Failing to prepare is preparing to fail

John Wooden

RETAIL INDUSTRY OF INDIA

EVOLUTION OF INDIAN RETAIL INDUSTRY

Barter system was known as the first form of Retail Followed by Kirana Stores and Mom & Pop Stores Finally Manufacturing era necessitated the small stores and specialty stores It was a sellers market till this point of time with limited number of brands available 1980s experienced slow change as India began to open up economy. The latter half of the 1990s saw a fresh wave of entrants with a shift from Manufactures to Pure Retailers. Post 1995 onwards saw an emergence of shopping centers Emergence of hyper and super markets trying to provide customer with 3 Vs Value, Variety and Volume Expanding target consumer segment

Barter system

Weekly market Village melas

Kirana Stores Convenie nce store

Government Stores

Super markets Hyper markets Malls Brand outlets

OVERVIEW

Manufacture rs

Whole seller

Organized Sector
Distributor

Retailer

Single Brand Retailing Multiband retailing

100% 51%

INDUSTRY DESCRIPTION
Indian retail Industry is Fifth largest in the world.
2000 1800 1729 1600 GDP(in Billion $) Retails Sales(In Billion $) 1842

The current penetration pegged at 5-7 per cent.

1400

1380 1200 1213

1200
1000

Accounts for 24% of countrys GDP and 8% of the total employment.

800 600 400 200

Food is the largest segment in terms of its.

0 2008 2009 2010 2011 2012

8

STRUCTURE & PHASE OF THE INDUSTRY

Retail formats in India: Hyper marts/supermarkets Mom-and-pop stores Departmental stores Convenience stores Shopping malls E-trailers Discount stores Vending Specialty stores

STAGE The retail Industry is still in its nascent stage of growth The foreign direct investment (FDI) inflows in single-brand retail trading during April 2000 to June 2012 stood at US$ 42.70 million Cash and carry represents an opportunity worth around Rs 8,250 billion (US$ 149.19 billion) of the Rs 27,500 billion (US$ 497.29 billion) annual retail business in India India's e-retail industry is likely to touch Rs 7,000 crore (US$ 1.26 billion) by 2015, up from Rs 2,000 crore (US$ 361.66 million) Focus on rural sector increasing

SIZE
The Indian retail market is currently estimated at USD 450 billion. Food segment contributes largest part of total value of retail market, followed by fashion, leisure & entertainment and fashion accessories. India's organized retail space is evolving fast and achieve penetration level of 7%, which signifies huge potential growth. Indian luxury market currently stands at USD 3.5 billion and expected to grow to make India the twelfth-largest luxury retail market in the world by 2016. Retail has become largest source of employment and has deep penetration into rural India. Retailing contributes to 24% of GDP and around 8% of the employment.

KEY SUCCESS FACTORS FOR THE INDUSTRY

Effective forecasting Strong balance sheet Stock control Market position Proximity to market Creating Systems In Retail Hiring the Right Employees Marketing

Buying The Right Merchandise

Customer Service

PORTERS FIVE FORCE MODEL

Threat of New Entrants

Power of Suppliers

Historically, retailers have tried to exploit 95% of the market is made up of small, relationships with supplier. uncomputerised family run stores. The ability to establish favorable supply In retail industry suppliers tend to have very contracts, leases and be competitive is little power. becoming virtually impossible. The vertical structure and centralized buying Following examples explain the same. gives chain stores a competitive advantage over independent retailers. Sears in 1970 set very high standards for quality; suppliers that did not meet these On the whole threat from new entrants in standards were dropped from the Sears line. retail industry is high. Walmart places strict control on its suppliers.

Power of Buyers

Availability of Substitutes

The tendency in retail is not to specialize in Customers have comparatively high one good or service, but to deal in wide bargaining power in unorganized sector than range of products and services. in organized sector. What one store offers is likely to be same as As the customer will demand products from that offered by another store. organized units he will be more focused towards quality aspect The threat from substitutes is high.

Competitive Rivalry
Retailers always face stiff competition and must fight with each other for market share and also with unorganized sector. They have tried to reduce cut throat pricing competition by offering frequent flier points, memberships and other special services to try and gain the customers loyalty. Thus retailers give each other stiff but healthy competition which is evident from their aggressive marketing strategies and segment policies.

SWOT ANALYSIS Strengths

Major contribution to GDP: the retail sector in India is hovering around 33-35% of GDP as compared to around 20% in USA.
High Growth Rate: High Potential: since the organized portion of retail sector is only 23%, thereby creating lot of potential for future players. High Employment Generator Low Labor Cost Technology intensive industry Rising disposable income Urbanization Shopping convenience Changing consumer habits and lifestyles High availability of quality retail space

WEAKNESS
Policy related issues Lack of industry status for retail. Numerous license, permits and registration requirement.

Limited consumer insight Lack of detailed region specific customer data. Lack of Skilled Labor Taxation hurdle Inconsistent octori, entry tax structure, vat and multiple taxation issues. large grey market presence.

Underdeveloped supply chain

Underdeveloped logistics infrastructure &absence of national cold chain networks. Lack of adequate utilities

Lack of basic infrastructure like power, transport and communication.

