PAST, PRESENT & FUTURE

EMERGING RETAIL FORMATS IN INDIA

LBSIM, DELHI

1st Year

Rinky Sachdeva

Rohit Jain

Atul Mathur

Munish Mittal

Aditya Goel

Satyam K. Saxena

• Introduction

• Evolution of Indian retail

• Emerging Trends

• Research• Future Retail

• Shoppers Stop

• FDI in Retail- Present & Future Scope

• Conclusion

FLOW OF PRESENTATION

“Retailing includes all the activities involved in selling goods or services directly to final consumers for personal, non-business use”

- Philip Kotler

• Indian retail industry is worth 500bn $

• Indian retail sector accounts for 22% of India’s GDP

• Contributes 8% to total employment

Source: Report named ‘Retail Sector in India’ by Research And Markets

INTRODUCTION

• Organized : Trade activities undertaken by licensed retailers• Current retail penetration: 8%

• Expected coverage by 2020: 20%

• Expanding at 20% per annum

• Rapid urbanization with increasing purchasing power, easy credit availability, policy support by government, increasing investments.

• Unorganized: Outlets run locally by the owner or a care taker of the shop- unlicensed.• Current retail penetration: 92%

• Low technical and accounting skills required

Source: Technopak Aranca Research- 2012

TYPES OF RETAIL

• Manufacturers opened their own outlets

• Pure play retailers realised the potential of the market

• Most of them in apparel segment

• Entry in food and general merchandise category

• Repositioning by existing players

Initiation

Conceptualisation

Consolidation

Expansion

Pre 1990s

1990–05

2005–10

2010 onward

• FDI in single-brand retail up to 100 per cent from 51 per cent

• Approval of FDI limit in multi-brand retail up to 51 per cent

• Rise in private label brands by retail players

• Increasing investments in retail infrastructure

EVOLUTION OF INDIAN RETAIL

Source: Technopak Advisors Pvt Ltd, Aranca Research

• India has 3rd highest number of internet users• Growing @40% per year• Present contribution of online retail: 0.5%

EMERGENCE OF ONLINE RETAIL

Source: Report by COMSCORE for ASSOCHAM- 2013

• Young population aided by easier access to credit and payment options; increasing internet penetration and speed, 24-hour accessibility, convenient and secured transactions

• Computer peripherals, camera and mobiles, and lifestyle segments account for a majority of total purchases

• Projected to increase from 0.6bn US$ in 2011 to 70bn US$ in 2020

ONLINE RETAIL

Source: MasterCard worldwide insights- 2011

• SPECIALTY STORES

A typical specialty store gives attention to a particular category and provides high level of service to the customers

For example if a customer visits a Reebok or Gap store then they find just Reebok and Gap products in the respective stores.

• DEPARTMENT STORES

A retailer of such store carries variety of categories and has broad assortment at average price & offer considerable customer service

For example: Food World in Bangalore

EMERGING RETAIL FORMATS

• DISCOUNT STORES

Offers extensive assortment of merchandise at affordable and cut-rate prices

Normally retailers sell less fashion-oriented brands

The service is inadequate

For example: The Loot

• CONVENIENCE STORES

Is essentially found in residential areas

Provide limited amount of merchandise at more than average prices with a speedy checkout

Store is ideal for emergency and immediate purchases

For Example: Reliance Fresh

• HYPERMARKETS: Approx 21% of retail space by 2014

• Provides variety and huge volumes of exclusive merchandise at low margins

Operating cost is comparatively less than other retail formats

For Example: Dmart , Big Bazaar, Trent, Landmark, Star Bazaar

• SUPERMARKETS

a self-service store consisting mainly of grocery and limited products on non food items

may adopt a Hi-Lo or an EDLP strategy for pricing

supermarkets can be anywhere between 20,000-40,000 square feet

For Example: SPAR™ supermarket

• MALLS

Has a range of retail shops at a single outlet

Endow with products, food and entertainment under a roof

For Example: Inorbit Mall, Ambience Mall.

