well as dispatched to various retail outlets across the country.
 Farm Supply Hubs: The Company is setting up 1,600 farm supply hubs across the country.
These UBS will facilitate the purchase of farm produce and sale and provision of farm supplies
such as fertilizers, seeds, fuel and credit to farmers. Farmers can also avail of the benefit of selling
their produce in these hubs. Hubs will benefit the company by connecting farms and the
unorganized retail through a distribution system.

 Creation of Retail Space
RRL is following a twin model of expansion, which includes both owning and leasing retail space. It has
acquired 1,260 properties for Reliance Fresh stores and Reliance Mart across the country. It is planning to
lease out 100,000 acres of farmland at a fixed price in Pune to grow vegetables, flowers and produce. That
apart, it is also acquiring properties across the country to set up captive vegetable and fruit mandis.

 Private Labels
RRL is entering into exclusive agreements with textile companies such as Arvind Mills, Celebrity Fashions
Ltd and Indus League Clothing Ltd to develop exclusive brands for its retail outlets.

Table 10: Exclusive Brands
Name Manufacturer
Spirit Indian Terrain
Contra Indigo Nation
Hero Arvind Mills- Wrangler
Cyber Gear Vibe Private Ltd
Buzz Blackberry
Source : Media Reports

The company has other private labels which it currently retails through its hypermarkets as well as
specialty store, Reliance Trendz. It plans to maintain the share of private labels at 35-40 percent.

INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 122

daily.  The healthy and beauty chain. and remaining stores of FW were retained by Dairy Farm International. supermarkets. hypermarkets. The joint venture with Dairy Farm International (DFI) was called off in 2005. After the split:  RPG retained 48 out of the 93 Food World (FW) stores under the brand. Health and Glow (HG). RPG Enterprises has business interests in retail.  The Company‘s shifted its headquarters from Chennai to Kolkata.4 RPG Enterprises  Profile One of India‘s large conglomerates. Daily. It entered the retail sector in 1996 by setting up Food World Supermarkets inn a joint venture with Dairy Farm International prior to FDI restrictions were levied in India. Super and Hyper. specialty stores Principal fascia Spencer's .1. The Company‘s retail business currently operates through the following three formats: Spencer‘s Retail. Supermarket. tyres and life sciences.1. It set up additional formats such as Spencer‘s-Express. Music World and Books & Beyond. power and transmission.RPG Retail Year of Incorporation 1996 Ownership Private Retail Sector Activity Convenience Stores. Fresh. Fresh. entertainment. Spencer‘s. Music World (MW) was also retained under the group. Hypermarket): Music World. technology. Table 12: RPG Enterprises. Books & Beyond Source : Media Reports INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 123 .(Express.

dairy-bakery Offering dairy and bakery bakery products bakery products.000 4. 1. FMCG. dairy.000 Area (sq ft) No of Stores 66 231 11 12 (Dec 2007) Source: Company and Media reports Centralized Purchase: Spencer‘s Retail runs a consolidated centre near Bangalore for the bulk purchase of fruits and vegetables directly from farmers.000 8. spanning 1 million sq ft. Fresh produce. Its main competitor is Planet M.5 Spencer’s Retail Part of RPG group.1.  Express/Franchisee Stores. Fresh produce. home care and products FMCG.000 sq ft. It has a network of 320 stores across 45 cities. stock different types of music.000-7. Express store with format with a larger products at low costs stocking fresh similar product offerings basket of product produce at discounted prices offerings Vertical Value Value Value Value Product Fresh Produce.  Specialty Stores  Music world Music World started its operations in November 1997 by taking over Saregama.These stores.These are 300-600 sq ft stores located independently in malls or as shop in shops within large departmental stores. Spencer‘s retail operates a chain of supermarkets across the country. home care personal products and frozen and personal products foods and frozen foods Avg Store 1. Its retail business operates under the following formats:  Destination Stores.000 25. Spencer‘s Retail runs food and grocery outlets across the country under the following formats: Table 13: Spencer's Retail Formats Spencer's Express Spencer's Daily Spencer's Super Spencer's Hyper Business A convenience A format larger than the A supermarket A hypermarket format offering Description store format. Fresh produce. This enables the Company to maintain low prices and offer discounts. admeasuring more than 4. products. belonging to the Videocon Group.000-15. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 124 . dairy.

