overview of indian retail industries - 30 pages

7/23/2019 Overview of Indian Retail Industries - 30 Pages

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Overview of Indian retailindustries

Website: http://info.shine.com/industry/retail/7.html

Year: 2014

The Indian Retail sector has come o age and has gone through maortransformation o!er the last decade "ith a noticea#le shift to"ards organisedretailing. $ T %earney& a '( )ased glo#al management consulting *rm hasran+ed India as the fourth most attracti!e nation for retail in!estment among ,0-ourishing mar+ets.

The retail mar+et is epected to reach a "hooping Rs47 la+h crore #y 20117&as it epands at a compounded annual gro"th rate of 1 per cent& accordingly tothe 3es )an+ $ssocham study.

The retail mar+et& 5including organised and unorganised retail6& "as at Rs2, la+hcrore in 201112. $ccording to the study& organised retail& that comprised ustse!en per cent of the o!erall retail mar+et in 201112& is epected to gro" at a$8R of 24 per cent and attain 10.2 per cent share of the total retail sector #y20117.

In terms of sheer space& the organised retail supply in 201, "as a#out 4.7 millions9uare feet 5s9 ft6. This sho"ed a 7 per cent increase o!er the total mall supplyof ust 2. million s9 ft in 2012.

;<a!oura#le demographics& increasing ur#anisation& nuclearisation of families&

rising a=uence amid consumers& gro"ing preference for #randed products andhigher aspirations are other factors "hich "ill dri!e retail consumption in India&>said ?( Ra"at& $ssocham (ecretary 8eneral.

Retail classication

Retail industry can #e #roadly classi*ed into t"o categories namely organisedand unorganised retail.

@rganiAed retail @rganised traders/retailers& "ho are licensed for tradingacti!ities and registered to pay taes to the go!ernment.

'norganiAed retail B It consists of unauthoriAed small shops con!entional %iranashops& general stores& corner shops among !arious other small retail outlets #utremain as the radiating force of Indian retail industry.

Market Dynamics

In the past fe" years& Indian Retail sector has seen tremendous gro"th in theorganised segment. Caor domestic players ha!e stepped into the retail arena"ith long term& am#itious plans to epand their #usiness across !erticals& citiesand formats.

ompanies li+e Tata& Reliance& $dani Dnterprise and )harti ha!e #een in!estingconsidera#ly in the #ooming Indian Retail mar+et. $long "ith these giant

http://info.shine.com/industry/retail/7.html

http://info.shine.com/industry/retail/7.html



retailers& a num#er of transnational #rands ha!e also entered into the mar+et toset up retail chains in close association "ith #igger Indian companies.

Eigh consumer spending o!er the years #y the young population 5more than,1F of the country is #elo" 14 years6 and sharp rise in disposa#le income aredri!ing the Indian organised retail sectors gro"th. D!en Tier I G Tier II cities andto"ns are "itnessing a maor shift in consumer preferences and lifestyles& theresult of "hich& they ha!e emerged as attracti!e mar+ets for retailers to epandtheir presence.

The Indian retail sector is highly fragmented and the unorganised sector hasaround 1, million retail outlets that account for around HHF of the total Indianretail industry. Eo"e!er& going for"ard& the organised sectors gro"th potential isepected to increase due to glo#alisation& high economic gro"th& and impro!edlifestyle.

$lthough the gro"th potential in the sector is immense& there are o#stacles too&

that could slo" the pace of gro"th for ne" entrants. Rigid regulations& highpersonnel costs& real estate costs& lac+ of #asic infrastructure& and highlycompetiti!e domestic retailer groups are some such challenges.

Key drivers of the Indian Retail Industry

• Dmergence of nuclear families

• $n increase in the dou#leincome households trend

• arge "or+ing population

• Reasona#le Real estate prices

• Increase in disposa#le income and customer aspiration• ?emand as "ell as increase in ependiture for luury items

• 8ro"ing preference for #randed products and higher aspirations

• 8ro"ing li#eraliAation of the <?I policy in the past decade

• Increasing ur#anisation&

• Rising a=uence amid consumers

• )ottlenec+s

• $ long "ay to meet international standards

• ac+ of eJcient supplychain management

• ac+ of re9uired retail space

• Ko *ed consumption pattern• (hortage of trained manpo"er

• ac+ of proper infrastructure and distri#ution channel

mer!in! sectors"trends in Indian retailin!

Lithin retail& the emerging sectors "ould #e food and grocery& apparel&electronics& ecommerce& fashion and lifestyle.

Incorporation of technology in the organised retail segment has #een somethingto rec+on "ith in the past fe" years. 'se of computers for merchandise planning

and management& control of in!entory costs and supplies and replenishment of



goods done electronically& internal store #illing& etc has changed the face ofproduct retailing.

@nline retail #usiness is the net gen format "hich has high potential for gro"thin the near future. $fter con9uering physical stores& retailers are no" forayinginto the domain of eretailing. The retail industry is all set to test "aters o!er theonline medium& #y selling products through "e#sites. <ood and grocery storescomprises the largest chun+ of the Indian retail mar+et.

$n emerging trend in this segment is the !irtual formats "here customer ordersare ta+en online through "e# portals "hich are deli!ered at the door step the!ery same day or the follo"ing day. This trend has #een catching up "ith most of the large siAed retail chains that ha!e their "e#sites.

#he Road $head%

$ccording to panel mem#ers at the se!enth <ood and 8rocery <orum India& theopportunities in food and grocery retail in India are immense& gi!en that itconstitutes a#out H per cent of Indias total retail mar+et. The Indian retailmar+et& currently estimated at M4H0 #illion& is proect to gro" at a compoundedannual gro"th rate of per cent to reach M #illion #y 202,. Codern retail "itha penetration of only F is epected to gro" a#out si times from the current 27#illion '(? to 220 #illion '(?& across all categories and segments.

@rganised Retail is emerging as the ne" phenomenon in India and despite theslump& the mar+et is gro"ing eponentially. $s economic gro"th #rings more ofIndias people into the consuming classes and organiAed retail lures more andmore eisting shoppers& #y 201& more than ,00 million shoppers are li+ely topatroniAe organiAed retail chains.

onsumer mar+ets in emerging mar+et economies li+e India are gro"ing rapidlyo"ing to ro#ust economic gro"th. IndiaNs modern consumption le!el is set todou#le "ithin *!e years to '(M 1. trillion from the present le!el of '(M 70#illion.

The gro"ing middle class is an important factor contri#uting to the gro"th ofretail in India. )y 20,0& it is estimated that H1 million households "ill #e middleclass& up from 21 million today. $lso #y 20,0& 70 million people are epected toli!e in cities& nearly t"ice the population of the 'nited (tates today.

Thus& "ith tremendous potential and huge population& India is set for high gro"th

in consumer ependiture. Lith IndiaNs large young population and highdomestic consumption& the macro trends for the sector loo+ fa!ora#le.



I&DI$& R#$I' I&D()#RY: *hallen!es+ Outlookand O,,ortunities

Website:

https://""".dn#.co.in/IndianRetailIndustry/o!er!ie".asp The retail sector has #een at the helm of Indias gro"th story. The sector hase!ol!ed dramatically from traditional !illage fairs& street ha"+ers to resplendentmalls and plush outlets& gro"ing from strength to strength. $ccording to theIndian ouncil for Research on International Dconomic Relations 5IRIDR6& India isthe se!enthlargest retail mar+et in the "orld& and is epected to gro" at a $8Rof o!er 1,F till <312. In <307 retail sales reached Rs 1,&,00 #n and amounting toaround ,,F of Indias 8?O at current mar+et prices1. $ccording to the entral(tatistical @rganisation 5(@6 estimates& the total domestic trade 5#oth retail and"holesale6 constituted 1,.0F of countrys 8?O in 1HHH2000& "hich has gone up

to 1.1F in <307.

What is retailin!-

Retailing is a distri#ution channel function& "here one organisation #uysproducts from supplying *rms or manufactures products themsel!es& and thensells these directly to consumers.

In maority of retail situations& the organisation& from "hom a consumer #uys& isa reseller of products o#tained from others& and not the product manufacturer.Eo"e!er& some manufacturers do operate their o"n retail outlets in a corporatechannel arrangement.

Retailers oer many #ene*ts to suppliers and customers as resellers.onsumers& for instance& are a#le to purchase small 9uantities of an assortmentof products at a reasona#ly aorda#le price. (imilarly& suppliers get anopportunity to reach their target mar+et& #uild product demand through retailpromotions& and pro!ide consumer feed#ac+ to the product mar+eter.

