Retailing in India Ppt_0

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RETAILING

IN INDIA

Presentation byShahnas ASyama K S

Sobymol Devasia

Sabitha Z.B

By: Prof. Nagendra Babuand Vijayakumar A B



According to Philip Kotler “retailing includes allthe activities involved in selling goods or

Services directly to final consumers for personal ,

Non business use”.

“Every sale of Goods and Services to finalconsumer” – Food products, apparel, movie

tickets; services from hair cutting to e-ticketing.



A retailer or retail store is any business enterprise

whose sale volume comes primarily fromretailing”.

A retailer may be defined, as a „ dealer or trader who sells goods in small quantities‟.

Any Organization Selling to final consumer

is retailing , whether they are

A Manufacturer

A Wholesaler A Retailer



It does not matter how they sell or serve ( By)

• Person• Mail

• Telephone

• Vending Machine or

• Internet

Or

Where these are sold

• A store• A street

• Consumer‟s House



Retailing may be understood as the final step in

the distribution of merchandise, for consumption by the end consumers.Retailers attempt to satisfy consumer needs by

having the right merchandise, at the right price,

at the right place, when the consumer wants it.Retailers are the final business in a distributionchannel that links manufacturers to consumers

Indian retail industry is the second largestemployer in the country with almost 12millionretail stores in India.



It offers direct interactionSale volume is comparatively large in quantities

Customer service

Sales promotions are offered at this point onlyDifferent forms

Location and layout are critical factors

More employment opportunities



• Department stores

• Specialty stores

• Convenience store

• Discount store

• Off-price retailer

• Super store



• Sorting• Breaking Bulk

• Holding stock

• Communications• Assist small suppliers

• Customer service



The Indian retail sector is highly fragmentedwith more than 90 per cent of its businessbeing carried out by traditional family runsmall stores.

This provides immense opportunity for largescale retailers to set-up their operations – aslew of organized retail formats likedepartmental stores, hypermarkets,

supermarkets and specialty stores are swiftlyreplacing the traditional formats dramaticallyaltering the retailing landscape in India.



India is the third-most attractive retailmarket for global retailers among the 30largest emerging markets, according to US

consulting group AT Kearney‟s reportpublished in June 2010



The total retail sales in India will grow fromUS$ 395.96 billion in 2011 to US$ 785.12billion by 2015

Indian retail sector accounts for 22 per cent of the country's gross domesticproduct (GDP) and contributes to 8 per

cent of the total employment.



Weekly MarketsVillage Fairs

Melas

Convenience StoresMom and Pop/Kiranas

PDS OutletsKhadi Stores

Cooperatives

Exclusive Brand OutletsHyper/Super MarketsDepartment Stores

Shopping Malls

Traditional/PervasiveReach

GovernmentSupported

Historic/RuralReach

Modern Formats/International

Evolution of Indian retail

Source of Entertainment

NeighborhoodStores/Convenience

Availability/ LowCosts /

Distribution

ShoppingExperience/Efficiency



Robust economic growth High disposable income with the end-consumer Rapid construction of organized retail

infrastructure are key factors behind the forecast

growth. Expansion in middle and upper class consumer

base Growth potential in India‟s tier -II and tier-III cities

as well.

The greater availability of personal credit and agrowing vehicle population providing improvedmobility also contribute to a trend towards annualretail sales growth of 12.2 per cent.



8.90%9.0%

6.8%6.0%

6.0%5.6%

5.2%

6.4%

6.6%

5.4%

9.2%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

Projections of 8% sustainable real GDP growth rate till 2020promise high growth potential for Indian Retail…

R e a l G r o w t h R a t e

Source :Central Statistical Organization (CS0)



2,630

916 979 1,068

2,374

4,367

13,245

10.7%

9.4%

6.7%

3.7%

2.0%2.8%

2.3%

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

China India Russia Brazil UK Japan US

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

9.4% growth rate makes India the second fastest growingeconomy in the world

G D P

( U S

$ b n )

