Retail Industry

Nitin Kumar Singh (06) Bhushan Narsinghani (11)

Agenda

Introduction History Major Players in retail Indian Retail reforms Growth of Industry SWOT Analysis Problems & Prospects







World’s Biggest Retailer?

Facts
Fortune 500 rank 1 – 2008  Fortune 500 rank 3 – 2009  CEO: Michael T. Duke  Biggest employer in the world  Employees: 2,100,000
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Revenues Profits Assets Stockholders' equity

$ millions 405,607.0 13,400.0 163,429.0 65,285.0

% change from 2007 7.1 5.3 — —

Introduction
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Retail-French word ‘retailer’ (to cut a piece off or break bulk) Retailing involves a direct interface with the customer and the coordination of business activities from end to end-right from the concept or the design stage of a product or offering to its delivery and post delivery service to the customer

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Retail business Models : Ownership
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Independent Retailer Chain retailer or Corporate retail chain Business format franchise Leased Departments

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Retail business Models : MERCHANDISE OFFERED

Convenience Store  Supermarkets  Hypermarkets  Specialty Store  Department Store  Off Price Retailers  Category Killers

Source : India retail report 2005

Source India Retail Real Estate, The road ahead, ICICI white paper pg2­6

ORGANISED RETAILING IN DEVELOPED COUNTRIES
U S A E U & JA P A N C H IN A S O U TH K O R E A IN D O N E S IA P H ILIP P IN E S B R A ZIL & A R G E N TIN A M A LA Y S IA & TH A ILA N D W E S TE R N E U R O P E 0% 20% 40% 60% 2 0% 15% 25% 35% 40% 5 0% 70% 80% 100% 80%

History : EVOLUTION OF RETAIL IN INDIA

Haats, Mandis and Melas have always been a part of the Indian landscape Mandis are markets set up by the state government for the sale of agricultural produce directly from the farmers Around 25000 melas and 6800 mandis are held annually in the country The Public distribution system (rationing) introduced by the British in1946 covering 771 cities/ towns

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It was reintroduced by the Indian govt.1956 to maintain Inflationary pressures (18000 in 1957 to 51000 in 1961).These shops were called Ration shops (fair price shops) Initial step of liberalization were taken in the period from 1985-90 restrictions on private companies were lifted One of the pioneers of organised retailing in Indian textile industry was Raymond’s fabric stores - 20000 retailers over 250 showrooms in 120 cities.

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Major Players
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Future Group – PRIL TATA Group RPG Group Reliance Retail AV Birla Group Landmark Group

Indian Retail reforms
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Current FDI Policy : FDI in retail trade is only permitted for ‘Single brand retail’ FDI upto 51% is allowed in ‘Single brand retail’ with prior govt approval 100% FDI is allowed in wholesale cash and carry format

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Retail entry options
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Strategic License Agreements ( Murjani group) Cash and Carry (Metro cash and carry) Distribution (International Cosmetic Brand e.g. Chanel , Dior etc) Franchisee route (Pizza hut) Manufacturing (UCB , Bata) Joint Venture (Bharti-Walmart)

retail trade in India as share of GDP
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2007 : 8-10% 2009, it rose to 12% Expected to reach 22% by 2010

Growth of Indian Retail

India retail industry is the most promising emerging market for investment Share of organized sector in 2007 was 7.5% of the total retail market and is expected to grow 20% of the total market share by 2010

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Swot analysis
strength………….
Demographic favor  Rising disposable income  Increase in number of people in earner category.  Urbanization  Shopping convenience  Low labor cost of skilled ones. 

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Strengths cont………….
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Changing consumer habits and lifestyles. Plastic card revolution. Greater availability of quality retail space.

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Swot analysis weakness……..
Policy related issues
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- lack of industry status for retail. - numerous licence,permits and registration requirement.

Limited consumer insight
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-lack of detailed region specific customer data. -less data on spending pattern.

Inadequate human resources
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-lack of trained personnel at all level. -stringent employment and industry laws. -fragment approach to human resources.
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Weakness cont………..
 Taxation hurdle
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-inconsistent octori and entry tax structure. -vat and multiple taxation issues. -large grey market presence.

 Underdeveloped supply chain
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-underdeveloped logistics infrastructure. -absence of national cold chain networks. -lack of national distribution networks and hubs

 Lack of adequate utilities

- lack of basic infrastructure like power, transport and communication creates difficulty in sustaining retail operations across the large geographical spread of country.

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Swot analysis opportunities……..
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Potential for investment. Sectors with high growth potential. Fastest growing formats. Rural retail.

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Opportunities cont………..

Wholesale trading. E-retailing Retail franchising

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Swot analysis threats…………..
 Political issues.


 Social issues.


 Inflation.


 Nostalgia


 Lack of differentiation among the malls that are coming.


 Poor inventory turns and stock availability measures.
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Problems (organized retail)
Stiff competition from the unorganized sector.  Shortage of quality real estate and infrastructure  Opposition to Foreign Direct Investment Very high stamp duties  Issues like Shortage of retail space , Land-use conversion , Rigid building laws  Pro-tenancy laws , property disputes .  Restrictions in Foreign Direct Investment  Customs duties levied on import of goods .

Conclusion
Over the last few years, retail has become one of the fastest growing sectors in the Indian economy.  The organized retail however is at a very nascent stage though attempts are being made to increase its proportion to US$ 833 billion by the year 2013bringing in a huge opportunity for prospective players . It is further expected to reach US$ 1.3 trillion by the year 2018 at a CAGR of 10%.  The sector is the largest source of employment after agriculture, and has started to penetration into rural India generating more than 10% of India's GDP.

Sources
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http://www.imagesretail.com/india_retail_report.htm www.money.cnn.com

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