?uring the last fe" years& the Indian retail mar+et has seen considera#le gro"thin the organised segment. Caor domestic players ha!e entered the retail arenaand ha!e am#itious plans to epand in the future years across !erticals& formats&and cities. <or eample& companies li+e Reliance& Tata& )harti& $dani Dnterprise&ha!e #een in!esting considera#ly in the #ooming Indian retail sector. )esides& a

num#er of transnational corporations ha!e also set up retail chains incolla#oration "ith #ig Indian companies.

The Indian retail sector is highly fragmented and the unorganised sector hasaround 1, million retail outlets that account for around HHF of the total Indianretail industry. Eo"e!er& going for"ard& the organised sectors gro"th potential"ill increase due to glo#alisation& high economic gro"th& and changing lifestyle.Coreo!er& high consumer spending o!er the years #y the young population5more than ,1F of the country is #elo" 14 years6 and sharp rise in disposa#leincome are dri!ing the Indian organised retail sectors gro"th. D!en small to"nsand cities are "itnessing a maor shift in consumer lifestyle and preferences& and

ha!e thus emerged as attracti!e mar+ets for retailers to epand their presence.

https://www.dnb.co.in/IndianRetailIndustry/overview.asp

https://www.dnb.co.in/IndianRetailIndustry/overview.asp



$lthough the gro"th potential in the sector is immense& it is not "ithoutchallenges that could slo" the pace of gro"th for ne" entrants. Rigidregulations& real estate costs& high personnel costs& lac+ of #asic infrastructure&shrin+age& and highly competiti!e domestic retailer groups are some suchchallenges. $dditionally& resource constraints at shopping mall proects are also

delaying completion and disrupting many retailers entry strategies.

.lobal Retail )cenario

Retailing has played a maor role in the glo#al economy. In de!eloped mar+ets&retailing is one of the most prominent industries. In 200& the '( retail sectorcontri#uted ,1F to the 8?O at current mar+et prices. In de!eloped economies&organised retail has a 70F share in total retail as compared "ith de!elopingeconomies& "here unorganised retail has a dominant share.

8lo#al retail sales "as estimated to #e around '(M 12 trillion in 20072P ho"e!er&in 200& the slo"do"n in the glo#al economy& especially in the '(& and creditcrunch& decreased consumer spending. @n a glo#al le!el& the economyperformed ro#ustly till 2007& #ut the '( crisis spread o!er to Durope in early200& and its impact "as felt in the $siaOaci*c region #y mid200.

India has the highest num#er of retail outlets in the "orld at o!er 1, million retailoutlets& and the a!erage siAe of one store is 0100 s9uare feet. It also has thehighest num#er of outlets 511&H0,6 per million inha#itants. The per capita retailspace in India is among the lo"est in the "orld& though the per capita retail storeis the highest. Caority of these stores are located in rural areas.



volution of or!anised retail

The share of organised retail in de!eloped countries is much higher thande!eloping countries li+e India. In 200,& the share of organised retail in the '(

"as around F& in Qapan it "as F& in the '% it "as 0F& "hile in de!elopingcountries li+e India& hina and Russia it "as F& 20F and ,,F& respecti!ely. Theconcept of organised retail had occurred much later in de!eloping economiesthan the de!eloped economies. Codern day retail came into eistence in threesuccessi!e "a!es. The *rst "a!e too+ place in the early to mid1HH0s in (outh$merica& Dast $sia ecluding hina& Korth entral Durope and (outh $frica. Thesecond "a!e of organised retail occurred during midtolate 1HH0s in Ceico&entral $merica& (outheast $sia and (outh entral Durope. The third "a!e oforganised retail #oom started in the late 1HH0s and early 2000 in some parts of$frica& entral and (outh $merica& (outheast $sia& hina& India and Russia andcontinues to gro" at a rapid pace.

Risin! household e/,enditure in 0RI* countries drives or!anised retail

The household ependiture in )raAil& Russia& India and hina& or the )RIcountries& is gro"ing at a faster rate than the de!eloped countries li+e the '(&'%& Qapan& 8ermany& and <rance& indicating the higher gro"th potential for theretail sector in these countries that ha!e a large consumer #ase. Eouseholdependiture 5at constant prices6 in de!eloped countries li+e the '(& '%&8ermany& and Qapan has "itnessed an a!erage annual gro"th of ,.2F& 2.F&0.2F& and 1.0F& respecti!ely& during 20042007& #ut the ependiture in the )RIcountries has #een much higher. The de!eloped countries are "itnessing a

continuous fall in domestic demand and high dependence on eport earnings&"hich are the reasons for lo"er household ependiture. In current times& theglo#al demand is "ea+ening& o"ing to economic slo"do"n& and this "orry islooming large o!er the retail sector.



The consumer mar+et in the de!eloped countries is saturating& and therefore& #igretail companies in those countries are increasingly epanding their footprint in

emerging countries li+e India& hina& and Russia. D!en though 100F <?I is notpermitted in the retail sector& India continues to attract leading glo#al retailers tostart retail #usiness through local alliances. <or eample& recently& LalCart hasopened its *rst store at $mritsar 5Ouna#6 in a oint !enture 5Q6 "ith )hartiDnterprises& and it is also planning to epand its footprint to other parts of India.

The fact that the penetration of organised retail in )RI countries is much lo"erthan the de!eloped countries is acting as an added ad!antage for these retailgiants.

Ma1or !lobal retail markets

This section pro!ides a #rief o!er!ie" on the retail industry in maor glo#al

mar+ets on the #asis of phases of retail lifecycle. @rganised retailing in mosteconomies typically passes through four distinct phases:

• In the *rst phase& ne" entrants create a"areness of modern formats li+ehypermar+et& supermar+et& department stores etc and raise consumerepectations

• In the second phase& consumers demand more modern formats as themar+ets de!elop& there#y leading to a strong gro"th

• In the third phase& the high rate of gro"th leads to a stage of maturemar+et

• In the *nal phase& the domestic mar+et reaches a saturation point leadingto limited gro"th& so retailers eplore and e!aluate ne" mar+ets acrossthe glo#e

()$

The '( retail mar+et is the largest retail mar+et in the "orld& and the organisedsector constitutes o!er F of the total retail sales. In 200& the '( retailindustry recorded sales of '(M 4&404.7 #illion& amounting to ,1F of the national8?O at current prices. The '( retailing is di!ided into three categories:department stores& mass merchandisers& and specialty stores. onsumers in the

'( ha!e no" #ecome more !alueconscious& "hich has led to an increase in thesales of discount stores that ma+e mass merchandisers as the largest category.



@nline retailing also has #een gaining popularity in the '(& #ut the recentslo"do"n in the economy and *nancial crisis ha!e shrun+ consumer spending&"hich is li+ely to re-ect in the retail sales *gures of 200. $s domestic mar+ets inthe de!eloped countries ha!e saturated and opportunities in emerging mar+etsare rising& organised retailers from those countries ha!e #een turning to ne"

mar+ets.

(K

The '% retail sales "ere !alued at S27 #illion in 200 "ith 1H7&HH0esta#lishments. The industry contri#uted to F of the national 8?O in 2004.

The retail industry in the '% pro!ides employment to 2. million people& "hichconstitutes 11F of the total "or+forceP ho"e!er& the recent glo#al economicslo"do"n has aected the '% mar+et also. $s the *nancial system in the '% isfacing pro#lems& and has resulted in a sluggish economy& consumer spendinghas also reduced.

*hinahina opened up its economy to the "orld in 1H0s "hich led the gro"th of theorganised retail mar+et in the country& "hich constituted 20F of the total retailsales of '(M 7 #illion in 200. hinas retail industry is also gro"ing at aphenomenal rate and plays a !ital role in the glo#al retail scenario due to itslarge and #urgeoning population& large cities& and increasing purchasing po"erof local population.

Retail in India: Industry )tructure

The retail industry in India is highly fragmented and unorganised. Darlier on

retailing in India "as mostly done through familyo"ned small stores "ith limitedmerchandise& popularly +no"n as +irana or momandpop stores. In those times&food and grocery "ere shopped from clusters of open +ios+s and stalls calledmandis. There "ere also occasional fairs and festi!als "here people "ent toshop. In the t"entieth century& infusion of "estern concepts #rought a#outchanges in the structure of retailing. There "ere some traditional retail chainsli+e Kilgiri and $+#arallys that "ere set up on the lines of "estern retail conceptsof supermar+ets. The go!ernment set up the pu#lic distri#ution system 5O?(6outlets to sell su#sidised food and started the %hadi 8ram 'dyog to sell clothesmade of cotton fa#ric. ?uring this time& high streets li+e in+ing Road and<ashion (treet emerged in Cum#ai. (ome manufacturers li+e )om#ay ?yeing

started for"ard integrating to sell their o"n merchandise. (hopping centres orcomple came into eistence& "hich "as a primiti!e form of todays malls.

