13569244 changing reatail scenario

8/8/2019 13569244 Changing Reatail Scenario

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Changing Retail Landscape in India


2/23

November 18, 2010

Indian Retail Buoyed by high GDP growth

8.90%9.0%

6.8%6.0%

6.0%5.6%

5.2%

6.4%

6.6%

5.4%

9.2%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

1 9 9 7

1 9 9 8

1 9 9 9

2 0 0 0

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6

2 0 0 7

Projections of 8% sustainable real GDP growth rate till 2020promise high growth potential for Indian Retail

RealGrowthRate

Source :Central Statistical Organization (CS0)


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November 18, 2010

India Experiencing Rapid Economic Growth

9.4% growth rate makes India the second fastest growingeconomy in the world

GDP(US$bn)

RealGrowthRate


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November 18, 2010

Led by Growth in Services Sector

13% 14%

55%

21%

7%6%

21%

37%41%

107%

0%

20%

40%

60%

80%

100%

120%

Tourist Arrivals Passenger CarsSales

CommercialVehicle Sales

Domestic Air Passengers

New Cell PhoneConnections

2005-06

2006-07

% Increase in growth over the previous year

Services sector adding to GDP in a significant manner


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November 18, 2010

Driven from Consumption Throughout the 1.1 BillionPopulation

5-7 millionSuper Rich

70 80 million

Afford Cars, Private Healthcare &Foreign travel

250 - 300 million

Afford goods like Refrigerators , Scooters& Colour TVs

600-700 million ( Generally Rural )Afford simple industrial products

e.g. bicycles , radios , textileserty Line = income less than $ 1/day

urce: McKinse ,

60 % of Indias population are under 24 years
http://images.google.com/imgres?imgurl=http://upload.wikimedia.org/wikipedia/en/thumb/2/23/Indian_Couple_on_Bicycle.jpg/180px-Indian_Couple_on_Bicycle.jpg&imgrefurl=http://en.wikipedia.org/wiki/Bicycle&h=250&w=180&sz=15&hl=en&start=1&tbnid=Vj2HXGk35I5f2M:&tbnh=111&tbnw=80&prev=/images%3Fq%3Dlower%2Bclass%2Bindians%26ndsp%3D20%26svnum%3D10%26hl%3Den%26lr%3D%26sa%3DN


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November 18, 2010

With High Private Consumption

GDP

US$ 935 billion

Private ConsumptionUS$ 580 Billion

(62%)

Public Spending and CapitalFormation

US$ 355 Billion (38%)

RetailUS$ 342 Billion

(59%)

Non RetailUS$ 238 Billion

(41%)

Urban (5,100 towns) US$ 154 Billion

(45%)

Rural (6,27,000 villages)US$ 188 Billion

(55%)

Modern retail US$ 12 billion8% of urban retail spends

Modern retailNegligible

Food

Apparel

Beverages

Footwear

Consumer durables

Appliances

Stationery

Kitchen utensils

Furniture

Furnishings

Sports goods

Health & Beauty

Personal Care

Jewellery

Timing

Transport

CommunicationRecreation

CulturalServices

Education

Rent

UtilitiesOther Services

Source: Central Statistical Organization (CS0) and Technopak AnalysisConversion rate: 1 US$ = 40.86 Rs.


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November 18, 2010

About US $530 Billion Retail Market by 2012

GDP*US$ 1,450 billion

Private ConsumptionUS$ 870 Billion

(60%)

Public Spending and CapitalFormation

US$ 580 Billion (40%)

RetailUS$ 530 Billion(61%)

Non RetailUS$ 340 Billion(39%)

UrbanUS$ 252 Billion

(47.5%)

RuralUS$ 278 Billion

(52.5%)

Modern retail US$ 78 billion31% of urban retail spends

Modern retail US$ 9 billion3% of rural retail spends

Source: Technopak Analysis *All figures are in nominal terms after taking into account inflation


