1

Retail Management- Strategy Class Growth Vs Profitability

Growth
Vs
Profitability
Presented by

Sachin Mangale
Ankit Das
Ram Biyani
Ruturaj Kodag
Shaivya Sharma
2
Overview of Indian Retail Industry
 Market Size- Billions $648.9 FY 2015 (as per case)
Market Size of Retail Industry
(USD Billion)
Year Market Size Projection 672.0
CAGR- 16-18%
600.0
2017 1026 534.0
518.0
490.0
2020 1300

 Transformation from Traditional Retail by removing

Differentiation between Organized & Unorganized
Retail.

 Metro Cities accounted for 30% Total Retail Consumption 2012 2013 2014 2015 2016
which is 90% of Organized retail Consumption
1% 4% 3%
11% 8% Food & Beverage
2%
3% Clothing & Textile
9% Consumer Durables & IT
Home Décor & Furnishing
90%
Beauty,Personal Care
Footware
69% Others
Organised Unorganised E-tail Source:-Care ratings Indian Retail Industry-Structure & Prospects
 3
Situation Analysis(1/3)
Company Analysis
EBITDA
Revenue Trend Spencer Retail (INR Billion)
(INR Billion) 2013 2014 2015
16.8
-1.0 -0.8
14.5
13.4

-7.9
2013 2014 2015
Facts about Company- Private Labels/Brands
20%
Food & Grocery Total No Stores- 120 Spencer's finest, Spencer’s
Formats of Store smart choice, Tasty wonders,
• Convenience Stores(1500-15000 Sq.ft) Clean home, Maroon, Island
Others(Personal care,
Home, Electronics & Elec- • Supermarket format(15000-50000 Sq.ft monks, Asankhya, La Bonita,
trical, Fashion & Acces-
sories, Specialities) • Hypermarket format Mark Nicolas, Scorez, Care &
No of Cities Operational in India- 40 essentials.
80%
Operating format- Umbrella store
Source:-Care ratings Indian Retail Industry-Structure & Prospects
 4
Situation Analysis(2/3)
Competitor Analysis
Area (Million Sq. Average area per
Competitor Name No. of Stores Private Label/Brands
Ft.) store (q.ft)

Future Retail 794 13.03 16411 Big Bazaar, Easyday, FBB, HomeTown, Ezone, FabFurnish
Haute Curry, Rockystar, Desigual, Vettorio Fratini, Fratini Women,
Shoppers Stop 249 5.98 24016 Wrogn, Avorio, Fresh Basket Avorio, Fresh Basket & Terzo, Maxit,
etc
D Mart, D Mart Minimax, D Mart Premia, D Homes, Dutch Harbour,
Avenue Supermarts Ltd. 126 3.83 30397
etc
Louis Phillipe, Van Heusen, Allen Solly, People, Peter England,
Planet Fashion, The Collective, Hackett London, Forever21
ABFRL 2242 6 2676
Pantaloons - 200 licensed and international brands, including 24
exclusive brands
Trent Ltd 160 4.77 29,813 Westside, Star Bazaar, Landmark
Vmart 136 1 7353 NA
V2 Retail 37 0.46 12465 God-speed, Andie, Glamora
More Quality 1st Supermarkets, More Megastore, VOW, Kitchen’s
ABRL 514 15.45 30058 Promise, Feasters, Prarthana, More Choice, More Daily, More Life,
Bluearth, Karinee, Kruff, Incheels, TRU, Chatter Kids and Yo

Reliance Fresh, Reliance Smart, RelianceSMART.in, Reliance

Reliance Retail 3616 13.5 3733 Market, Reliance Digital, Reliance Trends, Reliance Footprint,
Reliance Jewels, AJIO, Footprint 360

Spencers Finest, Spencers Smart Choice, Tasty Wonders, Clean

Spencer Retail 120 1.1 9167 Home, Maroon, Island Monks, Island Monks kids, Asankhya, La
Bonita, Mark Nicolas, Scorez, Care & Essentialz

Source:-Care ratings Indian Retail Industry-Structure & Prospects

 5
Situation Analysis(3/3)
Per Capita Private Final Consumption
Consumer Analysis Expenditure
• Demographic Advantage (In INR) 68049.0
61571.0
Younger population in India 57402.0
52268.0
Middle Class Consumer Segment Growing at substantial 45883.0
rate 40250.0

