retailing in India lec 3,4

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Retailing in India

Retailing in India.: 

Retailing in India. The global Retail development Index has ranked India first, among the top 30 emerging markets in the world. It is believed that India has the potential to deliver the fastest growth over the next 50 years.

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Some Statistics... Second largest sector after Agriculture. Contributes 10 – 11 % of the GDP Indian Retail trade increased from Rs. 2200 billion in 2000 to Rs 3300 billion by the year 2005 India's first true shopping mall – – was inaugurated as lately as in 1999 in Mumbai. ( this mall is called "Crossroads").

The Evolution of Retail in India: 

The Evolution of Retail in India Retail in India has evolved to support the unique needs of our country, given its size and complexity Haats, Mandis and Melas have always been a part of the Indian landscape. They still continue to be present in most parts of the country and form an essential part of life and trade in Various areas.

The Evolution of Retail in India: 

The Evolution of Retail in India The PDS (Public Distribution System) would easily be called as the single largest retail chain existing in the country. the evolution of the PDS of Grains in India has its origin in the “rationing system” introduced by the British during world war II

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The system was started in 1939 in Bombay and subsequently extended to other cities and towns. the system was abolished post war but however attaining independence India was forced to reintroduce it in 1950. The Canteen Stores Department and the Post Offices in India are also among the largest network of outlets in the country reaching population across the country.

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In the past decade, the Indian marketplace has transformed dramatically. However from the 1950,s to the 80,s, investment in various industries was limited due to low purchasing power in the hands of the consumer and the government’s policies favoring the small scale sector. The first attempts at organized retailing were noticed in the textiles sector. One of the pioneers in this field was Raymond’s which set up stores to retail fabric.

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Raymond’s distribution network today comprises 20,000 retailers and over 256 exclusive showrooms in over 120 cities of the country Other textile manufacturing who set up their own retail chains wee Reliance- which set up Vimal showrooms and Garden Silk Mills, which set up Garden Vareli showrooms.

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The Evolution of Retail in India Traditional Formats Haats Mesas Mandis etc . Emerging Formats - Exclusive retail outlets Hypermarkets, Internal retail Malls / Specialty Malls Multiplexes Fast food outlets Service galleries Established formats Kirana shops department Stores PDS/ fair price shops Pan/ Beedi shops

Drivers of Retail change in India : 

Drivers of Retail change in India major drivers : Changing Income Profiles : Steady economic growth fuelled the increase in disposable income in India. The average middle class family's disposable income rose by more than 20% between 1999-2003. Diminishing difference between Rural and urban India : Rural India accounts for over 75% of India population and this in itself offers a tremendous opportunity for generating volume driven growth. Tax benefit. In year 2002-03 LIC sold 50% of its policies in rural India. Same BSNL also sold its 50% connection in small towns .

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C hanges in Consumption patterns: Occupational changes and expansion of media have caused a significant change in the way the consumer lives and spends his money. The changes in income brought about changes in the aspirations and the spending patterns of the consumers. the buying basket of the consumer changed Drivers of Retail change in India

Drivers of Retail change in India : 

Drivers of Retail change in India The emergence of a young Earning India : Nearly 70% of the Indian population is below the age of 34. taking advantages of employment opportunity in the booming service sector these young Indians are redefining service and consumption patterns

Prominent sector in Indian retail: 

Prominent sector in Indian retail Clothing, textiles and fashion Accessories: Food & food Services: Consumer Durables: Books & Music: Jewellery retail Footwear retail Fuel Retail/ petro retail

Challenges to retail Development in India: 

Challenges to retail Development in India Retail not being recognized as an industry in India. The high costs of real estate. Lack of Adequate infrastructure. Multiple and complex taxation system.

