The Indian Retail Scenario

The Indian Retail Scenario Presented By: Ajay Bhura Amit Jain Anirban Bhattacharya Anjan Roy Anupam Kejriwal

overview  The sector contributes 10% of the GDP  Largest employer after agriculture - 8%* of population  Estimated to show 25%+ annual growth rate by the end of the    

decade as against the current growth rate of 8.5%. Most fragmented in the world and only 3% of the entire retailing business is in the organized sector. (CRISIL report ) Highest outlet density in world Around 12 million outlets Long way to go

•The share of organized retail in India is around 3% of the total retail market • The size of modern retail is about US$ 8 Billion and has grown by 35% CAGR in last five years

players in the market  Pantaloon Retail India

 Archies,

Ltd.,  Shoppers Stop,  Style SPA Furniture Ltd,  Subhiksha,  Titan Industries,  Lifestyle,  Walmart  Spencers  Westside

 Big Bazaar,  Crossword,  Ebony Retail Holdings

Ltd.,  Fabmall,  Food Bazaar,  Globus Stores Pvt. Ltd.,  Health and Glow,  Music World Entertainment Ltd.,

Recent Trends …..

M.N.C. REGIME CONTRACT FARMING

COLLECTION OF AGRICALTURE PRODUCTS

TO OWN FACTORY

TO CUSTOMER TO OWN DEPT. STORE

Forces Confronting Retail Firms Behavior of Consumers Socioeconomic Environment State of Technolog y

Retail Firm

Behavior of Competition

Behavior of the Supply Chain Legal and Ethical System

Swot analysis

…. Demographic favor Rising disposable income Increase in number of people in earner category. Urbanization Shopping convenience Low labor cost of skilled ones. Changing consumer habits and lifestyles. Plastic card revolution. Greater availability of quality retail space.

…..  Policy related issues

- lack of industry status for retail. - numerous licence,permits and registration requirement. -farmer and retailer unfriendly APMC act.  Limited consumer insight -lack of detailed region specific customer data. -less data on spending pattern.  inadequate human resources -lack of trained personnel at all level. -stringent employment and industry laws. -fragment approach to human resources.

cont………..  Taxation hurdle

-inconsistent octroi and entry tax structure. -vat and multiple taxation issues. -large grey market presence.  Underdeveloped supply chain

-underdeveloped logistics infrastructure. -absence of national cold chain networks. -lack of national distribution networks and hubs  Lack of adequate utilities

- lack of basic infrastructure like power, transport and communication creates difficulty in sustaining retail operations across the large geographical spread of country.

Opportunities  Exposure to global trend  Shift of expense basket from basics to

• •

lifestyle products  Increased spend on Apparel, personal care,

entertainment  Easy Bank credit boosts retail  Easing out on Import barriers, Government

sponsorship taking shape (FDI Policy, Tax and Duty structure, Subsidies)

 Locational advantage.

Changes in lifestyle – demand for “global” trends & Luxury goods

• •

Service Sector: creating new jobs.

• •

From Save to Spend

• •

Nuclear Families

•

Rural Retail

 M-Commerce & e-Commerce boosts retail  Potential for investment.

Increase in income

Working Population in 2010 will 70%

High disposable income family structures on a rise

DINKS (Double Income No Kids) & Multi income families

…..  Political issues.  Inflation.  Nostalgia  Lack of differentiation among the malls that are coming.  Poor inventory turns and stock availability measures.  Product offerings in different stores across the country is very different  Market not mature (has to be validated)  Skilled Labour – a significant challenge

 High taxes, bureaucratic clearance process and labour laws  Infrastructure  Supply Chain & Logistics  Competitive activity – reduction in margins

Challenges with Infrastructure and Logistics: The lack of proper infrastructure and distribution channels in the country results in inefficient processes. This is a major hindrance for retailers as a non-efficient distribution channel is very difficult to handle and can result in huge losses. Infrastructure does not have a strong base in India. Urbanization and globalization are compelling companies to develop infrastructure

SUPPLY CHAIN AND LOGISTIC ISSUES IN INDIAN RETAIL INDUSTRY •The biggest operational challenge for Indian retailers is managing the supply chain properly •Experts from the supply chain management companies and existing players in the retail sector agree to the fact that the back-end operations in retail need a solid boosting in terms of investment •The need to outsource the back-end operations to experts in the industry and its feasibility is also being explored •The infrastructure in India in terms of road, rail, and air-links are not sufficient. So, warehousing plays a major role as an aspect of supply chain operations •To overcome these problems, the Indian retailer is trying to reduce transportation costs and investing in logistics through partnership or directly. •The growth of the Indian retail industry, to a large extent depends on supply chain, so efforts must be made by Indian retailers to maintain it properly

ROLE OF FOREIGN DIRECT INVESTMENT IN INDIAN RETAIL INDUSTRY

•According to a report by CB Richard Ellis, India is one of the top 50 destinations by global retailers. The report explores globalization of retail industry and scrutinizes retailer presence in relation to market sectors, country of origin and other influences. •India’s retail market, currently valued at $511 billion, is poised to grow to $833 billion in the next 5 years. •The organized retail sector, currently accounting for less than 5 % of the total pie, is expected to register a compounded annual growth rate of 40% and swell to $107 billion within the same period. •The consumers spending in India has increased by an impressive 75% in the last 4 years and will quadruple in the next 20 years. •Domestic retailers and mall developers plan to move into smaller towns and cities with alacrity in order to respond to growing consumer markets there and capture rising demand for brands •However to enable this sector to realize , restriction son FDI in retail will have to be relaxed further and retail rentals will need to undergo some degree of rationalization

Driven from Consumption Throughout the 1.1 Billion Population 5-7 million Super Rich 70 – 80 million Afford Cars, Private Healthcare & Foreign travel 250 - 300 million Afford goods like Refrigerators , Scooters & Colour TVs

verty Line = income less than $ 1/day

ource: McKinsey,

600-700 million (Generally Rural) Afford simple industrial products e.g. bicycles , radios , textiles

60 % of India’s population are under 24 years

Ahead  India is amongst the least saturated of all major global markets in terms of

penetration of modern retailing formats  Many strong regional and national players emerging across formats and product categories  Most of these players are now gearing up to expand rapidly after having gone through their respective learning curves  Real Estate Developers are also moving fast through the learning curve to provide qualitative environment for the consumers  The Shopping Mall formats are fast evolving  Partnering among Brands, retailers, franchisees, investors and malls  Improved Infrastructure  Many companies like Lee Cooper, Starbucks and Walmart have put forward their FDI proposals to the government.  Walmart-Bharti combination, Tesco, AV Birla group and Future group are all gearing up for huge investments and aggressive business strategies.

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