Euro Monitor

Retailing - India
Euromonitor International : Country Market Insight March 2011
Retailing
India
List of Contents and Tables

Executive Summary ................................................................................................................................................ 1 Retailing Increases Strongly in India To Pre-crisis Level......................................................................................... 1 FDI in Multi-brand Retailing Is A Hot Topic............................................................................................................ 1 Inflation Drives Sales in Grocery Retailers .............................................................................................................. 1 Modern Grocery Retailers Are Niche, But Growing Strongly................................................................................... 1 Opportunity Awaits Retailers .................................................................................................................................... 1 Key Trends and Developments .............................................................................................................................. 1 Economic Conditions ................................................................................................................................................ 2 Internet Retailing ...................................................................................................................................................... 3 Government Regulation ............................................................................................................................................ 4 Private Label............................................................................................................................................................. 5 Retailers Stretch the Limits of Conventional Marketing ........................................................................................... 6 Manpower Concerns Loom in Retailing ................................................................................................................... 7 Market Indicators ................................................................................................................................................... 8 Table 1 Employment in Retailing 2005-2010................................................................................. 8 Market Data ............................................................................................................................................................ 9 Table 2 Sales in Retailing by Category: Value 2005-2010 ............................................................. 9 Table 3 Sales in Retailing by Category: % Value Growth 2005-2010 ........................................... 9 Table 4 Sales in Retailing by Grocery vs Non-Grocery 2005-2010 ............................................... 9 Table 5 Sales in Store-Based Retailing by Category: Value 2005-2010......................................... 9 Table 6 Sales in Store-Based Retailing by Category: % Value Growth 2005-2010 ....................... 9 Table 7 Sales in Non-Grocery Retailing by Category: Value 2005-2010 ......................................10 Table 8 Sales in Non-Grocery Retailing by Category: % Value Growth 2005-2010.....................10 Table 9 Sales in Non-store Retailing by Category: Value 2005-2010 ...........................................10 Table 10 Sales in Non-store Retailing by Category: % Value Growth 2005-2010 ..........................11 Table 11 Retailing Company Shares: % Value 2006-2010..............................................................11 Table 12 Retailing Brand Shares: % Value 2007-2010 ...................................................................11 Table 13 Store-Based Retailing Company Shares: % Value 2006-2010 .........................................12 Table 14 Store-Based Retailing Brand Shares: % Value 2007-2010 ...............................................12 Table 15 Non-Grocery Retailers Company Shares: % Value 2006-2010 ........................................12 Table 16 Non-Grocery Retailers Brand Shares: % Value 2007-2010..............................................13 Table 17 Non-store Retailing Company Shares: % Value 2006-2010 .............................................14 Table 18 Non-store Retailing Brand Shares: % Value 2007-2010 ..................................................14 Table 19 Forecast Sales in Retailing by Category: Value 2010-2015 .............................................15 Table 20 Forecast Sales in Retailing by Category: % Value Growth 2010-2015 ............................15 Table 21 Forecast Sales in Store-Based Retailing by Category: Value 2010-2015 .........................15 Table 22 Forecast Sales in Store-Based Retailing by Category: % Value Growth 20102015 ..................................................................................................................................15 Table 23 Forecast Sales in Non-Grocery Retailing by Category: Value 2010-2015 .......................16 Table 24 Forecast Sales in Non-Grocery Retailing by Category: % Value Growth 2010-2015.........................................................................................................................16 Table 25 Forecast Sales in Non-store Retailing by Category: Value 2010-2015 .............................16 Table 26 Forecast Sales in Non-store Retailing by Category: % Value Growth 20102015 ..................................................................................................................................16 Appendix .................................................................................................................................................................17 Operating Environment............................................................................................................................................17 Cash and Carry ........................................................................................................................................................19
Euromonitor International
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Table 27
Cash and Carry: Number of Outlets by National Brand Owner: 2009-2010 ....................20
Definitions ...............................................................................................................................................................20 Summary 1 Research Sources ..............................................................................................................22
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RETAILING IN INDIA
EXECUTIVE SUMMARY
Retailing Increases Strongly in India To Pre-crisis Level
Retiling in India increased strongly in 2010, with a similar growth rate to 2007, before the financial crisis. The driver of such strong growth was modern retailers expanding their reach further across India, particularly as the leading retailers could negotiate better rental prices after the global financial crisis. Nonetheless, inflation played a part in the strong growth, as the average inflation rate in 2010 was 13%, which was the highest over the review period. Inflation helped to drive current value sales growth, particularly in food/drink/tobacco specialists and independent small grocers, which account for the bulk of the retail landscape in India.
FDI in Multi-brand Retailing Is A Hot Topic

In 2010, foreign direct investment (FDI) in multi-brand retailers attracted a great deal of attention to market players, as the government brought up the issue of opening up the market for international retailers to invest in India. This initiative drew a mixed response, ranging from criticism amongst the opposition parties and independent players, to support from international retailers, which are eyeing up retailing in India; particularly international retailers such as Wal-Mart, Tesco, Metro and Carrefour, which invested in cash and carry in the review period. Discussion is still ongoing, with a discussion paper organised by the DIPP (Department of Industrial Policy and Promotion) for political debate in parliament.
Inflation Drives Sales in Grocery Retailers

Grocery retailers saw faster growth than non-grocery retailers after the financial crisis in 2008. This led the value share of grocery retailers to increase to 68%, which was the same as the share in 2005. In 2010, inflation was the main driver of value sales in grocery retailers, as it was stubbornly high, which drove up the prices of essentials such as dairy products, pulses and vegetables. Nonetheless, non-grocery retailers remained buoyant, seeing double-digit growth, supported by the growth of department stores, jewellers and clothing and footwear specialist retailers, as well as electronics and appliance specialist retailers.