(ince li#eralisation in early 1HH0s& many Indian players li+e (hoppers (top&Oantaloon Retail India td 5ORI6& (pencer Retail !entured into the organisedretail sector and ha!e gro"n #y many folds since then. These "ere the pioneersof the organised Indian retail formats. Lith the opening up of foreign directin!estment in single#rand retail and cashBandcarry formats& a ne" chapterunfolded in the retail space. Cany single#rand retailers li+e ouis uitton and

Tommy Eil*ger too+ ad!antage of this opportunity. The cashandcarry formathas pro!ed to #e an entry route for glo#al multichannel retailing giants li+eCetro& LalCart and Tesco.

0oomin! Indian economy s,urs consum,tion



The Indian economy posted a remar+a#le $8R gro"th of .HF during <304<30& "hich increased the per capita income and in turn& the disposa#le incomeof a large section of the population. 8ro"th in the retail trade depends on thefundamentals of an economy. The Indian economy gre" at a ro#ust rate o!er thelast *!e years& riding high on the high gro"th in the ser!ice sector 510.F6 and

the manufacturing sector 5H.4F6 as compared "ith 7.4F and 4.1F during <3HH<30,. The rise in per capita income and the resultant rise in disposa#le incomestimulated consumption during this *!eyear period& there#y resulting in a spurtin retail trade. <urthermore& according to the Cc+insey 8lo#al Institute 5C8I6& thea!erage real household disposa#le income is li+ely to gro" #y .,F during 200202 and reach Rs ,1&H per annum as compared "ith ,.F in the pre!ious20 years& "hich indicates the huge potential for the retail sector in India.

2rivate 3inal *onsum,tion /,enditure+ ,er ca,ita income and retailsales are ,ositively related

The pri!ate *nal consumption ependiture 5O<D6 and 8?O gro"th are indicati!eof the gro"th in the retail sector. In the past consumers& especially youngconsumers in the age group of 1,4& increased their consumption ependiture"ith an increase in their earningsP these young consumers totalled around 400million and constituted ,F of the total population. ?ue to the conse9uent #oomin the Indian retail sector many foreign and Indian players entered the Indian

retail sector.



The chart a#o!e sho"s that during <3H<300& the O<D 5constant prices6increased #y .4F per annum. ater on& from <301 to <30,& O<D declined to4.0F. $gain during <30,<307& it "ent up to .2F per annum. ?uring these timeperiods& the retail sales& the per capita income& and the real 8?O gro"th follo"eda similar trend as the O<D& "hich made it e!ident that there is a positi!ecorrelation #et"een real 8?O and O<D on the retail sector. ?uring <30& theO<D as a percentage of 8?O at factor cost at constant prices remained !eryhigh at 2.2FP hence& the o!erall retail sector gro"th recei!ed a maor impetusduring this period.

There ha!e #een stri+ing changes in Indias consumption pattern o!er the past0 years o"ing to the e!erincreasing media eposure& changes in lifestyle&gro"ing ur#anisation& coupled "ith an increase in the education le!els among

others. The Indian retail industry has matured tremendously o!er the years& andhas #ecome more processdri!en& standardised& 9ualityassured& and #randdri!en.

)i4e of the Indian retail industry

In 2007& the total Indian retail industry "as !alued at Rs 1,&,00 #illion5estimate6& and the organised segment constituted .HF of the !alue at Rs 7,#illion. In the segment& the clothing and accessories sales had a maority share of ,.1F follo"ed #y the food and grocery segment at 11.F and electronicssegment at H.1F. The organised retail industry gre" at a $8R of ,,F during20042007. D!en though the organised retail segment has a minuscule share inthe total industry& it has enormous potential considering the rising ur#anisation&the eJcient supplychain& the readilya!aila#le retail space& and moderntechnology& "hich help in reducing consumer prices to a great etent.



<urthermore& "ith the entry of #ig foreign players& the Indian organised retailmar+et has #ecome more competiti!e in terms of implementing ne"er #usinessmodels on the operational format& and pricing& and in terms of eJciency. Theorganised retail sector "ill largely #ene*t in terms of producti!ity and gro"th ifsectors li+e agriculture& food processing& and tetile are encouraged further. Thea#o!ementioned sectors "ould recei!e a remar+a#le #oost if they "ould supplyto #ig Indian and foreign retail players& "hich "ill ensure their gro"th in tandem"ith the retail sector. Coreo!er& the organised retail sector "ill directly and

indirectly impro!e the countrys employment scenario.

Cany Indian retail players ha!e already started purchasing supplies directly fromfarmers and other suppliers& "hich has in!aria#ly eliminated the supplychaincompleities and large num#er of intermediaries& and has resultantly lo"eredprices for consumers. <urthermore& the amendment of the $griculture OroductCar+eting $ct 5$OC6 has re!amped the farm produce supply chain.

Industry se!mentation

@rganised retail can #e segmented in t"o "ays segmentation #y !erticals and#y channels. erticals are segmented on the #asis of the type of merchandise

oeredP similar merchandise can #e clu##ed together to form a !ertical& forinstance food and grocery. hannels are the means through "hich retailers selltheir merchandiseP for eample& store channels of retailing that comprisedierent formats li+e hypermar+ets& supermar+ets and department stores andnonstore formats li+e online retailing& !ending and +ios+s.

Ma1or retail se!ments

3ood and !rocery:

In 2007& the food and grocery segment "as !alued at Rs 7&H20 #illion& and itenoyed a dominant mar+et share of 2F in the total Indian retail sectorP

ho"e!er& there "as a completely opposite scenario in the organised retail



segment. The food and grocery segment is the secondlargest in the organisedretail and has an 11.F share that is !alued at Rs H0 #illion.

Initially this segment gre" at a slo" pace due to the presence of an esta#lishedretailing system led #y +irana stores& a highlyfragmented food supply chain& andthe lac+ of a de!eloped food processing industry. Kilgiri "as one of the earliestretailers that started a chain or stores in dierent parts of the country. Eo"e!er&the gro"th of Kilgiris stores "as limited as it "as challenged #y a "ea+ supplychain and an underde!eloped food processing industry. Oostli#eralisation&organised retailers sa" a rene"ed opportunity in the food and grocery segment.

3ew food and !rocery retailers

3ood 0a4aar: ORI !entured into food retailing "ith <ood )aAaar in $pr 2002.Initially it "as a part of )ig )aAaar #ut later on it started operating as astandalone outlet in addition to #eing a part of )ig )aAaar. The store oers a"ide range of fruits& !egeta#les& <C8 products and readytocoo+ products. It

uses a concessionaire model for "et groceries& and it sources staples from $OCor farmers 5"here the state permits6. <ood )aAaar attracts high footfalls due toinno!ati!e initiati!es li+e li!egrinding& li!e #a+ery& fresh uice corner etc.

In $ug 2007& the store !entured into another retail format that ser!ed the foodand grocery segment called the %) <air Orice shop. This store is modelled on theconcept of lo"frills neigh#ourhood store of 1&0001&00 s9uare feet. The <airOrice store follo"s a pricing model that is 20F lo"er than the pre!ailing mar+etprice.

More: $ditya )irla Retail td forayed into the retail #usiness in 200 #y ac9uiring Trinethra (uper Car+et td& the southIndia #ased retail chain. In Cay 2007& the

company launched its o"n #rand of stores called Core in Oune. The supermar+etstore has a minimum siAe of 2&00 s9uare feet and oers fruits& !egeta#les&staples& personal care& general merchandise& pharmacy& poultry and dairyproducts.

Reliance Retail: Reliance Retail td& a su#sidiary of Reliance Industries td& hasan aggressi!e plan to epand its retail net"or+ across India. It entered the foodand grocery segment in Ko!em#er 200 through its con!enience store formatReliance <resh. The store oers a range of fruits& !egeta#les& personal care&home care and +itchen utensils. It focuses on #uilding a strong relationship "iththe agri#usiness !alue chain and sources directly from "holesalers.

3ashion and accessories

<ashion and accessories is the largest category in organised retail and had a,.1F share !alued at Rs 2H #n in 2007. In terms of total retail& this categoryheld the second position "ith a H.F share !alued at Rs 1&,1, #n. The segmenthas dri!en the retail #oom in India and has opened many opportunities for largeas "ell as glo#al retailers to enter the segment. ?espite the high rental& manyglo#al retailers li+e 8as& 8ucci& e!is& )enetton& Car+s and (pencer ha!e openedtheir stores in India& and also ha!e plans to increase their presence.

The mens "ear segment had the highest share of 40.2F in the Rs 1&,1,#illion

fashion and accessories mar+et in 2007 "hile the "omens category accountedfor ,4.F& follo"ed #y the +ids "ear and uniform category at 24.HF. ?emand in



the #randed apparel segment is increasing as consumers are upgrading topremium #rands due to changing preferences. The premium segment has seenthe fastest gro"th in !alue o"ing to the rising preference for formals at Indian"or+places& the ne" oerings from international #rands& and the increasing"illingness on the part of consumers to pay a premium for 9uality. The apparel

retailers are also pushing themsel!es to the accessories segment to attract morecustomers.