• E-TAILERS

Customer can shop and order through internet and the merchandise are dropped at the customer's doorstep

Format is ideal for customers who do not want to travel to retail stores and are interested in home shopping

For Example: Amazon and Ebay

FUTURE GROUP: The Walmart of India

Future Retail Ltd (FY12)

• Revenue: USD2.7 billion

• Operational retail space:16.3 msf

• Over 1000 stores in 121 cities

• Employees: 36,000

• It’s a flagship company of Future Group

• Multiple retail formats: hypermarkets & supermarkets

• A network of more than 315 stores encompassing an area of over 11 million square feet.

• Under Future Fashion, the company owns a portfolio of 24 leading brands and covers more than 121 cities

• Revenues expanded at a robust CAGR of 22.7 per cent during FY08-12

Contd…

• Shoppers Stop Ltd., a pioneer in modern retailing in India, has been promoted by K Raheja Corp. Group, one of the leading groups in the business of real estate development and hotels in the country.

• Shoppers Stop and its associate companies are involved in retailing through department stores, specialty stores, entertainment zones and large hypermarkets.

• The company owns 172 stores in 25 cities with 4.81 million sq ft space across eight store formats

• Over 2.5 million customers are a part of the First Citizen Loyalty Programme

• Centralized buying for all products except cosmetics and perfumes to avoid sales tax

SHOPPERS STOP: A case at hand

INDIAN RETAIL TO BENEFIT FROM FDI

In 1991, India shifted to New Economic Policy and allowed for international trade and investment, deregulation, initiation of privatization, etc

FDI upto 51% allowed under automatic route in selected sectors.

India in 1997 allowed foreign direct investment (FDI) in cash and carry wholesale.

FDI upto 51% allowed in single brand retail with prior govt. Approval.

In 2008-09, FDI stood at $27.3 billion.

In 2012-13, FDI dropped to $22.4 billion

FDI POLICY DETAILS ON INDIAN RETAIL SECTOR• Until 2011, Indian central govt. denied FDI in multi-

brand Indian retail

• On 24 November 2011, India allowed foreign groups to • own up to 51 % in multi-brand retailers

• own 100 % for single brand retailers, from the previous cap of 51%

• More recently, there have been relaxations in some norms so that a company can invest in cities having population of less than 10 lakhs

• The cap for 30 % sourcing regulation from local market has been increased from 1mn to 2mn USD

• Joint Ventures

• Franchising

• Cash & carry operations

• Non-store formats

• Sourcing of supplies from small scale sector

FORMS OF FDI IN INDIAN RETAIL

•India is the fifth largest preferred retail destination globally•The sector is experiencing exponential growth, with retail development taking place not just in major cities and metros, but also in Tier-II and Tier-III cities

Large number of retail outlets

•FMCG players are focusing on rural market as it constitutes over 33 per cent of FMCG consumer base in India•With increasing investment in infrastructure, retailers will be able to increase their access to high-growth potential rural market

Rural markets offer significant growth

potential

•The organised Indian retail industry has begun experiencing an increased level of activity in the private label space•Private label strategy is likely to play a dominant role as its share in the US and the UK markets is 19 per cent and 39 per cent, respectively while its share in India is just 6 per cent

Private label opportunities

GROWTH OPPORTUNITIES IN INDIAN RETAIL INDUSTRY

ATTRACTIVE INVESTMENT SEGMENTS•Retail component of real estate is an attractive opportunity which is currently attracting 29 per cent of total investment in real estate

•26 per cent of the overall investors are interested in investing in Tier II and III cities

•Training and warehouse spacing are the other viable options for investments

CONCLUSION• Emerging retail formats offer an ideal shopping

experience with an amalgamation of product, entertainment and service

• The hypermarkets, malls, supermarkets are the preferred kind of stores by consumers

• The dynamics of the demographics, double income, urbanization and internet revolution are the factors contributing to retail growth in India

• Younger generation prefer to visit malls and hypermarkets more for stress relieving purpose

THANK YOU!!