The Indian Retail Sector Boom

8/9/2019 The Indian Retail Sector Boom

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The Indian Retail Sector Boom

Anoop Kumar Gupta



What is Retailing?

Retailing involves selling products and

services to consumers for their personalor family use. Service providers, likedentists, hotels and hair salons, and online stores, like Ama!on.com, are

retailers.



Retail "acts at a Glance

Retail is India’s largest industry

(second only to agriculture in termsof employment).

Accounts for over 10 of !"#.



"actors driving Retail Boom

An #conomic imperative for India

#$tremely high intermediation

%o& ' negligi(le government revenue Strong inhi(itor 'disena(ler for the food

industry

#mployment

)arket access

Impact on #conomy *Benefits+





6o+ 7 negligi*le government revenue

Reduced Administrative costs / collection of much needed ta$es,&ould ena(le implementation of modern ta$ structure *0AT+ Among the developed and developing nations in the +orld India is oneof the fe+ countries +here the last level of value added’ is not ta%ed.It’s not that the !overnment does not +ant to8 it simply cannot. !iventhe hugely fragmented structure and the current retail environment it isclearly administratively a hopeless and indeed an uneconomic tas' tointroduce and administer a modern’ A& (value added ta%) system inthis country. Admittedly even the current system of flat annual rates and

so on are at *est initiatives more aligned to+ards administrative’convenience rather than ma%imi3ing much needed !overnmentrevenue. A modern retail environment +ill not only significantlyenhance the implementa*ility’ of A& it +ill also in the long termena*le the *asic rates to drop to more reasona*le levels apart fromsignificantly reducing administration costs.



/trong inhi*itor 7 disena*ler for the food

industry

2ood is vital to India’s prosperity. &here is pro*a*ly no country inthe World that has more to lose than India if +e do not succeed

in food. India can and should *ecome a +orld leader in foodproduction. &he opportunity in value added’ food alone isestimated at up+ards of Rs 900000 crore. &his gro+th +ill*ring immense *enefits to the economy raising the generaleconomic +ell*eing of a significantly large cross:section ofpeople in the country. Apart from progressive and proactive

!overnment policy +hat +ill *e 'ey is the e%tent ofmoderni3ation the retail channel in India undergoes in the firstdecade of the ne+ millennium. #mpirical data suggests thatfor a rupee invested in retail, Rs 1 is invested in the foodprocessing sector.





ar'et access

&he hugely fragmented retail structure has given rise toa distri*ution net+or' that is =uite uni=ue to India.

Indeed the cost and comple%ity of such a structurema'es it a huge competitive *arrier for ne+ entrantsor products. It also severely restricts the a*ility ofIndia’s small:scale manufacturers to reachcustomers. !iven the huge smallscale industry in

India, retail consolidation &ill act as a fillip to itsa(ility to access the market. Also the choice andrange availa(le to the end customer &ill go upsignificantly.



Impact on $conomy (>enefits)

In many other notsorelated areas, the (enefits of retail consolidation &ill (e immense Real estate &he re=uirement of real:estate +ill *e in millions of s=uare feet and the

demand from retail’ players +ill release for productive use large tracts of land lying +ithvarious !overnment agencies such as the #orts Rail+ays "efense and so on. It hashappened all over the +orld there is no reason +hy it +ill not happen here.

Tourism 3 4ut(ound shopping If one +ere to thin' of any city +hich attracts a largenum*er of tourists every year @ 6ondon /ingapore "u*ai e+ Bor' and so on @ one oftheir attractions is the +ell:developed shopping environment. Retail consolidation +ill actas a significant ena*ler to developing many of our cities as tourist destinations and if+ell:mar'eted and managed can significantly enhance !overnment revenues apart

from carrying ethnic Indian *rands across the +orld. &he impact on *enefits +ould *edifficult to =uantify *ut clearly they +ould *e huge. And finally one only has to loo' atthe countries +here retail consolidation and moderni3ation has occurred to concludethat it has almost al+ays radically and favora*ly affected the value:capturing capacityand moderni3ation of the farming industry restructured the supply chain for all 2C!products driven end customer prices do+n on a sustained *asis created significantemployment opportunities *een a source of considera*le revenue for !overnments*oth local and national and in general *een a catalyst in creating considera*le national+ealth. &here is no reason +hy it +ill not do the same for the Indian economy and herpeople.