3ew fashion and accessories retailers

2antaloons: The *rst Oantaloon store "as opened at 8ariahat in 1HH7 in &000s9uarefeet area. @!er the years& the store has undergone se!eral transitions.Lhen it "as launched& the store mostly sold eternal #rands. 8radually& itstarted retailing an eclectic mi of eternal #rands as "ell as pri!ate la#els.Initially& it positioned itself as a family store targeted across age and gender

groups #ut later it shifted its focus to"ards #eing a fashion store and ga!e moreemphasis on the youth. $s on ?ec 200& Oantaloons had around 44 stores spreadacross maor cities in India.

)ho,,ers )to,: (hoppers (top is one of the largest retailers in India. Itprimarily caters to the lifestyle segment and oers customers #oth domestic andinternational #rands. The store recently re!amped its #randing #y introducing ane" sym#ol. (hoppers (top has lifestyle retailing as its core housing #randacross categories li+e apparels and accessories. The store operated at 2locations in 12 cities as on ?ec 200.

Koutons: %outons Retail is a leading manufacturer of readymade and fashion

"ear #rand. It "as esta#lished as harlie reation O!t td in 1HH1 formanufacturing and eporting garments. ater in 1HH %outons "as esta#lishedto pro!ide aorda#le mens "ear to the masses. %outons also entered the"omens segment in $pr 200 #y launching its #rand es <emme& "hich catersto young "omen in the 1,4 years age group and includes apparels li+e tshirts&party"ear& lycra& semiformal shirts& denims& capri pants etc. %outons has alsolaunched its #rand es femme for "omen G %outons Qunior for +ids. <e"reno"ned #rand of %outons are: Koutons men’s wear, Les Femme, Koutons Junior

and Charlie Outlaw.

3ootwear

In 2007& the foot"ear segment had a 1.1F share in the total retail mar+et and"as !alued at Rs 10 #illion "hile it had a H.HF share in the organised mar+etand "as !alued at Rs 77. #illion. In the same year the organised foot"earmar+et recorded a fantastic gro"th of 4HF o!er 200 "hile the o!erall retailmar+et gre" #y ust 1.4F. The changes in consumer #eha!iour and attitudesre-ected in the increasing demand for ne"er styles and dierent types offoot"ear. The mar+et currently oers many #rands that cater to e!ery targetsegment. The Indian foot"ear mar+et is mo!ing at a #ris+ pace presently to caterto the domestic demand. Coreo!er& the in-u of international #rands is inducingthe other"ise priceconscious customers to shell out more #uc+s for theirfa!ourite #rands.



The foot"ear mar+et is eperiencing a changing consumer preference for casualand younger style due to media penetration and due to the increasing a"arenessa#out international trends and lifestyle. There already are a large num#er ofplayers& #oth domestic and international& in the semiformal& formal and casualsegment #ut the casual segment dominates the Indian foot"ear mar+et "ith a

7F share. )randed sports "ear is also gro"ing at a faster rate than the othersegments and the +ey players in this segment are $didas& Ree#o+& Ki+e& Ouma etal.

3ew footwear retailers

Reebok: In 1HH& Ree#o+ forayed into the Indian retail mar+et. Today Ree#o+ isone of the frontrunners in the Indian sports "ear industry. Ree#o+s oeringsinclude apparels& foot"ear and *tness e9uipment and products. Its foot"earoerings are mostly in the trainers and snea+ers segment. Ree#o+ recently hasintroduced its ne" lifestyle !ertical Ree#o+ lassic.

0ata: )ata India is one of the most "ell+no"n and largest foot"ear retailers inIndia. The retailer manufactures and mar+ets dierent types of foot"ear thatincludes ru##er& can!as& leather& and plastic foot"ear. It mar+ets foot"ear underthe #rand names of Korth (tar& Oo"er& $m#assador& Carie laire #esides dealingin international #rands li+e ?r (choll and Eush Ouppies. )ata has a strongdistri#ution net"or+ structure of "holesalers and distri#utors.

Khadim5s: %hadims forayed into foot"ear retailing in 1HH, and is one of themost reno"ned retailers in east India. %hadims mar+ets its o"n products#esides fe" others and specialises in "omens and childrens foot"ear. Theretailer has a presence in multi#rand outlets 5C)@s6 across the country inaddition to its o"n eclusi!e outlets.

6ome and o7ce im,rovement

In 2007& the home and oJcerelated retail segment "as !alued at Rs 4 #illionin the total retail mar+et "hile it "as !alued at Rs 0 #illion in the organisedretail mar+et. In the same year the segment had a .4F share in the organisedretail. Eome and oJce impro!ement is another important segment of theorganised retail as people ha!e started spending more on discretionary items.Oresently the segment is gro"ing at an impressi!e rate. ?ue to the salary hi+esand rise in the dou#leincome households& the lifestyle needs of the young and-ourishing India are surging and conse9uently& consumers are going for

reno!ation of their homes. The concomitant rise in in!estments in furniture&home accessories and furnishings& has added to the segments #oom.

3ew home and o7ce im,rovement retailers

.odre1 'ifes,ace: @n $pr 1& 200,& 8odre G )oyce Canufacturing ompany tdlaunched a ne" retail di!ision. The di!ision "as esta#lished to present a ne"concept in retailing #y displaying and selling under one roof the 8odre range ofhome and oJce furniture& appliances& security e9uipment and loc+s. ater in200& the sho"rooms "ere #randed as 8odre ifespace (tores.

6ome )to,: Eome (top is one of the premium home impro!ement stores that

oers a "ide range of merchandise. It stoc+s !arious national and international#rands that co!er all the home needs li+e home dcor& furniture& #ath



accessories& draperies and health e9uipment. Eome (top currently operatesthree Eome (top stores& one each in Cum#ai& )angalore and Ke" ?elhi.

6ome #own: Eome (olution Retail 5India6 td 5E(RI6& a su#sidiary company ofOantaloon Retail& is designed to cater to the home furnishing and impro!ementmar+et. The format is designed as a onestop destination that oers a completerange in consumer electronics& furniture and other home products. E(RIoperates *!e retail formats: ollectioni& <urniture )aAaar& Dlectronics )aAaar&Eome To"n and eAone.

lectronics In 2007& the electronics segment had a 4F share in the total retailsegment and "as !alued at Rs 7 #illion "hile it had a H.1F share in theorganised electronic retail segment !alued at Rs 71 #illion. The electronicsmar+et has seen a proliferation of #rands and product categories in recent years.$ll international #rands from Qapan& %orea& the '(& Durope and hina ha!e #eenlaunched in India and ha!e #een trying to #uild a panIndia dealer net"or+. Thelifestyle category has seen higher gro"th in India on the #ac+ of changing

consumer preferences and a consumption #oom.

3ew electronic retailers

e8one: eUone is an electronics specialty retail format from E(RI #y %ishore)iyaniled <uture 8roup. The *rst eUone store "as launched in 200 in Indoreand "as follo"ed "ith a second one in )angalore. eUone oers a range ofpersonal products li+e computers& laptops& handy cams& CO, players and mo#ilephones& entertainment products li+e plasma/?& -at Ts& home theatresystems& ?? players& and stereosystems& home products li+e refrigerators& airconditioners& "ashing machines and micro"a!e o!ens& among other +itchenappliances.

9iveks: In 1H& ) $ a+shmi Karayana (etty founded i!e+s in a 200s9uarefeetshop in hennai. Today i!e+s is one of the largest consumer electronics andhome appliances retail chains in India. i!e+s td is a pu#lic limited companythat runs t"o retail #rands B i!e+s and Qainsons. The store "as transformed intoa pu#lic company from a familyrun company "hen 14 stores of Qainsons "ere#ought o!er in 1HHH. ater on in 2001 t"o stores of Oremier and in 2002(pencers (uper (tore "ere purchased. i!e+s has recently a#sor#ed (pencersinto the Oremier #rand. i!e+s gre" from three stores in 1HH to more than ,stores as on ?ec 200.

*aterin! services In 2007& the catering ser!ice in organised retail sho"ed atremendous gro"th of 44.7F o!er the pre!ious year. It "as !alued at Rs 71,#illion in the total retail mar+et and at Rs 7 #illion in the organised retail mar+et.