Size of the organized retail market (Rs Cr): 

Size of the organized retail market (Rs Cr) 2001-02 2007 CAGR (%) ( compound Annual growth rate) TOTAL 16,000 37,216 18 Food 1,800 7,473 33 Clothing 4,950 10,423 16 Cons.Durables 1,650 3,787 18 Books & Music 450 1,426 26

Share of organized & unorganized retail with comparison source: Ernst &Young, The Great Indian Retail Story, 2006 : 

Preapred By Dr.Pooja Sharma 16 Share of organized & unorganized retail with comparison source: Ernst &Young, The Great Indian Retail Story, 2006

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Preapred By Dr.Pooja Sharma 17 Trade ($ bn) Employment (%) Shops (million) Organized Sector share (%) India 180-394 7 12 2 to 3 % China 360 12 2.7 20 US 3800 12/06/16 15.3 80

Retailing formats in India: 

Retailing formats in India Specialty Stores: Chains such as the Bangalore based Kids Kemp, the Mumbai books retailer Crossword, RPG's Music World and the Times Group's music chain Planet M, are focusing on specific market segments and have established themselves

Retailing formats in India: 

Retailing formats in India Discount Stores: As the name suggests, discount stores or factory outlets, offer discounts on the MRP through selling in bulk reaching economies of scale or excess stock left over at the season. The product category can range from a variety of perishable/ non perishable goods

Retailing formats in India: 

Retailing formats in India Department Stores: Large stores ranging from 20000-50000 sq. ft, catering to a variety of consumer needs. Further classified into localized departments such as clothing, toys, home, groceries, etc.

Retailing formats in India: 

Retailing formats in India Departmental Stores are expected to take over the apparel business from exclusive brand showrooms. Among these, the biggest success is K Raheja's Shoppers Stop, which started in Mumbai and now has more than seven large stores (over 30,000 sq. ft) across India and even has its own in store brand for clothes called Stop!.

Retailing formats in India: 

Retailing formats in India Super/ Hypermarkets Large self service outlets, catering to varied shopper needs are termed as Supermarkets. These are located in or near residential high streets. These stores today contribute to 30% of all food & grocery organized retail sales. Super Markets can further be classified in to mini supermarkets typically 1,000 sq ft to 2,000 sq ft and large supermarkets ranging from of 3,500 sq ft to 5,000 sq ft. having a strong focus on food & grocery and personal sales.

Retailing formats in India: 

Retailing formats in India Convenience Stores these are relatively small stores 400-2,000 sq. feet located near residential areas. They stock a limited range of high-turnover convenience products and are usually open for extended periods during the day, seven days a week. Prices are slightly higher due to the convenience premium.

Retailing formats in India: 

Retailing formats in India Multi Brand outlets - also known as Category Killers, offer several brands across a single product category. These usually do well in busy market places and Metros.

Retail Industry in India is: 

Retail Industry in India is Unorganized : Vast majority of the twelve million stores are small "father and son" outlets Fragmented : Mostly small individually owned businesses, average size of outlet equals 50 s.q. ft India has the highest number of retail outlets per capita in the world, the retail space per capita at 2 s.q. ft per person is amongst the lowest. rural bias: Nearly two thirds of the stores are located in rural areas. Rural retail industry has typically two forms: "Haats" and “Melas". Haats are the weekly markets : serve groups of 10-50 villages and sell day-to-day necessities. Melas are larger in size and more sophisticated in terms of the goods sold (like TVs)

Retail Industry in India is: 

Retail Industry in India is Experimentation with formats: Retailing in India is still evolving and the sector is witnessing a series of experiments across the country with new formats being tested out. Ex. Quasi-mall, sub-urban discount stores, Cash and carry etc .

Retail Industry in India is: 

Retail Industry in India is Store design : Biggest challenge for organised retailing to create a “customer-pull” environment that increases the amount of impulse shopping. Research shows that the chances of senses dictating sales are upto 10-15%. Retail chains like MusicWorld, and Globus are laying major emphasis & investing heavily in store design. Emergence of discount stores : T hey are expected to spearhead the organised retailing revolution. Stores trying to emulate the model of Wal-Mart. Ex. Big Bazaar, Bombay Bazaar D mart

Retail Industry in India is: 

Retail Industry in India is Unorganized retailing is getting organized : To meet the challenges of organized retailing such as large cineplexes, and malls, which are backed by the corporate house such as 'Ansals' and 'PVR‘ the unorganized sector is getting organized. 25 stores in Delhi under the banner of Provision mart are joining hands to combine monthly buying. Bombay Bazaar and Efoodmart formed which are aggregations of Kiranas.