#volution of Retail Industry

Traditionally retailing in India can be traced to– The emergence of the neighborhood ‘Kirana’ stores catering to the convenience of

the consumers– Era of government support for rural retail: Indigenous franchise model of store

chains run by Khadi & Village Industries ommission !"#$s e%perienced slo change as India began to open up economy' Te%tiles sector ith companies li(e )ombay *yeing+ ,aymond-s+ . Kumar-s and /rasim

first sa the emergence of retail chains 0ater Titan successfully created an organi1ed retailing concept and established a series

of shorooms for its premium atches The latter half of the !""$s sa a fresh ave of entrants ith a shift from

2anufactures to 3ure ,etailers' 4or e'g' 4ood 5orld+ .ubhi(sha and 6ilgiris in food and 42/7 3lanet 2 and 2usic

5orld in music7 rossord and 4ountainhead in boo(s' 3ost !""8 onards sa an emergence of shopping centers+

– mainly in urban areas+ ith facilities li(e car par(ing– targeted to provide a complete destination e%perience for all segments of society

Emergence of hyper and super mar(ets trying to provide customer ith 9 V’s Value+Variety and Volume

E%panding target consumer segment: The .achet revolution e%ample of reaching tothe bottom of the pyramid'

Economic reforms in India resulted in ave of consumerism' hanging consumer behavior+ consumption shift and evolving consumer preferences'



Weekly

MarketsVillage FairsMelas

ConvenienceStoresMom andPop/Kiranas

PDS OutletsKhadi StoresCooperatives

!clusive "randOutlets#yper/Super MarketsDepartment StoresShopping Malls

$raditional/Pervasive %each

&overnmentSupported

#istoric/%ural%each

Modern Formats/'nternational

volution o( 'ndian retail

Source o(ntertainmen

t

)eigh*orhoodStores/Convenie

nce

+vaila*ility/,o- Costs /Distri*ution

Shopping!perience/.cie

ncy



Consumerism in India &he e+ Wave

!ro+ing consumerism +ould *e a 'ey driver for organi3edretail in India. /everal demographic trends are favora*le for the

gro+th of organi3ed trade. Rapid income gro+th Consumers have greater a*ility to

spend. Increasing Dr*ani3ation 6arger ur*an population +hich values

convenience coupled +ith higher propensity of the ur*anconsumer to spend

!ro+ing young population !ro+th of post li*erali3ationmaturing population +ith the +illingness to spend (attitude)

&endency to spend no+ vs. save earlier. Consumers +illing to*orro+ for current consumption



&reater per capita income'ncrease in disposa*le income o( middleclass households

01234 gro-th in real disposa*le incomein 522260071

&ro-ing high and middle incomepopulation

&ro-ing at a pace o( over 5034 perannum over last decade

+8orda*ility gro-thFalling interest rates

asier consumer credit

&reater variety and 9uality at all pricepoints

Other drivers o( the %etail"oom: $he changing 'ndianconsumer



Consumption shift

E 6ifestyle 2re=uent eating out

!ro+ing health and dietarysupplements

!ro+ing organic produce

!reater focus on loo'ing andfeeling good

/ource A& earney

Consumption is moving out of home…….