The catering ser!ices mar+et is di!ided into fast food& cafes and restaurants andothers. India is a #uoyant mar+et for this segment "ith o!er a #illion people "ithdierent food ha#its& religious festi!als& and !arious regions. Dach region has itso"n traditional food& dietary ha#its and its o"n food specialities. In recent timesmany international food chains ha!e entered India& "hich has made this segmentmore dynamic and its gro"th& fastpaced. The +ey gro"th dri!ers of the segmentin India are: the changes in Indian demographics& young "or+ing population&nuclear families& rise in dou#leincome household etc.

3ew caterin! service retailers



Yum Restaurants: 3umV Restaurants is present in India through its #randsOiAAa Eut and %<. In 1HH& %<& "hich mainly ser!es chic+en products& set footin India. $fter ta+ing into account the !egetarian population of India& %<recently modi*ed its menu and launched a !egetarian fare& "hich no"constitutes 40F of the product categories. OiAAa Eut entered India in 1HH and

as on ?ec 200& there "ere 147 OiAAa Eut and 4 %< stores across , and 14cities& respecti!ely.

McDonald5s: Cc?onalds is a 0:0 oint !enture partnership in India #et"eenCc?onalds orporation 5'($6 and t"o Indian #usinessmen. EardcastleRestaurants O!t td o"ns and operates Cc?onalds restaurants in Lest India"hile onnaught OlaAa Restaurants O!t td o"ns and operates these food outletsin the Korth.

*af; *o<ee Day: af oee ?ay is a di!ision of Indias largest coeeconglomerate $malgamated )ean oee Trading ompany. af oee ?aysources coee from &000 acres of estates and is the secondlargest coee shop

in $sia. It has !entured into formats such as music cafes& #oo+ cafes& high"aycafes& lounge cafes& garden cafes and cy#er cafes.

#elecom

In 200 the telecom mar+et in India "as "orth Rs 272 #illion and had a 1.Fshare in the total retail mar+et "hile it had a ,.4F share in the organised retailsegment and "as !alued at Rs 27 #illion. The mo#ile and accessories segmentehi#ited tremendous gro"th in 2007. The Indian telecom sector emerged as thesecondlargest "ireless net"or+ in the "orld after hina "ith the recent spate innum#er of "ireless su#scri#ers.

3ew telecom retailers

#he Mobile )tore: The Co#ile (tore& promoted #y the Dssar 8roup& is one of thecountrys largest mo#ile retailers. Its a onestop mo#ile solution shop that oerstelecom products li+e mo#iles& accessories& mo#ile connections and recharges&mo#ile #ill payments& handset repairs& handset echange& music and gamingde!ices and ?TE& all under one roof& in a "orldclass shopping am#ience. Theshop had more than 1&,00 stores spread across 200 cities as on ?ec 200.

Mobile&=#: )angalore#ased Co#ileKWT Teleser!ices O!t td has a panIndiapresence and operates in the follo"ing three maor retail formats: standalonestores& store"ithinastore& and enterprise stores. This store is eyeing a pan

India net"or+ and hence has initiated a tieup "ith (hoppers (top& (tar )aAaar&Cega Cart& and andmar+ stores& for setting up store"ithina store in theiroutlets across the country. $s on ?ec 200& the company "as operating morethan , stores that "ere spread across maor cities in India.

2harmaceuticals

In 2007& the pharmaceuticals mar+et had a ,.F share and "as !alued at Rs 4#illion in the total retail mar+etP ho"e!er& its share in the organised retail mar+etaccounted for merely 2.0F share at Rs 1.4 #illion during the same period. Theorganised pharmaceutical retailer is +no"n to implement inno!ati!e concepts

and glo#al standards to pro!ide customers "ith an eperience that is completelydierent from "hat an unorganised retailer oers.



3ew ,harmaceutical retailers

$,ollo 2harmacy: In 1H,& $pollo Oharmacy& a di!ision of $pollo EospitalDnterprise td& entered retailing #y opening up its *rst store in hennai. Theretailer also too+ initiati!es to pro!ide medicines to the rural regions #y tying up"ith ITs echoupal and 8odre $adhaar. $pollo has also started epandingthrough the franchise route. It has recently launched a ne" concept&Kurse(tation& at its pharmacy outlets& "here the nurses are a!aila#le to attendthe patients at their houses& or refer them to an $pollo linic near#y. $s on ?ec200& $pollo "as operating at o!er H0 outlets across the country.

Med2lus: In 200& CedOlus Eealth (er!ices Ori!ate td "as incorporated inEydera#ad to cater into the health care segment. The company has esta#lisheda large num#er of pharmacy outlets chain across maor cities in !arious states ofthe country& and are maority of those are spread across four southern states. Ithas o!er 00 pharmacy outlets spread across , cities/ to"ns in the country.

0eauty and wellness In 2007& the #eauty and "ellness segment gre" at atremendous rate of F o!er the pre!ious year in the organised retail mar+et. Itsshare in the total retail mar+et& ho"e!er& "as ust 0.,F and "as !alued at Rs 4#illion. In the organised mar+et& the segment sho"ed tremendous gro"th due tothe rise in ser!ice sector employment.

3ew beauty and wellness retailers

Reliance Wellness: In @ct 2007& Reliance Retail td& o"ned #y Cu+esh $m#ani&entered the #eauty and "ellness segment #y opening its *rst store atEydera#ad. This store oers a "ide range of products under the health foods&personal care& healthcare& and pharmaceuticals categories.

6imalaya Dru!s: The Eimalaya ?rug ompany operates #oth eclusi!e retailoutlet formats and shop"ithinashop outlets. The stores oer an entire range of Eimalaya drugs from pharmaceuticals& personal care& to #a#y care and animalhealthcare products at competiti!e prices. The company emphasises on ser!ice&trained personnel and a 9uality shopping eperience in their stores. Eimalayahas also launched its online shopping "e#site to ma+e all its productscon!eniently a!aila#le to its customers 24/7 and to reach a "ider mar+et& "hereits stores are not present.

>ewellery

In 2007& e"ellery retail "as "orth Rs H4 #illion and accounted for F of thetotal retail mar+et. In the organised retail mar+et& e"ellery retail merely had a2.HF share at Rs 2, #illion. In the same year e"ellery retail in the organisedretail mar+et recorded high gro"th of ,.HF o!er 200 as compared "ith 1.,Frecorded in the total retail mar+et.

3ew 1ewellery retailers

.itan1ali: 8itanali 8ems td 5886 is one of the largest& integrated diamond and e"ellery manufacturer and retailer in India. It sources rough diamonds from

primary and secondary source suppliers in the international mar+et& cuts andpolishes the rough diamonds and eports the diamonds to its international



mar+ets. 88 sells diamonds and other e"ellery through retail operations inIndia as "ell as in international mar+ets. Its #rand etensions include 8ili& $smi&(angini& ??amas& 8iantti& Ka+shatra& ollection 8& 8old Dpressions& i!ah 8oldG %iah.

#anish?: In mid1HH0s Titan Industries td promoted #y the T$T$ 8roup entered e"ellery retailing through Tanish9. Tanish9 has set up production andsourcing #ases #y researching the e"ellery crafts of India. Its factory& located atEosur& Tamil Kadu& is spread across 1,&000 s9uare feet and is e9uipped "ith allmodern machinery and latest e9uipment. $s on ?ec 200& there "ere 11

Tanish9 stores spread across maor cities in India.

Reliance >ewels: Reliance Retail td entered e"ellery retailing #y opening its*rst store in )angalore. The company aims to ma+e Reliance Qe"els a onestopdestination that oers consumers a "ide range of gold and diamond e"ellery.

#imewear

In 2007& the Indian "atches mar+et enoyed a 2.HF share in the o!erallorganised retail mar+et as compared "ith merely 0.,F in the total retail mar+et.

The mar+et siAe of the "atch mar+et "as !alued at Rs 44 #illion in the sameyear. The siAe of this mar+et has epanded due to the changes in consumerpreference and the gro"ing mar+et for international "atches in India.International players li+e Tag Euer& Rado& @mega& Role ha!e e!en signed upIndian cele#ritiesas #rand am#assadors to tap the mar+et.

3ew timewear retailers

*iti4en: itiAen has , eclusi!e outlets in 27 cities across India. The Dclusi!e)randed @utlets 5D)@s6 called <irst itiAen house the latest international range of itiAen Latches and display o!er 00 dierent "atches. )esides& itiAen Latchesare also a!aila#le at ifestyle& (hoppers (top and more than 20 itiAen orners5C)@s6 across the country.

#itan: Titan is one of the largest manufacturers of "atches in India. It oersproduct ranges that include the -agship #rand Titan& Ddge& <astrac+& Ke#ula&Raga& (teel& Regalia& <lip& (onata& "hich is a!aila#le in Titan and eclusi!e(onata stores. $s on ?ec 200& there "ere 24 eclusi!e Titan sho"rooms 5Lorldof Titan6 across 122 Indian cities in India.

