RETAILING

RETAILING IN INDIA
IN INDIA

Presentation by
Shahnas A
Syama K S
Sobymol Devasia
Sabitha Z.B
Retailing
According to Philip Kotler “retailing includes all
the activities involved in selling goods or Services
directly to final consumers for personal , Non
business use”.
“Every sale of Goods and Services to final
consumer” – Food products, apparel, movie
tickets; services from hair cutting to e-ticketing.
A retailer or retail store is any business enterprise
whose sale volume comes primarily from
retailing”.
A retailer may be defined, as a ‘ dealer or trader
who sells goods in small quantities’.
Any Organization Selling to final consumer

is retailing , whether they are

A Manufacturer
A Wholesaler
A Retailer
It does not matter how they sell or serve ( By)
• Person
• Mail
• Telephone
• Vending Machine or
• Internet
Or
Where these are sold
• A store
• A street
• Consumer’s House
Retailing may be understood as the final step
in the distribution of merchandise, for
consumption by the end consumers.
Retailers attempt to satisfy consumer needs by
having the right merchandise, at the right
price, at the right place, when the consumer
wants it.
Retailers are the final business in a
distribution channel that links manufacturers
to consumers
Indian retail industry is the second largest
employer in the country with almost 12million
retail stores in India.
 Characteristics of retailing
Itoffers direct interaction
Sale volume is comparatively large in quantities
Customer service
Sales promotions are offered at this point only
Different forms
Location and layout are critical factors
More employment opportunities
Retailers Types

• Department stores
• Specialty stores
• Convenience store
• Discount store
• Off-price retailer
• Super store
Functions of Retailing
• Sorting
• Breaking Bulk
• Holding stock
• Communications
• Assist small suppliers
• Customer service
INDIAN RETAIL-BRIEF
OVERVIEW
The Indian retail sector is highly
fragmented with more than 90 per cent
of its business being carried out by
traditional family run small stores.
This provides immense opportunity for
large scale retailers to set-up their
operations – a slew of organized retail
formats like departmental stores,
hypermarkets, supermarkets and
specialty stores are swiftly replacing
the traditional formats dramatically
altering the retailing landscape in India.
India is the third-most attractive
retail market for global retailers
among the 30 largest emerging
markets, according to US consulting
group AT Kearney’s report published
in June 2010
RETAIL-MARKET SIZE
The total retail sales in India will
grow from US$ 395.96 billion in
2011 to US$ 785.12 billion by
2015
Indian retail sector accounts for
22 per cent of the country's gross
domestic product (GDP) and
contributes to 8 per cent of the
total employment.
Evolution of Indian retail
Historic/Rural Traditional/Pervasi Government Modern Formats/
Reach ve Reach Supported International

Exclusive Brand Outlets

Hyper/Super Markets
Department Stores
Shopping Malls

PDS Outlets
Khadi Stores
Cooperatives

Convenience Stores
Mom and Pop/Kiranas

Weekly Markets
Village Fairs
Melas

Source of Neighborhood Availability/ Shopping

Entertainmen Stores/Convenie Low Costs / Experience/Efficie
t nce Distribution ncy
REASONS FOR THE
GROWTH
 Robust economic growth
 High disposable income with the end-
consumer
 Rapid construction of organized retail
infrastructure are key factors behind the
forecast growth.
 Expansion in middle and upper class
consumer base
 Growth potential in India’s tier-II and tier-III
cities as well.
 The greater availability of personal credit and
a growing vehicle population providing
improved mobility also contribute to a trend
towards annual retail sales growth of 12.2 per
cent.
 Indian Retail – Buoyed by
high GDP growth
10% 9.0% 9.2%
8.90%
9%

8% 6.4%
6.8%
Real Growth Rate

6.6% 6.0%
7% 6.0%
5.4% 5.6%
6% 5.2%

5%

4%

3%

2%

1%

0%
1998

1999

2001

2004

2007
1997

2000

2002

2003

2005

2006
Source :Central Statistical Organization
(CS0)

Projections of 8% sustainable real GDP growth rate

till 2020 promise high growth potential for Indian
Retail…
 India Experiencing Rapid
Economic Growth

