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Retail In India
The document provides an overview of the retail industry in India. Some key points: - India has a booming $300 billion retail market that is growing at 25-30% annually. - Organized retail currently accounts for 5% of the market but is predicted to reach 15-20% by 2010. - Several major retail companies like Tata, RPG Group, and Pantaloon Retail are expanding rapidly in India. - Factors driving growth include a rising middle class, increased spending, urbanization, and favorable demographics with many young consumers.
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Introduction to the overview of the retail sector in India by R.S Khurana.
India's retail market projected at US$ 300 billion with 5.5 outlets per 1000 people, 25-30% growth in loans, and a shift to 15-20% organized retail share by 2010.
India positioned as third attractive market for apparel; expected growth rates of 12-15% annually in this sector.
Profiles of major Indian retailers, TATA and RPG Group, highlighting their growth strategies and product offerings.
Pantaloon Retail's inception, expansion strategies, and competitive advantage through in-house labels and authority given to managers.
Shoppers Stop's growth, logistics innovations, and entry into loyalty programs; focus on consumer spending and retail market dynamics.
Identifies challenges such as high rentals and liquidity pressures; discusses retailer strategies and private labeling.
Overview of current retail FDI regulations; collaboration with international brands and advantages of FDI in increasing competition.
Predictions for continued retail expansion, consumer engagement, and transformation in Indian retail dynamics.R.S Khurana summarizes the optimistic future of Indian retail and addresses the evolving consumer landscape.
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Retail In India
- 1. BY R.SKhurana MBA Ci &Cw SEM-4 OVERVIEW OF RETAIL IN INDIA
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- 4. The Number GameA booming US$ 300 billion retail market in India 5.5 retail outlets per 1000 population, highest in the world 25-30% annual growth in retail loans and credit cards The organized retail sector currently accounts for around 5 per cent of the Indian retail market. Organized Retail is predicted to capture 15 – 20% market share by 2010. Over 100 malls of over 30 million sq feet of new shopping centre space are projected to open in India between 2009 and end-2010.
- 5. Contd.. 720 million Indians to join consuming age by 2010 55% of the Indian population will be under 20 years of age by 2015 32% rise in urbanization by 2008 10% annual growth in Retail market since 2000 7% of the population is engaged in retailing Largest retail outlets in the world.
- 6. Contd…. Compound annualgrowth rate (CAGR) of 10 per cent. Also, organized retail, which is pegged at around US$ 8.14 billion, is expected to grow at a CAGR of 40 per cent to touch US$ 107 billion by 2013.
- 7. Contd…. India hasemerged the third most attractive market destination for apparel retailers, according to a study by global management consulting firm AT Kearney. It further says that in India, apparel is the second largest retail category and is expected to grow by 12-15 per cent per year. Apparel, along with food and grocery, will lead the organized retailing in India.
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- 12. TATA Started withLittlewoods retail stores in 1998 . Company renamed Trent limited Came with Westside – value for money In house merchandising Took retail store on lease Boutique store layout
- 13. Contd… Every departmentheaded by manager Reports to head of merchandising Under department manager are assistant buyers & merchandisers Along with in house brands are designer labels – Krishna Mehta ,Wendell Roderick Café Taj
- 14. Contd….. Trent launchedstarindia bazaar in 2004 Trent bought 26 % stake in landmark Titan – 25 % market share Manufactured watches to cater every segment Fast track, edge, raga, sonata, regalia, dash , bhandan 1998- launched sonata For price & quality conscious
- 15. Contd.. Titan –edge slimmest watch in the world Nebula – premium watch range, with Rohit Bal collection Manufacturing at Bangalore- 50000 sq feet Entered into jewelry segment with the brand name tanishq in 1995 Extensive distribution network 600 service centers
- 16. Contd… Franchisee managementprogramme Customer loyalty programme- Titan signet Point scheme followed in Signet 2006 among top6 manufacturer in the world
- 17. RPG group RPGGroup – power, tires, retail, transmission, entertainment, technology. Food world chain of grocery stores in 99 Growth rate 0f 30 % Western & Sothern India presence Stocks 5000 items hub & spoke model centralized ware house shorten the distribution channel 2002 – started sealing in house brands 10 -15 % lower no question asked replacement programme
- 18. Contd… 1997-Music world– videos, audios , accessories Music world destination stores -4000 square feet Music world express outlets- 300 to 600 sq feet located in large departmental store Music world unplugged outlets- gondola placed in high traffic outlets . Caters to impulse customer with just released titles
- 19. Contd… Focused onambience Health & glow- join venture b/w RPG & dairy farm international. Catering to health & beauty requirements Cosmetic & medicinal services under 1 roof
- 20. Pantaloon Retail IndiaLimited Pantaloons Big bazaar Food bazaar gold bazaar Central mall Incorporated in 1987- menz wear private ltd First outlet in 93 Products sold under the name of Bare, pantaloon & john miller
- 21. Contd… Wide rangeof choosing options Manager given authority for usage of shelf space In house labels 25- 30 % cheaper than others Central ware house in tarapur Maharashtra- 25000 square feet
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- 23. Overview In1991 the Rahejas handed over Shoppers Stop to B.S. Nagesh (M.D. Shoppers Stop) Ravi and Neil Raheja are official investors B.S. Nagesh owns 0.8% stake of Shoppers Stop.