0ooks+ music and !ifts

)oo+s& music and gift retailing "ere the earliest segments that "itnessed aconsolidation of #usiness into organised formats. The com#ined share of thissegment "as 1.1F of the total retail mar+et at Rs 14 #illion in 2007. @rganisedretailers li+e Olanet C& Cusic Lorld& and andmar+ dominated the musicsegment. $rchies& a prominent gift retailer& has a presence on #oth high streetsas "ell as in malls.

The #oo+s and pu#lishing #usiness continues to thri!e due to greater literacyle!els and rapidly gro"ing middle class and higher middle class population&Dnglishspea+ing middleclass population. Coreo!er& ne" format chains li+e

ross"ord& andmar+& @ford& and no"& @dyssey& that *t into the leisure



aspirations of people& are located con!eniently& and oer an am#ience conduci!eto #ro"sing and #oo+ #uying. $s a result& the segment has #een gro"ing further.

*rossword: ross"ord "as esta#lished in @ct 1HH2& is Indias leading #oo+storechain and a "hollyo"ned su#sidiary of (hoppers (top td. The company sells#oo+s and other products under the ross"ord #rand. ross"ord sells a "ide!ariety of products li+e magaAines& ? R@Cs& music& stationery and toys apartfrom #oo+s. ross"ord pro!ides customers "ith cafes& reading ta#les and cloa+facilities at each of its outlets. ross"ord customers can also shop for #oo+susing diala#oo+& faa#oo+ and emaila#oo+ facilities oered #y the company.Its other ser!ices include gift !ouchers& apart from the return& echange Grefunds policy #eing follo"ed #y the company. ross"ord #oo+stores arepresently located in Cum#ai& )engaluru& $hmeda#ad& Ke" ?elhi& Oune& Kagpur&adodara& %ol+ata& hennai& Qaipur and Eydera#ad.

ntertainment In 2007& the entertainment segment "as "orth Rs 4 #illionand had a ,.2F share in the total retail industry. This segment has #een dri!en

#y the increasing #ase of young population in India& "hose entertainment needshas #een surging "ith the in-u of malls and multiplees that pro!ide leisureretail& gaming& and cinema. Olayers in the segment are li+ely to gain greatermar+et share as the consumer spend on entertainment is increasing. ORcinemas& <un inemas& Ino are the maor players in the entertainment retailingspace.

Overview of formats"channels The Indian retail industry is categorised intodierent retail formats on the #asis of the retail operation. The formats are#asically de*ned on the #asis of the siAe of the outlet& the pricing strategyfollo"ed& the type of merchandise sold& and also the location. 8i!en #elo" is a

list of formats on the #asis of the a#o!ementioned characteristics:

6y,ermarkets: Eypermar+ets are #ig#o formats "ith an a!erage siAe thatranges #et"een 0&000120&000 s9uare feet& and they stoc+ multiple lines ofproducts such as food and grocery& general merchandise& sports goods& andapparels. Eypermar+ets are mammoth outlets that are fe"er in num#er #ut caterto a larger area 5, +ilometre6. EyperIT3& )ig )aAaar& RO8 (pencers and(hoprite Eyper are some maor players in this format.

)u,ermarkets: The a!erage siAe of supermar+ets range from 10&000,0&000s9uare feet. They are a smaller !ersion of hypermar+ets that holds multiple linesof merchandise #ut is limited in num#er "hen compared "ith supermar+ets.

(upermar+ets are spread across the city& are greater in num#er& #ut cater to asmaller area 512 +ilometer6. <ood"orld& <ood )aAaar and (pinach are somemaor players in this format.

*onvenience stores: on!enience stores oer easy purchase eperiencethrough easily accessi#le store locations. The stores are #asically small in siAe500,&000 s9uare feet6& "hich allo"s 9uic+ shopping and fast chec+outs.(u#hi+sha and Reliance <resh are some maor players in this format.

*ash@and@carry outlets: ashandcarry outlet is strictly not a retail format&#ut considering the #usiness dynamics it follo"s it can 9ualify for a retail format.In a retail #usiness usually a consumer has to purchase one or more products #utunder this format& the consumers ha!e to #uy a minimum !olume of products or!alue speci*ed #y the cashandcarry retailer. In this format the #uyers are



#asically small retailers or catering ser!ice pro!iders "ho purchase in #ul+9uantities. This stores siAe ranges from 100&000 s9uare feet to ,00&000 s9uarefeet. $t present& Cetro is a maor player that falls under this format. Lalmartsalliance "ith )harti and Tescos "ith Trent "ill also come under the cashandcarry format.



Discount stores: The focus of these stores is to oer merchandise at a pricethat is lo"er than the mar+et price& and to gain pro*t from !olumes. These stores+eep merchandise mainly on the #asis of its salea#ility. 'sually these are nofrillstores "ith simple surroundings and less ser!ice. )ig )aAaar and (u#hi+sha aresome famous eamples.

),ecialty stores: These stores usually specialise in one line/category ofmerchandise. $s these stores are concerned "ith only one type of merchandise&they are a#le to oer a "ider range of products at a lo"er price. Damples: Ketand iay (ales.

De,artment stores: These stores are typically lifestyle stores "here most ofthe merchandise constitutes apparels and products other than food and grocery.

These stores oer high 9uality ser!ice to consumers. These stores stoc+ lessermerchandise than other formats since the merchandise is stored in a presenta#lemanner. Kota#le eamples are (hoppers (top& Lestside& Trent& and 8lo#us.

*ate!ory killers: Cany maor retail chains ha!e adapted small specialty storeconcepts and ha!e epanded themsel!es to create large specialty stores. Theseepanded& large speciality stores are +no"n as category +illers. DAone& "hichspecialises in electronics& and (taples& "hich specialises in oJce stationery& areeamples of category +illers.

Re!ulatory 3ramework

The Indian go!ernment has not focussed on retail as an industry. 'ntil no"& thereare no speci*c rules and regulations that are to #e follo"ed #y retail companies.Eo"e!er& there are certain la"s that the retailers need to follo"& "hich aregeneral in nature and "hich pertain to the esta#lishment of stores and theconduct of acti!ities. These la"s are as follo"s:

• (hop and Dsta#lishment $ct

• (tandards of Leights and Ceasures $ct

• Oro!isions of the ontract a#our 5Regulations and $#olition6 $ct

• The Income Ta $ct

• ustoms $ct

• The ompanies $ct

$part from the a#o!e $cts& the companies also follo" certain regional rules and

regulations on the #asis of the stores location. In some regions regulations areimposed on the organised retailers to restrict their epansion and to promote



regional retailersP for instance& the Tamil Kadu go!ernment imposed a 10Fsurcharge on organised retailersP the Lest )engal go!ernment has #een as+ingmall de!elopers to reser!e 10F space for unorganised retailers.

Retailers are also re9uired to ta+e necessary appro!als from local #odies to carryon "ith their #usiness. There is no single "indo" for clearances& and companiesha!e to go to dierent agencies to get appro!als& "hich is one of the #iggesthurdles that the segment faces.

3DI scenario in India

In 1HH1& the Indian go!ernment introduced the economic policy to attract foreignin!estments and since then& it has amended the policy from time to time in!arious sectors to allo" higher le!els of foreign participation. The go!ernmentpolicy in retail sector allo"s 100F foreign in!estment in "holesale cashandcarry and single#rand retailing #ut prohi#its in!estments in retail trading. In1HH7& the go!ernment imposed restrictions on <?I in retail sector #ut in 200&

these "ere lifted and opened in single#rand retailing and in cashandcarryformats.

The cashandcarry #usiness is the easiest mode of entry for foreign retailers intoIndia. Cany glo#al players li+e Cetro and (hoprite ha!e already entered themar+et. Lalmart has forged an alliance "ith )harti for a cashandcarry#usiness& and )harti is concentrating on frontend retail. (imilarly& Tesco hasentered India through an alliance "ith Trent 5Tata 8roup6. $part from in!esting inthe cashandcarry #usiness& Trent "ill also support the #ac+end acti!ities of

Trent td.

Cany foreign #rands ha!e also entered India either through Qs "ith leading

Indian retailers or through eclusi!e franchisees to set up shop in India. ouisuitton& Car+s G (pencer Olc& 8$(& $rmani are some such operators "ho ha!eentered India through Qs. Cc?onalds& %<& ?ominos are the retailers "ho ha!eta+en the franchise route.

(lo"ly the go!ernment is opening up to the idea of permitting <?I in the Indianretail sectorP conse9uently there is greater momentum in the sector. ast year&o"ing to the glo#al meltdo"n& in!estments dropped in all sectors. Thego!ernment has therefore changed the guidelines for foreign in!estments to#oost in!estments in the current year. This mo!e is certainly li+ely to impro!e thein!estment climate in the Indian retail space.

