Documente Academic
Documente Profesional
Documente Cultură
Submitted by:
Of MBA 2017-19
Subject:
Business Environment
Submitted to:
Dr. Tanmoy De
Submitted on:
14.09.2017
OVERVIEW
The overall retail market in India is estimated to be ~630 Billion USD in 2015. The
organized market is estimated to be 9-10% of the total market i.e. ~ 60 Billion USD.
The sector has grown at ~12 % over the last decade and going forward we expect
USD by 2020, of which organized retail could be potentially 140-160 Billion USD.
The overall growth would be driven by significant demographic shifts: 70% increase in
income levels, 100 Mn youth entering the workforce, increasing nuclearization & 35%
In the last few years, retail has been one of the top performing sectors globally from a
shareholder returns perspective. However, in India, retail lags other sectors on key
metrics of profitability and return on capital. The average profitability in retail is lower
by 300-500 bps and return on capital employed by 500-1000 bps vs other sectors. The
same comparison also indicates Indian retailers deliver lower returns when compared
• Value conscious, digitally connected consumer, who demands lower prices and
• Supply side economics: Lower margins relative to global peers driven by lower
and ease of doing business constrained by regulation, both at the Centre and
The one big trend that would shape the industry is the increasing expectations for
• The drivers of buying online would not be just price but convenience, availability
• Pure-play online players would continue to grow and strengthen their business
models and capabilities. Retailers who are able to build strong capabilities in
However, the growth for organized retail is not a given. The size and profitability of the
opportunity would be driven by both some external uncontrollable factors but also by
The Indian retail market size stands at about USD 585 billion and is expected to grow
at CAGR of 13 percent to reach USD 1080 billion by 2020. This growth is largely
attributed to the coming of age of the Indian retail sector, which has gone through
major transformation over the last decade with a noticeable shift towards organised
retailing.
Speaking specifically on the Indian fashion accessories segment, the market was
worth around US$ 3 billion in 2013 and is expected to grow at a CAGR of 12 percent
touching US$ 6 billion by 2019. This growth in the fashion accessories market can be
- Less risk in design creativity- This allows designers to experiment with the
estimated that organised retail contributes only 16 percent to the bags, belts and
wallets markets of the accessories segment. This organised retail has been an influx
of some of the world’s biggest fashion retailers with far more conducive FDI norms
E-commerce has also changed the face of Indian retail sector in the past few years.
As the acceptance towards technology increases, more and more consumers are
willing to explore web based shopping alternatives. This has lead to an overcrowding
of platforms as customers are flooded with options. In such a scenario, E-tailers are
off-line and online channels, all the while trying to stay connected with their target
consumers via various touch points – social media being the most crucial of them.
These brands look to offer the consumers an experience, which extends beyond the
For Example – Though the advent of Demonetisation was beneficial to the nation’s
long-term growth it took a toll on the Fashion Retail Industry, especially the Luxury
market. Again, the post-demonetisation surge in gold prices in the country had
discouraged the consumer from investing into gold. Suppose these speculations in
gold prices continue in future, it would prove beneficial to an already growing fashion
jewellery market as consumers look for a cheaper substitute. Similarly, the real estate
market would also face a slowdown, leading to fall in property rates. This could again
The retail sector in India is emerging as one of the largest sectors in the economy.
the total market size is estimated to be around USD600 billion, thereby registering a
CAGR of 7.45 per cent since 2000. Retail industry is expected to grow to USD1.3
trillion by 2020, registering a CAGR of 9.7 per cent between 2000- 2020.
Factors affecting Demand of Retail Industry:
Credit availability
India is the fifth largest retail destination globally. The country is among the highest in
the world in terms of per capita retail store availability. India’s retail sector is
experiencing exponential growth, with retail development taking place not just in major
cities and metros, but also in Tier-II and Tier-III cities. Healthy economic growth,
consumer tastes and preferences are the other factors driving growth in the organised
Retail industry accounts for 10% of the total GDP of the nation and 8% of total Indian
employment. There are 12 million retail outlets in the country employing more than 33
million people. Retail industry has been on a growth trajectory over the past few years.
