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The Indian Retail Sector
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Industry Evolution
Traditionally retailing in India can be traced to The emergence of the neighborhood Kirana stores catering to the convenience of the
consumers
Era of government support for rural retail: Indigenous franchise model of storechains run by Khadi & Village Industries ommission
!""#s e$perienced slo% change as India began to open up economy Te$tiles sector %ith companies li'e (ombay )yeing* +aymond,s* - Kumar,s and
.rasim first sa% the emergence of retail chains /ater Titan successfully created an organi0ed retailing concept and established a
series of sho%rooms for its premium %atches The latter half of the !""#s sa% a fresh %ave of entrants %ith a shift from
1anufactures to 2ure +etailers 3or eg 3ood 4orld* -ubhi'sha and 5ilgiris in food and 31.6 2lanet 1 and 1usic
4orld in music6 ross%ord and 3ountainhead in boo's
2ost !""7 on%ards sa% an emergence of shopping centers* mainly in urban areas* %ith facilities li'e car par'ing targeted to provide a complete destination e$perience for all segments of
society Emergence of hyper and super mar'ets trying to provide customer %ith 8 Vs 9 Value*
Variety and Volume E$panding target consumer segment: The -achet revolution 9 e$ample of reaching to
the bottom of the pyramid t year end of ;##< the si0e of the Indian organi0ed retail industry is estimated at +s
7#*### crore plus
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RETAIL PROPERTY DEVELOPMENT
India is 10thlargest economy in theworld.Realestate sector growing 23%PA
The top 6 cities D!"#$ represent 6% opop&lation and contri'&te 1(% re)en&es*whilethe rest o the cities with +% pop&lationcontri'&te only 13% re)en&e.
Tier II cities and towns li,e-&rat*i/ayawada*#hopal*#h&'aneswar isepected to grow at 20%.
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RETAIL PROPERTY DEVELOPMENT
The tenants in malls in India ace high lease rentalsand payment o high costs towards common areamaintenance which aects retailer proita'ility.
$owe)er there are some pec&liarities o the indianmar,et that need to 'e &nderstood.A simpleapplication o western retail ormats may not really'e rele)ant to the indian contet.
Distri'&tion o all -paces across onesorthone435%*estone433%*-o&thone417% and 8astone410%.
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Retailing or!ats in India
Malls"
The largest orm o organied retailing today. 9ocated mainly in metrocities* in proimity to &r'an o&ts,irts. Ranges rom 60*000 s: t to+*00*000 s: t and a'o)e. They lend an ideal shopping eperiencewith an amalgamation o prod&ct* ser)ice and entertainment* all &ndera common roo.8amples incl&de -hoppers -top* Piramyd*Pantaloon.
S#ecialty Stores"
!hains s&ch as the #angalore 'ased "ids "emp* the &m'ai 'oo,sretailer !rossword* RP;
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Retailing or!ats in India
India)s nu!*er o Do!estic grocery chains and Early +oreign Entrants
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Recent Trends
Retailing in India is witnessing a h&gere)amping eercise as can 'e seen inthe graph
India is rated the ith most attracti)eemerging retail mar,et a potentialgoldmine.
8stimated to 'e -E 200 'illion* owhich organied retailing @i.e. moderntrade ma,es &p 3 percent or -E 6.('illion
As per a report 'y "P; the ann&algrowth o department stores isestimated at 2(%
Ran,ed second in a ;lo'al RetailDe)elopment Inde o 30 de)elopingco&ntries drawn &p 'y AT "earney.
Retail Sales in India
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Recent Trends contd0
<iple dri)ers leading to a cons&mption 'oomK ?a)ora'le demographicsK ;rowth in incomeK Increasing pop&lation o womenK Raising aspirations al&e added goods sales
Food and apparel retailing key drivers of growth
Lrganied retailing in India has 'een largely an &r'an phenomenon with al&ent classes and growing n&m'ero do&'le4income ho&seholds. ore s&ccess&l in cities in the so&th and west o India. Reasons range rom dierences in cons&mer '&ying
'eha)ior to cost o real estate and taation laws. R&ral mar,ets emerging as a h&ge opport&nity or retailers relected in the share o the r&ral mar,et across
most categories o cons&mptionK IT! is eperimenting with retailing thro&gh its e4!ho&pal and !ho&pal -agar K r&ral hypermar,ets.K $99 is &sing its Pro/ect -ha,ti initiati)e K le)eraging women sel4help gro&ps K to eplore the r&ral mar,et.K ahamaa is le)eraging technology and networ, mar,eting concepts to act as an aggregator and ser)e
the r&ral mar,ets.