.rowth Drivers

urrently& organised retail is in a nascent stage of gro"th in India as it ust has a.HF share in the total India retail trade. Eo"e!er& in recent years& organisedretailing has #een gro"ing at a ro#ust rate due to rise in the num#er of shoppingmalls as "ell as in the num#er of organised retail formats. The +ey factors ofgro"th of organised retail in modern India are discussed in the follo"ing pages.

Risin! dis,osable income of Indian middle@class

The Indian middleclass can #e categorised into see+ers and stri!ers& "hich is theconsuming class and the prime target segment for retailers in India. In 200&

these t"o categories together constituted around .4F of total households inIndia #ut accounted for 20F of the disposa#le income. )y 201& the middle class



is epected to constitute around 2F of total households and account for 44F of the total disposa#le income& and #y 202& the respecti!e *gures are li+ely to goup to 4F and F. The Indian middleclass population and their gro"ingdisposa#le income le!els "ill dri!e the future gro"th of organised retail in India.

*han!in! consumer ,references and sho,,in! habits

The prime reason for a paradigm shift in the shopping attitude of the Indianconsumer is the change in their preferences and tastes. ?ue to the increasinguse of IT and telecom& Indian consumers ha!e #ecome a"are of #rands andshops for lifestyle and !alue #rands according to the need and occasion.onsumers "ill continue to dri!e the gro"th in the organised retail #y epandingthe mar+et and compelling retailers to "iden their oerings in terms of #randsand in terms of !ariety.

The spending on essential commodities has #een steadily falling o!er the years&"hereas the consumption of discretionary products has #een gro"ing at ahealthy pace. If the composition of O<D is studied& one can notice that the shareof food& #e!erages and to#acco in the total O<D has declined from ,.0F in<3H0 to 42.2F in <30. @n the other hand& the share of communication&entertainment& personal care consumption has #een rising o!er the years.hanges in lifestyle ha!e #rought a#out a paradigm shift in consumption& "hich"ill undou#tedly continue to dri!e retail gro"th in segments li+e #eauty&healthcare& telecom& and entertainment. Coreo!er& the rising reach of mediaco!erage is increasing consumer a"areness a#out products& their prices and

ser!ices& "hich is li+ely to further encourage gro"th in the organised retailsegment.

*han!in! demo!ra,hics India is one of the youngest and largest consumermar+ets in the "orld "ith a median age of around 2 years& "hich is the lo"estas compared "ith other countries. $ccording to estimates& Indias median age"ould #e 2 #y 2020. It is epected that o!er ,F of the population "ill #eunder the age of ,0 #y 2020& "hich means that the potential for the Indian retailsegment "ill #e enormous. $nother plus a#out this population is that they "ill #emore dynamic than the pre!ious generations #ecause their consumption isdri!en #y "ants rather than needs. Thus& the organised retailing& "hich thri!es

on lifestyle products& is epected to recei!e a #oost #ecause of the youngpopulation #y 2020.



Increase in workin! ,o,ulation

India is the secondlargest country in the "orld in terms of population& and is thelargestconsumer mar+ets in the "orld o"ing to its fa!oura#le demographics. In200 Indias "or+ing population 5in the 14H years age group6 constitutedaround ,F of the population as compared "ith 4.F in the '%& 4HF in the '(&and ,F in Russia. <urther& the increase in the num#er of "or+ing "omen hasfuelled the gro"th in sales of discretionary items. There has #een a 20F increasein the num#er of "or+ing "omen in the last decade.

),urt in urbanisation

Eistorically cities and to"ns ha!e #een the dri!ing force of o!erall economic andsocial de!elopment. urrently o!er ,, million people of India reside in cities andto"ns& "hich translates to around ,0F of the total population7. The rapid gro"thin ur#anisation has facilitated organised retailing in India& and has caused thespeedy migration of population into maor tier I and tier II cities& "hich ha!e asigni*cant share in the retail sales of the country.



The ur#an populations contri#ution in Indias 8?O shot up from 2HF in 1H1 to0F in 2001 and is epected to increase to 70F #y 2011& as migration to citiesand to"ns gro"s rapidly in anticipation of higher income opportunities pro!ided#y these epicentres. Coreo!er& the continuous de!elopment in ur#an areas hasin!aria#ly attracted su#stantial in-o"s of capital #oth from domestic and foreignin!estments ha!e led to the transition of ur#an areas. $s the Indian organisedretail is mainly concentrated in the ur#an areas& its gro"th 5ur#an areas6 isimperati!e for the organised retail in the country.

Kota#ly& the ur#an areas are Indias gro"th centres and they are gro"ing rapidlyo!er the last couple of years as compared to the "orld a!erage as "ell countriesli+e )raAil& the '( and '% among others. <or instance& during 1HH2000& annual

ur#an gro"th in India "as 2.,F as compared to the "orld a!erage of 2.07F.<urtherance& the annual ur#an gro"th in India "ould touch 2.F during 20202&"hile glo#ally it "ould fall consistently to reach 1.F& hina 1.,F from ,.1Fduring 1HH2000& follo"ed #y )raAil to 0.2FH. Though& percentage of ur#anpopulation to total population in India 52HF6 is comparati!ely 9uite lo" againstthe "orld a!erage 54.F6& as "ell as countries such as )raAil 54F6& hina540F6& the '( 51F6 and Russia 57,F6& it is ho"e!er noticea#le that total ur#anpopulation in India "as far more than the total population of the entire '( in200 and #y 202& it is epected that Indias total ur#an population "ouldconstitute around .7F of the total "orld population. This "ould undenia#lyemerge as the Indias largest mar+et for organised retail& and therefore thechallenge for the retail players to le!erage the full potential of -ourishing ur#anareas.



<urthermore& due to the rapid infrastructure de!elopment in maor tier I& II and IIIcities& many rural inha#itants are attracted to cities& "hich increase the ur#anper capita income and in turn oers un#ound opportunities for the organisedretail segment. Increased glo#alisation has also played a #ig role in thede!elopment of ur#an areas.

Rise in M2* level in urban areas

The aggregate ur#an consumption in India has #een gro"ing steadily o!er thepast fe" years as the economy has #een continuously -ourishing during thisperiod& o"ing to a rise in ur#an population as "ell as a rapid per capita income

gro"th. In <30& .0F of the ur#an population "as #elo" the COD le!el of RsH,0& "hile in <307 the percentage of population under the COD le!el of Rs H,0decreased to 4.1F.

The a!erage COD for the ur#an population in <307 "as Rs 1&,12 up from Rs1&10 in <30& on the other hand& the a!erage COD for rural population in <307"as Rs H up from Rs 7H in <30710.

The K(( report clearly suggested that the consumption pattern in ur#an areasdiered from the rural areas. Lhile the food items constituted 2.2F of the rural



areas consumption in <307 and the nonfood items accounted for the remainingshare& in the ur#an areas& the share of food items in consumption "as ,H.4F andthe nonfood items accounted for the rest.

Or!anised retail concentration in tier II and III cities

Initially the retail re!olution #egan in the #ig tier I cities in IndiaP ho"e!er& as tierI cities are relati!ely saturated no"& retailers& especially !alue retailers& are*nding their "ay to smaller tier II and tier III cities as "ell. The changinglandscape of the Indian retail segment and the increasing competition has alsoforced retailers to tap gro"th opportunities in tier II and III cities in India.

Internet drives awareness and online ,urchases

There has #een a su#stantial increase in the num#er of Indians "ho use theInternet and a concomitant increase in the num#er of online purchases. Indiansha!e started using the Internet not only for increasing a"areness #ut also toshop online& "hich has opened a "hole ne" channel of retailing in the Indianretail scenario. @nline retailing oers consumers the con!enience of orderingmerchandise to their doorstep. Recently& <uture 8roup& "hich o"ns Oantaloon&has initiated a measure to capitalise on the online opportunity throughfuture#aAaar.com. $ similar !enture -ip+art.com is also pro!ing the ne" channelto #e highly !ia#le& especially since it eliminates the #iggest cost of the physicalstore.

asy credit availability A a boon for or!anised retail

The higher penetration of credit cards in India has also #oosted the gro"th of theorganised retail sectorP in fact& the young populations increasing fancy for plastic

money has further fuelled their purchasing po"er. D!en though the organisedretail sector is at a nascent stage 5constituted .HF of the total retail industry in20076& it is gro"ing at a rapid pace. Coreo!er& the spurt in issuance of creditcards and loans #y #oth Indian as "ell as foreign #an+s has further #oosted thesegments gro"th. $ccording to the R)I& as on <30H& the total num#er ofoutstanding credit and de#it cards in India "as 24.7 million and 1,7.4 millionrespecti!ely.