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Major Retailers Leading Retailers

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Some of the Key Players in Organised Retail

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Retail Industry employs 17-20% Workforce that drives the Economy. Retail trends often mirror trends in a nation’s overall economy. Retailers add value by Providing the Right Product at The Right Place at the Right Time.

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Projections of 8% sustainable real GDP growth rate till 2020 promise high growth potential for Indian Retail HIGH GDP GROWTH

Radical Transformation Anticipated In Indian Retail: 

Radical Transformation Anticipated In Indian Retail China 20% 10 Poland 20% 8 Brazil 36% 15 Thailand 40% 18 US 85% 50 India 17% (estimated) 27% (estimated) 5 10 India looking at rapid GROWTH compared to other countries

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Growth Of Indian Retail … Indian Retail expected to grow close to 12% p.a. in the next 10 years *Projected Source: Technopak Analysis, CSO & Other Sources

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Analysis of Growth It is expected that retail in India could be worth US$ 175-200 billion by 2016. 2007-08 Total retails contribution to GDP is between 8% which would further jump up to nearly 12% in next few years. By 2010, retails contribution to national GDP in totality is likely to be 22%. 2007 – Retail Growth rate – 25-28%, Unorganized and organized retail size – 300 billion US$ Opening 10 to 15 outlets by 2015, it plans to employ about 5,000 people selling groceries, consumer goods, fruits and vegetables. India's retail industry is worth $300bn (£148bn) Eg: Bharti is expected to invest 60 Billion with the largest retail Walmart

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Government Policies The retail industry in India is growing at a significant pace. However, there are several problems faced by the industry. The major challenges for the organized sector include : Taxation laws that favor small retailers. Multi-point octroi collection. According to analysts, for this industry to thrive, Indian retailers need to emulate worldwide retail practices such as accuracy in financial reporting, increased levels of corporate governance and greater accountability among employees. Foreign Equity does not go beyond 51 percent. Additions to the product categories to be sold under ‘single brand’ require fresh govt. approval.

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International Retail: At a Glance

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Share of Organized Retail

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Key Players Highly evolved US market has WalMart taking only 8% market share UK market has Tesco with only 13.4% market share China market still does not have a clear leader USA = US$ 2,350 Bn UK = US$ 406 Bn China = US$ 313 Bn

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SWOT Analysis

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Strength Increasing demand driven by the country’s young working population Increase in per capita income which in turn increases the household consumption value chain ( suppliers, producers, retailers and customers). Improvement in the standard of living. Technology intensive industry

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Weakness Lack of expertise in Supply Chain Management Inadequate Infrastructure Stringent Labour Laws Lack of specialized professionals in Industry Lack of industry status. Government Restrictions on FDI Non-Availability of Government Land.

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Opportunities Change in consumer behavior pattern and increase in disposable income. It is estimated that 15 million people would be engaged in Retail and Retail support activities by 2010 Indian rural markets offer a sea of an opportunity for the retail sector. Upcoming international Players Healthy prospect for the fashion industry.

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Threats Indian taxation system favors small retail business. Competition from unorganized Sector to the organized Sector. Middle class Psychology. Increasing Real Estate prices

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Conclusion Huge Scope for Development Competitive Market Organized retail is fast growing at a rate of 30% YOY Greater opportunity for employment

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Entry Point: August 2006 Entry Point: 2002 -2003 Stores : 857 across India Stores: 20 Stores in Maharashtra and Gujarat Products: FMCG, Vegetables Products: FMCG , Medicines and Vegetables Consumer Segmentation: Targeting 2 tire and 3tire Market Consumer Segmentation: Targeting 2 tire and 3 tire market Marketing Strategy: News Papers, TV etc. Marketing Strategy: Believe in mouth publicity Marginal Profitability: The average ticket size is 30 0 RS Marginal Profitability: The average ticket size is 550 Rs. \

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Thank You