The first store was launched in 2007 at the Megacity Mall in Gurgaon. toys. along with music and home videos. It also has a dedicated section for music and home videos from Music World. gifts and stationery.  Books & Beyond It is a new format conceptualized by the Company during the year. offering books. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 125 .These are small gondolas.  Unplugged. which are run as concessionaires in other departmental and large stores.

gift items.000 12. FMCG.000-45. home accessories. It started its retail operations by acquiring the UK-based Littlewoods department store in Bangalore in 1998. and a specialty store retailing books and music called Landmark.000-30. music. stationery. Star India Bazaar Source : Media Reports  Corporate Structure of Tata Trent Tata Ltd Trent Ltd Infiniti Retail Ltd Westside Star India Bazaar Landmark Croma  Tata Trent – Formats Table 15: Trent Ltd-Formats Westside Star India Bazaar Landmark Business A departmental store format Hypermarket format of the company aimed at Specialty store retailing Description primarily retailing apparel offering products at discounted prices books. Trent is part of the Tata Group. staples. Croma. Table 14: Tata Trent Ltd Year of Incorporation 1998 Ownership Public Limited Company Retail Sector Activity Apparel stores. consumer durables Avg Store 15. etc Line of Lifestyle Value Lifestyle Business Product Apparel.1.000 50.Music.‘ which operates 28 stores in major Indian cities. Its chain of stores is called ‗Westside. specialty-Books. Hypermarket Principal fascia Westside. Landmark. one of India‘s large business conglomerates. 1. jeweler.000 Area (sq ft) No of Stores 60 25 29 (Dec 2007) Source: Company and Media Reports INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 126 . under the group company. Books.6 The Tata Group  Profile: Established in 1998. Fresh fruit and vegetables. toys. furnishings health and beauty products. home products. greeting Offering artifacts. music footwear. The group also runs a chain of electronic and appliance store. Star India Bazaar. cards. Infiniti Retail. It also runs a hypermarket.

with their share being over 80 per cent. which commenced operations with a single store in 1987. Under this venture. The store caters to the middle class through quality and mid-price segments.  Private Labels Private labels contribute to most of the revenue. now has 10 stores across the country. a Chennai based books and music retail chain.Trent acquired Landmark. providing value for money along with fashion Table 16: Private Label Men's Wear Indian Wear Kids Wear Edward Navya Tammy France Giovanni Spike Fashion Street Source: Company Reports  Infiniti Retail Croma The Company has initiated a new venture called ‗Infiniti Retail Ltd‘(a wholly-owned subsidiary of Tata Sons) by entering into a technical-cum-sourcing agreement with Woolworths. 085 million. an Australian retailer. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 127 . the company retails multi-brand consumer electronics and consumer durable store. The bookstore. Croma. in 2006 for Rs 1.

1. Initially its main operations were confined to South India. The company operates in four areas: fruits and vegetables. Subhiksha Pharmacy. Subhiksha Mobile Source: Media reports Subhiksha is a food chain offering discounts in the range of 8-10 percent.7 Subhiksha Trading Services  Profile Chennai based Subhiksha Trading Servcoces. Table 17: Subhiksha Trading Services Ownership Private Retail Sector Activity Supermarkets. the company has tied up with farmers to purchase their produce at current price levels under a preferred buying arrangement  The company has set up a Centralised Processing Unit(CPU) at Nashik. R Subramaniam.  New Format  Subhiksha Mandi: This new format offers only fruits and vegetables. particularly Tamilnadu. Subhiksha Pharmacy and the newly introduced Subhiksha Mobile. the company operates 12 store in Delhi and plans the concept in Pune.  Strategy  In order to facilitate a strong supply chain. This chain primarily targets the middle and lower income population. On an average.500-2. Its average size is around 600 sq ft.  Subhiksha Mobile: Subhiksha has started retailing mobiles through stores titled ‗Subhiksha Mobile‘.000 sq ft and offer a discount of 8-10 per cent. It was established in March 1997 as a chain of 10 stores in Chennai by banker turned businessman. Subhiksha stores span across 1. a private limited company. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 128 . to make discounts possible. as it sources 50 per cent of fruits and vegetables under Contract farming to meet the requirements of all its stores. FMCG and telecom through three formats.1. apart from retailing fruits and vegetables. which involve retailing handsets and phone connections.  At Ahmedabad. pharmacy. coupled with low operating costs. Pharmacies. the company operates two new verticals. Mobile Stores Principal Fascia Subhiksha. pharmacy and telecom. It follows a bulk sourcing strategy.Subhiksha. operates a chain of supermarkets- cum-pharmacies called ‗Subhiksha‘. These stores offer low prices on branded mobile phones. Currently.

