Retail Marketing: Prof.p.c.mehra

Retail Marketing Introduction

Prof.P.C.Mehra

Retail Marketing Management Retailing – Consists of those business activities involved in the sale of goods & services to consumers for their personal, family or household use – the final stage in the distribution process. The word ‘retail’ is derived from a French word retaillier, meaning “to cut a piece off” or “break bulk”

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Retail Marketing Management

Manufacturer Wholesaler

Retailer

Consumers

Importance of Retailing  The final link with consumer for selling & feedback  Impact on the economy  Accessibility in various locations  Avenue to study consumer preferences & buying habits  Avenue for imaginative merchandising  Buying thru touch, feel & comparison without dealer influence  Buys in bulk, sells in smalls  Induces impulse purchase

Retailing in India  India is the 4th largest economy in the world in Purchasing Power Parity terms after USA, China & Japan.  According to one estimate the retailing industry in India is estimated at USD 205b (Rs.230,000 Crore) growing at 5% p.a. Worldwide retail sales are estimated at $7 trillion  If it maintains a growth rate of 10% it will be worth $300 b with 1 m jobs & 10 m Sq.ft. of constructed space in the next 10 years  According to ATKearney, in 2000 the Retailing industry was estimated to be Rs.400,000 crore and set to achieve Rs.800,000 crore by 2005 at a growth rate of 20% p.a  Organized Retail was worth only about Rs.20,000 crore (2000) and expected to grow to Rs.160,000 crore by 2005.  96% of the retail outlets are said to be smaller than 500 sq ft in area amounting to approx 2 sq ft per capita when compared to 16 sq ft in the US.  According to a McKinsey report – by 2005, India will see 25 warehouse clubs & 33 super centres leading to $ 2.5 b direct investment.

Some Statistics

 An average retail mall is 1 – 1.5 lac sq.ft  Average investment per mall Rs.30 cr  Average rate of return @ 18-20%  Cities other than Bombay / Delhi are far more attractive for retail malls growth

Organized Retailing in India Present  12 m retail outlets in the country (Mexico has 1.18m)  Density of outlets 5.5/1000 persons  Bata – India’s largest retail chain has a combined T/o of $ 140 m, whereas Walmart has $180m from one store  Ratio of land space cost to GDP in India is the highest in the world: Mumbai 115 Bangalore 52 Singapore 12 Tokyo 9 Sydney 6 Kaula Lumpur 2  Organized retail industry in India is only 2% as against 50% in Malaysia.

Organized Retailing in India The mall mania  93 malls are planned in the next 2 years across 14* cities all India, 39 in 2005 and 54 in 2006 with additional 29m sq ft retail space  By 2010, 300 malls are expected to become operational in the country.  NCR to boast of 50 malls in the next 2 years with retail space in excess of 22m sq ft.  Mumbai will have 42 malls with retail space of 19m sq ft  Bangalore will have 14 malls with 6m sq ft  Kolkatta will have 13 malls with retail space of 4m sq ft.

 *14 cities…..NCR, Mumbai, Bangalore, Hyd, Kolk, Pune, Lucknow, Indore, Jpr, Ludh, Cochin, Chand, Chennai, Ahmd,

The Organized Retailing Pie Jewellery & watches 7%

Books, music & gifts 3%

Mobile handsets 3% Others 4%

Catering services 7% Furniture & furnishings 8%

Footwear 9%

Clothing & textile 39% Consumer durables 9%

Source – KSA Technopak Research

Food & grocery 11%

Region-Wise Mall Development - 2005

South 22%

Region-Wise Mall Development - 2006 South 14%

East 5%

North 44%

West 40%

East 4%

North 42%

West 29%

Source: ICICI Property Services

Mall Development in India – Top 14 Cities Number of Malls

Area (Million sq ft)

City

2005

2006

TOTA L

2005

2006

TOTAL

NCR

14

18

32

3.35

6.67

10.03

Mumbai

7

14

21

2.45

4.60

7.05

Bangalore

5

1

6

1.06

0.50

1.56

Hyderabad

3

4

7

0.74

0.65

1.39

Kolkata

2

1

3

0.45

0.70

1.15

Pune

2

6

8

0.41

2.20

2.61

Lucknow

2

1

3

0.34

0.40

0.74

Indore

1

-

1

0.30

-

0.30

Jaipur

1

1

2

0.20

0.25

0.45

Ludhiana

1

1

2

0.20

0.20

0.40

Cochin

-

2

2

-

0.85

0.85

Chandigarh

-

2

2

-

0.40

0.40

Chennai

1

2

3

0.40

0.65

1.05

Ahemadabad

-

1

1

-

0.65

0.65

39

54

93

9.90

18.72

28.62

TOTAL

Source – ICICI Property Services Research

Inorbit mall & Phoenix High Street Mumbai

Source: ICICI Property Services

Mixing Retail, Leisure & Pleasure NCR experience • The NCR is set to witness the Mother of all Malls in the Vasant Kunj….DLF Place with 850,000 sq ft area. • Consist of twin properties…The Promenade & The Emporia providing holistic family entertainment and shopping. • Will house the largest multiplex (74,000 sq ft) and food court (65,000 sq ft) with parking for 2700 cars. • Promises to bring together International brands and offer an International shopping experience. • Land sold by DDA for Rs.409 Crore, along with another piece of land for Rs.330 crore for another mall.

West Edmonton Mall, Canada

Listed in the Guinness Book for the largest shopping centre in the world & world’s largest parking lot.

Source: ICICI Property Services

Phases of Mall development

Infancy

Development

Bangladesh, Sri Lanka

Maturity

South East Asia, Middle East China, India

Phase I

Decline

Phase II

USA, UK

Phase III

Source: ICICI Property Services

Phase IV

Asian Comparisons 

India is among the last Asian economy to liberalize the retail sector

 Thailand, Malaysia, Taiwan – 40% of all consumer goods are sold through organized retailers  In China more than a 10th of all consumer goods are sold through modern retail formats.  FDI is encouraged all over Asia.

Organised Retailing in South Asian Countries • • • • • • •

Malaysia Thailand Philippines Indonesia China S.Korea India

Organized. Ret 50% 40% 35% 25% 20% 15% 02%

Traditional Ret. 50% 60% 65% 75% 80% 85% 98%

What Ails India



No policy concerning retail sector, no political consensus

 FDI not permitted, expected to open up selectively  Red tape – 12/15 clearances & the license RAJ still prevail  Land ownership laws have made real estate prohibitive, not scarcity of space.  Future growth is technology driven & India is far behind on logistics & supply chain (it has taken McDonald’s 5 years to established acceptable levels of arrangements)

Commercial property rentals an overview • London’s West End, most expensive destination globally (rentals $ 179/sq ft) • Tokyo Inner CBD (rentals $131/sq ft) ranks 2 • Tokyo Outer CBD (rentals $123/ sq ft) ranks 3 • Mumbai (rentals $57/ sq ft) global rank 23 • Midtown Manhattan (rentals $53.70) ranks 27 • Delhi (rentals $43/ sq ft) global rank 33 • 10 years ago Mumbai was No:1

Khul ja Sim Sim !!! • • • • • • • •

Starbucks eyes partner for India Debenhams plans stores in Delhi, Gurgaon McDonald’s to set up 100 restaurants in 2 years Pantaloon to set up flagship store for home management products Tiffany, Louis Vitton, Hermes Saks 5th Avenue line up for India GAP, H&M expected to set up shop Retail FDI buzz draws Walmart honcho M&S, Metro too keen on India