Real Growth Rate

GDP (US$ bn)

9.4% growth rate makes India the second fastest

growing economy in the world
 Led by Growth in Services
Sector
% Increase in growth over the previous year

120%
107%

100%

80%

60% 55%
2005-06
41%
40% 37%
2006-07
21% 21%
20% 13% 14%
6% 7%

0%
Tourist Arrivals Passenger Cars Commercial Domestic Air New Cell Phone
Sales Vehicle Sales Passengers Connections

Services sector adding to GDP in a significant manner

 Driven from Consumption Throughout the 1.1
Billion Population

5-7 million
Super Rich

70 – 80 million
Afford Cars, Private Healthcare &
Foreign travel

250 - 300 million

Afford goods like Refrigerators , Scooters
& Colour TVs

600-700 million (Generally Rural)

Poverty Line = income less than $ 1/day Afford simple industrial products
e.g. bicycles , radios , textiles

60 % of India’s population are under 24 years

Source: McKinsey,
 With High Private
Consumption GDP
US$ 935 billion
Food
Apparel
Private Consumption Public Spending and Capital
Beverages
US$ 580 Billion Formation
Footwear (62%) US$ 355 Billion (38%)
Transport
Consumer
durables Communicati
Retail Non Retail on
Appliances
US$ 342 Billion US$ 238 Billion Recreation
Stationery (59%) (41%)
Cultural
Kitchen Services
utensils
Urban (5,100 towns) Education
Furniture Modern retail – US$ 12 billion
US$ 154 Billion 8% of urban retail spends Rent
Furnishings (45%)
Utilities
Sports goods
Other
Health & Rural (6,27,000 villages) Services
Beauty Modern retail
US$ 188 Billion Negligible
Personal Care (55%)

Jewellery
Source: Central Statistical Organization (CS0) and Technopak Analysis
Timing
Conversion rate: 1 US$ = 40.86 Rs.
 About US $530 Billion Retail Market by
2012
GDP*
US$ 1,450 billion

Private Consumption Public Spending and Capital

US$ 870 Billion Formation
(60%) US$ 580 Billion (40%)

Retail Non Retail

US$ 530 Billion US$ 340 Billion
(61%) (39%)

Urban
Modern retail – US$ 78 billion
US$ 252 Billion 31% of urban retail spends
(47.5%)

Rural
Modern retail – US$ 9 billion
US$ 278 Billion 3% of rural retail spends
(52.5%)

All figures are in nominal terms after taking into account inflation Source: Technopak Analysis
Which Makes Indian Retail an Attractive
Market

India tops the Global Retail Development Index

March 20, 2020

ORGANISED v/s
UNORGANISED
The Indian retail market, over the last
decade, has been increasingly leaning
towards organized retailing formats.
The pattern in domestic retailing is
altering in the favor of organized
modern retailing, a big change from
the traditional plethora of unorganized
family-owned businesses.
Rapid urbanization, changes in
shopping pattern, demographic
dividend and pro-active measures by
the Government are abetting the
growth of the retail sector in India.
 Organised retail in India is expected to increase from
5 per cent of the total market in 2008 to 14 - 18 per
cent of the total retail market and reach US$ 450
billion by 2015

 According to a report titled 'India Organised Retail

Market 2010', published by Knight Frank India, during
2010-12 around 55 million square feet (sq ft) of retail
space will be ready in Mumbai, national capital region
(NCR), Bengaluru, Kolkata, Chennai, Hyderabad and
Pune. Besides, between 2010 and 2012, the organised
retail real estate stock will grow from the existing 41
million sq ft to 95 million sq ft.
 Driven by the growth of organised retail coupled with
changing consumer habits, food retail sector in India
is set to be more than double to US$ 150 billion by
2025.
 Organized Retailing in India (2006)
Organized retail INR 28,000 crore
Clothing, Textiles &Fashion 39%
accessories
Footwear 9%
Jewellery & Watches 7%
Mobile handsets & accessories 3%
Health & Beauty (including services) 2%
Food & Grocery 18%
Durables 13%
Books, Music & Gifts 3%
Home 3%
Modern Retail – Organized Channels