Indian retail market is expected to reach US$ 950 billion by 2018, registering a
compound annual growth rate of 8.9 per cent during 2000-18 and is expected to
double to US$1.3 trillion by 2020 from US$ 600 billion in 2015. Of this, organized retail
is expected to grow at a rate of 25% per annum. The traditional and organized retail
are expected to reach a size of US$ 650 billion (76% of total) and US$ 200 (24% of
India’s online retail may increase seven times more in next five years. E-commerce is
expected to be the next major area for retail growth in India. Retail e-commerce sales
in India are expected to reach $17.5 billion (Rs 105,120 crore) by 2018, from $5.3
Retail market is divided into the organized sector comprising of licensed retailers
operating in hypermarkets, super markets, malls, departmental stores etc and, the
vendors, hand cart hawkers etc. A third form of retail is the virtual retails where
products are ordered via mail, telephone or online without having examined physically
Increasing participation from foreign and private players has given a boost to Indian
retail industry. India’s price competitiveness attracts large retail players to use it as a
sourcing base. Global retailers such as Wal-Mart, GAP, Tesco and JC Penney are
increasing their sourcing from India and are moving from third-party buying offices to
The Government of India has introduced reforms to attract Foreign Direct Investment
(FDI) in retail industry. The government has approved 51 per cent FDI in multi-brand
retail and increased FDI limit to 100 per cent (from 51 per cent) in single brand retail,
and plans to allow 100 per cent FDI in e-commerce, under the arrangement that the
products sold must be manufactured in India to gain from the liberalised regime.
Margins for retail businesses are extremely variable. Dollar stores, for example,
generally have low margins and aim for high sales, while stores selling luxury items
will sell far less product in a given time period, but can expect profit margins to be
considerably higher.
Pricing usually falls into one of two types "Cost-plus” prices are set by the retail store
“Suggested retail” prices are determined by the manufacturer and are often printed on
the product. Retailers can discount from the Manufacturer's Suggested Retail Price
RAW MATERIAL
The above figure explains the Supply Chain of goods’ distribution right from
manufacturers, until it reaches the end consumers. This chain originates from
manufacturers, who distribute their products to different manufacturers’ distribution
centres. These centres are usually warehouses and godowns who inturn distribute
these products to the retail distribution centres located at various places. Finally, the
products are moved on to the retail outlets located at different vicinities, such as D-
mart, More, BigBazaar etc, thus getting into direct contact with the end customers.
SKILL MANPOWER
Retailing is the vital link in any typical supply chain as it is closest to the customers.
Retailing adds value in terms of bulk breaking, providing a wide assortment of goods,
and incidental services to customers. The value chain and core processes involved in
Store operations play a critical role in shaping the customer perceptions towards the
maintenance, customer service and transaction processing. The sales person plays
an important role in technology goods, high value high involvement goods such as
jewellery, watches, etc. Customer service includes delivery, repair, warranty work and
the customer and is a key differentiating factor. It is a dynamic activity which has to be
in resonance with customer trends and also has implications for the top-line and
Logistics
The infrastructure bottlenecks in India i.e., road conditions, lack of strong cold chains,
poor warehousing facilities, are well documented. These bottlenecks add up to the
logistics cost both in terms of time and money. Logistics plays an important role for
sourcing systems. The high logistics cost also forces the retailers to trade-off between
Marketing
Marketing strategies of a firm shape both the pulling the target audience to the store
promotion programmes. The challenge for Organised Retail is to ensure both high
footfalls and conversion ratio. Increasing the average transaction size is one of the
main concerns for a retail outlet. Effective CRM strategies such as loyalty programmes
Centralised purchasing is important for the organised retailers to get advantage of their
scale of operations. Retailing often involves a number of products and stock keeping
unit (SKU) which make this task even more difficult. Purchasing function has to work in
co-ordination with logistics and merchandising. The function also takes care of Vendor
Corporate services
Corporate services are support functions such as Finance, HR, IT, Administration. IT
and HR functions are increasing in importance. IT plays a key role in improving the
TECHNOLOGY
Technological advances have found more and more retailers struggling to keep up.