- 24. Fashion &lifestyle store for the family Have never crossed 1:1 debt equity ratio. Rahejas are constantly investing in the project. Shoppers Stop has 51 stores all over India. 51 crosswords stores and 3 Hyper city marts.
- 25. Contd.. One ofthe First retailer to in India to realize the importance of SCM in the operations of a retail business. Developed process manuals for each part of the logistics chain. Modules included – vendor management purchase order management stock receiving system purchase verification & inventory build up Generation & fixing of price & store tags ERP with arthur planning system & oracle financials
- 26. Contd.. First tolaunch Indians retail loyalty programme “The first citizen” .
- 27. Shoppers Stop –A growing phenomenon YEAR REVENUE In FY 03-04 Rs 3,448 million In FY 04-05 Rs 4,411 million In FY 05-06 (42%) Rs 6,228 million In FY 05-07 (30%) Rs 8,123 million In FY 07-08 (32%) Rs 10,794million
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- 30. Reasons Behind RetailGrowth: Consumer spending has risen sharply at 75% as the youth population (more than 33 percent of the country is below the age of 15) has seen a significant increase in its disposable income. Retail industry in India is expected to rise 25% yearly being driven by strong income growth, changing lifestyles, and favorable demographic patterns. India‘s retail still unexploited and under penetrated. Easy availability of credit, and large scale real estate developments were fuelling the growth of India‘s approximately USD 25 billion organized retail market. Ever-expanding middle- and upper-class consumer base, there will also be opportunities in India‘s tier II and tier III cities.
- 31. The greater availabilityof personal credit The terms commonly used include ―billion-plus‖ population, ―a middle class consisting of hundreds of millions‖, ―rapidly-growing income and consumption‖. India has had one of the consistently highest GDP growth rates of the last few years. Newer opportunities such as airport real estate are emerging with the upgrade of the major and secondary airports, as well as a change in government policy allowing expansion of retail activity at airports.
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- 33. Major expansion plansin retail sector: Marks & Spencer Reliance India is planning to open 35 more stores over the next five years,. Carrefour SA, Europe‘s largest retailer, may start wholesale operations in India by 2010. Carrefour exports goods worth US$ 170 million from India to Europe, UAE, Indonesia, Europe, Thailand, Singapore and Malaysia. Mahindra Retail, a part of the US$ 6.7-billion Mahindra Group, plans to invest US$ 19.8 million by 2010 to step up its specialty retail concept 'Mom and Me'. .
- 34. Expansions.. (Contd) PantaloonRetail India (PRIL) plans to invest more than US$ 103.3 million to expand its seamless mall Central and the value fashion format Brand Factory over the next two years. Jewellery manufacturer and retailer, Gitanjali Group and MMTC are jointly setting up a chain of exclusive retail outlets called Shuddi–Sampurna Vishwas. The joint venture, which plans to open around 60 stores across India by end of this year, will retail hallmarked gold and diamond jewellery.