• The share of organized retail is less than 3% of the total retail market
• The size of modern retail is about US$ 8 Billion and has grown by 35% CAGR in last
five years

100%
20% 20% 3%
36% 30%
80% 40%
55%
60% 85% 81%

40%

20%

0%
US Taiwan Malaysia Thailand Brazil Indonesia Poland China India

Traditional Channel Modern Channel

March 20, 2020

.. but Rapid Transformation is Anticipated

Current Size & Future Projections for Indian Retail Market

900 800
800
700
600 530
US$ Billion

486
500 445
373 408
400 342
300
200 200
100 87
26 39 59
0 12 18
2007 2008 2009 2010 2011 2012 2017

Total Retail Organized Retail

And may reach a share of 25% by 2017

March 20, 2020
RECENT TRENDS

March 20, 2020

March 20, 2020
Recent Trends
Traditionally three factors have plagued
the retail industry:
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. Rural retail industry has
typically two forms: "Haats" and “Melas". Haats
are the weekly markets : serve groups of 10-50
villages and sell day-to-day necessities. Melas
are larger in size and more sophisticated in
terms of the goods sold (like TVs)
Recent changes:
Experimentation with formats: Retailing in
India is still evolving and the sector is witnessing
a series of experiments across the country with
new formats being tested out. Ex. Quasi-mall,
sub-urban discount stores, Cash and carry etc.
Store design : Biggest challenge for organized
retailing to create a “customer-pull” environment
that increases the amount of impulse shopping.
Research shows that the chances of senses
dictating sales are upto 10-15%. Retail chains
like MusicWorld, Baristas, Piramyd and Globus
are laying major emphasis & investing heavily in
store design.
Emergence of discount stores: They are
expected to spearhead the organized retailing
revolution. Stores trying to emulate the model of
Wal-Mart. Ex. Big Bazaar, Bombay Bazaar,
RPGs.
Unorganized retailing is getting organized:
To meet the challenges of organized retailing
such as large Cineplex's, and malls, which are
backed by the corporate house such as 'Ansals'
and 'PVR‘ the unorganized sector is getting
organized. 25 stores in Delhi under the banner
of Provision mart are joining hands to combine
monthly buying. Bombay Bazaar and Efoodmart
formed which are aggregations of Kiranas.
March 20, 2020
Retail Market not limited to metros but widely across
India

• The classic ”skimming” strategy in the

metros is not longer sufficient
– 100 cities strategy
Ludhiana
• Over 250 large size shopping malls
are currently under construction New Delhi
Lucknow
• Leading cities 2030 are Varanasi Patna
forecasted to be Jaipur
– Mumbai
Kanpur
– New Delhi Ahamabad Indore
Vadodara
– Chandigarh Bhopal Kolkata
Surat Nagpur

Pune Hyderabad Visakhapatnam

Mumbai

Bangalore
Chennai Above 10 Mn inhabitants
Above 4 Mn inhabitants
Kochin
Above 2 Mn inhabitants
Coimbatore
Madurai Above 1 Mn inhabitants