By becoming early adopter, some retailers have manged to rapidly outspace the
competition. Some of the technologies used by modern retail store is listed below:
1. Barcode Scanner
2. Billing software
3. Metal Detector
4. E-commerce
5. Travelator
6. CCTV
7. Kiosks Machine
8. Packaging
9. Swipe machine
OTHER RESOURCES
Ware House
accordance to retail industry, which focuses majorly on fast demand high value goods,
stocking of necessary goods is very essential in order to meet the customer demands.
Warehouse management is the primary concern for any retailer as this involves high
Transportation
Every product that has been manufactured has to reach the customers and this is
taken care by transportation. Based on the capacity of the customer the forms of
transportation differ. Transportation is an integral part of the value chain that the cost
incurred in transportation adds to the final price of the product. That is why the industry
people focus much on reducing the transportation cost so that the customer gets
Organized retail is a difficult business in India. As can be seen in the exhibit below, the
sector performance lags most other sectors on key metrics. In this analysis top 10
GDP has grown from US$ 1.823 trillion in 2011 to US$ 2.264 trillion in 2016, with the
annual growth rate for 2016 being 7.1%. A booming economy has in turn led to
increase in consumer expenditure reaching US$ 1.25 billion. The increased consumer
expenditure has been beneficial to the retail sector at large. The retail sector in India
is emerging as one of the largest sectors in the economy. It’s total market size was
estimated to be US$ 672 billion in 2016, registering a Compounded annual growth rate
(CAGR) of 7.74% since 2000. A growth to US$ 1.3 billion is expected by 2020.
Gross Contribution
The retail sector contributed to 10% of the total GDP of India in 2016, i.e. US$ 226
billion; and 8% of the employment making it one of the largest contributors in the
service sector.
INDUSTRY TREND AND CHALLENGES
Retail consolidation
Manufacturer practices
Omni-channel is Expanding
Retail consolidation:
thereby substantially altering the retail competitive arena. The effects of consolidation
size which helps them to facilitate offerings and extend their reach, thereby lowering
revenues from consumers and markets, and gaining market share across channels
Manufacturer practices:
variable. By focusing on a single buyer for an entire chain, they are able to sell more
manufacturer as “captain” for each major category. They rely on the consumer
funds, which account for about 54% of the marketing dollars. Trade allowances have
traditionally been used to adjust pricing and support promotions at the retail level.
allowances, which means reimbursement is based on units sold by the retailer, or off-
retailer.
Advance in technology and innovation:
The shift toward data and technology-driven approaches has been a cultural change
for many retailers. Information management and supply chain management helped by
technological advances have driven retailers’ costs down. In the 1990s, supply chain
tools helped improve efficiencies in the flow of goods, but did not always ensure that
retailers had the right merchandise in the right stores at the right price and at the right
time.
big box retailers are slowly moving away from chain-wide marketing and
based on a store’s geographic location. With this more localized perspective, a retailer
can spotlight local, favourite brands, and also source more products locally. This more
localized approach requires the retailer to reconsider digital discovery alongside in-
strategies. Stores can also utilize advanced technologies to modernize the customer
location, sales and CRM systems for inventory management, personnel management
and more.
Omni-channel is Expanding:
Mobile are influence approximately $1 trillion in spending this year for U.S. brick-and-
mortar retailers. Retailers have long realized that establishing an Omni channel
presence is necessary to bridge the digital and physical divide. In 2016, retailers will
invest heavily across each channel to create seamless experiences to meet shopper
demand as they engage with retailers across multiple touch points. Areas that will
continue to gain momentum include ship from store options and Buy-Online-Pickup-
engage shoppers who use smartphones to search for specific products to purchase.
Brands will desire to reach highly targeted retail audiences through mobile.
CHALLENGES
Economic factors, including personal income, consumer confidence, job growth, and
interest rates, can greatly affect consumer spending and the retail sector. During
recessionary periods, retail sales growth can slow drastically and even decline. Retail
spend a greater share of income and increase their personal debt. Rising interest rates
affect consumer credit and consumer ability to finance large retail purchases, such as
cars.
Industry Concentration:
In many retail segments, large companies dominate and hold the majority of the
market. Small retailers specialize in a niche area of product. Although this can be
strength when consumers are looking for product expertise, small retailers are
retailers by offering volume discounts. With limited marketing funds, small retailers
struggle to compete with the large advertising budgets gives upper hand to large
retailer.