Modern Grocery Retailers Are Niche, But Growing Strongly

Modern grocery retailers such as Future Value Retail and Reliance Retail are still small in India, yet they increased strongly over the review period. Modern grocery retailers managed to carve out a 1% share of grocery retailers in 2005, but doubled this in 2010, despite a slowdown due to the global financial crisis. Niche brands such as electronics and appliance specialist retailers Next and Croma, homeshopping formats such HomeShop18, and direct selling companies such as Amway India increased strongly to tap into the growth of the Indian economy in the review period.
Opportunity Awaits Retailers

With discussion about FDI in multi-brand retailers, the direction is moving towards the gradual opening up of the market; this is creating a great deal of excitement globally amongst multinational retailers, due to the prospects for growth in the Indian economy. Furthermore, an increase in the number of middle-income households is projected, which will lead to higher disposable incomes in the forecast period. However, significant investment will be needed to develop Indias infrastructure before these multinational players can enjoy the fruits of their investment.
KEY TRENDS AND DEVELOPMENTS
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Economic Conditions
Considering the global upheaval in economic stability, the economic outlook and stature of India was relatively healthy over 2009/2010. Although GDP growth was affected by the global economic downturn in 2008 and 2009, which fell below 7% in both years, based on Euromonitor Internationals Country and Consumer research, it received a healthy boost, returning to pre-2008 rates in 2010, growing by more than 9%. Euromonitor Internationals Country and Consumer research also estimates that the consumer group which has a disposable household income of between US$2,500 and US$10,000 per annum grew from 35% in 2005 to 47% in 2010, benefiting from the economic growth in the review period. Nonetheless, the astronomical inflation rates were a particularly notable feature of the Indian economy in 2009 and 2010, around 11% and 13% respectively, putting pressure on economic growth in India.
Current impact In 2010, financial optimism amongst consumers was the result of signs of recovery portrayed by the global markets. In addition, a significant increase in the hiring of professionals by multinational firms led to higher spending in 2010. Since most of these professionals belong to the middle- and high-income segments, retailers offering well-known international brands and aspirational products saw a healthy rise in value sales. Nonetheless, grocery retailing still saw higher growth than non-grocery retailing in 2010. Several factors contributed to this trend. Apart from the rampant food inflation rates, which were the highest amongst all commodities in 2010, the incessant growth of hypermarkets and the overly dominant nature of kirana stores in retailing in India also contributed to this development. Many companies have started investing in addressing the need for selective marketing by transforming a significant proportion or their entire store chains into modern, trendy locations. Prime examples are the chains operated by Bata India and Titan Industries. Whilst Bata was involved in increasing the size and changing the traditional image of many of its stores, Titan opened different premium outlet chains altogether. Indian retail majors such as Pantaloon Retail India Ltd (PRIL) and Reliance Retail are constantly looking to enter the retailing of high-margin products. For instance, both these players saw rapid expansion of their presence in consumer durables and jewellery in 2010.
Outlook The World Investment Prospects Survey 2010-2012, conducted by the United Nations Conference on Trade and Development (UNCTAD), depicted India as the second most significant FDI market for multinational corporations in the period 2010-2012. FDI regulation for retailing multi-brand outlets is projected to open up gradually in the long term of the forecast period, due to the pressure from global superpower economies such as the US and Europe, as well as the pressure of high inflation, which is caused by the underdeveloped supply chain infrastructure across India. Therefore, by gradually opening up FDI in retailing, the Indian overall economy is predicted to benefit from such a move in the long-term. In addition, Indias GDP is projected to grow by around 8% annually in the forecast period. This marks a revival in its fortunes, as GDP growth was pulled down to 5-7% in 2008 and 2009. Benefiting from the expected strong economy, the unemployment rate in India is expected to gradually decline in the forecast period, to reach 9% by 2015. This will result in a growing number of households which have disposable incomes between US$2,500 and US$10,000 per annum, reaching 59% of Indias population, based on the projection of Euromonitor Internationals Country and Consumer research study.
Future impact With the Indian economy gradually growing into one of the powerhouses of the world, its influence is set to increase in the economic decisions made internationally. Therefore, FDI in multi-brand outlets is projected to be opened up gradually, which will lead to more international players being more visible, as several new players are keen to enter and influence the burgeoning retail environment in India. Retailing in India is expected to see a constant value CAGR of 7% in the forecast period, which is faster than in the review period, which saw a constant value CAGR of only 3%. As aspirational products, international and recognised brands will become more widely available throughout the country due to retailers expansion. Also, consumer spending is expected to rise over the forecast period, as the population below the poverty line is projected to decline in the forecast period. Increasing disposable incomes, primarily for middle- and high-income consumers, will also be a driving
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factor for such products. Chained national retailers are concentrating on increasing their outlet presence across the country. In particular, several chains, spanning department stores, clothing and footwear specialist retailers and leisure and personal goods specialist retailers, are looking to decrease the substantial share of independent retailers in India. Therefore, domestic retailers should leverage the period before the government decides to open up FDI in multi-brand retailers by strategically acquiring prime locations across India, particularly in second-tier and third-tier cities, in order to compete with the large multinational players. For multinational players, they should invest in and tie up with chained domestic multi-brand players to support the back-end before launching their own multi-brand outlets, due to sensitivity in terms of FDI in the retail market.