March 20, 2020

 RURAL RETAILING
AADHAR
Future Group and Godrej Agrovet's joint
venture (JV) in rural retailing, 'Aadhar', is all
set for a revamp. The alliance operates
stores in Gujarat, Maharashtra, Haryana and
Punjab and mainly sells wheat and paddy
apart from daily need products. The
company also provides farmers with
solutions to problems regarding their
agricultural output, which includes what kind
of crop can they plant and when, along with
techno-commercial suggestions to help them
give a better output.
Champion Agro Ltd
Rajkot based Champion Agro Ltd is
planning to come up with single window
shopping facility for farmers.
The company already has 35 agri-
retailing outlets in the Saurashtra
region, and is expected to open around
400 outlets at a taluka level across
Gujarat by 2016.
 It will open 50 new outlets by the end of
2011with an investment of US$ 3.3
million. The overall investment planned
is between US$ 66.7 – US$ 88.94 million.
ACIL Cotton Industries
Vadodara based ACIL Cotton
Industries is all set to come up with
around 40 outlets of 'ACIL Krishi
Store' in Gujarat. Of these, four
outlets got operational in April -
May 2011. As for 2011, ACIL has
decided to focus on the Gujarat
market. ACIL stores will sell all
types of seeds, fungicides,
fertilisers, micronutrients.
OTHER VENTURES
Marico is using mobile technology
innovatively to arm its field
representatives in their
procurement process. The IT team
at Marico developed a mobile-
based application for Nokia 5235
series handsets. The company gave
these GPS-enabled phones to 120
of its field representatives, with
mapped routes.
Hindustan Unilever Ltd (HUL) is
experimenting with tablet PCs in its
attempt to increase its rural reach. It has
been able to reach to 500,000 outlets in
a year’s time. According to Nitin
Paranjape, managing director, HUL, “We
put all the villages on an IT map. The
name of the village, its total strength,
nearest distributors available, whether it
has a school, a hospital, a primary health
centre, all of this was mapped. We used
this information to determine the
opportunity the village presented to us.
Global Heavyweights in Indian
Retailing
Joint Ventures Product Range Retail Formats

Bharti-Walmart (with $2.5 Food & grocery, electronics & appliances, clothing & Hypermarkets, Supermarkets and
Billion investment by footwear, furniture & furnishing, household articles. Convenience
Bharti)
Carrefour-Landmark Food and groceries, FMCG, apparel and electronics Hypermarkets

Home Retail Group plc - Franchising the Argos concept under the terms of Multi Channel propositions
Shopper's Stop Ltd and the arrangement, Argos will be providing its brand,
Hypercity Retail India catalogue and multi-channel expertise and IT
Private Ltd support
Tata-Woolworths Sourcing agreement for Consumer durables and Multi brand retail chain
Foods under brand name CROMA

Staples Inc – Pantaloon Global Sourcing of Office equipments across various Cash and carry
Retail businesses

Reliance Food & grocery, electronics & appliances, clothing & Multi format and Multi Category
footwear, furniture & furnishing, household articles.