- 35. Expansions.. (Contd) BhartiRetail has introduced eight Wal-Mart private labels—including two of its largest, ‗Great Value‘ and ‗George‘—in its supermarket chain Easy day. Italian sportswear brand Lotto will launch two new footwear brands Sabots and Calcetto in the country in the next few weeks. The plan is to have at least 50 exclusive outlets by March 2010. Steel players such as JSW Steel and Essar Steel are increasing their focus on opening up more retail outlets pan India.. Similarly, Essar Steel also has such retail outlets called Essar hyper marts. With a total 150 such outlets currently, this segment contributes to about 20-25 per cent to the Essar‘s total revenue.
- 36. Contd… EBONY Homes,the home furniture retail arm of the US$ 3 billion DS Constructions, has plans to invest US$ 25.1 billion to set up a chain of 20-25 furniture stores styled Ebony Gautier across the country by March 2012. Gujarat Co-operative Milk Marketing Federation (GCMMF), which owns and markets Asia's largest dairy brand, Amul, plans to add 6,000 Amul retail parlors across the country in FY 2009. The brands planning an India entry include: The Pizza Company and Spicchio Pizza Coffee Club from Australia Japanese brand Lolita Fashion Revive Juice Bars from the UK Mrs. Fields Cookies Jamba Juice from the US French fashion brand Jules. Retail brands such as United Colors of Benetton, Tommy Hilfiger and Puma are opening factory outlets to sell excess stock and woo the price-conscious buyers.
- 37. Organized Retailing: AdvantageTo Indian Economy ..Is It?? Lets see.. Organized retail will result in a complete revamp of the agricultural supply chain in the country. Boost to Exports : Some of the international retailers that have plans for India in the future have already developed suppliers in the country and have started exporting from India. For example, Wal-Mart exported an equivalent of US$ 600 million, and IKEA about 380 million Euros from India in 2006-07. Organized retailing will work with farmers to: (i) improve yields by enabling them to obtain quality input supplies (ii) adopt superior farm technology and practices (iii) access timely credit at reasonable rates.
- 38. Contd… Small-scale manufacturerswill be the major beneficiaries of private labels. Organized retail‘s direct purchase from farmers and other suppliers compresses the supply chain and eliminates a large number of intermediaries and hence can offer consumers a lower price than the traditional channels. Unorganized retailers normally do not pay taxes and most of them are not even registered for sales tax, VAT, or income tax. Organized retailers, by contrast, are corporate entities and hence file tax returns regularly.
- 39. What will bethe impact on the traditional mom and pop store…? The answer could be a co-existence. The major advantage for the smaller players is the size, complexity and diversity of our Indian Markets. It is too early to predict the erosion of the mom and pop stores in India. This is also proved by countries where Wal-Mart the world‘s biggest retailer operates. The smaller stores have a peaceful coexistence in these countries with the number one company in the fortune 500 list.
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- 42. Rentals – skyrocketingto all time high:
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- 44. Contd.. Besides theweak economy and the feeble consumer sentiments, the disappointing retail growth is also attributed to Poor supply chain management and weak support infrastructure, absence of a mature 3PL player providing high service levels at competitive prices.
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- 48. Entering intoalliances and leveraging expertise
- 49. Some Of TheStrategies Adopted By Retailers:
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- 51. Private labeling :Indian Context
- 52. Innovative Concepts ….In Indian Retail
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- 56. Current Indian FDIRegime FDI not permitted in retail trade sector, except in: Private labels Hi-Tech items / items requiring specialized after sales service Medical and diagnostic items Items sourced from the Indian small sector (manufactured with technology provided by the foreign collaborator) For 2 year test marketing (simultaneous commencement of investment in manufacturing facility required) FDI in Retail not permitted FDI in Indian retailing
- 57. Metro Group ofGermany Cash-and-carry wholesale trading Proposal faced strong opposition Entities established prior to 1997 Allowed to continue with their existing foreign equity components. No FDI restrictions in the retail sector pre-1997 Food world 51:49 JV between RPG and Dairy Farm International, Leading food retailer in India now Mc Donalds Current FDI FDI in Indian retailing
- 58. Franchise International companygives name and technology to local partner. Gets royalty in return In case master franchise is appointed for region or country, he has right to appoint local franchisees Nike, Pizza Hut, Tommy Hilfiger, Marks and Spencer, Mango Manufacturing Company sets up Indian arm for production How they are present International retailers in India: Strategies
- 59. Distribution International companysets up local distribution office Supply products to Indian retailers to sell Also set up franchised outlets for brand Swarovski, Hugo Boss Wholesale trading Cash and Carry operations 100% FDI permitted Metro Cash n Carry How they are present International retailers in India: Strategies
- 60. Improve competition Developthe market Greater level of exports due to increased sourcing by major players Sourcing by Wal-Mart from China improved multifold after FDI permitted in China Similar increase in sourcing observed for Metro in India Provides access to global markets for Indian producers Benefits of FDI Why FDI?