Internet Retailing
Internet retailing was still an extremely nascent retail channel in the country up to 2010. In 2010, value sales in internet retailing still accounted for a negligible share of overall value sales in retailing in India, which excludes service sales such as travel tickets. The barriers to the development of internet retailing were the lack of infrastructure investment for the internet, as well as the supply chain, which led to higher overall costs for internet retailing. Although the usual suspects, such as eBay and India Times, have a historic presence in internet retailing, they were not able to influence the retail environment as a whole, due to the limit on internet penetration in India. Fraud is the other barrier to growth, leading to consumer scepticism about using the internet as a shopping channel. Some retailers do have internet retailing capability, but for most retailers their websites serve more as an online catalogue rather than a popular sales channel. Nonetheless, for non-grocery products such as consumer electronics, consumer appliances and media products, internet retailing was more developed in the review period.
Current impact Internet retailing was the second fastest growing retail channel in current value terms in 2010. With sales increasing by 32% in current value terms in 2010, it trailed only hypermarkets in terms of growth. Consumers exposed to the internet and computing technology are gradually becoming aware of the convenience of internet retailing. Apart from offering comparative features, online retail portals give consumers the opportunity to have the goods delivered to their home at little or no cost. Internet retailing in India was very much confined to a few product categories in 2010, such as clothing and footwear, media products and consumer electronics and appliances. Looking at the similarities for these product types, they provide consumers with a wide choice, and have a longer shelf-life and higher profit margins than essential products such as groceries. Due to the factors mentioned above, they attract more consumers due to less perceived risk amongst consumers. Based on Euromonitor Internationals Consumer Electronics research, almost 8% of the Indian population possessed a computer in 2010. As the popularity and need for such consumer electronics rises in India, the internet is also experiencing an increase in popularity. However, the internet penetration rate (internet connections/person) was still less than 2% in 2010, based on the same research, thus limiting the influence of internet retailing amongst the masses. Several retailers which are looking to establish a renewed trendy and upmarket brand image ventured into internet retailing over the review period. Retailers employing this channel included Shoppers Stop, Pantaloon Retail (futurebazaar, Big Bazaar, Pantaloons, eZone), Bata and Next. Nonetheless, sales through internet retailing for these companies were still negligible compared with the overall company sales in 2010. Specifically dedicated e-commerce companies were not very popular in the review period. However, several premium brands, such as Jimmy Choo, Hugo Boss and Lancme, were looking to intensify their internet retailing capabilities in 2010, as they tried to hold onto their product margins in the face of increasing store rental.
Outlook Although computers are becoming popular electronic commodities amongst the Indian population, the internet has not yet reached similar levels of acceptance. However, as national telecommunications brands such as Airtel, MTNL, BSNL and Reliance publicise their internet connections through the mass media, the internet is set to see increasing penetration over the forecast period. Thus, internet penetration via dial-up and broadband is expected to be 3% of the Indian population (which is double the review period) by 2015,
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based on Euromonitor Internationals Consumer Electronics research. Furthermore, the ownership of computers is projected to increase to almost 15% by 2015. Internet retailing will be boosted by the ripple effect created by increased internet use, even by the increased emphasis on internet sales by the service industry, such as for purchasing travel tickets. Furthermore, increasing consumer confidence and ownership of financial cards will help the growth of internet retailing. In addition, more pure internet retailing portals, such as flipkart.com, as well as hybrid internet retailers, such as homeshopping channels or bricks-and-mortar retailers which invest more in internet retailing, will further fuel the growth of internet retailing in the forecast period.
Future impact Accounting for a 37% share of value sales in non-store retailing in 2010, internet retailing is a major channel for companies to consider when they are balancing alternatives to outlet expansion. However, the gulf between store-based retailing and non-store retailing is captured by the fact that total internet retailing value sales in 2010 were negligible within overall store-based retailing. Internet retailing still has a very long way to go before it challenges store-based retailing. Although less risky products such as media products, apparel and electronics and appliance brands could generate some quantifiable sales through internet retailing, sales of these products will still depend on bricks-and-mortar stores for driving their sales in India, due to the low level of internet penetration in the country. With much sales in internet retailing coming from electronics and appliances in 2010, electronics retail chains are expected to follow in the footsteps of Next and set up online sales portals in order to complement their own bricks-and-mortar sales. With the individual retail chains entering the internet retailing channel in India, there is immense potential and room for growth in sales through this channel. Retailers which have non-grocery products should start investing in internet retailing to attract consumers who are looking for convenience when shopping for non-grocery products, since the number of such consumers is expected to increase in line with the growth of internet penetration. Nonetheless, grocery products, which have a lower profit margin and relatively short life span when compared with non-grocery products, will be not affected by internet retailing in the forecast period, because of the low level of investment in infrastructure in terms of delivering the products to consumers doorsteps. Furthermore, the significant presence of kirana stores is also a major barrier for grocery products, because buying from kirana stores is just a phone call away.
Government Regulation
In 2010, there were three major talking points over the governments policy pertaining to retailing. The first was the imminent introduction of the Goods and Services Tax (GST) in place of the present taxation structure, including value added tax (VAT). GST is primarily an initiative to simplify the taxation structure in India, which currently comprises excise duty, VAT, service tax and any additional taxes. The GST system is proposed to have a straightforward two-tier system of taxation: central and state. The second major point was the continuing issue of opening up Indian retailing to allow a greater FDI percentage in single-brand and multi-brand retailers. The third was the rampant inflation rate in 2010, even as the Reserve Bank of India (RBI) undertook measures to contain this rate.
