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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
Web : www.technopak.com