leveraging franchisees for profitable growth in retail: infographic
TRANSCRIPT
Leveraging Franchisees for Profitable Growth in Retail
The Indian retail market is considered as one of the most attractive markets in the world in terms of market size and potential.
This is reflected in the ̀ 30000 CR Retail Franchising industry in India, which is growing at an annual rate of 30%. However there are kinks in the growth story.
67% of these companies reported lower profits in FY'12 compared to that in Financia Year 2008-09
86% of Indian Retailers improved Sales Change from Financial Year 2008 to 2012
Retailers with improved Profits 33%
Retailers with Lower Profits
67%
Retailers with sales degrowth 14%
Most companies reported growth in sales
but the increase in sales growth is
not reflected in the profits
These 21 retail companies amount to a cumulative turnover of Rs 21,000 crore in Financial Year 2012-13
Only 33% of Indian Retailers improved profits from Financial Year 2008 to 2012
How can Retail Companies Grow ? Retail companies can grow by expanding the retail
footprint by way of own stores and of late-through Franchising.
FranchisingOwnStores
DecliningProfit Trend
Maintaining profitability = Growth in retail
Established Players
Franchising
Franchising
Franchising
Franchising
Only 33% of Indian Retailers improved profits from Financial Year 2008 to 2012
Many established players are still to take the
growth route forward in a rapid pace,
possibly because of their current
declining profit trend.
A profitability pressure has always been
a reason for a cautious approach toward
growth.
Franchisee appears to be one such option
where growth can come without increasing the
operating expenses.
Increasing growth
Declining operating expenses
F
F F
F
FF
OwnStores
Making the franchisee model profitable is closely related with making the retailing profitable in the first place.
To understand why retailers are not on a solid ground, let us reiterate the pressures that a typical organized retailer faces today in the existing business:
F
Increasing competition in
home markets, other retailers
looking to expand, internet
retail, and global retailers
entering India
More demanding
consumers looking to
extract the best value
for money.
Limited negotiating
power to increase
margin with
established brands
Increasing operating
costs due to
inflationary pressures
Slowdown in the
Indian Economy,
resulting in
decreased number of
consumers and
reduced discretion-
Retailers are struggling to make money Franchisee to the rescue
Problems of a Retailer
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