Current impact High inflation ensured that the entire retail market grew more than expected in terms of current value sales. Growth in current value terms in 2010 was higher for grocery retailers than their non-grocery counterparts, partly due to the double-digit inflation on food commodities. However, the early double-digit rise in commodity and fuel prices in 2010 affected the raw materials and transportation costs for both grocery and non-grocery manufacturers and retailers; hence forcing many manufacturers to increase retail prices in order to avoid a drastic decline in margins. However, the RBI intervened in the latter half of 2010, as it modified national repo rates in order to avoid unrealistic inflation rates plaguing industrial growth. The implementation of GST ran into multiple problems in 2010. Whilst several state governments were not happy to implement the system because it is related to the state income, some manufacturers and marketers had mixed views about GST implementation. This caused some delays in the expected GST implementation, which was still in the discussion process at the time this report was being written.
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The government discussed the topic of FDI extensively with industry players, experts and the Retail Association of India (RAI). As of 2010, no FDI was allowed in multi-brand retailers, whilst there was an allowance of a maximum 51% foreign investment in single-brand retailers and 100% for cash and carry retailers. If a greater allowance for FDI in multi-brand single-brand retailers is approved, existing national players will face even stronger competition from international players. With such barriers, traditional independent grocery stores, which include kirana stores, are still the force to be reckoned with, as they command consumer loyalty in residential areas, whilst providing the key benefits of proximity and reasonable prices.
Outlook Inflation rates and GST rollout are set to continue to affect retailers over the short term of the forecast period. However, it is not possible to say whether these will benefit or hamper the growth of retailing in the same period. Inflation rates are still expected to be watched closely by the RBI, and GST taxation rates may invite several discussions in the first half of the forecast period. Although the new GST rates would be much more convenient and transparent, it remains to be seen which individual categories will be negatively impacted. The FDI discussion being carried out in retailing circles is one of the keys to the future of retailing in India. If the increasing cries for a higher share of FDI do come to fruition, international players such as Wal-Mart and Metro would be increasingly interested in the growth opportunities in India by setting up their own retailers. According to trade sources, there are positive signs expected in terms of gradually opening up FDI in multi-brand retailers in the forecast period, because this could boost the prospects for the Indian economy.
Future impact Prospective players attracted by the increased FDI limit have the potential for extensive investment and cheaper production costs. Their expansion, in turn, may pose a significant challenge to growth for domestic retail chains such as Big Bazaar, Shoppers Stop, Lifestyle and Hypercity. However, until FDI in multibrand retailers is gradually opened up, these domestic retailers need to step up their expansion to acquire strategic locations across regions and cities in India. Intense competition may negatively affect some of the independent players in residential neighbourhoods, which do not possess the investment capability to achieve economies of scale. However, the government may look into setting up a regulatory body which governs the pricing and location standards of domestic players, so that independent small grocers (kirana stores) avoid a slow death due to its decision. In addition, multinational retailers should engage in corporate social responsibility to help these independent small grocers, by offering better and faster supply chain management, since FDI is a politically-sensitive issue.
Private Label
In India, private label products serve as a major sales area for multi-brand retailers such as hypermarkets, supermarkets and department stores. However, in the latter half of the review period, some other nongrocery retail channels jumped onto the bandwagon. Leading players amongst both electronics and appliance specialist retailers and health and beauty specialist retailers looked to enhance the presence of their private label products in order to capitalise on their established retail brand names. According to trade sources, chained modern grocery retailers had quite considerable private label sales in the review period, which ranged between 15% and 30% of retailers value sales. Acceptance of private label products is normally higher for non-risk products such as fresh food, home care and tissue and hygiene products. In chained non-grocery retailers, retailers gradually built up their private label portfolios over the review period, dominated by clothing, electronics and appliances. Other than the channels mentioned above, health and beauty specialist retailers also entered the private label race, as leading chemist/pharmacy chains Apollo Pharmacy and Guardian enhanced their private label portfolios towards the latter half of the review period. Products covered by these extensive chains include personal care, tissue and hygiene and consumer healthcare.
Current impact Consumers are open to private label products retailed by well-known chained retailers such as Big Bazaar, Hypercity, Reliance, Pantaloons, Westside and Vishal Mega Mart. As such, these brands are seen by Indian
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consumers to be on par with national brands, but their prices are normally below those of the leading brands. Therefore, some of the leading retailers are focusing on expanding their private label products or adding new private label products to fill the gaps within their stores, and to offer a wider range to consumers, as well as to boost the retailers bottom line. The consumer appeal of private label products in India comes from their availability and price compared with their branded counterparts in their respective product categories. As for the retailers involved, private label products provide an opportunity to use the well-established name of the store to obtain higher margins. According to industry estimates, private label margins for electronics goods are up to 20% higher compared with average brands. This percentage rises to 30-50% when it comes to clothing. Even though department stores tend to price their products at levels on a par with standard-priced products in India, electronics and appliance specialist retailers, as well as health and beauty specialist retailers, look to price their products lower than the respective leading brands in order to generate volume sales. Therefore, expanding the private label range gives more power to retailers in managing their product portfolios, enabling them to ask for better profit margins from manufacturers. In 2010, leading manufacturer Kellogg India could not distribute its products through Big Bazaar because it could not agree on the profit margin.
Outlook Private label sales are set to increase over the forecast period, as retailers aim to improve their profits. As multi-brand retail chains sprout up across non-grocery retail channels, they will want to turn to private label in order to spruce up their profit margins, after gaining positive consumer feedback on the quality of their product ranges and service. Grocery retailers, such as retailers of fresh food and packaged food, are expected to have a greater influence in the forecast period. Price wars are set to intensify over the forecast period, as retailers will push their low priced products, which claim to serve the consumer without compromising product quality. In addition, modern retailers such as hypermarkets and department stores are projected to focus on improving their profit margins on private label products such as consumer electronics, clothing and home furnishings in the forecast period.
