development of indian retail market

8/9/2019 Development of Indian Retail Market

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DEVELOPMENT OF INDIAN

RETAIL MARKET A PRESENTATION BY

MAYANK SHARMA



RETAILING

v According to Kotler: “Retailing includes all the activitiesinvolved in selling goods or services to the final consumers for personal, non business use”.

vThe Indian retail is dotted by traditionally market placecalled bazaars or haats comprises of numerous small and large shops, selling different or similar merchandise .



INDUSTRY HISTORY

Traditionally retailing in India can be traced to The emergence of the neighborhood ‘Kirana’

stores catering to the convenience of theconsumers

Era of government support for rural retail:Indigenous franchise model of store chainsrun by Khadi & Village IndustriesCommission

1980s experienced slow change as India began to

open up economy. Textiles sector with companies like BombayDyeing, Raymond's, S Kumar's and Grasim firstsaw the emergence of retail chains

Later Titan successfully created an organized

retailing concept and established a series of showrooms for its premium watches



CONTINUED…

The latter half of the 1990ssaw a freshwave of entrants with a shift fromManufactures to Pure Retailers.

For e.g. Food World, Subhiksha andNilgiris in food and FMCG; Planet Mand Music World in music; Crosswordand Fountainhead in books.

Post 1995 onwards saw an emergenceof shopping centers,mainly in urban areas, with facilities like car

parking targeted to provide a complete destination

experience for all segments of society



INDUSTRY IN PRESENT

The India Retail Industry is the largest amongall the industries, accounting for over 12 percent of the country’s GDP and around 8 percent of the employment. The Retail Industry

in India has come forth as one of the mostdynamic and fast paced industries withseveral players entering the market. But allof them have not yet tasted successbecause of the heavy initial investments

that are required to break even with othercompanies and compete with them. TheIndia Retail Industry is gradually inching itsway towards becoming the next boomindustry.



Types of Retail Sectors

Unorganized Retailing Hawkers (Kirana) Weekly Markets Organized retailing

Convenient / Departmental stores Factory outlets and discounts Market Supermarkets Wholesalers market

Company and Franchises showroom



Some of the Key Players in OrganizedRetail

.



Retailing formats in India

.Malls:

The largest form of organized retailing today. Locatedmainly in metro cities, in proximity to urban outskirts. Ranges from60,000 sq ft to 7,00,000 sq ft and above. They lend an ideal shoppingexperience with an amalgamation of product, service andentertainment, all under a common roof.Examples includeShoppers Stop, Piramyd, Pantaloon.

lSpecialty Stores:

Chains such as the Bangalore based Kids Kemp, theMumbai 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.

lDiscount Stores:

As the name suggests, 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

lDepartment Stores:

Departmental Stores are expected to take over theapparel business from exclusive brand showrooms. Among these,the biggest success is K Raheja's Shoppers Stop, which started inMumbai and now has more than seven large stores (over 30,000sq. ft) across India and even has its own in store brand for clothescalled Stop!.

lHypermarts/Supermarkets:

Large self service outlets, catering tovaried shopper needs are termed as Supermarkets.These are located in or near residential high streets.These stores today contribute to 30% of all food &grocery organized retail sales. Super Markets canfurther be classified in to mini supermarketstypically 1,000 sq ft to 2,000 sq ft and largesupermarkets ranging from of 3,500 sq ft to 5,000 sq

ft. having a strong focus on food & grocery andpersonal sales.

lConvenience Stores:

These are relatively small stores 400-2,000sq. feet located near residential areas. They stock alimited range of high-turnover convenience productsand are usually open for extended periods during theday, seven days a week. Prices are slightly higherdue to the convenience premium.

lMBO’s :

Multi Brand outlets, also known asCategory Killers, offer several brands across a singleproduct

category. These usually do well in busymarket places and Metros.



Recent Trends

Retailing in India iswitnessing a hugerevamping exercise ascan be seen in thegraph

India is rated the fifthmost attractiveemerging retail market:a potential goldmine.

Estimated to be US$ 200billion, of whichorganized retailing (i.e.modern trade) makesup 3 percent or US$ 6.4billion

As per a report by KPMGthe annual growth of department stores isestimated at 24%

Ranked second in aGlobal RetailDevelopment Index of 30 developing countriesdrawn up by AT

Kearney.



Recent Trends contd.

Multiple drivers leading to a consumption boom: Favorable demographics Growth in income Increasing population of women Raising aspirations : Value added goods sales

Food and apparel retailing key drivers of growth Organized retailing in India has been largely an urban

phenomenon with affluent classes and growingnumber of double-income households.

More successful in cities in the south and west of India.Reasons range from differences in consumer buying

behavior to cost of real estate and taxation laws.



Continued…..

opportunity for retailers reflected in the share of the rural market acrough its e-Choupal and Choupal Sagar – rural hypermarkets.e – leveraging women self-help groups – to explore the rural market.nd network marketing concepts to act as an aggregator and serve the

retailers ranging from Amazon.com to eBay to radically change buyingt.

ortal or tie-sups with horizontal players like Rediff.com and Indiatimes.