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November 18, 2010

Which Makes Indian Retail an AttractiveMarket

India tops the Global Retail Development Index


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November 18, 2010

Modern Retail Organized Channels

The share of organized retail is less than 3% of the total retail market The size of modern retail is about US$ 8 Billion and has grown by 35% CAGR in last

five years

85% 81%

55%40% 36%

30% 20% 20%3%

0%

20%

40%

60%

80%

100%

US Taiwan Malaysia Thailand Brazil Indonesia Poland China India

Traditional Channel Modern Channel


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November 18, 2010

.. but Rapid Transformation is Anticipated

Current Size & Future Projections for Indian Retail Market

342 373408 445

486530

800

12 18 26 3959 87

200

0100200300400500

600700800900

2007 2008 2009 2010 2011 2012 2017

U S $ B i l l i o n

Total Retail Organized Retail

And may reach a share of 25% by 2017


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November 18, 2010

Weekly MarketsVillage Fairs

Melas

Convenience StoresMom and Pop/Kiranas

PDS OutletsKhadi Stores

Cooperatives

Exclusive Brand OutletsHyper/Super Markets

Department StoresShopping Malls

Traditional/Pervasive Reach

GovernmentSupported

Historic/RuralReach

Modern Formats/International

Evolution of Indian retail

Source of Entertainmen

t

NeighborhoodStores/Convenie

nce

Availability/Low Costs /Distribution

ShoppingExperience/Efficie

ncy


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November 18, 2010

Price, concern and typical Indian features are some examples

Adaptation to Local Market Road for Success

cKinse Quaterl , winnin the Indian consumer, 2005

Chicken hamburger toreach segments thatdo not eat beef

McDonalds MaharajaMac

Nokia 1100

Anti dust keypad for dirtyroads,anti slip grip for the heatand flash-light in case of electricity shortage

Indian menus withsinge touch

Samsung microwaves

Memory backup tocompensate forfrequent powershortage

Samsung laundrymachine

10 milli lt. sachet for lessthan 5 cents increasedthe shampoo buyingpopulation dramatically

Head & Shoulders


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November 18, 2010

Recent Trends

Experimentation with formats: Retailing inIndia is still evolving and the sector is witnessinga series of experiments across the country withnew formats being tested out. Ex. Quasi-mall,sub-urban discount stores, Cash and carry etc.

Store design : Biggest challenge for organizedretailing to create a customer-pull environmentthat increases the amount of impulse shopping.Research shows that the chances of sensesdictating sales are upto 10-15%. Retail chainslike MusicWorld, Baristas, Piramyd and Globusare laying major emphasis & investing heavily instore design.

Emergence of discount stores: They areexpected to spearhead the organized retailingrevolution. Stores trying to emulate the model of Wal-Mart. Ex. Big Bazaar, Bombay Bazaar,RPGs.

Unorganized retailing is getting organized:To meet the challenges of organized retailingsuch as large Cineplex's, and malls, which arebacked by the corporate house such as 'Ansals'and 'PVR the unorganized sector is gettingorganized. 25 stores in Delhi under the banner of Provision mart are joining hands to combinemonthly buying. Bombay Bazaar and Efoodmartformed which are aggregations of Kiranas.

Experimentation with formats: Retailing inIndia is still evolving and the sector is witnessinga series of experiments across the country withnew formats being tested out. Ex. Quasi-mall,sub-urban discount stores, Cash and carry etc.

Store design : Biggest challenge for organizedretailing to create a customer-pull environmentthat increases the amount of impulse shopping.Research shows that the chances of sensesdictating sales are upto 10-15%. Retail chainslike MusicWorld, Baristas, Piramyd and Globusare laying major emphasis & investing heavily instore design.

Emergence of discount stores: They areexpected to spearhead the organized retailingrevolution. Stores trying to emulate the model of Wal-Mart. Ex. Big Bazaar, Bombay Bazaar,RPGs.

Unorganized retailing is getting organized:To meet the challenges of organized retailingsuch as large Cineplex's, and malls, which arebacked by the corporate house such as 'Ansals'and 'PVR the unorganized sector is gettingorganized. 25 stores in Delhi under the banner of Provision mart are joining hands to combinemonthly buying. Bombay Bazaar and Efoodmartformed which are aggregations of Kiranas.

Recent changes:Recent changes:

Unorganized : Vast majority of the twelve millionstores are small "father and son" outlets

Fragmented : Mostly small individually ownedbusinesses, average size of outlet equals 50 s.q.ft. Though India has the highest number of retailoutlets per capita in the world, the retail spaceper capita at 2 s.q. ft per person is amongst thelowest.