Future impact Retail players involved in private label production and sales will look to ensure that they cover all highgrowth categories. For example, multi-brand retail chains may wish to focus on electronics product categories such digital televisions and portable computers; apparel will be targeted towards childrens clothing and casual clothing such as jeans. However, low budget regional retail chains will not be able to keep up with the private label competition, due to the considerable initial investment and marketing efforts. Nonetheless, the balance between private label and well-known brand offerings is expected to remain crucial, as Indian retailers are still looking for aspirational products in order not to lose consumer traffic. In addition, balancing the number of SKUs and the size of the outlets will be important factors in the forecast period, particularly due to projected rental increases, as the leading retailers are making efforts to tap into prime strategic locations. Retailers should launch masstige products in order to tap into the growing group of middle-income consumers in the forecast period, which will demand value-added benefits from private label products. Furthermore, retailers could get even better profit margins should their masstige private label products be well accepted by consumers. These products could compete with products from other manufacturers, which are also projected to tap into the growing base of middle-income consumers in the forecast period.
Retailers Stretch the Limits of Conventional Marketing

As many urban inhabitants slowly migrate to making sporadic purchases at modern retail outlets, the concerned chains are looking for attractive propositions in order to retain such consumers. The long-term aim of such modern retail formats (including hypermarkets, supermarkets and department stores) is to provide a wholesome and enriching shopping experience, which will help to transform such irregular customers into regular monthly customers. This strategy is being employed by modern retailers in the face of extensive competition from domestic and international players; the leaders in Indias retail landscape indulged in innovative methods to retain and
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attract consumers. The marketing tools employed included the provision of additional services, fashion consulting, home delivery, special discount periods, and even rebranding of retail chains. Current impact The leading player in Indias retail environment, Future Value Retail, regularly used specifically targeted discount periods to attract footfall. While the Sabse Saste 4 Din (Cheapest four days) initiative was held in January, a month-long shopping festival took place in the summer season in 2010. Most shopping festivals organised by Future Group ran for all its retail formats. These short periodic discounts proved to be effective in the latter part of the review period. Spencers Retail, on the other hand, started a project under which it conducted workshops for specific locations in Kolkata. The themes for these workshops included cooking, health and hygiene, fashion and beauty. Such activities are expected to popularise the Spencers brand name. In 2010, Shoppers Stop launched its campaign entitled Start Something New Today by introducing a new fashion product every week throughout the celebratory period. This was heavily flanked by publicity through local and social media networks. The retail chain also organised free yoga classes for some consumers as part of its social awareness campaign. Bata India, apart from upgrading many of its stores to have a modern, trendy look, introduced a home delivery service in metropolitan areas. This channel is now complementing bricks-and-mortar stores, as well as the internet retailing portal, which is already functional for the company. ITC tried to improve service levels by reducing the time taken for any alterations at its clothing outlets to a maximum of one hour, whilst also providing a home delivery service at selected outlets. Towards the end of the review period, many clothing brands, such as Koutons, Peter England, Megamart and Weekender, changed their positioning to being family-centric stores, rather than focusing on adult male clothing.
Outlook The initiatives which were carried out in the review period are expected to be continued to help retailers boost their sales at two levels: increased footfall, and a rise in the conversion of footfall to sales. Hence, despite many of these sales being driven by comparatively low unit prices (as in the case of PRIL), the high volume sales generated due to these marketing campaigns ensured their success. With the rise of educated middle-income consumers in the forecast period, consumers are projected to be more demanding in terms of the convenience, quality of products and services that retailers can offer. Some updated services offered by retailers, such as free parking, hobby classes and enhanced store service levels, will attract the attention of consumers and ensure repeated footfall in the future. The family store concept is becoming increasingly popular, as retailers realise the importance of one-stop shopping for Indian families.
Future impact Special initiatives for the promotion of retail sales are likely to become widespread over the forecast period. An increasing number of international players and national conglomerates will enter the retail environment in order to take advantage of the high growth rates being attained by various retail channels in the organised segment. As competition for sales amongst major investment-backed groups intensifies, they will continually look for methods to sustain their presence and maintain growth in the market. New marketing tools will be the primary tool for achieving this objective, as they enable retailers to selectively reach target consumers. Rural consumers will also come into the marketing scope of national retailers, as they extend their outlet chains to less affluent areas in India.
Manpower Concerns Loom in Retailing

For the majority of the review period, retail majors in India were concerned about the quality of the workforce at their disposal. With a lack of any formal training, and with the hired personnel usually being new to modern retail formats, some employees working in stores do not match the standards set by these players themselves. This issue stems from the fact that before the entry of large leading retail majors, primarily over the review period, India was heavily reliant on neighbourhood kirana stores for periodic as well as impulse purchases. As consumers gradually migrated to modern retail stores, including supermarkets, hypermarkets and luxury brand outlets, they expected to witness a transformation in the level of service. Since kirana stores pay little
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or no attention to professional service, it was very difficult for retail chains to find professional staff in the country. Considering the workforce requirements of large format stores, new personnel in these modern outlets require some background about the retail industry and knowledge of the products being offered, as well as being able to handle different consumer attitudes. Much of the current staff serving the retail sector hails from less affluent households in India, thus increasing the requirement for training pertaining to personal grooming and new product categories.