• Rapid Urbanization
Population Shift from Rural to Urban seeking good
standard of living boosting demand in Urban areas. 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17

Changing Consumption Pattern of

• Rising Income levels & Growing per capita Indian Consumer
expenditure 100%
India’s per capita GDP growing at 10.4%(FY12-17) has 90%
37.0 37.0
80% 40.0 39.0 38.0
increased personal disposable income by 10.2% & private 70%
final consumption expenditure by 11.2%. 60%
10.0 10.0 11.0 11.0 12.0
50%
40%
30%
50.0 51.0 52.0 52.0 50.0
20%
• Changing face of Indian Consumers 10%
Changing consumer preference from essential to non 0%
2011-12 2012-13 2013-14 2014-15 2015-16
essential products Food Grocery & Non Alcoholic beverages Clothing & footware
Discretionary Spend
Source:-Care ratings Indian Retail Industry-Structure & Prospects
6
SWOT Analysis
Strength Weakness
• Facing losses from last three years & looking for
• Spencer Retail is operating under umbrella store
way out to be profitable.
format.
• Lack of investment for new stores creation along
• Generating Individual Operating profits for
with issue of ROI.
majority of stores.
• 80% of the sales revenue coming from Food &
Grocery Segment in high competitive
environment (Kirana stores)

SWOT
Opportunity Threats
• 20% Sales generating segments must be checked • Competitors/ Larger format retailer are adding
for Operating profitability. new stores at a rate of 15% per year.
• A Category having comparatively higher margin • Huge competition (Kirana & in large sales
should be worked upon. generating segment(Food & Grocery)
• Growing middle class & Income along with shift
of preferences from essential to non essential
goods.
7
Problem Statement…Growth Vs Profitability
Why No Growth Why Profitability
• Long term Strategy • Short Term Strategy
Increasing no of stores requires huge investment and ROI This strategy emphasized on creating more visibility on
cant be expected in shorter span of time so it can be long higher margin category products.
term strategy but not short term.

• Investment Dilemma
• High Competition Long Time Vs Short Term Investment
Lets assume that company go for growth strategy in terms
of increasing no of stores but competitors have advantage
in terms of no of store already.
 8
Profitable Categories with Higher Margins
Fashion & Accessories
Mkt
Market Share
Segment Industry CAGR Growth Drivers Product Mix Competition Sub Segment CAGR Opportunities Profitability Summary
Size (%
FMCG)

Increased
Penetration in
Organized retail, Mens Casual, Mens
Way to attract
favorable Office Wear, Womens Men's Apparel-
 Future Retail, Men’s, Kids, Unorganized market These segments have
Fashion & Textile & 150B demographics, Casual, Womens 9.8% , Kids &
16-18% Reliance Retail, Women  NA  NA customers is by higher margin
Accessories Apparel (2017) Rising Disposable ethnic, Innerwear, Women Apparel-
ABRL etc. Wear  venturing into Online segments.
Income Level, Accessories, 7.5%
retail or E-tail  
Availability of Footwear
Raw Material,
Huge Investment

Comparison with Similar kind of Store Type & Marketing Mix Avenue Super- 26%
23% markets Ltd Rev-
FY 2015 Apparel Spencer Retail
Market-65K Cr • Revenue Share from each category enue
Rs • Operating Margins in Apparel Category
20%
• Umbrella Brand
25% Foods & 21%
Grocery

Home &
52% Personal 53%
80% Care
Fashion &
Mens Womens Kids Foods & Grocery Others Apparel

Source-http://www.careratings.com/upload/NewsFiles/SplAnalysis/Consumer%20Durables_May%202018.pdf, IBEF, ABFRL Annual Report

 9
Profitability Strategy
Fashion & Accessories
Introducing new product segment which is ‘SPORTSWEAR. We Assume that introduction of this thing will complete the product mix
and will give extra reason to visit the store.
From 2015-2016 Grew by 22%
By 2020 expected to grow at additional 12%.

Entering in E-tail for Fashion & Accessories

These segments are higher margin segments and along with online selling cuts costs such as real estate, sales staff and electricity
improving operating margins.

Source- Euro monitor

10

THANK YOU