R e a l G r o w t

h R a t e



13% 14%

55%

21%

7%6%

21%

37%41%

107%

0%

20%

40%

60%

80%

100%

120%

Tourist Arrivals Passenger Cars

Sales

Commercial

Vehicle Sales

Domestic Air

Passengers

New Cell Phone

Connections

2005-06

2006-07

% Increase in growth over the previous year

Services sector adding to GDP in a significant manner



5-7 million

Super Rich

70 – 80 million

Afford Cars, Private Healthcare &

Foreign travel

250 - 300 million

Afford goods like Refrigerators , Scooters& Colour TVs

600-700 million (Generally Rural)

Afford simple industrial productse.g. bicycles , radios , textiles

Poverty Line = income less than $ 1/day

Source: McKinsey,

60 % of India’s population are under 24 years

http://images.google.com/imgres?imgurl=http://upload.wikimedia.org/wikipedia/en/thumb/2/23/Indian_Couple_on_Bicycle.jpg/180px-Indian_Couple_on_Bicycle.jpg&imgrefurl=http://en.wikipedia.org/wiki/Bicycle&h=250&w=180&sz=15&hl=en&start=1&tbnid=Vj2HXGk35I5f2M:&tbnh=111&tbnw=80&prev=/images?q=lower+class+indians&ndsp=20&svnum=10&hl=en&lr=&sa=N



GDPUS$ 935 billion

Private Consumption

US$ 580 Billion(62%)

Public Spending and CapitalFormation

US$ 355 Billion (38%)

RetailUS$ 342 Billion

(59%)

Non RetailUS$ 238 Billion

(41%)

Urban (5,100 towns)

US$ 154 Billion(45%)

Rural (6,27,000 villages)US$ 188 Billion

(55%)

Modern retail – US$ 12 billion8% of urban retail spends

Modern retailNegligible

Food

Apparel

Beverages

Footwear

Consumer

durables

Appliances

Stationery

Kitchen utensils

Furniture

Furnishings

Sports goods

Health & Beauty

Personal Care

Jewellery

Timing

Transport

Communication

Recreation

CulturalServices

Education

Rent

UtilitiesOther Services

Source: Central Statistical Organization (CS0) and Technopak AnalysisConversion rate: 1 US$ = 40.86 Rs.



GDP*US$ 1,450 billion

Private ConsumptionUS$ 870 Billion

(60%)

Public Spending and CapitalFormation

US$ 580 Billion (40%)

RetailUS$ 530 Billion(61%)

Non RetailUS$ 340 Billion(39%)

UrbanUS$ 252 Billion

(47.5%)

RuralUS$ 278 Billion

(52.5%)

Modern retail – US$ 78 billion31% of urban retail spends

Modern retail – US$ 9 billion3% of rural retail spends

Source: Technopak Analysis *All figures are in nominal terms after taking into account inflation



11 June 2013

Which Makes Indian Retail an Attractive Market

India tops the Global Retail Development Index



The Indian retail market, over the lastdecade, has been increasingly leaningtowards organized retailing formats.

The pattern in domestic retailing is altering in

the favor of organized modern retailing, a bigchange from the traditional plethora of unorganized family-owned businesses.

Rapid urbanization, changes in shopping

pattern, demographic dividend and pro-activemeasures by the Government are abettingthe growth of the retail sector in India.



Organised retail in India is expected to increase from 5per cent of the total market in 2008 to 14 - 18 per cent

of the total retail market and reach US$ 450 billion by2015

According to a report titled 'India Organised RetailMarket 2010', published by Knight Frank India, during

2010-12 around 55 million square feet (sq ft) of retailspace will be ready in Mumbai, national capital region(NCR), Bengaluru, Kolkata, Chennai, Hyderabad andPune. Besides, between 2010 and 2012, theorganised retail real estate stock will grow from the

existing 41 million sq ft to 95 million sq ft. Driven by the growth of organised retail coupled with

changing consumer habits, food retail sector in India isset to be more than double to US$ 150 billion by 2025.