Birla Food & grocery, electronics & appliances, clothing & Convenience and Supermarket
footwear, furniture & furnishing, household articles.
FDI in Retail
At present, the government allows 51%
foreign direct investment in a single-
brand retail venture while 100% is
permitted in wholesale cash-and-carry.
Under single-brand retailing a store can
stock goods that have the same brand.
In the wholesale cash-and-carry route,
which most foreign retailers use, there
is restriction on sale to individuals.
These stores are only permitted to sell
to outfits such as restaurants and
kirana stores
FDI in Retail
Foreign direct investment (FDI)
inflows between April 2000 and
December 2010, in single-brand
retail trading, stood at US$ 66.69
million, according to the
Department of Industrial Policy
and Promotion (DIPP).
FDI in Multi Brand
Retailing
India's multi-brand retail sector,
is estimated to be worth $28
billion (Rs 125,000 crore)
according to a Boston Consulting
Group (BCG) study.
The government is likely to
permit foreign direct investment
(FDI) in the multi-brand retail
sector from April 2012.
The government prepared a draft in July
2011, which says 49 per cent FDI in
multi-brand retail will be allowed in a
phased manner which will be effective
from the next financial year i.e. April
2012.
The Committee of Secretaries (CoS)
headed by Cabinet secretary Ajit Kumar
Seth met on July 22 to finalise the
blueprint of the proposal for political
clearance. One of the major outcome of
the discussion is raising 49% to 51%.
 According to the the economic advisor to
the Prime Minister, Kaushik Basu , the
government will allow FDI in three phases.
In the first phase, foreign multi-brand retail
chains will be allowed in the metros Delhi,
Mumbai, Kolkata and Chennai. In the
second phase other metros like Bangalore,
Hyderabad and Pune will be included.
The draft has laid out strict norms such as
earmarking 40 per cent investment for
backend infrastructure, such as cold
storage, soil testing labs and seed farming,
for prospective entrants.
The move has paved the much-
required way for international retailer
like Bentonville, Arkansas-based Wal-
Mart Stores Inc. and Paris-based
Carrefour SA to open their retail stores
through strategic partnerships.
According to Business Monitor
International, retail sales in India may
jump from $396 billion in 2011 to $785
billion in 2015, representing a growth
of around 100 per cent.
toharm self-employment
opportunities
adversely affect the
manufacturing sector
harm small traders across the
country.
consumers will soon more
options to choose products
more and more investment in the
backend
Improve the standard of
efficiency of supply chain
management.
Latest Information on Indian
Retail Scenario
Singapore-based CapitaMalls Asia,
which develops, owns and manages
malls across Asia, has pledged US$
400 million to its growth in India up
till 2014. Mr Kevin Chee, CEO and
Country Head of CapitaMalls Asia,
has said that apart from funding
the two malls that are operational
now, this money would be used to
develop seven more malls in India.
Reliance Retail will enter the cash
and carry market with "Reliance
Market" in Ahmedabad; the first
one to be opened by August
2011.
Ujala fabric whitener maker Jyothy
Laboratories has bought Henkel AG's
50. 97 per cent stake in its Indian
subsidiary for US$ 137.02 million,
including debt and preference
shares, the two companies revealed.
The deal includes Henkel's entire
portfolio that includes Henko and
Chek detergents, Pril dish cleaners
and Fa deodorant, and rights to the
multinational's future launches.
With the launch of its first 'Arvind
Experience Store' in Gujarat at
Vadodara, denim major Arvind
Ltd. is looking at 100 stores by
the end of the financial year
2011-12. The store in Vadodara is
the company's eighth in the
country after seven stores in
Andhra Pradesh.
Quick food service restaurant
chain Subway will set up 45
outlets across the country by
2011-12 entailing an investment
of around US$ 9 million. The
company has now 205 outlets in
India and plans to take its count
to 250 by the end of 2011-12.
Max Hypermarkets, the food
retailing chain of the Dubai-based
Landmark Group is investing US$
122.14 million for its store
expansion business across 30
cities in India.
Retail - Government
Initiatives
 Indiawill announce new rules for foreign
investment in retail by April 2012, paving
the way for companies such as Wal-Mart
Stores and Carrefour to open stores,
according to Junior Trade Minister
Jyotiraditya Scindia. A government panel has
issued a report that recommends easing a
law that prohibits non-Indian companies
from operating multi-brand outlets. Allowing
foreign investment in multi-brand retail may
help moderate food prices, said Kaushik
Basu, chief economic adviser in the finance
ministry, who sits on the panel.
 India currently allows 51 per cent FDI in single-
brand retail and 100 per cent in wholesale cash-
and-carry operations.
 In a landmark decision, the government has
eased norms for investments by foreign
companies that are present in India through a
joint venture (JV) or a technical collaboration.
Now, the foreign company will not have to seek a
no-objection certificate (NOC) from the Indian
partner for investing in the sector where the joint
venture operates.
 The government has also relaxed norms for
downstream investments and convertible
instruments, giving foreign companies more
powers. The changes are part of the third
revision of the Consolidated FDI Policy.
KEY CHALLENGES
 THE KIRANA
 CRM practice
 Known about the customer’s families
 Credit and home delivery
 Consumer familiarity runs from
generation to generation
 Open longer hours and stock most of
the goods
 Consequently, a large number of
customers are not willing to pay a
premium for the shopping
experience promised by large format
retailers.
HIGH COSTS FOR THE
ORGANIZED SECTOR

High expenses to organized sector .

