Organized Retail - The Opportunities Ahead

Organized Retail The Opportunities Ahead

Retail – the largest private industry in world economy Sales (USD Trillion) 1999

6.6

Retail

5.1

Financial services

3.2

Construction / Engineering

2

Packaged goods

1.4

Chenmicals

1.2

Energy

1.1

Electronics

1

Automotive

0.8

telecom Pharmaceuticals; diagnostice

0.3

Source : Euromonitor, European Chemical Industry Council: Automotive News; Wall Street Journal; Chemical market Reporter; IDATE; Global Vantage

Retailing – the largest private industry in the world •

Over 50 of the Fortune 500 companies are retail companies.

•

25 of the Asian top 200 companies are retail companies.

•

The world’s largest company is a retail company. (Wal-Mart – last valued at Rs 1,091,250 crore)

Current Retail scenario in India • Retail industry accounts for 35% of our GDP • Estimated industry size - USD 205 bn (INR 230,000 cr) in 2004. • Highest number of outlets per capita - 12 million outlets • Lowest per capita retail space - 2 sft per person as compared to 16 sft per person in USA • Only 4% of the country’s outlets are larger than 500 sft

India’s retail setup is therefore crowded with small outlets, largely disorganized and primarily owner managed Source: KSA Technopak

Organized Retail Organized Retail arrived in India in the 90’s • 1999

Rs 550 Crore

• 2002

Rs 4,000 Crore

• 2004

Rs 28,000 Crore

• 2005

Rs 35,000 Crore

Organised Retail Penetration

Examples of Growth in Emerging Markets Years taken for organized retail to grow from <5% to over 20%

INDIA IS STILL AT 2.5% Source : MG1, team analysis

Forecast 2010 • Organized retail is expected to grow at 30% - 35% p.a. to become USD 24 bn (INR 100,000 cr) by 2010 • Organized Retail Penetration (ORP) will increase from less than 3% in 2005 to 8% by 2010 • FDI in real estate will accelerate pace of development of retail infrastructure • Investments in organized retailing are estimated to touch USD 4,000 Mn (INR 20,000 cr) by end of 2010

Source: KSA Technopak, HSBC Report

Development Curve of Organised Retail

Growth Drivers - Young & rapidly evolving consumers

India is one of the most youthful countries in the world with 53% of the population less than 25 yrs of age

Within a decade the number of people in age group of 20 – 49 would increase 30% from 395mn in 2000 to 510 mn in 2010

Growth Drivers – Middle Class Population

Currently estimated at 92 Mn the middle class (family income between INR 200,000 – 10,00,000 p.a.) is expected to be around 153 Mn by 2010

Growth Drivers – Retail Infrastructure

•

India will have 225 malls by 2007 spread over 50 cities

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Relaxation in FDI in Real Estate to give further impetus

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Real Estate Mutual Funds ( REMFs) & Real Estate Investment Trusts ( REITs) comes to India

Organized Retail Emerging Opportunities

Retail – Largest Employer in the World Increased employment opportunities

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The annual employee turnover of Wal-Mart is more than the entire workforce of General Motors 18% of the US workforce is employed in retail

Socioeconomic Impact of McDonalds on the US Job Market McDonalds captures 1 out of every 6 restaurant visits in the US

• • • • •

market

Employs more than 5,00,000 people Largest employer of High School Students 12.5 % of the US workforce has worked for McDonalds 1 out of 15 American got his/her 1st Job at McDonalds Nations largest Job Training Organisation -Bigger than the US Army – teaching the future US workforce “ work routines,job discipline and organisational teamwork

Retail – Opportunities for Entrepreneurs

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World of Franchising

Specialized retail formats Bangles, Candy, Kite, - opportunities immense !!

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