Major Retailers India’s top retailers are largely

lifestyle, clothing and apparelstores

This is followed by grocery stores Following the past trends and

business models in the west retailgiants such as Pantaloon,Shoppers’ Stop and Lifestyle arelikely to target metros and smallcities almost doubling their current

number of stores These Walmart wannabes have theeconomy of scale to be low –medium cost retailers pocketingnarrow margin



Top 10 retailers…..

Pantaloon Retail

K.Raheja Group Retail

Tata Group

RPG Group Landmark group

Piramal group

Subhiksha

Bharti-Walmart Relaince

A.V.Birla group



India vs. World

Indian retail is fragmented with over 12 million outletsoperating in the country. This is in comparison to 0.9million outlets in USA, catering to more than 13 timesof the total retail market size as compared to India

India has the highest number of outlets per capita inthe world - widely spread retail network but with the

lowest per capita retail space (@ 2 sq. ft. per person) Annual turnover of Wal-Mart (Sales were $219 billion) is

higher than the size of Indian retail industry. Almost100 times more than the turnover of HLL (India'slargest FMCG company).

Wal-Mart - over 4,800 stores (over 47 million square

meters) where as none of India's large format store(Shoppers' Stop, Westside, Lifestyle) can compare. The sales per hour of $22 million are incomparable to

any retailer in the world. Number of employees inWal-Mart are about 1.3 million where as the entireIndian retail industry employs about three millionpeople.



India vs. World continued……

One-day sales record at Wal-Mart $1.25 billion -roughly two third of HLL's annual turnover.

Developed economies like the U.S. employbetween 10 and 11 percent of their workforce inretailing (against 7 percent employed in Indiatoday).

60% of retailers in India feel that the multipleformat approach will be successful here whereasin US 34 of the fastest-growing 50 retailers have

just one format Inventory turns ratio: measures efficiency of

operations. The U.S. retail sector has an average

inventory turns ratio of about 18. Many Indianretailers KPMG surveyed have inventory turnslevels between 4 and 10.

Global best-practice retailers can achieve morethan 95 percent availability of all SKUs on theretail shelves (translating into a stock-out levelof less than 5 %).The stock-out levels among

Indian retailers surveyed ranged from 5 to 15percent



Share of organized & unorganized retail

with comparison

85 15

81 19

55 45

40 60

36 64

30 70

20 80

3 97

1 99

0% 20% 40% 60% 80% 100%

USA

TAIWAN

MALASIA

THAILAND

BRAZIL

INDONESIA

CHINA

INDIA

PAKISTAN

ORGANISED

UNORGANISED



Future direction: Positives

AT Kearney has estimated India’s total retail market at US$ 202.6billion which is expected to grow at a compounded 30 per cent overthe next five years.

With the organised retail segment growing at the rate of 25-30 percent per annum, revenues from the sector are expected to triplefrom the current US$ 7.7 billion to US$ 24 billion by 2010.

The share of modern retail is likely to grow from its current 2 per centto 15-20 percent over the next decade

Over next two years India will see several Indian retail businessesattaining a critical mass as growth in the industry picks upmomentum driven by two key factors: Availability of quality real estate and mall management

practices Consumer preference for shopping in new environments

Wal-Mart : huge plans for India. Moving a senior official from itsheadquarters in Bentonville, Arkansas, to head its market researchand business development functions pertaining to its retail plans inIndia.

New York-based high-end fashion retailer Saks Fifth Avenue has tiedup with realty major DLF Properties to set up shop in a mall in NewDelhi.

Tommy Hilfiger, retailer of apparels, expects to open one store each inDelhi, Ahmedabad, Lucknow and Bangalore in the next fourmonths.



Future direction: Concerns 68 million square feet of mall space is expected to be available by

end of 2007, which might lead to over-capacity of malls Lack of differentiation among the malls that are coming up. One

option may be to look at specialization. Poor inventory turns and stock availability measures - retailers

clearly need to augment their operations. Operations of retailers and suppliers are not integrated. Efficient

replenishment practices practiced in the Indian auto and auto-component industry can be leveraged to implement efficientsupply chain management techniques.

Supplier maturity, in terms of adherence to delivery schedules anddelivering the quantity ordered, is an issue

Sales tax laws - lead to retailers having state-level procurement andstorage leads to Indian retailers having higher inventories. VAThas helped alleviate this a bit.

Increased adoption of IT and shrinkage management will be a criticalarea. Supply chain and customer relations followed by merchandising,

facilities management and vendor development are areas whichhave significant gaps and proactive training is a key imperativefor overcoming these.



Analysis of Growth

Organized retail growing at estimated 25% . The Indian retail market, which is the fifth

largest retail destination globally, has beenranked as the most attractive emergingmarket for investment in the retail sector by

AT Kearney's eighth annual Global RetailDevelopment Index (GRDI), in 2009. Theshare of retail trade in the country's grossdomestic product (GDP) was between 8–10per cent in 2007. It is currently around 12

per cent, and is likely to reach 22 per centby 2010. E.g.: Bharti has invested 60 Billion with the

largest retail Wal-Mart (last year).



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development of indian retail market

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