Retail Project

By: Abhishek Jethwa

 THE INDIAN ECONOMY
• GDP growth for the year 2005-06 ended at 8.4%.

• Tops AT Kearney list of emerging markets for global

retailers to enter.

• 2nd Fastest growing economy in the World

• Fourth in terms of Purchasing Power Parity next only to

USA, China and Japan.

• 50% of the total GDP led by services such as IT,

telecommunications, healthcare and retailing.

• Reserves crossed the $150 bn mark, showcasing India as

one of the top ten holders of Foreign exchange reserves.

• Over 3.9 mn tourists visited India this year, up from 3.0

mn last year.
 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
store chains run by Khadi & Village Industries Commission
• 1980s experienced slow change as India began to open up economy.
• Textiles sector with companies like Bombay Dyeing, Raymond's, S Kumar's
and Grasim first saw the emergence of retail chains
• Later Titan successfully created an organized retailing concept and
established a series of showrooms for its premium watches
• The latter half of the 1990s saw a fresh wave of entrants with a shift from
Manufactures to Pure Retailers.
• For e.g. Food World, Subhiksha and Nilgiris in food and FMCG; Planet M and
Music World in music; Crossword and Fountainhead in books.
• Post 1995 onwards saw an emergence of shopping centers,
– mainly in urban areas, with facilities like car parking
– targeted to provide a complete destination experience for all segments of
society
• Emergence of hyper and super markets trying to provide customer with 3 V’s -
Value, Variety and Volume
• Expanding target consumer segment: The Sachet revolution - example of
reaching to the bottom of the pyramid.
• At year end of 2000 the size of the Indian organized retail industry is estimated
at Rs. 13,000 crore
 Indian Retail Industry- A Brief
Overview
• India is currently the ninth largest retail market in the world.
• The Indian retail market is estimated at US$ 215 billion.
• While organised retail in India is only two per cent of the total
US$ 215 billion retail industry, it is expected to grow 25 per cent
annually, driven by changing lifestyles, strong income growth
and favourable demographic patterns.
• Organised retailing in small-town India is growing at a
staggering 50-60 per cent a year compared to 35-40 per cent in
the large cities.
• KSA-Technopak, a retail consulting and research agency,
predicts that by 2010, organised retailing in India will cross the
US$ 21.5-billion mark from the current size of US$ 7.5 billion.
• Food dominates the shopping basket in India. The US$ 6.1
billion Indian foods industry, which forms 44 per cent of the
entire FMCG sales, is growing at 9 per cent and has set the
growth agenda for modern trade formats.
 Category-wise Private Final Consumption Expenditure

11% 43%
Rs 7,18,136 cr
3% Rs.1,78,998 cr Food, Beverage,
Miscellaneous Tobacco
Rs 57,367 cr
Education, Recreation
Total Private
15% Final Consumption
Rs 2,58,696 cr
Expenditure is
Transport, Rs 16,90,000 cr
Communication

55% is Retail Sales

8% i.e. Rs 9,30,000 cr
Rs 1,42,143 cr
Medical, Health Care
5%
4% 12% Rs 79,631 cr
Clothing, Footwear
Rs 49,852 cr Rs 2,03,391 cr
Furniture, Furnishing, Rent, Fuel, Power
Appliance
SEGMENTWISE RETAIL & ORGANIZED RETAIL SALE
SEGMENT Retail Sale Organized % Share in
Rs cr Retail Sale Org. Retail
Rs cr
Clothing, Textile & Fashion Accessories 80,000 10,900 39
Jewellery 43,500 850 3
Watches 2,800 1,110 4
Footwear 10,000 2,500 9
Health & Beauty Care Services 2,500 150 1
Health & Beauty Products (Incl. Pharma) 30,000 550 2
Consumer Durables 32,000 2,500 9
Mobile Handsets & Accessories 13,000 840 3
Furniture & furnishings 33,000 2,200 8
Food & Grocery 6,15,000 2,950 11
Catering Services ( F & B ) 35,000 2,000 7
Books, Music & Gifts 8,200 800 3
Entertainment 25,000 650 2
Rs 9,30,000 Rs 28,000 100
ONLY 3 %
RETAIL INDUSTRY GROWTH

1400000
1200000
1000000
800000
600000
400000
200000
0
2004 2005 2006 2007 2008 2009 2010

By 2010 Rs 14,00,000 cr Growth Rate is 8%

ORGANISED RETAIL GROWTH

100,000
90,000
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
2004 2005 2006 2007 2008 2009 2010