It is moving into lifestyle products, eating out,

events, entertainment. And that is going to continue



$volving consumer preferences

F 2rom traditional toG G moderni3ed traditional

F2rom glo*ali3e toG G Indianise

F 2rom functional toG G lifestyle



$volving consumer preferences

F 2rom value for money toG

G value for time and convenience

F 2rom cautious toG G e%perimentation

F 2rom over:the:counter toG

G touch:and:feel



Happening &imes

F Indian !"# gro+that .J for ,00K:0< is thehighest in 1L yearsF Analysts across theglo*efind Indian gro+thsustaina*le

F $conomic outloo'for Indiais positiveF Indian +or'ingpopulationis confident



I"IA M1 $$R!I! R$&AI6

!R5W&H AR$&

)ost5nsaturatedModern Retail

Penetration:

6 17%arge )arketRetail Market Size: 8urrent 5S9 11Billion"uture :ro2ections;5S 9<- Billion (y =ear >??Gro&th rate of 17

yearonyear A.&. earney !lo*al Retail "evelopment Inde% (!R"I)



5rgani3ed retail is still in its infancy

F With ;ust , organi3ed retail G

G.India is a *ig opportunity



ost attractive retail mar'et

India’s retail mar'et has gro+n *y 10 on average for past - years

Gsteadily rising to top position in !R"I



5rgani3ed Retailing is *ig

opportunity

With ro*ust economy

sustained !"# gro+thand*ooming stoc' e%changethere are severalemergingsectors in India +aiting to

*e tapped

G5rgani3ed Retail is at the forefront of these opportunities



!ro+th in 5rgani3ed Retail

F India is in ,nd phase of retail gro+thF Increasing Range #ortfolio and 2ormat options

F 2ood retailing leads the gro+th in Indian organi3ed retail



Retailing formats in India

)alls&he largest form of organi3ed retailing today. 6ocated mainly in metrocities in pro%imity to ur*an outs'irts. Ranges from K0000 s= ft to<00000 s= ft and a*ove. &hey lend an ideal shopping e%perience +ithan amalgamation of product service and entertainment all under acommon roof.$%amples include /hoppers /top #iramyd #antaloon.

8ompany o&nedcompany operated *8484+ As isevident from the name itself the retail facility is o+ned and managed*y the manufacturing or mar'eting company. #opular and familiar$%amples are >ata sho+rooms N petrol pumps o+ned *y petro:companies.

@iscount Stores As the name suggests discount stores or factory outlets offerdiscounts on the R# through selling in *ul' reaching economies of

scale or e%cess stoc' left over at the season. &he product categorycan range from a variety of perisha*le4 non perisha*le goods

@epartment Stores A department store is a retail esta*lishment +hich speciali3es inselling a +ide range of products +ithout a single predominantmerchandise line. "epartment stores usually sell products includingapparel furniture appliances electronics and additionally selectother lines of products such as paint hard+are toiletries cosmeticsphotographic e=uipment ;e+ellery toys and sporting goods.

Speciali!ed 8hains A specialty store is a store usually retail that offers specific andspeciali3ed types of items. &hese stores focus on selling a particular*rand or a particular type of item. 2or e%ample a store thate%clusively sells cell phones or video games +ould *e consideredspeciali3ed.

ypermarts 3 Supermarkets A hypermarket or multidepartment store is a superstore +hichcom*ines a supermar'et and "epartment store. &he result is a verylarge retail facility +hich carries an enormous range of productsunder one roof including full lines of groceries and generalmerchandise. When they are planned constructed and e%ecutedcorrectly a consumer can ideally satisfy all of his or her routine+ee'ly shopping needs in one trip.

8onvenience Stores&hese are relatively small stores J00:,000 s=. feet located nearresidential areas. &hey stoc' a limited range of high:turnover

convenience products and are usually open for e%tended periodsduring the day seven days a +ee'. #rices are slightly higher due tothe convenience premium.

)ulti Brand outlets *)B4+s ulti >rand outlets also 'no+n as Category illers offer several*rands across a single productcategory. &hese usually do +ell in *usy mar'et places and etros.



Recent Trends

Retailing in India is +itnessing a hugerevamping e%ercise as can *e seen inthe graph

India is rated the fifth most attractiveemerging retail mar'et a potentialgoldmine.

$stimated to *e D/O 990 *illion of+hich organi3ed retailing (i.e. moderntrade) ma'es up , percent or D/O K.K*illion

As per a report *y #! the annualgro+th of department stores is

estimated at ,J Ran'ed first in a !lo*al Retail

"evelopment Inde% (!R"I) of 90developing countries dra+n up *y A&earney.

