Why this study?

6%

40%

Size of the retail market - 2013

100% = USD 440 bn, Rs 265,000 cr

Organized Retail; including e-tailing

“Mom & Pop” stores

“Organizing” Retailers <20 stores< 20 cr Turnover; Modern practices – billing / inventory

• Qualitative• 23 retailers in• Chennai and

surrounding markets

• Categories: Apparel, Grocery, Food, Restaurant, Fast fashion, Cosmetics, Jewelry

“State of Play” of Independent Retail

Business Growth

Profitability

Competition

People

Technology

Regulatory Policy

Customer experience

Space

• Growth for most retailers is 15% + y-o-y – last 3 to 5 years.

• Margins – Shrinking or Stable. No-one spoke about expanding margins

Branding is the single biggest challenge

Business Growth

Profitability

• Creating a brand in the customer’s mind – single biggest challenge.

• Mechanisms:• Franchising• Creating own

label• Service• Move up the

value chain

Competition

People

Technology

Regulatory Policy

Customer experience

Space

“Customer's expect a modern apparel store which has invested in

frontage and store windows to sell an item worth

Rs.500 at Rs.100” – Vimal Rajan, Director, Amigos

 

“Consumer discretionary spend on apparel, footwear

is decreasing. Inflation needs to be stable for

consumer confidence to return” - Murali Krishnan, MD, Kalyani Associates  

Grocery retailers: Input cost has increased by

more than 50% for the last two years – they were not able to pass on the entire price rise to the consumer.

 

Competition: “Re” and “E”

Business Growth

Profitability

Competition

People

Technology

Regulatory Policy

Customer experience

Space

“I realize the power of e-commerce,

when I see my staff regularly giving directions to the Flipkart delivery

boy”, Arun Kumar, Director, Sri Ramana

Silks; Madurai

Space and People worries

Business Growth

Profitability

Space

Technology

Regulatory Policy

Customer experience

People

Not only is space cost increasing, the

pace is the highest in the smaller towns –

Salem, Trichy, Erode, Karur, Thanjavur. Retailers in these cities report that

rentals have risen as much as 10 times in the last 10 years.

Competition

People Matters

All but one retailer spoke of high

attrition – in most cases - above 90%

per year. That means that front end staff in any

given store changes

completely every year.

 

“Attrition is linked to ‘brand power’. Even banks give better loans to staff

who work for brands like Levi’s”

- Vimal Rajan, Diretor, Amigos

Technology: Social, but not sure how to go about e-commerce

Technology

Regulatory Policy

Emerging Retailers are “ Surprisingly

Social”

Billing / Inventory are automated.

Except for grocery / small format

supermarkets, all retailers felt that an ecommerce listing

would help – but were not always sure how

to go about it.

Regulatory: Accumulative, minor ‘irritants’

Regulatory Policy

Emerging retailers want clarity and speed on licensing and operating norms. Reactions to FDI are mixed – some

believe it will push up space and people costs, others see it as an opportunity to

learn from global retailers.

Larger retailers among those surveyed see GST as an enabler.

About a third of the retailers wanted protection from the predatory pricing of e-

tailers.

Regulatory: Accumulative, minor ‘irritants’

Regulatory Policy

Need clarity, transparency on:

• Licenses for store opening

• 365 days permission

• Labour registers

• Coordination with urban planning (e.g. metro work in Chennai)

Emerging retailers want clarity and speed on licensing and operating norms. Reactions to FDI are mixed – some

believe it will push up space and people costs, others see it as an opportunity to

learn from global retailers.

Larger retailers among those surveyed see GST as an enabler.

About a third of the retailers wanted protection from the predatory pricing of e-

tailers.

In summary: “State of Play” of Independent Retail

Business Growth

Profitability

Space

People

Competition

Regulatory Policy

Customer experience

Technology

Based on your feedback we will look

to continue this dialogue with retailers across other markets – Delhi, Bangalore, Mumbai, Surat etc.