Organized retail INR 28,000 crore

Clothing, Textiles &Fashionaccessories

39%

Footwear 9%

Jewellery & Watches 7%

Mobile handsets & accessories 3%

Health & Beauty (including services) 2%

Food & Grocery 18%

Durables 13%

Books, Music & Gifts 3%

Home 3%







11 June 2013

Modern Retail – Organized Channels

• The share of organized retail is less than 3% of the total retail market

• The size of modern retail is about US$ 8 Billion and has grown by 35% CAGR in lastfive years

85% 81%

55%40% 36% 30% 20% 20% 3%

0%

20%

40%

60%

80%

100%

US Taiwan Malaysia Thailand Brazil Indonesia Poland China India

Traditional Channel Modern Channel



11 June 2013

.. but Rapid Transformation is Anticipated

Current Size & Future Projections for Indian Retail Market

342 373408

445486

530

800

12 18 26 39 59 87

200

0

100

200

300

400

500

600

700

800

900

2007 2008 2009 2010 2011 2012 2017

U S $

B i l l i o n

Total Retail Organized Retail

And may reach a share of 25% by 2017



11 June 2013

RECENT TRENDS



11 June 2013



11 June 2013

Recent Trends

Experimentation with formats: Retailing inIndia is still evolving and the sector is witnessinga series of experiments across the country withnew formats being tested out. Ex. Quasi-mall,sub-urban discount stores, Cash and carry etc.

Store design : Biggest challenge for organizedretailing to create a “customer -pull” environment

that increases the amount of impulse shopping.Research shows that the chances of sensesdictating sales are upto 10-15%. Retail chainslike MusicWorld, Baristas, Piramyd and Globusare laying major emphasis & investing heavily instore design.

Emergence of discount stores: They areexpected to spearhead the organized retailingrevolution. Stores trying to emulate the model of Wal-Mart. Ex. Big Bazaar, Bombay Bazaar,RPGs.

Unorganized retailing is getting organized: Tomeet the challenges of organized retailing suchas large Cineplex's, and malls, which are backedby the corporate house such as 'Ansals' and'PVR„ the unorganized sector is gettingorganized. 25 stores in Delhi under the banner of Provision mart are joining hands to combinemonthly buying. Bombay Bazaar and Efoodmartformed which are aggregations of Kiranas.

Recent changes:

Unorganized : Vast majority of the twelve million

stores are small "father and son" outlets

Fragmented : Mostly small individually owned

businesses, average size of outlet equals 50 s.q.

ft. Though India has the highest number of retailoutlets per capita in the world, the retail space

per capita at 2 s.q. ft per person is amongst the

lowest.

Rural bias: Nearly two thirds of the stores are

located in rural areas. Rural retail industry has

typically two forms: "Haats" and “Melas". Haats

are the weekly markets : serve groups of 10-50villages and sell day-to-day necessities. Melas

are larger in size and more sophisticated in terms

of the goods sold (like TVs)

Traditionally three factors have plaguedthe retail industry:



11 June 2013

Retail Market not limited to metros but widely across India

• The classic ”skimming” strategy in the

metros is not longer sufficient – 100 cities strategy

• Over 250 large size shopping mallsare currently under construction

• Leading cities 2030 areforecasted to be

– Mumbai

– New Delhi

– Chandigarh

New Delhi

Bangalore

Mumbai

Chennai

Kolkata

Ahamabad

HyderabadPune

Above 10 Mn inhabitants




Kanpur

Lucknow

Jaipur

Nagpur

Coimbatore

Bhopal

Madurai

Kochin

Varanasi

Visakhapatnam

Patna

Indore

Surat

Vadodara

Ludhiana



Future Group and Godrej Agrovet's jointventure (JV) in rural retailing, 'Aadhar', is allset for a revamp. The alliance operatesstores in Gujarat, Maharashtra, Haryana andPunjab and mainly sells wheat and paddyapart from daily need products. The company

also provides farmers with solutions toproblems regarding their agricultural output,which includes what kind of crop can theyplant and when, along with techno-

commercial suggestions to help them give a

RURAL RETAILING



Rajkot based Champion Agro Ltd is planningto come up with single window shoppingfacility for farmers.

