global retail conundrum – the consulting club iim ranchi

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Global Retail Conundrum – The Consulting Club IIM Ranchi

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Page 1: Global Retail Conundrum – The Consulting Club IIM Ranchi

Global Retail

Conundrum – The Consulting ClubIIM Ranchi

Page 2: Global Retail Conundrum – The Consulting Club IIM Ranchi

Agenda

• Introduction

• What is Retail?

• Global Retail: Leading Players

• Global Retail: Retail Statistics

• Global Retail: Issues and Trends

• Retail in India: Changing Landscape

• Online Retail in India

• Challenges Ahead

Page 3: Global Retail Conundrum – The Consulting Club IIM Ranchi

What is Retail?

Page 4: Global Retail Conundrum – The Consulting Club IIM Ranchi

Defining Retail Industry

Global Retail

• Industry comprises companies engaged in the sale of finished goods• Defined on the basis of revenues generated by companies operating in this

sector• Classification on the basis of the kind of products sold

• The food retail subsector involves companies engaged in the sale of food and beverages for off-premise consumption through various channels

• Food products sold in this subsector include meat and poultry, bakery, grocery, organic foods, and prepared foods

• Non-food retailing involves the sale of products other than food and beverages through various retail channels

• Non-food retailing broadly includes following:– Apparel and footwear– Electronics and

computers– Pharmaceuticals

• The restaurants and food service subsector involves sale of all food and drink (soft and alcoholic) in or through restaurants and cafes’, quick service restaurants, catering and drinking places

Food Retail Non-Food Retail Restaurants & Food Services

Page 5: Global Retail Conundrum – The Consulting Club IIM Ranchi

Global Retail Industry on the Recovery Path

Global Retail Industry Size

Sales decline during recession

Source: GCC Retail Industry, Alpen Capital, November 1, 2011

Page 6: Global Retail Conundrum – The Consulting Club IIM Ranchi

Retail: Some Quick Facts

Sales of Top 250 retailers: US$3.94 Trillion

Average Size of Top 250 Retailers: US$15.76 Billion

Composite y-o-y Sales Growth: 5.3%

Composite Net Profit Margin: 3.8%

Composite Return on Assets: 5.8%

Composite Asset Turnover: 1.5 times

Top 250 Retailers, 2010

Source: Annual Reports, Deloitte

Page 7: Global Retail Conundrum – The Consulting Club IIM Ranchi

Global Retail: Leading Players# Retailers Country Sales (US$

Billion)Dominant Operational Format

# of Countries of Operation

CAGR (‘05-10)

1 Wal-Mart US 418.95 HM, SC, SS 16 6.0%

2 Carrefour France 119.64 HM, SC, SS 33 3.9%

3 Tesco UK 92.17 HM, SC, SS 13 9.3%

4 Metro Germany 88.93 Cash & Carry 33 3.8%

5 Kroger US 82.19 Supermarket 1 6.3%

6 Schwarz Germany 79.12 Discount Store 26 9.8%

7 Costco US 76.26 Cash & Carry 9 8.0%

8 Home Depot US 67.99 Home Improvement

5 -2.5%

9 Walgreen US 67.42 Pharmacy 2 9.8%

10 Aldi Germany 67.11 Discount Store 18 5.9%

Source: Annual Reports, Deloitte

Notes: HM = Hyper market; SC = Super Center; SS = Super Store

Top 10* Sales: US$1.16 BillionTop 250 Sales: US$3.94 BillionConcentration of Top 10: 29.4%

Page 8: Global Retail Conundrum – The Consulting Club IIM Ranchi

Food Retail: Carrefour

Source: Annual Reports

• Carrefour SA, is a French company primarily engaged in retail distribution.

• It operates through various retail formats, including cash-and-carry outlets,

convenience stores, discount stores, hypermarkets and supermarkets. It

also offers e-commerce services.

• The company has more than 15,000 stores in35 countries worldwide. Its

stores are either company-operated or franchised.

• It employs approximately 476,000 people globally.

• The company’s auditor is KPMG

Page 9: Global Retail Conundrum – The Consulting Club IIM Ranchi

Food Retail : Tesco

Source: Annual Reports

• Tesco Plc is an international retailer based in the UK. It entered the US

market in 2008.