‘ for Rs 1.1. It has a presence in over 20 countries.000 sq ft each. It plans to hire between 10. is valued at $24 billion. ‗Trinethra. More and Select.8 Aditya Birla Retail  Profile The Aditya Birla Group.  The company has launched two ‗More‘ hypermarkets in Baroda and Mysore. cement. Trinethra. with a floor space of 70.000 sq ft) in its portfolio.5 billion in 2006 which is being rebranded to ‗More‘ by the Company. processed foods. It made a foray into the retail industry by acquiring south-based retail chain. and has established direct linkages with farmers and suppliers.  It has tied up wit Apollo hospitals to set up pharmacies within its supermarkets. textiles and insurance.000 people. fertilizers. it operates around 300 outlets across the country. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 129 .  The acquisition of Trinethra has provided the company wit an employee base of 4. The group has interests in varied sectors such as metals.000 and 15.  It would maintain a mix of hypermarkets (avwerage75.  As part of its sourcing strategy.000 sq ft) and supermarkets (average 10.  The chain is also covering categories such as groceries. bakery products and personal care products through its private labels.  Strategy  Aditya Birla Retail acquired 170 stores of the south-based retail chain. one of the largest Indian conglomerates. the company has set up a sourcing centre for fresh farm products such as fruits and vegetables.1.000 employees by 2012. Currently.

11 0% 0%  Greater Kailash I.26 24% 24%  Basant Lok 806 18.1.71 15.18 0% 0%  Gurgaon 385 9. M Block 1.74 12.15 2% 17%  Prime Mall Rents-2008 Rent % Growth Short Location /sq. 2008 (Source: India Retail Report.055 24.78 0% 16%  Exchange rate: USDI = INR 42.58 LEGEND: Market Rising  Market Falling  Market Stagnant likely to Strengthen  Market Stagnant Likely to Weaken  Market Stagnant  INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 130 . ANNEXURE II 2. EURU I = INR 66.85 5% 23%  Karol Bagh 550 12.1.16 0% -4%  Noida 478 11. 2009) 2.88 8.88 12.05 0% 12%  Connaught Place (Inner Circle) 800 18.ft/mth Measurement Term Trend INR US$ EURO 3 Month 1 Year South Delhi 662 15. City-wise Rental Trends Following is the rental trend for top Indian cities during the second quarter of August-November. 2.19 7.26 20.5 9.02 5.18 16.075 25.02 0% 3%  South Extension 1 & II 1.6 6.1 Delhi Prime Main Street Rents-2008 Rent % Growth Short Location /sq.94 0% 6%  West Delhi 410 9.70.ft/mth Measurement Term Trend INR US$ EURO 3 Month 1 Year Khan Market 1.335 31.

86 0% 37%  Fort Fountain 450 10.51 0% 4%  Ghatkopar 350 8.72 6.02 4.27 0% 84%  Colaba Causeway 960 22.2 Mumbai Prime Main Street Rents-2008 Rent % Growth Short Location /sq.48 14.76 0% 91%  Prime Mall Rents-2008 Rent % Growth Short Location /sq.70.42 0% 195%  Lokhandwala Andheri 390 9.3 7.1.13 5.05 9.54 6.26 5% NA  Exchange rate : USDI = INR 42.2 5.ft/mth Measurement Term INR US$ EURO 3 Month 1 Year Trend Linking Road 1.ft/mth Measurement Term INR US$ EURO 3 Month 1 Year Trend Lower Parel 700 16.350 31. 2.43 5. EURU I = INR 66.23 0% 19%  Mulund 360 8.01 58% 107%  Vashi 300 7.51 0% 36%  Malad 525 12.62 20.41 0% 18%  Goregaon 600 14.25 14.39 10.89 0% 35%  Link Road Andheri (W) 415 9.58 LEGEND: Market Rising  Market Falling  Market Stagnant likely to Strengthen  Market Stagnant Likely to Weaken  Market Stagnant  INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 131 .28 0% 123%  Kemps Corner/Breach Candy 950 22.