Retail Sales in India



:resent Retail Stores and "uture

:lans of Big :layers:layer "ormat 3 Came :resent Cum(er of

Stores"uture :lan

A. >irla !roup /uper ar'et 1J 1000

>harti:Walmart Wholesale /tore 0 J$%press Retail /ervice >ig Apple K- ,00

!odre; !roup Aadhar 91 1000

#antaloon>ig >a33ar KL 100

2ood >a33ar L ,00

Reliance Retail

Reliance 2resh ,J0 J<1

Hyper art , -00

Reliance &o+n Centre 0 <LJ

R#! /pencer ,00 000

/u*hi'sha "iscount /tore L<0 1-0

Wadh+an 2ood Retail /uper 6ocal J 1-00

/ource:2ICCI:#! Report



"uture direction :ositives

A& earney has estimated India’s total retail mar'et at D/O 990 *illion +hich is e%pected to gro+ at acompounded 90 per cent over the ne%t five years.

With the organised retail segment gro+ing at the rate of ,-:90 per cent per annum revenues from the sector

are e%pected to triple from the current D/O <.< *illion to D/O ,J *illion *y ,010. &he share of modern retail is li'ely to gro+ from its current , per cent to 1-:,0 percent over the ne%t decade 5ver ne%t t+o years India +ill see several Indian retail *usinesses attaining a critical mass as gro+th in the

industry pic's up momentum driven *y t+o 'ey factors @ Availa*ility of =uality real estate and mall management practices @ Consumer preference for shopping in ne+ environments

:layers in Retail Business1. Reliance Retail,. /u*hi'sha (-00 outlets across India ma'ing it the largest in the discount format)

9. >ig AppleJ. Aditya >irla !roup.-. #antaloon RetailK. >harti:Wal:art

<. &ata:Wool+orths (electronics home appaliances store: Croma)

L. Rahe;a !roup:Hypercity in um*ai. Carrefour (2rench Retailing a;or):+aiting in +ings

10. &esco (>ritish):+aiting in +ings



"uture direction 8oncerns

0 million s=uare feet of mall space is e%pected to *e availa*le *y end of ,00< +hich might leadto over:capacity of malls

6ac' of differentiation among the malls that are coming up. 5ne option may *e to loo' atspeciali3ation. #oor inventory turns and stoc' availa*ility measures : retailers clearly need to augment their

operations. 5perations of retailers and suppliers are not integrated. $fficient replenishment practices practiced

in the Indian auto and auto:component industry can *e leveraged to implement efficient supplychain management techni=ues.

/upplier maturity in terms of adherence to delivery schedules and delivering the =uantity orderedis an issue

/ales ta% la+s : lead to retailers having state:level procurement and storage leads to Indianretailers having higher inventories. A& has helped alleviate this a *it. Increased adoption of I& and shrinkage management will be a critical area. /upply chain and customer relations follo+ed *y merchandising facilities management and

vendor development are areas +hich have significant gaps and proactive training is a 'eyimperative for overcoming these.

#oliticians opposing the retailing of fruits and vegeta*les through retail chains due to oppositionfrom the intermediaries e.g. D.#. !ovt ordered closure of Reliance fresh stores and /pencer’s/tores citing la+ and order pro*lems.



Retail reform

&he !overnment allo+s 100 per cent foreigndirect investment (2"I) in cash and carrythrough the automatic route and -1 per centin single *rand. >esides the franchise routeis availa*le for *ig operators. o+ the!overnment also proposes further

li*erali3ation in the retail sector allo+ing -1per cent 2"I in consumer electronics sportsgoods stationery and *uilding e=uipment.





Sources

&he >ird of !old’ &he Rise of India’s Consumer ar'et *ycinsey N Company

IRC Analysis on India Retail 5pportunity &he !reat Indian Retail /tory *y $rnst N Boung India

5rganised Retail in India *y &ata /trategic anagement !roup

A& earny

2orrester Research ,00K #!:2ICCI Report

http44+++.indiain*usiness.nic.in4

$uromonitor Retail /urvey



Thank =ou

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The Indian Retail Sector Boom

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