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Where We Stand
y Indian retail is fragmented with over 12 million outlets where as 0.9 million y y
y y y y y
outlets in USA, caters to more than 13 times of the total Indian retail market size India has the highest number of outlets per capita in the world - but with the lowest per capita retail space (@ 2 sq. ft. per person) Annual turnover of Wal-Mart (Sales in 2001 were $219 billion) is higher than the size of Indian retail industry. [Almost 100 times more than the turnover of HLL, India's largest FMCG company] Number of employees in Wal-Mart are about 1.3 million where as the entire Indian retail industry employs about three million people. Developed economies like the U.S. employ between 10 and 11 percent of their workforce in retailing (against 7 percent employed in India today). 60% of retailers in India feel that the multiple format approach will be successful here whereas in US 34 of the fastest-growing 50 retailers have just one format The U.S. retail sector has an average inventory turns ratio of about 18. Many Indian retailers KPMG surveyed have inventory turns levels between 4 and 10. Global best-practice retailers can achieve more than 95 percent availability of all SKUs on the retail shelves (i.e. a stock-out level of less than 5%). The stock-out levels among Indian retailers surveyed ranged from 5-15%
y Traditionally retailing in India can be traced to
The emergence of the neighborhood µKirana¶ stores catering to the convenience of the consumers Era of government support for rural retail: Indigenous franchise model of store chains run by Khadi & Village Industries Commission
y 1980s experienced slow change as India began to open up economy. y Textiles sector with companies like Bombay Dyeing, Raymond's, S Kumar's
and Grasim first saw the emergence of retail chains
y Later Titan successfully created an organized retailing concept and
established a series of showrooms for its premium watches
The Beginning (contd.)
y The later half of the 1990s saw a fresh wave of entrants with a shift from
Manufactures to Pure Retailers. For e.g. Food World, Subhiksha and Nilgiris in food and FMCG; Planet M and Music World in music; Crossword and Fountainhead in books.
y Post 1995 onwards saw an emergence of shopping centers,
mainly in urban areas, with facilities like car parking targeted to provide a complete destination experience for all segments of society
y Emergence of hyper and super markets trying to provide customer with 3 V¶s -
Value, Variety and Volume
y Expanding target consumer segment: The Sachet revolution - example of
reaching to the bottom of the pyramid.
Traditionally three factors have plagued the retail industry: Recent changes:
Unorganized : Vast majority of the twelve million stores are small "father and son" outlets Fragmented : Mostly small individually owned businesses, average size of outlet equals 50 s.q. ft. Though India has the highest number of retail outlets per capita in the world, the retail space per capita at 2 s.q. ft per person is amongst the lowest. Rural bias: Nearly two thirds of the stores are located in rural areas.
Experimentation with formats: The sector is witnessing a series of experiments across the country with new formats being tested out. Ex. Quasi-mall, sub-urban discount stores. Store design : Biggest challenge for organized retailing is to create a ³customer-pull´ environment to increase impulse shopping. Emergence of Supermarts: Stores like Big Bazaar, Bombay Bazaar are trying to emulate the model of Wal-Mart. Unorganized retailing is getting organized: 25 stores in Delhi under the banner of Provision mart are joining hands to combine monthly buying.
Retailing Formats in India
The largest form of organized retailing today. Located mainly in metro cities, in proximity to urban outskirts. Ranges from 60,000 sq ft to 7,00,000 sq ft and above. They lend an ideal shopping experience with an amalgamation of product, service and entertainment, all under a common roof. Examples include Piramyd, City Centre
Chains such as the Mumbai books retailer Crossword, RPG's Music World and the Times Group's music chain Planet M, are focusing on specific market segments and have established themselves strongly in their sectors.
Discount stores or factory outlets, offer discounts on the MRP through selling in bulk reaching economies of scale or excess stock left over at the season. The product category can range from a variety of perishable/ non perishable goods
Multi Brand outlets, also known as Category Killers, offer several brands across a single product category. These usually do well in Metros.
Retailing Formats in India
Large stores ranging from 20000-50000 sq. ft, catering to a variety of consumer needs. Further classified into localized departments such as clothing, toys, home, groceries, etc. E.g. Shoppers Stop, Pantaloon, Westside
Large self service outlets, catering to varied shopper needs are termed as Supermarkets. These stores today contribute to 30% of all food & grocery organized retail sales. Super Markets can further be classified in to - mini supermarkets typically 1,000 sq ft to 2,000 sq ft and -large supermarkets ranging from of 3,500 sq ft to 5,000 sq ft.
These are relatively small stores 400-2,000 sq. feet located near residential areas. They stock a limited range of highturnover convenience products and are usually open for extended periods during the day, seven days a week. Prices are slightly higher due to the convenience premium.
Shoppers' Stop Ebony
Department Store Department Store
New Formats. (Experimenting With )
Quasi-mall Quasi-mall, smaller outlets, adding food retail
Large bookstore Department Store
Corner shops Quasi-mall, food retail
Pantaloon Subhiksha Vitan Foodworld
Own brand store Supermarket Supermarket Food supermarket
Hypermarket Considering moving to self service Suburban discount store Hypermarket, Foodworld express
Small fashion stores
Bombay Bazaar Efoodmart Metro S Kumar's
Aggregation of Kiranas Aggregation of Kiranas Cash and carry Discount store
Acquired/ JV Company/ Target Liberty Shoes Indus - League Clothing Odyssey India Acquirer Nature of Business Retail (Footwear) Retail clothing Leisure retail chain (books, music, toys) Books, music, accessories Restaurant (Food retail) Stake Consideration (US$ million) 3 5 14
Future group Future group Deccan Chronicle Holdings
51% 68% 100%
TGI Friday's (a subsidiary of Carlson Restaurant World-wide) Etam group, France
Indus League clothing (Future group company)
Lingerie and women's wear retailing
New Business Model
ITC spent 3 years and Rs. 80 crore on r&d to come up with the concept of Echoupal and Choupal Sagar-rural hypermarkets. HLL came up with Project Shakti in late 2000 to sell its products through women self-help groups Another step to tap the rural market was `Operation Bharat' wherein low-priced sample packets of toothpastes, fairness creams and shampoos reach to 20mn households.
The Road Ahead
1. Ernst & Young, The Great Indian Retail Story, 2006. 2. FICCI - ICICI Property Services Study. 3. Let gradualism guide FDI in retail, Economist, 2006. 4. AT Kearney, GRDI 2006. 5. Retail scenario most developed in Bangalore, DH News service, According to Bijou Kurien, 6. President & Chief Executive - Life Style, Reliance Retail. 7. CII, Logistics and Freight News, March 2006. 8. KPMG analysis, Consumer markets in India - the next big thing, September 2005. 9. India's changing household, Deutche Bank, November 2004. 10. CII, Manufacturing Bulletin, June 2006. 11. Pharma's retail push, Business Line, 2006. 12. Northbridge Journal, Industry Outlook - Retail, 2006. 13. Express Press release, Consumer durables sector sees pick-up sales in India, 2006. 14. Price Water Coppers, Asia-Pacific M&A bulletin, Mid year 2006. 15. KSA Technopak, June 2006. 16.Forrester Research 2006 17.KPMG-FICCI Report 18.http://www.indiainbusiness.nic.in/