Current impact Retailing accounted for a 9% share of overall employment in India in 2010. Despite this, India has no recognised training centre for new staff in the retail market. The problem is greater in some states in North India, including Bihar and Uttar Pradesh, where the education systems and governance are not strong enough to support proper training for the rapidly increasing population. Although the demand for high quality labour is continuously increasing due to the execution of ambitious expansion plans, this is not met with the adequate supply of skilled workers. The result is that many national retailers take on staff who are below par for in-store positions. This, in turn, adversely affects consumer confidence in the brand and the level of customer service offered day-to-day. Apart from losing a proportion of prospective sales due to the lack of knowledge and inexperience of store employees, a poor employee also leaves a lasting negative impression of the retail brand. Nonetheless, the Retailers Association of India, and some of the leading retailers, such as Future Group and Aditya Birla, have make efforts to develop training centres, either by themselves, or by joining with an education institution to solve the manpower issue in retailing.
Outlook With the number of outlets set to expand in the forecast period thanks to the leading modern grocery retailers, department stores and international clothing and footwear specialists, this could add more burden for retailers to fight for the best candidates, as well as adding more staff to their new outlet expansion in the forecast period. Furthermore, should FDI in multi-brand retailers gradually open up in the forecast period, this will add further demand for better educated and trained retail staff in the forecast period, in order to maintain the brand positioning of retailers.
Future impact The government is being made increasingly aware of the seriousness of the situation. In 2010, Bharti WalMart and the Delhi government came to an agreement, under which the company will provide specialised development training to unemployed youngsters. With store-based retailing projected to expand further in the forecast period, there will certainly be the need for well-trained retail professionals in the near future. A sustainable pool of retail talent within the country would not only be a pillar of growth for the retail market, but may also serve as a useful tool to counter unemployment of amongst the educated population in India. Should growth in outlet expansion be higher than the growth in retail manpower, higher staffing costs are projected for retailers, which will lead to rising costs for retailers in the forecast period.
MARKET INDICATORS
Table 1 Employment in Retailing 2005-2010 2005 Total employment ('000 people) Employment in retailing ('000 people) Employment in retailing 386,969.3 36,474.7 9.4 2006 394,162.5 37,031.0 9.4 2007 405,171.6 37,768.4 9.3 2008 415,647.2 38,596.0 9.3 2009 420,588.0 39,224.0 9.3 2010 427,835.0 40,008.5 9.4
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(%) (% of total employment)

Source: Euromonitor International from official statistics, trade associations, trade press, company research, trade interviews
MARKET DATA
Table 2 Rs bn 2005 Store-based Retailing Non-Store Retailing Retailing
Source:
Sales in Retailing by Category: Value 2005-2010
2006 8,535.0 39.3 8,574.4
2007 9,631.2 48.8 9,680.0
2008 10,820.0 61.9 10,881.9
2009 11,972.7 76.0 12,048.7
2010 13,507.5 93.0 13,600.5
7,695.1 32.1 7,727.2
Euromonitor International from official statistics, trade associations, trade press, company research, trade interviews, trade sources
Table 3
Sales in Retailing by Category: % Value Growth 2005-2010
% current value growth 2009/10 Store-based Retailing Non-Store Retailing Retailing

Source:
2005-10 CAGR 11.9 23.7 12.0
2005/10 TOTAL 75.5 190.1 76.0
12.8 22.4 12.9
Table 4
Sales in Retailing by Grocery vs Non-Grocery 2005-2010
% retail value rsp excl sales tax 2005 Grocery Non-Grocery Total
Source:
2006 65.5 34.5 100.0
2007 63.5 36.5 100.0
2008 62.0 38.0 100.0
2009 61.5 38.5 100.0
2010 62.0 38.0 100.0
67.5 32.5 100.0
Table 5 Rs bn
Sales in Store-Based Retailing by Category: Value 2005-2010
2005 Grocery Retailers Non-Grocery Retailers Store-based Retailing

Source:
2006 5,710.9 2,824.1 8,535.0