The company already has 35 agri-retailingoutlets in the Saurashtra region, and isexpected to open around 400 outlets at ataluka level across Gujarat by 2016.

It will open 50 new outlets by the end of 2011with an investment of US$ 3.3 million.The overall investment planned is betweenUS$ 66.7 – US$ 88.94 million.



Vadodara based ACIL Cotton Industries isall set to come up with around 40 outlets of 'ACIL Krishi Store' in Gujarat. Of these,

four outlets got operational in April - May2011. As for 2011, ACIL has decided tofocus on the Gujarat market. ACIL stores

will sell all types of seeds, fungicides,fertilisers, micronutrients.



Marico is using mobile technologyinnovatively to arm its field representativesin their procurement process. The IT team

at Marico developed a mobile-basedapplication for Nokia 5235 serieshandsets. The company gave these GPS-

enabled phones to 120 of its fieldrepresentatives, with mapped routes.



Hindustan Unilever Ltd (HUL) isexperimenting with tablet PCs in its

attempt to increase its rural reach. It hasbeen able to reach to 500,000 outlets in ayear‟s time. According to Nitin Paranjape,managing director, HUL, “We put all the

villages on an IT map. The name of thevillage, its total strength, nearestdistributors available, whether it has a

school, a hospital, a primary health centre,all of this was mapped. We used thisinformation to determine the opportunitythe village presented to us.



Joint Ventures Product Range Retail Formats

Bharti-Walmart (with $2.5

Billion investment byBharti)

Food & grocery, electronics & appliances, clothing &

footwear, furniture & furnishing, household articles.

Hypermarkets, Supermarkets and

Convenience

Carrefour-Landmark Food and groceries, FMCG, apparel and electronics Hypermarkets

Home Retail Group plc -Shopper's Stop Ltd andHypercity Retail India

Private Ltd

Franchising the Argos concept under the terms of thearrangement, Argos will be providing its brand,catalogue and multi-channel expertise and IT support

Multi Channel propositions

Tata-Woolworths Sourcing agreement for Consumer durables andFoods under brand name CROMA

Multi brand retail chain

Staples Inc – PantaloonRetail

Global Sourcing of Office equipments across variousbusinesses

Cash and carry

Reliance Food & grocery, electronics & appliances, clothing &footwear, furniture & furnishing, household articles.

Multi format and Multi Category

Birla Food & grocery, electronics & appliances, clothing &footwear, furniture & furnishing, household articles.

Convenience and Supermarket



At present, the government allows 51% foreigndirect investment in a single-brand retailventure while 100% is permitted in wholesale

cash-and-carry.Under single-brand retailing a store can stockgoods that have the same brand. In thewholesale cash-and-carry route, which most

foreign retailers use, there is restriction onsale to individuals. These stores are onlypermitted to sell to outfits such as restaurantsand kirana stores



Foreign direct investment (FDI) inflowsbetween April 2000 and December 2010,in single-brand retail trading, stood at US$

66.69 million, according to the Departmentof Industrial Policy and Promotion (DIPP).



India's multi-brand retail sector, isestimated to be worth $28 billion (Rs125,000 crore) according to a Boston

Consulting Group (BCG) study.The government is likely to permit foreign

direct investment (FDI) in the multi-brand

retail sector from April 2012.



The government prepared a draft in July2011, which says 49 per cent FDI in multi-brand retail will be allowed in a phased

manner which will be effective from the nextfinancial year i.e. April 2012. The Committee of Secretaries (CoS) headed

by Cabinet secretary Ajit Kumar Seth met on

July 22 to finalise the blueprint of theproposal for political clearance. One of themajor outcome of the discussion is raising49% to 51%.