By 2010 Rs 1,00,000 cr 9% of Total Retail Industry Growth Rate is 30%

 Discovering power of Indian Retail
Key Growth Drivers

• Favorable Demographics

• Rising Consumer Income

• Mall Boom
 Favorable Demographics & Mall
Boom
Indian Mall Scene in 2006
City Area (mn sq ft)
Indore 0.06
• Real estate is key for a retail business Jaipur 0.67
during its investment phase Chandigarh 0.12
• Drop in interest rates have made Ludhiana 0.2
property buying and leasing viable
Lucknow 1.07
• 100% FDI in Construction & Real Ahmedabad 1.95
Estate now permitted Pune 2.03
Chennai 1.22
• Over 600 malls expected by 2010 Calcutta 1.15
Hyderabad 1.26
• Total investments of USD 5 bn would
be required from organized retailers by Bangalore 2.12
2010 Mumbai 4.8
NCR (Delhi) 10.62
• Real Estate development in India –
poised for Dramatic growth
 Retailing formats in India

Supermarkets (Foodworld,Spencer’s)
Hypermarkets (Big Bazaar,Trent )
Department Stores (Shoppers Stop,LifeStyle)
Specialty Chains (Spar)
Discount Chains (Subhiksha)
Cash ‘N’ Carry (Metro)
Petro Convenience (In & Out, Shell)
Traditional Format Retailers
Kiranas: Traditional Mom and Pop Stores
Kiosks
Street Markets
Exclusive /Multiple Brand Outlets
 Recent Trends
Retail Sales in India
• Retailing in India is witnessing
a huge revamping exercise as
can be seen in the graph
• India is rated the fifth most
attractive emerging retail
market: a potential goldmine.
• Estimated to be US$ 200 billion,
of which organized retailing (i.e.
modern trade) makes up 3
percent or US$ 6.4 billion
• As per a report by KPMG the
annual growth of department
stores is estimated at 24%
• Ranked second in a Global
Retail Development Index of 30
developing countries drawn up
by AT Kearney.
 Recent Trends
• Multiple drivers leading to a consumption boom:
Favorable demographics Raising aspirations : Value added goods sales
Growth in income Increasing population of women
• Food and apparel retailing key drivers of growth
• Organized retailing in India has been largely an urban phenomenon with affluent classes and
growing number of double-income households.
• More successful in cities in the south and west of India. Reasons range from differences in consumer
buying behavior to cost of real estate and taxation laws.
• Rural markets emerging as a huge opportunity for retailers reflected in the share of the rural market
across most categories of consumption
– ITC is experimenting with retailing through its e-Choupal and Choupal Sagar – rural
hypermarkets.
– HLL is using its Project Shakti initiative – leveraging women self-help groups – to explore the
rural market.
– Mahamaza is leveraging technology and network marketing concepts to act as an aggregator
and serve the rural markets.
• IT is a tool that has been used by retailers ranging from Amazon.com to eBay to radically change
buying behavior across the globe.
• ‘e-tailing’ slowly making its presence felt.
• Companies using their own web portal or tie-sups with horizontal players like Rediff.com and
Indiatimes.com to offer products on the web.
CHANGE IN RETAILING
Counter
Service
Self
Service
CHANGE IN RETAILING
Less Than
200 SKU

8000 to
10,000 SKU
CHANGE IN RETAILING
Few Hundred
sq. ft. Shop

50,000 plus
sq. ft.
Now Lakhs of sq.ft in pipeline
CHANGE IN RETAILING
No gadgets

Advanced
gadgets
CHANGE IN RETAILING
No IT

Advanced
IT
CHANGE IN RETAILING
No
Bar coding
Advanced
RFID
CHANGE IN RETAILING
Dull Shopping
Experience

Shopentertainment
or Shoppertainment
TOP 15 RETAILERS OF THE WORLD
Sr NAME COUNTRY SALE
$ BILLION
1 WAL MART STORES USA 256. 329
2 CARREFOUR FRANCE 87. 342
3 ROYAL AHOLD NITHERLAND 68. 224
4 METRO GERMANY 65. 147
5 KROGER USA 53. 791
6 TESCO UK 50. 326
7 TARGET USA 48. 163
8 RWE GERMANY 44. 241
9 COSTCO USA 41. 693
10 ALDI GERMANY 41. 011
11 INTERMATCH (ITM) FRANCE 36. 723
12 SAFEWAY USA 35. 552
13 ALBERTSON USA 35. 436
14 SWAZ GROUP GERMANY 33. 357
15 WALLGREENS USA 32. 505
TOP RETAILERS OF INDIA
Sr Name Company Sale (Cr)