• The company operates through two business segments – Financial services

(retail banking and insurance services) and Retailing.

• The company has 4,331 stores worldwide, employing more than 470,000

people across 14 countries.

• The company’s auditor is PriceWaterhouseCoopers

Page 10: Global Retail Conundrum – The Consulting Club IIM Ranchi

Food Retail : Metro

Source: Annual Reports

• Metro AG is a German trade and retail company. It acts as a holding

company for the Metro Group, which is organized into four independent

sales divisions —

Galeria Kaufhof (department store), Media Market and Saturn (consumer

electronics company), Metro Cash & Carry, and Real (hypermarket

operator).

• The company is active in 2,127 locations in 33 countries, employing 251,650

people.

• The company’s auditor is KPMG

Page 11: Global Retail Conundrum – The Consulting Club IIM Ranchi

Non-Food Retail : Wal-Mart

Source: Annual Reports

• Wal-Mart Stores, Inc. operates retail stores in various formats around the

globe. It provides an assortment of merchandise and services to its

customers at low prices.

• Wal-Mart’s operations comprise ofthree business segments — Wal-Mart

US, Sam's Club and Wal-Mart International, with Wal-Mart US being the

largest of the three.

• The company has more than 8,400 stores in 15 countries, serving more

than 200 million customers each week.

• It employs approximately 2,100,000 people.

• The company’s auditor is Ernst & Young

Page 12: Global Retail Conundrum – The Consulting Club IIM Ranchi

Non-Food Retail : CVS Caremark Corporation

Source: Annual Reports

• CVS Caremark Corporation is one of the largest providers of prescriptions

and related healthcare services in the US through its 7,000 stores and its

CVS.com retail website.

• The company comprises of two business segments — Retail Segment and

Prescription Benefit Management.

• The average number of prescriptions managed orfilled by the company in a

year is more than 1 billion. It employs approximately 211,000 people.

• CVS Caremark Corporation drives value for its customers by managing their

pharmaceutical costs as well as improving healthcare results through its

stores.

• The company’s auditor is Ernst & Young

Page 13: Global Retail Conundrum – The Consulting Club IIM Ranchi

Non-Food Retail : Costco Wholesale Corporation

Source: Annual Reports

• Costco Wholesale Corporation operates an international chain of

membership warehouses, under the name of “Costco Wholesale”.

• The warehouses are designed to help small to mid-size businesses reduce

costs in purchasing for resale or for everyday use.

• Some of the product categories that the company offers include groceries,

candy, appliances, television and media, automotive supplies, tyres, and

toys.

• Costco Wholesale Corporation is open only to members and offers three

types of memberships — Business, Gold Star (individual) and Executive.

• It employs approximately 79,000 people.

• The company’s auditor is KPMG

Page 14: Global Retail Conundrum – The Consulting Club IIM Ranchi

Restaurant & Food Services : McDonald’s

Source: Annual Reports

• McDonald’s Corporation franchises and operates more than 30,000

McDonald’s restaurants, serving nearly 50 million people in more than 100

countries worldwide.

• Independently-owned and operated distribution centers, approved by the

company, distribute products and supplies to most McDonald’s restaurants.

• In 2009, of its 32,478 restaurants in 117 countries, 26,216 were operated by

franchisees and 6,262 by the company.

• It employs approximately 385,000 people.

• The company’s auditor is Ernst & Young.

Page 15: Global Retail Conundrum – The Consulting Club IIM Ranchi

Restaurant & Food Services : Compass Group Plc

Source: Annual Reports

• Compass Group Plc is a UK food service provider, which operates in over 50

countries worldwide.

• The company provides services to a wide range of consumers in hospitals,

schools, sporting or cultural events, workplaces and remote environments.

• Its well-known brands include “Catering to You” and “Outtakes.”

• It employs approximately 386,168 people.

• The company’s auditor is Deloitte & Touch

Page 16: Global Retail Conundrum – The Consulting Club IIM Ranchi

Restaurant & Food Services : Yum! Brands

Source: Annual Reports

• Yum! Brands, Inc. (Yum) is one of the largest restaurant companies, with

37,000 restaurants in more than 110 countries and approximately 1.4

million associates.