Rural bias: Nearly two thirds of the stores arelocated in rural areas. Rural retail industry hastypically two forms: "Haats" and Melas". Haatsare the weekly markets : serve groups of 10-50villages and sell day-to-day necessities. Melasare larger in size and more sophisticated interms of the goods sold (like TVs)

Unorganized : Vast majority of the twelve millionstores are small "father and son" outlets

Fragmented : Mostly small individually ownedbusinesses, average size of outlet equals 50 s.q.ft. Though India has the highest number of retailoutlets per capita in the world, the retail spaceper capita at 2 s.q. ft per person is amongst thelowest.

Rural bias: Nearly two thirds of the stores arelocated in rural areas. Rural retail industry hastypically two forms: "Haats" and Melas". Haatsare the weekly markets : serve groups of 10-50villages and sell day-to-day necessities. Melasare larger in size and more sophisticated interms of the goods sold (like TVs)

Traditionally three factors have plaguedthe retail industry:

Traditionally three factors have plaguedthe retail industry:


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November 18, 2010

Recent Trends ..


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November 18, 2010

Retail Market not limited to metros but widely acrossIndia

The classic skimming strategy in themetros is not longer sufficient

100 cities strategy Over 250 large size shopping malls

are currently under construction Leading cities 2030 are

forecasted to be Mumbai New Delhi Chandigarh

New Delhi

Bangalore

Mumbai

Chennai

Kolkata

Ahamabad

HyderabadPune

Above 10 Mn inhabitants




Kanpur

Lucknow

Jaipur

Nagpur

Coimbatore

Bhopal

Madurai

Kochin

Varanasi

Visakhapatnam

Patna

Indore

Surat

Vadodara

Ludhiana


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November 18, 2010

Drivers for Indian Retail

High IncomeOpportunitiesHigh Income

OpportunitiesChanging AttitudeChanging Attitude International

ExposureInternational

ExposureNecessities to

LifestyleNecessities to

Lifestyle

Service Sector: creatingnew jobs.

Working Population in2010 will 70%

IT Industry: increasing

professionalopportunities

Rising Salary levels

MNCs entering Indiaand homegrowncompanies going global

Service Sector: creatingnew jobs.

Working Population in2010 will 70%

IT Industry: increasing

professionalopportunities

Rising Salary levels

MNCs entering Indiaand homegrowncompanies going global

From Save to Spend

High disposableincome familystructures on a rise

Nuclear Families

DINKS (DoubleIncome No Kids)

Multi income families

From Save to Spend

High disposableincome familystructures on a rise

Nuclear Families

DINKS (DoubleIncome No Kids)

Multi income families

International travel

Exposure to globaltrends

Highest Growth inoutbound tourists in

the world

International travel

Exposure to globaltrends

Highest Growth inoutbound tourists in

the world

Shift of expensebasket from basicsto lifestyle products

Increased spend onApparel, personalcare, entertainment

Easy Bank creditboosts retail

Shift of expensebasket from basicsto lifestyle products

Increased spend onApparel, personalcare, entertainment

Easy Bank creditboosts retail

Customer value drivers are continuing to fragment as a result of changing demographics & valuesystems

Consumption expenditure is 60 % of Indias GDP

Market &Government

Market &Government

Easing out onImport barriers,Governmentsponsorship takingshape (FDI Policy,Tax and Duty

structure, Subsidies)Fluid retailSegments

M-Commerce & e-Commerce boostsretail

Easing out onImport barriers,Governmentsponsorship takingshape (FDI Policy,Tax and Duty

structure, Subsidies)Fluid retailSegments

M-Commerce & e-Commerce boostsretail


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November 18, 2010

Global Heavyweights in Indian RetailingJoint Ventures Product Range Retail Formats

Bharti-Walmart (with $2.5

Billion investment by Bharti)

Food & grocery, electronics & appliances, clothing &

footwear, furniture & furnishing, household articles.

Hypermarkets, Supermarkets and

Convenience

Carrefour-Landmark Food and groceries, FMCG, apparel and electronics Hypermarkets

Home Retail Group plc -Shopper's Stop Ltd andHypercity Retail India Private

Ltd

Franchising the Argos concept under the terms of thearrangement, Argos will be providing its brand,catalogue and multi-channel expertise and IT support

Multi Channel propositions

Tata-Woolworths Sourcing agreement for Consumer durables and Foodsunder brand name CROMA

Multi brand retail chain

Staples Inc Pantaloon RetailGlobal Sourcing of Office equipments across variousbusinesses

Cash and carry

Reliance Food & grocery, electronics & appliances, clothing &footwear, furniture & furnishing, household articles.