Retail investment



In!estments in the retail sector ha!e impro!ed since <?I has #een allo"ed insingle#rand and cashandcarry formats. $ccording to the Technopa+ estimates&in!estments in the organised retail "ill touch '(M , #illion in the net *!e yearsor so. In!estments allo" organised players in retail to epand at a !ery high rate.$ll +ey retailers in India ha!e epansion plans o!er the net ,4 yearsP for

instance& Oantaloon has an am#itious epansion plan to ta+e its retail space up to,0 million s9uare feet #y 2011. i+e"ise& ishal Retail is epected to ta+e its totalstore count to 00 "ith an estimated retail space of around 10 million s9uarefeet #y 2011.

$vailability of ?uality real estate$ccording to industry sources& mall space in India has gro"n from a meagre 1.0million s9uare feet in 2002 to a#out 7., million s9uare feet #y the end of 200Ptier I cities are epected to account for around 7,F of the mall space and therest is li+ely to #e e9ually di!ided #et"een tier II and tier III cities.



Industry Overview A Indian Retail

Website: http://""".iit+.ac.in/ime/C)$XIIT%/a!antgarde/Y

pZ12

$lumni (pea+& Industry (pea+

Retail in India "as al"ays a challenge from mar+eters point of !ie"& #ut theconsumers are al"ays spoilt for choice. onsumerism in India is "itnessing anunprecedented gro"th dri!en #y a young and "or+ing population& ur#aniAation&rising income le!els& fa!ora#le demographics as "ell as gro"ing #randorientation. The Indian retail mar+et "hich is estimated to #e "orth '(M20#illion5201,6 and is epected to gro" at a $8R of 1,F& re-ects this !ery "ell.8ro"ing at this rate it "ill reach around '(MH0 #illion #y 201. @rganiAed retailpenetration& currently estimated at 7.F& is epected to cloc+ a 1H20F p.a.

gro"th to reach 10F #y 201.Lith limited space in $!ant 8arde& Ill try to thro" some light on this industrythrough su#topics li+e Industry formats pre!alent in India& "hat goes into yourpurchasing at store& most common strategies that retailers adopt to maimiAesales& future gro"th prospects& and concerns of top management. The article is#ased on my interactions "ith #ig Retailers li+e Cadura <ashion G ifestyle& Core(uper G Eypermar+ets& Oantaloons <ashion G Retail td. etc.& supported "ith myresearch on this industry.

Retail 3ormats

ets ta+e a step #ac+ G understand ho" this industry "or+s and ecitingdynamics that are pre!alent. In India& the retail landscape constitute follo"ingformats B

• Departmental stores @B Lestside& (hoppers (top etc.

• Hypermarkets -> )ig )aAaar& $ditya )irla Retail etc.

• Supermarkets/Convenience stores -B$ditya )irla Retail& (pencers etc.

• Specialty stores -> Titan& roma etc

• Cash & Carry stores ->Cetro& Reliance etc.

ver Made $ 2urchase $t Retail )tore-

There are many teams that are constantly s"eating it out to ma+e your purchasea "onderful eperience such as the follo"ing ones

• Analytics - There is an $nalytics team that ta+es real time data fromOointofsale 5cash counters6& se!eral feed#ac+s G e!en customersmo!ement trac+ from security camerasP and translate the data intomeaningful information.

• Merchandiser/Category - These teams use this analytics to decide themerchandise to #e displayed o!er the shelf.

http://www.iitk.ac.in/ime/MBA_IITK/avantgarde/?p=1268



http://www.iitk.ac.in/ime/MBA_IITK/avantgarde/?cat=46









• Buyer - $ #uyer negotiates G *naliAes the !endor to ful*ll the supply ofproducts.

• Space lanners - These "or+ out the allocation of shelf space in thestores to dierent merchandises.

• !eplenishment - These teams plan out the replenishment structure ofmerchandise& i.e. reorder le!els& minimum order etc.

• Supply Chain - This team ensures the transfer of merchandise from"arehouse& ? or !endors to respecti!e stores at the right time G "ith theright 9uantity.

• "perations - This team ma+e sure that merchandise is a!aila#le on shelfG get sold to the customers.

)trate!ies Retailers (se 3or )ales Ma/imi4ation @

"#ering discounts• Cost retailers ha!e ad!anced oseason sales for 1 ,0 days "ith

discounts ranging from 2070 F on certain products

• Eigher discounts and other !alue added ser!ices for mem#ers

$o%ering prices

• ertain retailers adopt <irst Orice Right approach. Retailers do not oerdiscounts under this strategy B they directly compete on the selling price#y oering a #est price "ithout any mar+do"ns

"#ering value-added services

• ompanies oer inno!ati!e !alue added ser!ices such as customer loyaltyprogrammes& happy hours on shopping deals

• @ers for senior citiAens& contests for students& and lottery gains are no"!ery common

$everaging partnerships

• In order to +eep customers shopping for a longer time and increasecon!ersions& retailers are no" pitching to partner "ith manufacturers&ser!ice pro!iders& *nancial companies& etc. to create a #uAA around certain

product categories

Industry Outlook

@rganiAed retail mar+et in India is #urgeoning and is epected to gro" at $8Rof 1H20F o!er the net years. This "ill #e dri!en #y a demand& supply andalso se!eral regulatory factors "hich are deemed to #e the future gro"thengines. <ollo"ing are the factors that dri!e the gro"th in the Indian Retailindustry:

!egulatory actors B i#eraliAation of <?I policies in retail coupled "ith theepected rollout of the 8oods and (er!ice Ta



Demand-side actors B Rising disposa#le income& increasing ur#aniAation&highly a"are and a=uent young population& gro"ing num#er of "or+ing "omenand changing consumer preferences

Supply-side actors B Rapid real estate and infrastructural de!elopment& easya!aila#ility of credit& inno!ati!e physical and online channels& increased ser!iceorientation

#o, *oncerns for Retailers

@rganiAed retailers in India ha!e eperienced rapid gro"th o!er the last decade. This gro"th comes along "ith a signi*cant cost that has #een incurred to achie!eit. The returns from the #usiness are a concern& especially "ith respect to thein!estment of time G capital during its gestation period. <ollo"ing are the topconcerns that Retailers are anious a#out:

• In!entory management

• Eigh operating costs

• Lor+ing capital management

• omple regulatory frame"or+

• Talent retention

• (lo"ing re!enue gro"th G lo" retail producti!ity

• In-ation

• IneJciencies in the supply chain

• $chie!a#le pro*ta#le gro"th

In!entory management is a top concern for Retail <@s. This is largely dri!en #ythe !agaries in the Indian supply chain such as long lead times and orderingcycles& lo" *ll rates and lac+ of process orientation. These result in lo" turns&high in!entory holding and high in!estment in stoc+.

Retail C You

With this background, it is quite evident that etail in !ndia is a challenging

industr" to work #or, and hence there is lot to learn #rom its o$erations. %his is

the best industr" that hel$ "ou to understand the consumer d"namism more

closel" and accuratel". &t an earl" stage o# career, the industr" let "ou handlegood res$onsibilities in managing $eo$le, 'nance( o$erations. )ot *ust the

internal stakeholders, it makes "ou well equi$$ed to #ace e+ternal stakeholders

as well, like vendors, regulator" authorities etc. %he thick e+$erience that "ou’ll

gain in this industr" can o$en avenues in FC- and u$coming eCommerce

industries as well.

On the other side, as the industr" gra$$le with thin $ro'tabilit" margins (

com$le+ regulator" guidelines, it becomes di/cult to sta" motivated with all the

hard work that goes with less $a" structure.

)evertheless it is the industr" that will kee$ "ou su$ercharged #or the rest o#

"our li#e.



0o, read" to *oin1

References

1. Retail report from India )rand D9uity <oundation 5I)D<6& Carch 20145""".i#ef.org6

2. Oulse of Indian Retail Car+et B $ sur!ey of <@s in the Indian retail sector&Carch 2014 B #y D3 and R$I

,. 8lo#al Oo"er of Retailing 2014 B Retail #eyond #egins& 2014 B #y ?eloitte

B

$bout the $uthor

9i,ul Mathur is an alumnus of the C.).$. programme at I.I.T. %anpur5)atch20020076. urrently he is a )enior Mana!er A )u,,ly *hain 2ro1ects*or,orate o7ceE "ith $ditya 0irla .rou,+ MumbaiF ipul has a rich

eperience in industries such as Retail& Tetiles& Canufacturing G Telecom "ithfunctional specialiAation in (upply hain Canagement& )usiness OrocessImpro!ements& (trategic Oroects D!aluation G ommercial Dcellence. ipul isalso an a!id photographer "ith a +een interest in ?igital Ohotography.

http://www.ibef.org/

http://www.ibef.org/

overview of indian retail industries - 30 pages

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