key drivers of growth in indian retail
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Key Drivers Of Growth In Indian RetailTRANSCRIPT
Key Drivers of Growth in Indian Retail
Presented By
Pinaki Basu200940
Introduction An Overview of Indian Retail Industry
• Size of Indian Retail Industry : $ 390 Billion or ₹ 18,10,000 crore
• Compounded Annual Growth Rate : 11.74%
Source: F & R Research
Value in ₹ BillionYear Organised Unorganised Total 2004 280 9020 9300 2005 375 9925 10300 2006 550 11450 12000 2007 783 12517 13300 2008 1120 13680 14800 2009 1600 14800 16400 2010 2300 15800 18100
CAGR 2004-2010 (%) 11.74
2004 2005 2006 2007 2008 2009 20100
5000
10000
15000
20000
280
375
550
783
1120 16
00 2300
9020 99
25 1145
0
1251
7
1368
0
1480
0
1580
0
9,30
0
10,3
00 12,0
00 13,3
00 14,8
00 16,4
00 18,1
00
Growth of Indian Retail - Total
Year
₹ B
illion
Organized
Unorga-nized
Total
Source: Source: F & R Research
2004 2005 2006 2007 2008 2009 2010
Organised 280 375 550 783 1120 1600 2300
250
750
1250
1750
2250
Organised Retail Growth in India
Year
₹ i
n B
illi
on
CAGR : 45.74%Source: Source: F & R Research
Key Drivers
Consumer or Demand-Side Drivers
• Personal Consumption as a percentage of GDP
• Only second to Vietnam in Asia• Fourth in the world• China (~35%), Singapore (~45%), Hong Kong
(~50%), South Korea (~46%) in 2007
Consumer or Demand-Side Drivers
• Population as a Growth Driver
20012003
20052007
20092011
20132015
20172019
1,000,0001,050,0001,100,0001,150,0001,200,0001,250,0001,300,0001,350,000
Projected Total Population
Year
Proj
ecte
d Po
pula
tion
Source: censusindia.gov.in
Consumer or Demand-Side Drivers
• Population as a Growth Driver– Adoption of Nuclear Family Culture
• Average Household Size in 1991 : 5.57• Average Household Size in 2001 : 5.36• Average Household Size in 2011 : 5.02
(Expected)
Source: censusindia.gov.in
Consumer or Demand-Side Drivers
• Population as a Growth Driver– Baby Boomer Effect
• Steep Growth in Earning Population (15-60 yrs)• 335 million people (54 % of total population) in 1975• 593 million people (58.3% of total population) in 2000• Growth in Earning Population over 25 yrs: 77% • ( CAGR of 2.3%)• Growth in Indian Population over 25 yrs: 64%• (CAGR of 2%)• 782 million people (62.8% of total population) in 2015 (Expected)
Source: censusindia.gov.in
Consumer or Demand-Side Drivers
• Population as a Growth Driver– Growing Working Women
Population • Working women can spend 1.3 times more than
housewives• Working women in 1991: 22%• Working women in 2001: 26%
Source: censusindia.gov.in
Consumer or Demand-Side Drivers
• Population as a Growth Driver– Growth in Urban Population
• Urbanization has increased at a rate of 2.7 percent from 1991-2001
• Urban population 2000 : 28.1 crore• Expected to grow at 2.4%
Source: censusindia.gov.in
Consumer or Demand-Side Drivers
• Plastic Money Becoming a Greater Pie of Credit– India is the second fastest growing Financial
Cards market in the Asia - Pacific region.– Growth at 30-35% p.a. from 27mn cards in 2007. – Credit Card Sales: 1.2% in 2008– Credit Card Sales: 1.4% in 2010
(Expected)
Source: Euro Monitor (www.euromonitor.com)
Consumer or Demand-Side Drivers
• Internet Driving Awareness and Online Purchases
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
010,000,00020,000,00030,000,00040,000,00050,000,00060,000,00070,000,00080,000,00090,000,000
Internet Users in India
No.
Of P
eopl
e
Source: Internet World Stats, Angel Research
Retailer or Supply-Side Drivers
• Increased Investments in Retail
Source: Ernst & Young (www.ey.com)
Organised Retail will possibly touch ₹ 2300 bn in 2010
Allow organised players in Retail to expand
Funds through Private Equity, IPO route and infusion of funds through warrants
Retailer or Supply-Side Drivers
• Increased Investments in Retail
Source: Ernst & Young (www.ey.com)
At an average investment of ₹ 3,000 per sq. ft. by Retailers, these investments would translate to 750 mn sq. ft. of Organised Retail space by FY2010
All key Retailers in India have chalked out substantial investments over next 3-4 years to fuel their expansion plans.
Retailer or Supply-Side Drivers
• Increased Investments in Retail
Source: Ernst & Young (www.ey.com)
Pantaloon is expected to invest around ₹ 6,000 cr over the next four years to fuel its three-fold expansion plan and take its total Retail space to 26mn sq. ft. by FY2012.
Vishal Retail is expected to invest ₹ 3,000cr to fuel its ambitious five-fold expansion plan to take its total Retail space to 10mn sq. ft. by FY2011.
Retailer or Supply-Side Drivers
• Tier- II & III cities to fuel future growth of Modern Retail– The Top-784 cities in India constitute about 26%
of population– They contribute 35% to Total Retail Sales.– Tier- II and III cities account for 18% of the overall
population– They contribute 22% to the Total Retail sales.
Retailer or Supply-Side Drivers
• Shortened Supply Chain benefits consumers – A Traditional supply chain in India
comprises 5-6 levels – Two major disadvantages:
• Cost of the product increases• Increase in shrinkage
Traditional v/s Modern supply chain
Company / Manufacturer Distributor
Buying Agent
Multi-Brand Outlets
Franchisees
Consumers
Company owned outlets / large
organized retailers
Back End
Front End
5% Margins for Distributors5%
Commission for Buying Agents
35% Margins for Multi-Brand Outlet Retailers
30% Margins for Franchisees
30-32% Margins for company owned outlets/ large retailers
Traditional v/s Modern supply chain
Company / Manufacturer
ConsumersRetailers
Back End
Front End
38-40% Margins for Retailers
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