Multi format and Multi Category

Birla Food & grocery, electronics & appliances, clothing &footwear, furniture & furnishing, household articles.

Convenience and Supermarket

12


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November 18, 2010

Format Definition12

Formats Description Key categoriesretailed

Typical sizeSq.ft .

Example

Hyper marketsHyper markets

A large superstore,combining a supermarket

and departmental store,offering full lines of groceryand general merchandise allunder one roof

Food, groceries, apparel,

furnishings, consumer durables

15,000-100,000 Big Bazaar, Hypercity, Spencer,

Star India Bazaar, VishalMegamart

Super

markets

Super

markets

A large self service outletoffering food and householdgoods

Food, groceries, medicines 3,000-15,000 FoodWorld, Trinethra, Subshiksha,Food baazar

DepartmentalstoresDepartmentalstores

A large self service outletoffering a variety of merchandise

Apparel, Jewellery, watches,fashion accessories, footwear,furniture, furnishings

10,000-50,000 Shoppers Stop, Lifestyle,Pantaloon, Westside

Category

killers

Category

killers

Large speciality storesfocussed on one or a fewcategories of merchandise,offering a wide selection at

low prices

Electronics, office supplies,apparel 20,000-100,000 Best Buy Circuit City, Staples

ConveniencestoresConveniencestores

Small size, easily accessiblestores offering a quickshopping, fast check outexperience and extendedworking hours

Food, groceries, medicines 500-2,000 In&Out, Trinethra, Subhiksha,traditional stores

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November 18, 2010

Format Definition (Contd.)12

Formats Description Typical sizeSq.ft. Example

Single brandoutletsSingle brandoutlets

Retail outlet offering products of a single brand

Apparel, footwear, tyres, foodservices, furniture

1,000-5,000 Nike, Adidas, Colourplus,McDonalds, Gautier, Gucci, TBZ

Multibrandspecialitystores

Multibrandspecialitystores

Retail outlet offering multiplebranded products belongingto a single category class

Footwear, apparel, electronics,books

1,000-20,000 Planet Sports, Planet Fashion,Crosswords

WarehouseclubsWarehouseclubs

Warehouse style large stores,

offering goods in bulk atdiscount prices to members

Food, groceries 100,000 + Metro cash and carry, Costco,

Sams Club

Key categoriesretailed


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November 18, 2010

Retail Challenges

Organizing Retail in India-Challenges

Heterogeneous market

Product offerings in different stores across the country will bevery different

No standard mode of operation across formats

Market not mature (has to be validated)

Infrastructure will bring about logistical challenges

Though, improvements in road networks, power supply are

underway Trained employees with understanding of retail business are

inadequate compared to the needs of organized retail

Barriers to Entry

High taxes, bureaucratic clearance process and labour laws

High cost of real estate

though over 600 malls are to come up all over the country by thenext 4 years

Indian retailers are deeply entrenched, are expanding andbuilding on logistics and technology initiatives


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November 18, 2010

ProcessesProcesses

Complex Processes - Multiple MRP, Deals & Promotions, Forecasting & Replenishment, Lean supply chain JIT inventory, flowthrough warehouse

Evolving processes in Supply chain & merchandising

Global Best Practices not adopted

Consumer Consumer

InfrastructureInfrastructure

High disposable income Changing consumer preferences 28 states, 100+ religion, 250+ festivals

Supply chain not reliable. Cold storage infrastructure evolving Outsourced transportation Low level automation in warehouses

Supplier/

Vendor

Supplier/

Vendor

Current ITCurrent IT

Little or no collaboration between vendor & retailer

Low fill rates from vendors

Highly localized assortments leading to relationship with multiple vendors

Complex trading contracts and off invoice discounts

Multiplicity of disparate Systems & Data Formats No architecture roadmap Base ERP and home grown POS solutions. Low investments in store systems

No investments in planning & optimization technologies

At ground level .


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November 18, 2010

The Way Ahead

India 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 acrossformats and product categories

Most of these players are now gearing up to expand rapidlyafter having gone through their respective learning curves

Real Estate Developers are also moving fast through thelearning curve to provide qualitative environment for theconsumers

The Shopping Mall formats are fast evolving

Partnering among Brands, retailers, franchisees, investorsand malls

Improved Infrastructure

In view of a compressedevolution cycle, retailers need to

simultaneously address issues of speed,Execution and efficiency


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Thank You

13569244 changing reatail scenario

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