• The company develops, operates, franchises and licenses a worldwide

system of restaurants that prepare, package and sell a range of food items.

• The well-known restaurant brands of the company include KFC, Pizza Hut,

Taco Bell and Long John Silver’s.

• It employs approximately 49,000 people.

• The company’s auditor is KPMG

Page 17: Global Retail Conundrum – The Consulting Club IIM Ranchi

Global Retail: Share of Top 250 sales, by Country

Source: Annual Reports, Deloitte

1.20% 2.60% 6.50%

8.80%

11.60%

5.40%

1.80%9.50%

41.70%

11.10% Africa/MECanadaUKJapanOther EUOther APACLatin AmericaFranceUSGermany

Page 18: Global Retail Conundrum – The Consulting Club IIM Ranchi

Global Retail: Sales by Product, 2010

Source: Annual Reports, Deloitte

8.00%

66.60%

15.60%

9.80%

FasionFMCGHardlines & LeisureDiversified

Page 19: Global Retail Conundrum – The Consulting Club IIM Ranchi

Retailers: Value Chain Analysis

Retailers

Procurement through third party vendors

Fully integrated retailer*

*A fully-integrated retailer is one which operates by itself, at each level of the value chain

Page 20: Global Retail Conundrum – The Consulting Club IIM Ranchi

Value Chain Analysis –Retailers (Food / Non-food) Procuring from Third-Party Vendors

Procurement of products

Transportation and Distribution

Display, Sales & Marketing

Feedback

Source: KPMG

Manufacturers Distributors Retailers

Feedback

Display, Sales & Marketing

Page 21: Global Retail Conundrum – The Consulting Club IIM Ranchi

Value Chain Analysis – Fully Integrated Retailers

Transportation and Distribution

Display, Sales & Marketing Feedback

Processing and Packaging

Farming and procurement

Source: KPMG

Page 22: Global Retail Conundrum – The Consulting Club IIM Ranchi

Trends in Global Retail Industry

Source: Deloitte

Trend Description

• Globalization is not a new theme any more• Retailers continue to look to enter new markets

in Asia, Africa and South America

• Retailers have learnt to deal with barriers in emerging markets. They are customizing their business model as well as product offerings to meet local needs & preferences.

• Retailers will not only be looking for growth in emerging markets; they will also look to innovate in multi-channel strategies, mobile and data analytics to maintain or grow their market shares in developed markets.

Growth in Emerging Markets

Page 23: Global Retail Conundrum – The Consulting Club IIM Ranchi

Trends in Global Retail Industry

Source: Deloitte

N America

Africa

Mid-East

Cent America

Oceania

Southeast Asia

E Asia

E Europe

Cent Europe

W Europe

0 2 4 6 8 10 12 14 16 18 20

1

1

2

6

5

7

10

3

2

3

1

3

8

5

2

3

2

1

3

2

4

9

1

1

1

Franchising/Licensing Organic Growth Acquisition JV

In 2010, 40 retailers began operations in new country, with a combined total of 88 new market entries

Market expansion by Top 250 retailers, 2010

Page 24: Global Retail Conundrum – The Consulting Club IIM Ranchi

Trends in Global Retail Industry

Source: Deloitte

Trend Description

• Retailers are entering new markets through various channels

• Retailers to focus on multi-channel strategy

• As consumers become more tech-savvy, retailers will focus on seam less integration across retail channels

• They will have their presence in internet based-as well as physical retailing

• Some retailers are using online medium to test grounds in new geographies before physical expansion

Multi-Channel Retailing

Page 25: Global Retail Conundrum – The Consulting Club IIM Ranchi

Other Global Trends/Issues

• Mergers and acquisitions picking up

• Growth of private labels

• Emphasis on cost management

• Shift in consumer demand

Organic Foods, Eat at Home

• Retailers pushing pressure on suppliers for discounts

• Shrinkage and loss prevention

• Customer-centric merchandising practices

• Sustainability and Environment

Page 26: Global Retail Conundrum – The Consulting Club IIM Ranchi

Retail in India

Page 27: Global Retail Conundrum – The Consulting Club IIM Ranchi

Bright Future Prospects

• One of the top 5 retail markets of the world

• Accounts for 22 % of India’s GDP

• Market estimated to reach US$650 billion by 2015

• Organized retail penetration to cross 10% in next 5 years

Source: Indian retail: Short-term blips but long term prospects bright, CRISIL Research, May 2012