The lease cost up to 6-10 percent
of sales
Manpower cost is lower at 5-6
percent of sales
Capital costs are more in retail
business due to major renovations
needed every 5-7 years.
Organizing Retail in India-Challenges

 Heterogeneous market
◦ Product offerings in different stores across the country will
be very different
◦ No standard mode of operation across formats
◦ Market not mature (has to be validated)
 Infrastructure will bring about logistical challenges
◦ Though, improvements in road networks, power supply are
Retail underway
Challenges  Trained employees with understanding of retail
business are inadequate compared to the needs of
organized retail
 Barriers to Entry
◦ High taxes, bureaucratic clearance process and labour laws
 High cost of real estate
◦ though over 600 malls are to come up all over the country
by the next 4 years
 Indian retailers are deeply entrenched, are expanding
and building on logistics and technology initiatives
 • Complex Processes - Multiple MRP, Deals & Promotions, Forecasting &
Replenishment, Lean supply chain – JIT inventory, flow through
Processes warehouse
• Evolving processes in Supply chain & merchandising
• Global Best Practices not adopted
• High disposable income
Consumer • Changing consumer preferences
• 28 states, 100+ religion, 250+ festivals

• Supply chain not reliable. Cold storage infrastructure evolving

Infrastruct
ure • Outsourced transportation
• Low level automation in warehouses

• Little or no collaboration between vendor & retailer

Supplier/ • Low fill rates from vendors
Vendor • Highly localized assortments leading to relationship with multiple
vendors
• Complex trading contracts and off invoice discounts
• Multiplicity of disparate Systems & Data Formats
Current IT • No architecture roadmap
• Base ERP and home grown POS solutions. Low investments in store
systems
• No investments in planning & optimization technologies
Challenges contd..
Weakness of Player
 Retail not being recognized as an industry in india.
 The lack of recognition as an industry hampers the availability
of finance to the existing and new players. This affects growth
and expansion plans
The high cost of real estate:
 Real estate price in some cities in India are amongst the
highest in the
world.
 The lease or rent of the property is one of the major areas of
expenditure, high lease rentals eat into the profitability of a
project.
Lack of adequate infrastructure
 Poor roads , lack of a cold chain infrastructure, etc , hamper the
development of food and fresh grocery retail in india.
 The existing supermarkets and food retailers have to invest a
substantial amout of money and time in building a cold chain
network.
Multiple and complex taxation system
 The sales tax rates very from state to state while
organised players have to face a multiple point
control and tax system,there is considerable expense
to transfer good from one store to another.
Foreign direct investment:-
 The fact that foreign direct investment(FDI)is not
permitted in pure retailing is seen as one of the
prime reasons for the slow growth of
retail in India.
 A global retailer can enter India only by way of a
franchise with an Indian partner or through
technological alliances.
Purchasing power of money
 As the Indian population mostly consist of middle
class families and
low wages worker they don't want to go in the super
market or retail market
The Way Ahead

 India is amongst the least saturated of all

major global markets in terms of penetration of
modern retailing formats
 Many strong regional and national players
emerging across formats and product
categories
 Most of these players are now gearing up to
expand rapidly after having gone through their
respective learning curves
 Real Estate Developers are also moving fast
through the learning curve to provide
qualitative environment for the consumers
 The Shopping Mall formats are fast evolving
In view of a compressed
 Partnering among Brands, retailers,
franchisees, investors and malls evolution cycle, retailers need to
simultaneously address issues of speed,
Execution and efficiency
 Improved Infrastructure
 Key Challenges

Key Challenges
to overcome

Internal
• Attracting & retaining qualified manpower
• Implementing SOP’s & best practices
• Focus on improving operational efficiency
• Cost control
• CRM & Service levels
External
• High real estate cost
• Anarchic laws
• Shortage of qualified manpower
• Poor infrastructure
• Unorganized & poor supply chain
 Key Opportunities
 Supply Chain Investments

• Setting up logistics and supply chain infrastructure

• Import of know how and logistics techniques from developed retail

countries

 IT Infrastructure

• IT is the enabler behind communication, collaboration with

suppliers, and an efficient supply chain

 Manpower

• Potential tie-ups with universities and setting up dedicated retail

institutes

• Utilize experience of international retailers to train local talent

Large Rural market

RETAIL – ROAD AHEAD
There is a huge untapped opportunity
in the retail sector, thus having
immense scope for new entrants,
driving large investments into the
country.
A good talent pool, huge markets and
availability of raw materials at
comparatively cheaper costs are
expected to make India lead one of the
world’s best retail economies by 2042.
The industry is also slated to be a
major employment generator in future.