- 61. Investment in technologyCold storage chains solve the perennial problem of wastage Greater investment in the food processing sector technology Better operations in production cycle and distribution Better lifestyle Greater level of wages paid by international players usually More product variety Newer product categories Economies of scale to help lower consumer price Increased purchasing capacity of consumers Benefits of FDI Why FDI?
- 62. Speaking facts.. Foreigndirect investment (FDI) inflows as on July 2009, in single-brand retail trading, stood at approx. US$ 46.60 million. (Department of Industrial Policy and Promotion DIPP.) This sector is expected to invest around US$ 503.2 million in retail technology service solutions in the current financial year. This could go further up to US$ 1.26 billion in the next four to five years, at a CAGR of 40 per cent.
- 63. The Way AheadIndia is amongst the least saturated of all major global markets in terms of penetration of modern retailing formats Many strong regional and national players emerging across formats and product categories Most of these players are now gearing up to expand rapidly after having gone through their respective learning curves Real Estate Developers are also moving fast through the learning curve to provide qualitative environment for the consumers The Shopping Mall formats are fast evolving Partnering among Brands, retailers, franchisees, investors and malls Improved Infrastructure
- 64. Conclusion The demandingassertive Indian consumer is now sowing the seeds for an exciting retail transformation that has already started bringing in larger interest from International Brands / formats. With the advent of these players, the race is on to please the Indian consumer and its time for the Indian Consumer to sit back and enjoy the hospitality of being treated like a King. The future looks extremely bright indeed, with lots of possibilities ahead -- big possibilities. Like the song says, ''We've just begun.''”
- 65. THANK YOU By R.S Khurana MBA Marketing & Sales Amity University
Editor's Notes
- #34 according to Mark Ashman, CEO of the company. The 51:49 joint venture between UK‘s Marks and Spencer and Reliance Retail Ltd already has 15 stores in India
- #36 JSW Steel currently has 50 such steel retail outlets called JSW Shoppe and is targeting to increase it to 200 by March 2010
- #38 A recent study by CRISIL has estimated a current annual total loss of about Rs. 1,000 billion in the agricultural supply chain, 57 per cent of which is due to avoidable wastage and the rest due to avoidable costs of storage and commissions ( CRISIL Research, June 2007). Organized retailers have already started procuring fruit and vegetables from farmers directly bypassing the various intermediaries who add more costs than value to the food chain. They are investing heavily on logistics in the form of centralized warehousing and distribution centres, transport and cold storage, either directly or through engaging third party logistics companies.
- #54 According to India Retail Report 2009 by Images, "India's rural markets Offer a sea of opportunity for the retail sector. The urban-retail split in consumer spending stands at 9:11, with rural India accounting for 55 percent of private retail consumption." As per IBEF, rural India accounted for almost half of the Indian retail market, which was worth about USD 300 billion. With most of the retail markets getting saturated in Tier I and Tier II cities, the next phase of growth is likely to be seen in the rural markets. Major domestic retailers have started setting up farm linkages. Few Examples include, DCM‘s Hariyali Kisan Bazaars, Pantaloon Godrej‘s joint venture Aadhars, ITC‘s Choupal Sagars, Tata‘s Kisan Sansars and Reliance Fresh are some of the established rural retail chains.