According to the the economic advisor to thePrime Minister, Kaushik Basu , the governmentwill allow FDI in three phases. In the first phase,foreign multi-brand retail chains will be allowed in

the metros Delhi, Mumbai, Kolkata and Chennai.In the second phase other metros like Bangalore,Hyderabad and Pune will be included.

The draft has laid out strict norms such as

earmarking 40 per cent investment for backendinfrastructure, such as cold storage, soil testinglabs and seed farming, for prospective entrants.



The move has paved the much-required wayfor international retailer like Bentonville, Arkansas-based Wal-Mart Stores Inc. and

Paris-based Carrefour SA to open their retailstores through strategic partnerships.

According to Business Monitor International,retail sales in India may jump from $396billion in 2011 to $785 billion in 2015,representing a growth of around 100 per cent.



to harm self-employment opportunitiesadversely affect the manufacturing sector harm small traders across the country.



consumers will soon more options tochoose products

more and more investment in the backend Improve the standard of efficiency of

supply chain management.



Singapore-based CapitaMalls Asia, whichdevelops, owns and manages malls across

Asia, has pledged US$ 400 million to its

growth in India up till 2014. Mr Kevin Chee,CEO and Country Head of CapitaMalls

Asia, has said that apart from funding the

two malls that are operational now, thismoney would be used to develop sevenmore malls in India.



Reliance Retail will enter the cash andcarry market with "Reliance Market" in

Ahmedabad; the first one to be opened by

August 2011.



Ujala fabric whitener maker JyothyLaboratories has bought Henkel AG's 50.97 per cent stake in its Indian subsidiary

for US$ 137.02 million, including debt andpreference shares, the two companiesrevealed. The deal includes Henkel'sentire portfolio that includes Henko and

Chek detergents, Pril dish cleaners and Fadeodorant, and rights to the multinational'sfuture launches.



With the launch of its first 'ArvindExperience Store' in Gujarat at Vadodara,denim major Arvind Ltd. is looking at 100

stores by the end of the financial year 2011-12. The store in Vadodara is thecompany's eighth in the country after

seven stores in Andhra Pradesh.



Quick food service restaurant chainSubway will set up 45 outlets across thecountry by 2011-12 entailing an investment

of around US$ 9 million. The company hasnow 205 outlets in India and plans to takeits count to 250 by the end of 2011-12.



Max Hypermarkets, the food retailing chainof the Dubai-based Landmark Group isinvesting US$ 122.14 million for its store

expansion business across 30 cities inIndia.



India will announce new rules for foreigninvestment in retail by April 2012, paving the wayfor companies such as Wal-Mart Stores andCarrefour to open stores, according to Junior

Trade Minister Jyotiraditya Scindia. A governmentpanel has issued a report that recommendseasing a law that prohibits non-Indian companiesfrom operating multi-brand outlets. Allowing

foreign investment in multi-brand retail may helpmoderate food prices, said Kaushik Basu, chief economic adviser in the finance ministry, who sitson the panel.



India currently allows 51 per cent FDI in single-brand retailand 100 per cent in wholesale cash-and-carry operations.

In a landmark decision, the government has eased norms for investments by foreign companies that are present in Indiathrough a joint venture (JV) or a technical collaboration. Now,the foreign company will not have to seek a no-objectioncertificate (NOC) from the Indian partner for investing in thesector where the joint venture operates.

The government has also relaxed norms for downstreaminvestments and convertible instruments, giving foreigncompanies more powers. The changes are part of the thirdrevision of the Consolidated FDI Policy.





CRM practice Known about the customer‟s families Credit and home delivery Consumer familiarity runs from

generation to generation Open longer hours and stock most of thegoods Consequently, a large number of

customers are not willing to pay apremium for the shopping experiencepromised by large format retailers.



High expenses to organized sector .The lease cost up to 6-10 percent of salesManpower cost is lower at 5-6 percent of

salesCapital costs are more in retail business

due to major renovations needed every 5-7years.

