Trends, Myths & Realities Agenda for Real Estate

Ankur Bisen 23rd January 2015

Retail in India

Indian Retail Market Will Mirror GDP Growth India’s real GDP growth, will average nearly 6% over the next

decade. This will translate into >US$ 1 Trillion retail market by 2020 (at nominal growth)

2014

Retail: US$ 525 Bn

(49%)

Non Retail: US$ 555 Bn

(51%)

Urban: US$ 252 Bn

(48%)

Rural: US$ 273 Bn

(52%)

Organized Retail: US$ 46 Billion (~9%)

GDP: US$ 1,890 Bn

Private Consumption: US$ 1080 Bn (57%)

2014

Retail: US$ 1040 Billion

(45-50%)

Non Retail: US$ 1060 Billion

(50-55%)

Urban: US$ 572

Billion (50-55%)

Rural: US$ 468 Billion

(45-50%)

Organized Retail: US$ 182 Billion (~17%)

GDP: US$ 3,700 Billion

Private Consumption: US$ 2100 Billion (57%)

2017 2020P

2 Source: Planning Commission, Technopak Analysis

525

1040

46

182

2014 2020

Total Retail Organized Retail

91

12

83

14

Brick & Mortar Organized Retail Growth has Been Stunted

9%

17%

% Share in total retail

91% 83%

8% 14%

0.4% 3%

2014 2020

Share Of Retail Channels in Total Retail

(USD Bn)

Organized Retail : E-tailing

Organized Retail (Brick & Mortar)

Independent Retail

• Organized Retail is currently 8% of retail but E-tailing will fuel organized retail’s growth in the coming decade

3

Overall Retail Market (US$ Bn)

Share of Retail Channels (%)

Share Of Retail Consumer Spending In Cities

0

100

200

300

400

500

600

Top 2 cities Next 6 Next 16 Next 50 Rest of India

In U

S$

bn

49

54

49 49

324

India retail spend of US$ 525 billion in 2014 across different city & region types

• 11% of India’s population ontri utes 30% of total retail spend

• Delhi & Mumbai clusters contribute about 9% of India’s total retail spending. Top 22 cities account for 29% of total retail, and top 72 cities account for

almost 39%.

4

11 11

7 7

5 4

3

1 1 2

1 2

Mum

bai

Delh

i

Kolk

ata

Bangalo

re

Hydera

bad

Ahm

edabad

Kanpur

Jaip

ur

Ludhia

na

Kochi

Ranchi

Gw

alior

Retail opportunity among aspiration class across 12 clusters (in USD bn.)

Size Of Retail Spending Of SEC-A and SEC-B In Key Clusters (2014)

5

E erge ce of co ce trated co su ptio clusters ….

USD bn

5

Current Impact And Future Impact Of E-tailing In India

6

2014 2020

Electronics

Apparel &Lifestyle^

Home

Food &Grocery

Others#

USD 32 Bn*

1225

147

3 %

22%

USD 2.3 Bn*

41% 1% 3% 25%

30%

34%

2% 4%

30%

30% ~55%

Total Retail (USD Bn)

Organized Retail (USD Bn)

525

46

0.4%

5.0%

E-tail (% Total Retail)

E-tail (% Organized Retail)

*on the basis of Net Sales and not on Gross Merchandise Value (GMV)

6

Myths and Realities of E-commerce Going Forward

Myths • E-commerce will wipe

out Brick and Mortar Retail

• Amazon will take over

the world

• E-commerce is all about price and discounts

• Some consumers will never buy online

Reality

• E-commerce under the best case scenario is only 15% of the

total retail so far. Some categories will require a brick and

mortar support (Food, Home etc. )

• Many leading brick players have not gone online and don’t have plans to do so (Costco, Primark, Uniqlo, H&M, IKEA etc.)

• Amazon is a market place model based business that has a

dominant market share as a e-market leader. 60% of the e-

business is addressed by significant other players

• E-Retail businesses are about supply chain and technology

competencies, and can be both price as well as assortment

driven

• If there is a gap between availability or in pricing, consumers

do go online sooner or later 7

7

E-tailing Trajectory –Retail Led Vs. Pure Online

Pure Play E-commerce Retail Led

Developed Markets

(US, West Europe, Korea, Australia,

Japan)

50% 50%

Developing Markets

(China, Brazil, India, Indonesia etc.) 90% 10%

• In developed markets, brick & mortar retailers have rapidly seized the E-

commerce opportunity and successfully leveraged their capabilities to become

multi-channel players

• In developing markets, low penetration of organized brick & mortar players

created a space for pure play E-tailers

8 8

Challenges of Brick and Mortar Formats

• Rentals average 8 % of turnover for international retail companies

• In India it averages ~15% of turnover

• Even at 6% growth of retail, India will require additional 2000 Mn sqft of retail space by 2020

• To be serviced through malls, high streets, etc.

• Quality & Design of real estate remains a concern

High Cost of Real Estate

Limited Availability of Rigth

Real Estate

9

What It Means For Real Estate Planning ?

10

• “One Size Fits All” approach will not work … modern retail is not malls

• Deeper understanding of emerging retail and consumer consumption scenarios to develop solutions accordingly

• Retail = Merchandise + Food Services + Healthcare + Etc.

• Design & Flexibility

Real Estate Response In NCR

Mix Use Development

Day care centres for heathcare

11

Quality high streets

Space for reail stores that will be smarter formats

Customized development for destination retail (IKEA, GAP etc.)

Thank You !

For Further Dialogue, Please Contact :

Ankur Bisen

Sr. Vice President

Technopak Advisors (India)

T : (+91) 124 454 1111

E : ankur.bisen@techopak.com

Web : www.technopak.com