6 0% 55%  Koregaon Road 250 5.36 6.ft/mth Measurement Term INR US$ EURO 3 Month 1 Year Trend MG Road 380 8.22 2. 2.ft/mth Measurement Term Trend INR US$ EURO 3 Month 1 Year MG Road 400 9.27 3.01 0% 33%  JM Road 400 9. EURU I = INR 66.15 3.75 11% 100%  Aundh 200 4.68 3 0% 54%  Bund Garden 240 5.9 5.7 0% NA  Exchange rate : USDI = INR 42.3 0% 19%  Nagar Road 180 4.2 5.71 9% 27%  Bund Garden 350 8.62 3.38 0% NA  Ganesh Khind Road 220 5.85 3.26 0% 75%  Kalyani Nagar 225 5.01 5% 135%  FC Road 240 5.62 3.3 Pune Prime Main Street Rents-2008 Rent % Growth Short Location /sq.58 LEGEND: Market Rising  Market Falling  Market Stagnant likely to Strengthen  Market Stagnant Likely to Weaken  Market Stagnant  INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 132 .70.6 0% NA  Prime Mall Rents-2008 Location Rent % Growth Short /sq.36 6.1.

45 2.35 0% 20%  Prime Mall Rents-2008 Rent % Growth Short Location /sq.ft/mth Measurement Term Trend INR US$ EURO 3 Month 1 Year CG Road 190 4.46 1.34 1.85 0% 21%  Law Garden 130 3.3 0% 20%  Drive-in Road 105 2.95 0% 13%  Satellite Road 105 2.70.58 0% 7%  Kankaria Lake 100 2.04 1.68 3 0% 14%  SG Highway 153 3.ft/mth Measurement Term Trend INR US$ EURO 3 Month 1 Year Vastrapur 200 4.5 0% 18%  Exchange rate : USDI = INR 42. EURU I = INR 66.1.58 0% 14%  SG Highway 90 2.11 1.46 1.58 2.4 Ahmedabad Prime Main Street Rents-2008 Rent % Growth Short Location /sq. 2.58 LEGEND: Market Rising  Market Falling  Market Stagnant likely to Strengthen  Market Stagnant Likely to Weaken  Market Stagnant  INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 133 .

ft/mth Measurement Term INR US$ EURO 3 Month 1 Year Trend Koramangala 485 11.75 10% 10%  100 Feet Road.58 LEGEND: Market Rising  Market Falling  Market Stagnant likely to Strengthen  Market Stagnant Likely to Weaken  Market Stagnant  INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 134 . EURU I = INR 66.51 -6% NA  New BEL Road 140 3.27 2.6 0% 5.08 3.75 -6% 5.16 2.1.33 2.78 5.85 3.62 3.6 5.50%  Brigade Road 375 8.ft/mth Measurement Term Trend INR US$ EURO 3 Month 1 Year MG Road 240 5.85 3.91 -1% 13%  Sampige Road. Malleswaram 135 3.63 7% 14%  Commercial Street 250 5.35 7.53 0% 0%  Cunningham Road 225 5.78 1% NA  Vittal Mallya Road 300 7. Indiranagar 250 5.26 3.86 2.03 2% 6%  Koramangala 80 Feet Road 185 4. 2.5 Bengaluru Prime Main Street Rents-2008 Rent % Growth Short Location /sq.48 0% 10%  Exchange Rate : USDI = INR 42.70.28 0% 0%  Magrath Road 368 8.02 4. 11 Main 260 6.30%  th th Jaya Nagar 4 Block.1 2% NA  Prime Mall Rents-2008 Rent % Growth Short Location /sq.38 0% 0%  Mysore Road 165 3.

1.6 Hyderabad Prime Mall Rents-2008 Location Rent % Growth Short /sq.11 1.51 2.1 12% 14%  Banjara Hills Road No.82 0% 25%  Exchange Rate: USDI = INR 42.35 11% NA  Adyar Main Road 150 3.68 3 0% 33%  Cathedral Road – RK Salai 150 3.1.25 0% 41%  Purasavakkam High Road 90 2.1 2.ft/mth Measurement Term INR US$ EURO 3 Month 1 Year Trend CBD 250 5.85 3.41 0% 60%  Khadar Nawaz Khan Road 200 4.ft/mth Measurement Term INR US$ EURO 3 Month 1 Year Trend Nungambakkam High Road 160 3.11 1.27 3.51 2.35 0% 13%  Prime Mall Rents-2008 Location Rent % Growth Short /sq.75 -2% 33%  Suburbs 188 4.ft/mth Measurement Term INR US$ EURO 3 Month 1 Year Trend NTR Gardens 110 2.25 0% 33%  Usman Road – South 140 3. 2.65 0% 5%  Himayathnagar 140 3.58 1.38 0% 34%  2.58 LEGEND: Market Rising  Market Falling  Market Stagnant likely to Strengthen  INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 135 .28 2.75 2.70. EURU I = INR 66.7 Chennai Prime Main Street Rents-2008 Rent % Growth Short Location /sq.1 4% NA  Usman Road – North 100 2.25 0% 50%  Anna Nagar 2nd Avenue 150 3.51 2.28 2.1 225 5.