1 Big Bazaar Pantaloon 650.00

2 Food World RPG 545.00
3 Shopper Stop K.Raheja 404.00
4 Margin Free 300.00
5 Nilgiris Nilgiris 250.00
6 Life Style Land Mark 230.00
7 Subhiksha Vishwapriya Group 200.00
8 West Side Tata (Trent) 130.00
9 Adani Adani 100.00
10 Piramyd Piramals 79.00
11 D’Mart Avenue SuperMkt 78.00
 India vs. World
• Indian retail is fragmented with over 12 million outlets operating in the country. This is in
comparison to 0.9 million outlets in USA, catering to more than 13 times of the total retail
market size as compared to India
• India has the highest number of outlets per capita in the world - widely spread retail
network but with the lowest per capita retail space (@ 2 sq. ft. per person)
• Annual turnover of Wal-Mart (Sales in 2001 were $219 billion) is higher than the size of
Indian retail industry. Almost 100 times more than the turnover of HLL (India's largest
FMCG company).
• Wal-Mart - over 4,800 stores (over 47 million square meters) where as none of India's
large format store (Shoppers' Stop, Westside, Lifestyle) can compare.
• The sales per hour of $22 million are incomparable to any retailer in the world. Number
of employees in Wal-Mart are about 1.3 million where as the entire Indian retail industry
employs about three million people.
• One-day sales record at Wal-Mart (11/23/01) $1.25 billion - roughly two third of HLL's
annual turnover.
• Developed economies like the U.S. employ between 10 and 11 percent of their workforce
in retailing (against 7 percent employed in India today).
• 60% of retailers in India feel that the multiple format approach will be successful here
whereas in US 34 of the fastest-growing 50 retailers have just one format
• Inventory turns ratio: measures efficiency of operations. The U.S. retail sector has an
average inventory turns ratio of about 18. Many Indian retailers KPMG surveyed have
inventory turns levels between 4 and 10.
• Global best-practice retailers can achieve more than 95 percent availability of all SKUs
on the retail shelves (translating into a stock-out level of less than 5 %).The stock-out
levels among Indian retailers surveyed ranged from 5 to 15 percent.
 Future direction: Positives
• AT Kearney has estimated India’s total retail market at US$ 202.6 billion which
is expected to grow at a compounded 30 per cent over the next five years.
• With the organised retail segment growing at the rate of 25-30 per cent per
annum, revenues from the sector are expected to triple from the current US$
7.7 billion to US$ 24 billion by 2010.
• The share of modern retail is likely to grow from its current 2 per cent to 15-20
percent over the next decade
• Over next two years India will see several Indian retail businesses attaining a
critical mass as growth in the industry picks up momentum driven by two key
factors:
– Availability of quality real estate and mall management practices
– Consumer preference for shopping in new environments
• Wal-Mart : huge plans for India. Moving a senior official from its headquarters
in Bentonville, Arkansas, to head its market research and business
development functions pertaining to its retail plans in India.
• New York-based high-end fashion retailer Saks Fifth Avenue has tied up with
realty major DLF Properties to set up shop in a mall in New Delhi.
• Tommy Hilfiger, retailer of apparels, expects to open one store each in Delhi,
Ahmedabad, Lucknow and Bangalore in the next four months.
 Future direction: Concerns
• 68 million square feet of mall space is expected to be available by end of 2007,
which might lead to over-capacity of malls
• Lack of differentiation among the malls that are coming up. One option may be to
look at specialization.
• Poor inventory turns and stock availability measures - retailers clearly need to
augment their operations.
• Operations of retailers and suppliers are not integrated. Efficient replenishment
practices practiced in the Indian auto and auto-component industry can be
leveraged to implement efficient supply chain management techniques.
• Supplier maturity, in terms of adherence to delivery schedules and delivering the
quantity ordered, is an issue
• Sales tax laws - lead to retailers having state-level procurement and storage leads
to Indian retailers having higher inventories. VAT has helped alleviate this a bit.
• Increased adoption of IT and shrinkage management will be a critical area.
• Supply chain and customer relations followed by merchandising, facilities
management and vendor development are areas which have significant gaps and
proactive training is a key imperative for overcoming these.