For many retailers, cash flow is uneven because of seasonal demand. Due to
increased demand during the winter holidays, many retailers, including toy, jewellery,
Consumer tastes and preferences can change rapidly and greatly affect demand for
retail items. Fashion fads and product life cycles can be unpredictable and companies
error can result in excess merchandise or out-of-stocks and missed opportunity. The
fickle nature of certain demographics, such as children and young adults, has resulted
in short product life cycles and high new product failure rates in some categories.
In the world of retail today cheaper, faster, better is necessity. Efficiency drives
competitive success. The greater streamline and creates flow of goods and services
in a better way .Tight budgets, achieving more with less staff and information overload
Upcoming of E-commerce:
by its online rivals. Online companies are now penetrating Tier II and Tier III cities,
new micro-markets within cities. Expansion of ECOMMERCE has created threat for
small and large retailers as it provides portal for all goods and services at reasonable
price and on your door step. The graph below highlights growth of E-COMMERCE
Sector Strengths
remarkable position in global retail rankings. It enjoys four major appeal factors,
namely:
Robust Demand
Innovation in financing
Policy Support
Increasing Investments
In FDI Confidence Index, India ranks 8th; while being ranked 2nd in the Global Retail
Development index 2016. These rankings are witnessed by the US$ 511.76 billion in
FMCG players are focusing on rural market as it accounted for over 40 per
The organised Indian retail industry has begun experiencing an increased level of
activity in the private label space. The share of private label strategy in the US
and the UK markets is 19 per cent and 39 per cent, respectively, while its share
in India is just 6 per cent. Stores like Shopper Stop, Lifestyle generates 15 to 25
Sourcing base
base. Global retailers such as Walmart, GAP, Tesco and JC Penney are
increasing their sourcing from India and are moving from third-party buying
buying offices.
Luxury retailing
retailing, accessories and jewellery among many others. The Indian luxury
market stood at around US$ 18.6 billion in 2016 from US$ 14.7 billion in 2015 ,
their strategies. The Boston Consultancy Group has identified Pricing as one of the
Pricing
A host of issues come up for consideration in retail pricing; the nature of the local
competition; product discounts; and defining the rules of pricing by store catchment,
geography and product hierarchy. Most retailers in India, take a fairly simple
consumers in the catchment to pay, or the historical price elasticity. This approach
falls short of identifying opportunities to drive both price perception and profitability,
Price perception plays a key role in deciding choice of shopping destination. The
pricing model needs to be well synchronised with the overall banner proposition
along with tools to handle large amounts of data to drive benefits in a short time.
An integrated approach to pricing has been proven successful. The key for deriving
short and long-term value from pricing is to win both price and price perception. It is equally
critical that the principles behind the pricing model are closely linked to the core banner
proposition. A dynamic pricing model requires looking at a wide gamut of levers. It also
requires institutionalizing the use of multiple objective techniques such as customer price
worldwide. The group was founded by Seth Shiv Narayan Birla in 1857. The group
interests in sectors such as viscose staple fibre, metals, cement (largest in India),
Aditya Birla Retail Limited (ABRL) is the retail arm of Aditya Birla Group company. ABRL is the
fourth largest supermarket chain in the country after Future Group, Reliance Retail and D-Mart. It
operates two different store formats - Supermarket and Hypermarket under the brand more. It has
about 494 supermarkets and 19 hypermarkets around the country. ABRL plans to open 100
Aditya Birla Retail Limited provides customers products under its own labels. Private label Food
Brands include Feasters, Kitchen's Promise, and Best of India. Home & Personal care brands
include Enriche, 110%, Pestex, Paradise and Germex. As per a report in Economic Times, Aditya
Birla Retail Ltd ( ABRL) with its 500 + 'More' branded supermarkets and 14 hypermarkets reported
sales of Rs 1,966 crore and a net loss of Rs 650 crore in the year ended March 2012. The company
has accumulated losses of Rs 2,984 crore since it entered the segment over six years ago.