IT is a tool that has 'een &sed 'y retailers ranging rom Amaon.com to e#ay to radically change '&ying'eha)ior across the glo'e. Je4tailingM slowly ma,ing its presence elt. !ompanies &sing their own we' portal or tie4s&ps with horiontal players li,e Redi.com and Indiatimes.com to
oer prod&cts on the we'.
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Ma1or Retailers
IndiaMs top retailers are largelyliestyle* clothing and apparelstores
This is ollowed 'y grocerystores
?ollowing the past trends and'&siness models in the westretail giants s&ch asPantaloon* -hoppersM -topand 9iestyle are li,ely totarget metros and small citiesalmost do&'ling their c&rrentn&m'er o stores
These almart wanna'es
ha)e the economy o scale to'e low Kmedi&m cost retailerspoc,eting narrow margin
9eading Retailers
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India vs0 2orld
Indian retail is ragmented with o)er 12 million o&tlets operating in the co&ntry. This is in comparison to 0.5million o&tlets in -A* catering to more than 13 times o the total retail mar,et sie as compared to India
India has the highest n&m'er o o&tlets per capita in the world 4 widely spread retail networ, '&t with thelowest per capita retail space @N 2 s:. t. per person
Ann&al t&rno)er o al4art @-ales in 2001 were E215 'illion is higher than the sie o Indian retailind&stry. Almost 100 times more than the t&rno)er o $99 @India %.The stoc,4o&t le)els among Indian retailerss&r)eyed ranged rom > to 1> percent.
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+uture direction" Positives
AT "earney has estimated IndiaMs total retail mar,et at -E 202.6 'illion which is epected togrow at a compo&nded 30 per cent o)er the net i)e years.
ith the organised retail segment growing at the rate o 2>430 per cent per ann&m* re)en&esrom the sector are epected to triple rom the c&rrent -E +.+ 'illion to -E 2( 'illion 'y 2010.
The share o modern retail is li,ely to grow rom its c&rrent 2 per cent to 1>420 percent o)er thenet decade
L)er net two years India will see se)eral Indian retail '&sinesses attaining a critical mass asgrowth in the ind&stry pic,s &p moment&m dri)en 'y two ,ey actors
K A)aila'ility o :&ality real estate and mall management practicesK !ons&mer preerence or shopping in new en)ironments
al4art h&ge plans or India. o)ing a senior oicial rom its head:&arters in #enton)ille*
Ar,ansas* to head its mar,et research and '&siness de)elopment &nctions pertaining to itsretail plans in India. ew Oor,4'ased high4end ashion retailer -a,s ?ith A)en&e has tied &p with realty ma/or D9?
Properties to set &p shop in a mall in ew Delhi. Tommy $iliger* retailer o apparels* epects to open one store each in Delhi* Ahmeda'ad*
9&c,now and #angalore in the net o&r months.
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+uture direction" 'oncerns
67 million s:&are eet o mall space is epected to 'e a)aila'le 'y end o 200+* which might leadto o)er4capacity o malls
9ac, o dierentiation among the malls that are coming &p. Lne option may 'e to loo, atspecialiation. Poor in)entory t&rns and stoc, a)aila'ility meas&res 4 retailers clearly need to a&gment their
operations. Lperations o retailers and s&ppliers are not integrated. 8icient replenishment practices practiced
in the Indian a&to and a&to4component ind&stry can 'e le)eraged to implement eicient s&pplychain management techni:&es.
-&pplier mat&rity* in terms o adherence to deli)ery sched&les and deli)ering the :&antity ordered*is an iss&e
-ales ta laws 4 lead to retailers ha)ing state4le)el proc&rement and storage leads to Indianretailers ha)ing higher in)entories. AT has helped alle)iate this a 'it. Increased adoption o IT and shrinkage management will be a critical area. -&pply chain and c&stomer relations ollowed 'y merchandising* acilities management and
)endor de)elopment are areas which ha)e signiicant gaps and proacti)e training is a ,eyimperati)e or o)ercoming these.
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Sources
AT "earny
?orrester Research 2006
"P;4?I!!I Report http==www.indiain'&siness.nic.in=