Organizing Retail in India-Challenges



Retail Challenges

g g g

Heterogeneous market

• Product offerings in different stores across the country will be

very different

• No standard mode of operation across formats

• Market not mature (has to be validated)

Infrastructure will bring about logistical challenges

• Though, improvements in road networks, power supply are

underway

Trained employees with understanding of retail business are

inadequate compared to the needs of organized retail

Barriers to Entry

• High taxes, bureaucratic clearance process and labour laws

High cost of real estate

• though over 600 malls are to come up all over the country by

the next 4 years

Indian retailers are deeply entrenched, are expanding and

building on logistics and technology initiatives



Processes

• Complex Processes - Multiple MRP, Deals & Promotions, Forecasting &Replenishment, Lean supply chain – JIT inventory, flow through warehouse

• Evolving processes in Supply chain & merchandising

• Global Best Practices not adopted

Consumer

Infrastructure

• High disposable income

• Changing consumer preferences

• 28 states, 100+ religion, 250+ festivals

• Supply chain not reliable. Cold storage infrastructure evolving• Outsourced transportation

• Low level automation in warehouses

Supplier/Vendor

Current IT

• Little or no collaboration between vendor & retailer

• Low fill rates from vendors

• Highly localized assortments leading to relationship with multiple vendors• Complex trading contracts and off invoice discounts

• Multiplicity of disparate Systems & Data Formats

• No architecture roadmap

• Base ERP and home grown POS solutions. Low investments in store systems

• No investments in planning & optimization technologies



Weakness of Player Retail not being recognized as an industry in india. The lack of recognition as an industry hampers the availability of finance to

the existing and new players. This affects growth and expansion plansThe high cost of real estate: Real estate price in some cities in India are amongst the highest in the

world. The lease or rent of the property is one of the major areas of expenditure, high lease rentals eat into the profitability of a project.Lack of adequate infrastructure Poor roads , lack of a cold chain infrastructure, etc , hamper the

development of food and fresh grocery retail in india. The existing supermarkets and food retailers have to invest a substantial

amout of money and time in building a cold chain network.



Multiple and complex taxation system The sales tax rates very from state to state while organised

players have to face a multiple point control and taxsystem,there is considerable expense to transfer good from

one store to another.Foreign direct investment:- The fact that foreign direct investment(FDI)is not permitted in

pure retailing is seen as one of the prime reasons for theslow growth of

retail in India. A global retailer can enter India only by way of a franchise

with an Indian partner or through technological alliances.Purchasing power of money As the Indian population mostly consist of middle class

families andlow wages worker they don't want to go in the super market

or retail market



India is amongst the least saturated of all major global markets in terms of penetration of modernretailing formats

Many strong regional and national players emergingacross formats and product categories

Most of these players are now gearing up to expandrapidly after having gone through their respectivelearning curves

Real Estate Developers are also moving fastthrough the learning curve to provide qualitativeenvironment for the consumers

The Shopping Mall formats are fast evolving

Partnering among Brands, retailers, franchisees,investors and malls

Improved Infrastructure

In view of a compressedevolution cycle, retailers need to

simultaneously address issues of speed,

Execution and efficiency



Key Challenges

to overcome

• Attracting & retaining qualified manpower• Implementing SOP’s & best practices

• Focus on improving operational efficiency• Cost control• CRM & Service levels

Internal

• High real estate cost• Anarchic laws

• Shortage of qualified manpower• Poor infrastructure• Unorganized & poor supply chain

External



Supply Chain Investments

• Setting up logistics and supply chain infrastructure

• Import of know how and logistics techniques from developed retail countries

IT Infrastructure

• IT is the enabler behind communication, collaboration with suppliers, andan efficient supply chain

Manpower

• Potential tie-ups with universities and setting up dedicated retail institutes

• Utilize experience of international retailers to train local talent

Large Rural market



There is a huge untapped opportunity in theretail sector, thus having immense scope for new entrants, driving large investments intothe country.

A good talent pool, huge markets andavailability of raw materials at comparativelycheaper costs are expected to make India

lead one of the world‟s best retail economiesby 2042. The industry is also slated to be a major

employment generator in future.

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