PERFORMANCE ANALYSIS OF ADITYA BIRLA RETAIL
NET SALES
5000
4000
3000
1850 1661
2000 1285
1000
0
2017 2016 2015 2014 2013
OPERATING PROFIT
300
200
100
72 66.12
33
0
2017 2016 2015 2014 2013
NET PROFIT
50
0
2017 2016 2015 2014 2013
-50
-100
-150
-200
-250
TOTAL REVENUE
1851 1661
1285
The above graphs give us a clear analysis, that the net sales has increased steadily
overtime. The operating profit dipped in the beginning and then increased
exponentially. The net profit dipped steeply for three years and increased steeply. The
total revenue was low and quite constant from 2013 to 2015 and then increased with
a steep slope.
All this shows that the company was in losses before but, it turned its losses into profits
As India’s leading retailer, Future Retail inspires trust through innovative offerings,
quality products and affordable prices that help customers achieve a better quality of
life every day. We serve customers in more than 240 cities across the country through
Future Retail is the flagship company of Future Group, India’s retail pioneer catering
to the entire Indian consumption space. Through multiple retail formats, we connect a
diverse and passionate community of Indian buyers, sellers and businesses. The
collective impact on business is staggering: Over 330 million customers walk into
our stores each year and choose products and services supplied by over 30,000 small,
Future Group is a corporate group and nearly all of its businesses are managed
through its various operating companies based on the target sectors For e.g., retail
Hometown etc. are operated by its retail hand, Future Retail Ltd, while its fashion
outlets Brand Factory, Central, Planet Sports etc. are operated via another of its
subsidiaries, Future Lifestyle Fashions With these many fashion outlets and
supermarket, the group also promotes respectively, its fashion brands like Indigo
Nation, Spalding, Lombard, Bare etc., and FMCGs like Tasty Treat, Fresh & Pure,
Future Group retail services sorted by operating companies
Food Bazaar
Fbb
HomeTown
E Zone
Foodhall
FutureBazaar.com (e-retailing)
Easyday
Big Bazaar
PERFORMANCE ANALYSIS OF FUTURE RETAIL
NET SALES
OPERATING PROFIT
500
0
2017 2016 2015 2014 2013
-500
-1000
NET PROFIT
368
14
2017 2016 2015 2014 2013
-314
-379
-538
TOTAL REVENUE
15000
10000
5000
0
2017 2016 2015 2014
PERFORMANCE SUMMARY
According to the graphs, we can see that the net sales of the company has been
increasing throughout the five years. The graph also shows that the net sales has
increased three times from the last year. And the net profit has also increased almost
25 times which proves that the company is making a lot of profit thus we can say that
company is in a good position. The graph also give a clear view to us that the company
started to progress in last two year and now they are almost the number one company
V-Mart is a complete family fashion store that provides its customers true value for
their money.
V-Mart offer customers a great shopping experience each time they visit store by
offering a vast range of products under one roof. Maintaining high standards in
quality and design, V-Mart offers fashion garments at down-to-earth prices and over
a period of time it has emerged as the destination of choice for bargain hunters and
V-Mart primarily operate in tier II & tier III cities with the chain of “Value Retail”
departmental stores. Their stores cater to the needs of the entire family altogether by
“Priceless Fashion” is the main motto through which we believe in providing the
latest trends to the upwardly mobile Indians at the best possible price.
V-Mart has 153 stores across 129 cities in 14 states and union territories. Our
Haryana, Jammu & Kashmir, Madhya Pradesh, New Delhi, Punjab, Rajasthan, and
Uttar Pradesh. They are amongst the pioneers in setting up modern ambience stores
NET SALES
1000
800
600
400
200
0
2017 2016 2015 2014 2013
OPERATING PROFIT
80
60
40
20
0
2017 2016 2015 2014 2013
NET PROFIT
NET PROFIT
39
37
27
25
18
TOTAL REVENUE
REVENUE
81042
72239 69783
54783
The above graphs show that the net sales increased by 161% over the years,
operating profit has also steadily increased over the years, the net profit grew till 2015
then took a sharp dip in 2016 before growing back again in 2017, but the revenue has
remained quite steady over the years. This shows that the company has remained
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