Retail Formats

Development of Retail Formats in India and Challenges ahead Presented b y Hari Ram Pal, +919837962636 College of Agribusiness Management, G.B Pant University of Agri. & Technology

Recent Trends

 Retailing in India is witnessing a

huge revamping exercise as can be seen in the graph

 India is rated the fifth most

attractive emerging retail market: a potential goldmine.

 Estimated to be US$ 200 billion, of

which organized retailing (i.e. modern trade) makes up 3 percent or US$ 6.4 billion

 As per a report by KPMG the annual

growth of department stores is estimated at 24%

 Ranked second in a Global Retail

Development Index of 30 developing countries drawn up by AT Kearney.

Retail Sales in India

Consumer Trends

Source: The Great Indian Market, Results from the NCAER’s Market Information Survey of Households, August 9, 2005

Source: The Great Indian Market, Results from the NCAER’s Market Information Survey of Households, August 9, 2005

Retail the largest private industry globally, is still in its nascent stages in India

Over 12 Million Outlets i n India

8 #1

Global Retail industry is of size USD 8 Trillion

Fortune #1 “Wal-Mart” is a Retailer

Organiz ed Retail < 3%

Unorgan ize d Retail

50 Over 50 of the Fortune 500 companies are retailers

25 25 of the Asian Top 200 companies, are retailers

Source: CII Mckinsey, HSBC

Set to gr ow to 810% by 2010 Organize d Retail expected be aroun to d Rs.110 ,000 Cr(USD 2 5 b) by 2 010

Organized Retail Market in India Metros of Mini Metros & Cities

Population in Crores 2008 -2025 (EST)

Proportion of the Total Retail Market (in %)

6.7

13

15

13

25

20

6 2

6 3

7 3

10 4

Top Cities (Pop: > 1mn) 27 cities

3.7

7.2

Large Cities (Pop: 0.5-1 mn) 32 Cities

2.4

4.5

Rest of 5500 Towns +6 lakh Villages Total

87.4

11.5

77

73

69

57

100.2

140.0

2004

2010

2015

2025

Source: NCEAR, CSSO

Share of Retail Industry in Total Employment Country

Share of Employment

India

6-7 %

China

6%

Poland

12 %

Brazil

15 %

USA

11.7 %

Korea

18 %

UK

11 %

Malaysia

7%

Retail

in

Total

Source: FDI in Retail Sector in India, Arpita Mukherjee, Nitisha Patel, ICRIER Publication Pg. 31

Major Retailers India’s top retailers are largely

lifestyle, clothing and apparel stores This is followed by grocery stores Following the past trends and business models in the west retail giants such as Pantaloon, Shoppers’ Stop and Lifestyle are likely to target metros and small cities almost doubling their current number of stores These Walmart wannabes have the economy of scale to be low –

Store Format By Location 1. High Street Format It is Located in busy shopping area. Area is less than 2000 square feet. No parking facility Focused Merchandised Category Example: M. G. Road in Bangalore

2. Destination Format Huge Parking space Wide merchandise category They are Independent retail store

with alluring proposition for the customer to visit the store with the primary intention of shopping there

3. Convenience Store Located in the catchment area of target

customers Extended hours of operation Less than 5000 square feet 24X7 convenience stores situated close to homes to generate high footprints snacks, grocery type items & confectionary Merchandise include: beverages, ready to eat These store carry a limited stock of daily use goods with a special focus on food products eg. In & Out petrol pump outlets.

Store format by ownership Franchise Format Independent Store

Format

Store format by Merchandise Category Speciality store Specializing in a given type of

merchandise. Consortium of retailers that carry a

certain category of products. They are usually situated some distance from the city centre. Consumers have to make a special visit to pick up the goods. eg, Gold, Wedding Souk.

Department store: Large retail store offering a variety of services and merchandise, organised in separate departments. Occupy prominent positions in the heart of town or as anchor stores in out-of-town malls eg. Shopper’s Stop.

• Supermarket: A store that sells a wide variety of goods including food, medicine and household products. Often part of a chain that owns or controls other supermarkets in the same or other towns; thus going for economies of scale. The chains are often supplied from the distribution centres of a larger business eg. FoodWorld.

Various other Retail Formats • Hypermarket (from the French term hypermarche) : •A store that combines a supermarket and a department store. A gigantic retail facility that carries a big range of products under one roof, including fresh groceries and apparel. When planned, constructed and executed correctly, hypermart caters to all routine weekly shopping needs in one trip eg. Big Bazaar, Giant, Hyderabad •Size: 2000 Sq feet and above • Category killers: •Large format stores that specialise in a narrow line of merchandise eg. Vivek, Vijay Sales, Mega Mart. •They use their buying power to negotiate low prices

Seamless malls: Consortium of

retailers without walls separating the individual stores. One enormous shop, with hundreds of popular brands sharing space with each other. Eg. Pantaloon’s Central Mall. Outlet mall: Shopping centre with national brand-name retailers selling discounted merchandise. Eg. Huma Mall.  Lifestyle centres: Shopping centres or malls whose array

of retail outlets are designed to appeal to a particular segment of the population. Typically, lifestyle centres feature upscale specialty stores, services, and restaurants. Eg. Centrestage Mall.

Discounters Internet Retailing

 Anchor clients: The most important elements in a large

format mall. An anchor is among the first clients to enter a mall, and occupies at least 25-30% floor space. Eg. Big Bazaar in Sahara Mall Gurgaon.  Draw tenant: A store that attracts a large number of potential customers to a shopping centre, often an anchor store.  Food court: Separate area of a shopping centre containing fast-food outlets and a common, seating area. Gross leaseable area (GLA): Total floor

space available for retail sales, usually in square feet. Irregulars: Saleable merchandise with minor imperfections sold at discount.

Dollar store: US based My Dollar Store started operation in Mumbai through franchise arrangement with Sankalp Retail Value.  Floor Space: 4000 Sq. Feet  Merchandise: Cleaning, Health & Beauty, Hardware,  plastice ware, Kitchen ware & confectionary etc. 

Challenges Ahead Infrastructure Technology Supply Chain Human Resource Foreign Direct Investment

Thanks