leveraging franchisees for profitable growth in retail: infographic

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Page 1: Leveraging Franchisees for Profitable Growth in Retail: Infographic

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

Read full article: http://bit.ly/XWlOMM

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