5 3.1.3 4.85 57% 111%  Elgin Road 404 9.70.5 3.45 2.02 0% 15%  Elgin Road 233 5.3 4.94 6% 39%  Salt Lake 500 11.3 5.ft/mth Measurement Term INR US$ EURO 3 Month 1 Year Trend Park Street 268 6.07 0% 24%  Exchange Rate: USDI = INR 42.ft/mth Measurement Term INR US$ EURO 3 Month 1 Year Trend South Kolkata 395 9.51 0% 24%  Rajarhat 190 4. Market Stagnant Likely to Weaken  Market Stagnant  2. EURU I = INR 66.5 0% 27%  Prime Mall Rents-2008 Location Rent % Growth Short /sq.58 LEGEND: Market Rising  Market Falling  Market Stagnant likely to Strengthen  Market Stagnant Likely to Weaken  Market Stagnant  INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 136 .02 0% 15%  Camac Street 268 6.71 7.9 Kolkatta Prime Main Street Rents-2008 Location Rent % Growth Short /sq.5 0% 27%  Theatre Road 233 5.5 6.

Mumbai Style Spa.Home Solutions – Pantaloon Retail (India) Ltd. Mumbai Processed Food – Buying & Merchandizing. Mumbai Odyssey India Ltd. Pantaloon Retail (India) Ltd. Mumbai Durian. Connaught Plaza Restaurants Pvt. INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 137 ... Bangalore Furniture . Mumbai Staples – Buying & Merchandizing. New Delhi Café Coffee Day..3. Gurgaon Mohann‘s Estate Consultant – Retail. Mumbai One or more than one interviews were conducted with each of the above mentioned companies to capture the required details.. Mumbai Shoppers‘ Stop Ltd. Mumbai Vishal Retail Ltd. Mumbai Home Stop (Raheja Group).. Mumbai General Merchandize. Mumbai Godrej Interio. Pantaloon Retail (India) Ltd. Mumbai Franchising Association of India.. Mumbai Big Bazaar.. Chennai Landmark (Tata Group). Chennai Ansal properties & Infrastructure Ltd. Mumbai Food Bazaar.. Aditya Birla Retail Ltd.. Aditya Birla Retail Ltd. References Primary Research – Expert Interviews List of Companies with whom Depth Interviews were conducted as part of Primary Research on this Study: Metro Shoes Ltd... Pantaloon Retail India Ltd. (Raheja Group). Ltd. New Delhi Mc Donald‘s India.

March 2007. Ltd. 2006-07 F&B (Servicing) Retail India in India. Ernst & Young India. 2008 Investment in India . Cygnus – Business Consulting & Research Pvt. Impact of Organized Retailing on the Unorganized Sector. January 2007 Press Release of India Retail Report 2007. Government of India. Soundararajan Nirupama. Food Forum India. Cygnus Business Retailing & Research. Feb 2008 Indian Food Retailing. CRISIL Research Pro. India‘s Store War. AT Kearney. 2007 India Retail Report 2007 (www.Apparel Retailing.indiaretailing.. ICRIER Economic Survey of India and Technopak analysis. 2007 IMAGES Malls in India Study. Ltd.com). Retail. Retail Revolution and the Battle for the Next 500 Million Shoppers. May 2008. July 2007 Global Retail Development Index 2007. March 2008 The Logistic Challenges of Doing Business in India. Department of Commerce. January 2007 The Great Indian Retail Story. DHL Retail in India – Getting organized to drive growth. 2008 Joseph Mathew. 2008 Reports on Modern Retail in India. Paras Kuhad and Associates. Ministry of Commerce & Industry. Logistics Management. Solving the Supply Chain Puzzle in India. Secondary Research Sources The India Retail Story. August 2008 Industry Monitor. June 2007 The C Factor. Cygnus – Business Consulting & Research Pvt. 2006-07 INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 138 . India Retail Report 2009. AT Kearney. Images F & R Research Hiscock Geoff. 2007 Industry Insight. Gupta Manisha and Sahu Sanghamitra. Advocates..Overview.

Census and Projections. Research Wikis Retail FAQ. The Times of India & Others INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 139 . REALTECH Real Estate Services Articles from India Real Estate Monitor Various News Updates and Study Articles on Retail Sector from The Hindu.Government of India. Propagent Lease Terminology. 2001 Retail Marketing Research – India. The Economic Times.