OPPORTUNITIES
Potential for investment.
Locational advantage. Sectors with high growth potential. Fastest growing formats. Rural retail. Create transparency in the system Healthy Competition will be boosted and there will be a check on the prices (inflation) Intermediaries and mandi system will be evicted, hence directly benefiting the farmers and producers Quality Control and Control over Leakage and Wastage Heavy flow of capital will help in building up the infrastructure for the growing population

THREATS
Political issues.

Social issues.
Inflation. Lack of differentiation among the malls that are coming. Poor inventory turns and stock availability measures. Big players can knock-out competition Current Independent Stores will be compelled to close India does not need foreign retailers Remember East India Company it entered India as trader and then took over politically.

The government hasnt able to build coordination.

DEMAND-SUPPLY DYNAMICS, DEMAND TRENDS

The global demand falling consistently due to crisis in US and Europe adding India recently . On the supply side, retailers are slowing down their expansion plans and many real estate developers are falling behind schedules in their shopping mall projects due to currency fluctuation. However in Future Indian retail is expected to grow 25 per cent annually. The Food Retail Industry in India dominates the shopping basket. The Mobile phone Retail Industry in India is progressing. The Retail sector in the small towns and cities.

MARKETS FOR THE PRODUCTS

India has emerged as the fifth most favourable destination for international retailers. Rural marketing through direct channel contributes about 23 per cent of the firm's total sales, which it expects to increase to more than 35 per cent in the next three years. India's franchise market is growing at a healthy pace with tier II and tier III cities gradually getting attracted to the network of retailers and franchisers. Indian apparel retailers are increasing their brand presence overseas in developed markets.

Pantaloons Reliance Bharti retail RPG Lifestyle K raheja Subhiksha Piramyd Trent Vishal group

GLOBAL

INDIAN

Tesco Walmart Metro Carrefour B&Q Target

SOME OF THE KEY PLAYERS IN ORGANISED RETAIL

Company Name
Wal-Mart
Carrefour Tesco Metro AG The Kroger Company Schwarz Unternehmens Treuhand KG Costco Wholesale Home Depot Target Aldi GmbH & Company oHG

Net Sales(Billion $)
$421,849.00
$120,297 $94,185 $89,081 $82,189

Country
USA
French UK German USA

$77,220.00
$77,946 $67,997 $67,390 $58,000

German
USA USA USA German

Company Name
Pantaloon Ret Shoppers Stop Trent Brandhouse

Net Sales(Billion $)
0.79 0.37 0.16 0.14

REI Six Ten

Provogue Koutons Retail Kewal Kiran Cantabil Retail Arunjyoti Enter Prozone Capital

0.11
0.11 0.10 0.05 0.03 0.01 0.00

MAJOR PLAYERS
Provogue 6% Others 12% Trent 7% Brandhouse 8% Shoppers Stop 18% Koutons Retail 6% Pantaloon Ret 43%

Pantaloons Retail India Ltd. is market leader with 43% of the market share in terms of turnover Followed by Shoppers stop, Brandhouse, Trent, Provogue
Source Moneycontrol.com

COST STRUCTURE
2.22 0

17.06

Raw Materials
Power & Fuel Cost

3.82 4.56 1.45

Employee Cost Other Manufacturing Expenses Selling and Administration Expenses Miscellaneous Expenses

70.9

International retailers in India: Strategies

How they are present

Franchise International company gives name and technology to local partner. Gets royalty in return In case master franchise is appointed for region or country, he has right to appoint local franchisees Nike, Pizza Hut, Tommy Hilfiger, Marks and Spencer, Mango Manufacturing Company sets up Indian arm for production Bata India. It also has right to retail in India

International retailers in India: Strategies

How they are present

Distribution International company sets up local distribution office Supply products to Indian retailers to sell Also set up franchised outlets for brand Swarovski, Hugo Boss Wholesale trading Cash and Carry operations 100% FDI permitted Metro Cash n Carry

FUTURE PROSPECTS
Uncertain macroeconomic environment Prices of apparel also surged concomitantly with the increase in cotton prices and the levy of excise duty on branded apparel Store expansion to drive revenue growth Retail consumption growth to remain strong

The overall retail market is likely to grow at healthy compounded rate of 15 per cent from Rs 24 trillion in 2011-12 to Rs 47 trillion in 2016-17
Organized retail penetration to cross 10% by 2016-17 Food , Grocery & Beauty products to grow faster Slower growth expected in books, home dcor, and consumer durables. Focus on reducing store-level operating expenses

RISKS FOR RETAIL SECTOR

Low-growth consumer markets Regulation and compliance Inability to control costs/rising input prices

Inability to benefit from e-commerce

Wrong price image Supply chain disruptions

Inability to penetrate emerging markets

Failure to respond to shifting consumer behavior Sourcing Volatility in commercial real estate markets

OPPORTUNITIES FOR RETAIL SECTOR

Rising emerging market demand and rise of global middle class New marketing channels and social media Competitive differentiation via CSR and green branding

Multichannel approach
Demographic change Private label Launching new products and services Global urbanization Competitive differentiation via local branding Enhancing efficiency in the supply chain

CONCLUSION
Huge Scope for Development

Competitive Market

Organized retail is fast growing at a rate of 30% YOY

Greater opportunity for employment

RECESSION STRATEGY
Offering more & more special discounts.

The Great Indian Shopping Festival.