Overall retail growth in India Organized retail growth in India

Page 28: Global Retail Conundrum – The Consulting Club IIM Ranchi

Changing Landscape of Retail in India: Post FDI

Page 29: Global Retail Conundrum – The Consulting Club IIM Ranchi

Changing Landscape of Retail in India: Post FDI

Source: Economic Times

At least 10 states in India are opposing FDI in Retail

Page 30: Global Retail Conundrum – The Consulting Club IIM Ranchi

Saga of Online Retail in India

Page 31: Global Retail Conundrum – The Consulting Club IIM Ranchi

Both external and internal drivers are likely to propel online retail growth in the coming years

• Rising per capita disposable income• Growing employment and opportunities• Increasing percentage of households with at

least one computer• Growth in broadband penetration

Improving incomes and greater internet access will likely benefit the online retail sector

• Consumers’ greater comfort to purchase online• Improved online presence of retail categories• Broader web shopping capabilities (mobile and

tablet devices)• Innovative new shopping models (increased

personalization, greater integration of social media tools in the online shopping experience, improved back-end logistics, flash sites, subscription models, shopping walls etc.)

• Online loyalty programs • Aggressive promotional offers from online

retailers (daily deal sites)

Technology, innovation, and increasing comfort to shop online will drive online retail spending

Ext

ern

al D

rive

rs

Inte

rnal

Dri

ver

s

Page 32: Global Retail Conundrum – The Consulting Club IIM Ranchi

India

China

US

UK

Brazil

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

50

44

19

14

36

26

33

16

20

23

2

1

19

30

8

5

6

19

18

5

6

2

17

6

19

11

14

10

12

10

Social Digital Shoppers Digital Shopaholics Rational Online Shoppers Value Seekers Occasional Online Shoppers Techno-Shy Shoppers

Source: Digital Shopper Relevancy, Capgemini, 2012

Indians are already comfortable with Digital Retail

Social Digital Shoppers: Heavy users of social media who want to share opinions and experiences through social media Digital Shopaholics: Early adopters and experimenters who actively use smart phone apps and in-store technologyRational Online Shoppers: Internet is preferred mode of shopping but little interest in mobile apps and social mediaValue Seekers: Price sensitive customers who barely care about digital shopping. They shop online to get best dealsOccasional Online Shoppers: Infrequent shoppers who generally use digital channels for comparing and tracking deliveryTechno-Shy Shoppers: Shoppers who do not feel confident while using digital technology in any step of shopping

• Only 11% of the surveyed Indian population falls into the Techno-Shy Category, implying a strong inclination toward digital shopping

• Additional 11% Indian respondents fall under Occasional Shopper and Value Seeker category. It shows great confidence for digital innovation and sends a strong signal to retailers

Percentage of digital shopper segments by country, 2012 (Capgemini)

Page 33: Global Retail Conundrum – The Consulting Club IIM Ranchi

Mobiles opening up new avenues for consumer interaction in Retail Industry

Self Checkout &

Scanning

M-Commerce

Loyalty Points

Promotions

Coupons

In-store Navigation

Payments

Shopping Lists Scanning & Self

Checkout

M-Commerce

Loyalty Points

PromotionsCouponsIn-store Navigation

Payments

Shopping Lists

Source: Getting your retail environment ready for mobile, GS1 MobileCom, 2010

Page 34: Global Retail Conundrum – The Consulting Club IIM Ranchi

Challenges for Retail in India

• Shortage of Skilled Manpower There are very few courses specific to the retail sector and

graduates/post graduates from other streams are recruited.

• Lack of Industry Status Due to the absence of ‘industry status’, organized retail in India

faces difficulties in procurement of organized financing and fiscal incentives.

• Real Estate In most cities, it is difficult to find suitable properties in central

locations for retail, primarily due to fragmented private holdings, infrequent auctioning of large government owned vacant lands and litigation disputes between owners

Page 35: Global Retail Conundrum – The Consulting Club IIM Ranchi

THANK YOU