2007 6,382.1 3,249.1 9,631.2
2008 7,240.1 3,579.9 10,820.0
2009 8,109.5 3,863.2 11,972.7
2010 9,212.4 4,295.1 13,507.5
5,251.4 2,443.7 7,695.1
Table 6
Sales in Store-Based Retailing by Category: % Value Growth 2005-2010
% current value growth 2009/10 2005-10 CAGR 2005/10 TOTAL
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Retailing
India
Grocery Retailers Non-Grocery Retailers Store-based Retailing

Source:
13.6 11.2 12.8
11.9 11.9 11.9
75.4 75.8 75.5
Table 7 Rs bn
Sales in Non-Grocery Retailing by Category: Value 2005-2010
2005 Clothing and Footwear Specialist Retailers Electronics and Appliance Specialist Retailers Health and Beauty Specialist Retailers Home and Garden Specialist Retailers Leisure and Personal Goods Specialist Retailers Mixed Retailers Other Non-Grocery Retailers Non-Grocery Retailers
Source:
2006 889.4 359.0
2007 1,027.3 412.9
2008 1,130.0 454.1
2009 1,220.4 495.0
2010 1,354.6 549.5
766.7 309.5
327.3 332.8 586.5
366.2 375.9 695.8
410.7 423.7 815.4
454.5 454.7 907.4
496.0 473.8 989.2
548.1 505.7 1,125.3
22.9 98.1 2,443.7
30.9 106.9 2,824.1
43.2 116.0 3,249.1
52.7 126.5 3,579.9
52.2 136.6 3,863.2
61.6 150.2 4,295.1
Table 8
Sales in Non-Grocery Retailing by Category: % Value Growth 2005-2010
% current value growth 2009/10 Clothing and Footwear Specialist Retailers Electronics and Appliance Specialist Retailers Health and Beauty Specialist Retailers Home and Garden Specialist Retailers Leisure and Personal Goods Specialist Retailers Mixed Retailers Other Non-Grocery Retailers Non-Grocery Retailers
Source:
2005-10 CAGR 12.1 12.2 10.9 8.7 13.9 21.9 8.9 11.9
2005/10 TOTAL 76.7 77.5 67.5 52.0 91.9 169.4 53.1 75.8
11.0 11.0 10.5 6.7 13.8 18.0 10.0 11.2
Table 9 Rs bn
Sales in Non-store Retailing by Category: Value 2005-2010
2005 Direct Selling Homeshopping Internet Retailing Vending Non-Store Retailing 24.6 2.7 4.7 32.1
2006 28.5 3.4 7.5 39.3
2007 31.9 4.5 12.5 48.8
2008 37.0 5.8 19.1 61.9
2009 42.5 7.2 26.3 76.0
2010 49.6 8.8 34.7 93.0
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Retailing
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Source:
Table 10
Sales in Non-store Retailing by Category: % Value Growth 2005-2010
% current value growth 2009/10 Direct Selling Homeshopping Internet Retailing Vending Non-Store Retailing
Source:
2005-10 CAGR 15.0 26.7 48.9 23.7
2005/10 TOTAL 101.2 226.1 631.6 190.1
16.5 22.0 32.0 22.4
Table 11
Retailing Company Shares: % Value 2006-2010
% retail value rsp excl sales tax Company Future Value Retail Ltd Titan Industries Ltd Reliance Retail Ltd Pantaloon Retail India Ltd LG Electronics India Pvt Ltd Shopper's Stop Ltd Amway India Enterprises Aditya Birla Retail Ltd Next India Retail Ltd Infiniti Retail Ltd Vishal Retail Ltd Spencer's Retail Ltd Subhiksha Trading Services Pvt Ltd Others Total
Source:
2006 0.2 0.0 0.2 0.2 0.1 0.1 0.0 0.0 0.1 0.1 0.1 99.0 100.0
2007 0.2 0.0 0.4 0.2 0.1 0.1 0.1 0.1 0.0 0.1 0.1 0.2 98.5 100.0
2008 0.3 0.2 0.5 0.2 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.3 98.0 100.0
2009 0.3 0.2 0.5 0.2 0.1 0.1 0.1 0.1 0.1 0.1 0.1 98.1 100.0
2010 0.4 0.4 0.3 0.2 0.2 0.1 0.1 0.1 0.1 0.1 0.1 0.1 97.9 100.0
Table 12
Retailing Brand Shares: % Value 2007-2010
% retail value rsp excl sales tax Brand Company Big Bazaar Tanishq Reliance Amway LG Shoppe More Croma Vishal Mega Mart Spencer's Big Bazaar Subhiksha Others Future Value Retail Ltd Titan Industries Ltd Reliance Retail Ltd Amway India Enterprises LG Electronics India Pvt Ltd Aditya Birla Retail Ltd Infiniti Retail Ltd Vishal Retail Ltd Spencer's Retail Ltd Pantaloon Retail India Ltd Subhiksha Trading Services Pvt Ltd
2007 0.2 0.0 0.1 0.1 0.1 0.0 0.1 0.1 0.3 0.2 98.9
2008 0.2 0.2 0.1 0.1 0.1 0.1 0.1 0.1 0.3 0.3 98.4
2009 0.2 0.2 0.1 0.1 0.1 0.1 0.1 0.1 0.3 98.6
2010 0.4 0.3 0.2 0.1 0.1 0.1 0.1 0.1 0.1 98.5
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Retailing
India
Total
Source:
100.0
100.0
100.0
100.0
Table 13
Store-Based Retailing Company Shares: % Value 2006-2010
% retail value rsp excl sales tax Company Future Value Retail Ltd Titan Industries Ltd Reliance Retail Ltd Pantaloon Retail India Ltd LG Electronics India Pvt Ltd Shopper's Stop Ltd Aditya Birla Retail Ltd Next India Retail Ltd Infiniti Retail Ltd Vishal Retail Ltd Spencer's Retail Ltd Subhiksha Trading Services Pvt Ltd Others Total
Source:
2006 0.2 0.0 0.2 0.2 0.1 0.0 0.0 0.1 0.1 0.1 99.1 100.0
2007 0.2 0.0 0.4 0.2 0.1 0.1 0.1 0.0 0.1 0.1 0.2 98.6 100.0
2008 0.3 0.2 0.5 0.2 0.1 0.1 0.1 0.1 0.1 0.1 0.3 98.0 100.0
2009 0.3 0.2 0.5 0.2 0.1 0.1 0.1 0.1 0.1 0.1 98.2 100.0
2010 0.4 0.4 0.3 0.2 0.2 0.1 0.1 0.1 0.1 0.1 0.1 98.0 100.0
Table 14
Store-Based Retailing Brand Shares: % Value 2007-2010
% retail value rsp excl sales tax Company Future Value Retail Ltd Titan Industries Ltd Reliance Retail Ltd Pantaloon Retail India Ltd LG Electronics India Pvt Ltd Shopper's Stop Ltd Aditya Birla Retail Ltd Next India Retail Ltd Infiniti Retail Ltd Vishal Retail Ltd Spencer's Retail Ltd Subhiksha Trading Services Pvt Ltd Others Total
Source:
2007 0.2 0.0 0.4 0.2 0.1 0.1 0.1 0.0 0.1 0.1 0.2 98.6 100.0
2008 0.3 0.2 0.5 0.2 0.1 0.1 0.1 0.1 0.1 0.1 0.3 98.0 100.0
2009 0.3 0.2 0.5 0.2 0.1 0.1 0.1 0.1 0.1 0.1 98.2 100.0
2010 0.4 0.4 0.3 0.2 0.2 0.1 0.1 0.1 0.1 0.1 0.1 98.0 100.0
Table 15
Non-Grocery Retailers Company Shares: % Value 2006-2010
% retail value rsp excl sales tax Company Titan Industries Ltd LG Electronics India Pvt Ltd Pantaloon Retail India
2006 0.5 0.5 0.2
2007 0.7 0.5 0.3
2008 0.8 0.5 0.4
2009 1.0 0.5 0.5
2010 1.1 0.5 0.5
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Ltd Next India Retail Ltd Infiniti Retail Ltd Godrej & Boyce Manufacturing Co Ltd Vishal Retail Ltd Shopper's Stop Ltd Reebok India Pvt Ltd Lifestyle International Pvt Ltd Raymond Ltd Vijay Sales Ltd Apollo Hospitals Enterprises Ltd Koutons Retail India Ltd Tribhovandas Bhimji Zaveri Delhi Pvt Ltd adidas India Marketing Pvt Ltd Samsung India Electronics Ltd Bata India Ltd Bombay Dyeing & Manufacturing Co Ltd Reliance Retail Ltd Others Total
Source:
0.1 0.0 0.3 0.2 0.2 0.2 0.2 0.3 0.1 0.1 0.1 0.2 0.1 0.1 0.3 0.2 96.1 100.0
0.2 0.0 0.3 0.3 0.3 0.2 0.2 0.3 0.1 0.1 0.2 0.2 0.2 0.1 0.3 0.2 0.0 95.4 100.0
0.2 0.2 0.3 0.4 0.3 0.2 0.2 0.3 0.2 0.2 0.3 0.2 0.2 0.2 0.3 0.2 0.1 94.5 100.0
0.3 0.3 0.3 0.3 0.3 0.2 0.2 0.2 0.2 0.2 0.3 0.2 0.2 0.2 0.2 0.2 0.1 94.1 100.0
0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 93.5 100.0
Table 16
Non-Grocery Retailers Brand Shares: % Value 2007-2010
% retail value rsp excl sales tax Brand Company Tanishq LG Shoppe Croma Interio Next Vishal Mega Mart Shoppers' Stop Reebok Pantaloon Lifestyle Vijay Sales Apollo Pharmacy TBZ - The Original adidas Samsung Plaza Bata Raymond Shop, The Bombay Dyeing eZone Reliance Digital Others Titan Industries Ltd LG Electronics India Pvt Ltd Infiniti Retail Ltd Godrej & Boyce Manufacturing Co Ltd Next India Retail Ltd Vishal Retail Ltd Shopper's Stop Ltd Reebok India Pvt Ltd Pantaloon Retail India Ltd Lifestyle International Pvt Ltd Vijay Sales Ltd Apollo Hospitals Enterprises Ltd Tribhovandas Bhimji Zaveri Delhi Pvt Ltd adidas India Marketing Pvt Ltd Samsung India Electronics Ltd Bata India Ltd Raymond Ltd Bombay Dyeing & Manufacturing Co Ltd Pantaloon Retail India Ltd Reliance Retail Ltd
2007 0.5 0.4 0.0 0.3 0.2 0.3 0.3 0.2 0.2 0.2 0.1 0.1 0.2 0.2 0.3 0.2 0.2 0.1 0.0 96.1
2008 0.6 0.4 0.2 0.3 0.2 0.4 0.3 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.3 0.2 0.2 0.2 0.1 95.2
2009 0.7 0.4 0.3 0.3 0.3 0.3 0.3 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.1 94.9
2010 0.9 0.4 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 94.3
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Retailing
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Total
Source:
100.0
100.0
100.0
100.0
Table 17
Non-store Retailing Company Shares: % Value 2006-2010
% retail value rsp excl sales tax Company Amway India Enterprises Eureka Forbes Ltd Dell India Pvt Ltd TV18 Home Shopping Network Ltd Oriflame India Pvt Ltd Tupperware India Pvt Ltd Herbalife International India Pvt Ltd Rediff.com India Ltd Forever Living Products India Pvt Ltd Modicare Ltd TVC Skyshop Ltd Times Internet Ltd Telebrands India Pvt Ltd Asian Sky Shop Ltd Avon Beauty Products India Pvt Ltd Hindustan Lever Network AMC Cookware India Pvt Ltd Yahoo Web Services India Pvt Ltd Sify Ltd Indiaplaza India Pvt Ltd Others Total
Source:
2006 18.8 14.5 3.6 2.3 5.2 2.1 1.3 2.7 6.4 1.4 0.7 1.7 1.4 1.5 2.4 1.9 0.5 0.5 31.0 100.0
2007 16.4 13.4 4.7 3.1 4.8 1.9 1.6 2.5 3.5 1.5 1.0 1.7 1.4 1.5 2.0 1.7 0.6 0.5 0.8 35.3 100.0
2008 18.2 11.9 6.0 1.5 3.4 4.3 1.6 2.0 2.2 1.8 1.4 1.3 1.7 1.4 1.3 1.6 1.4 0.7 0.6 0.7 35.0 100.0
2009 18.5 10.6 6.9 2.8 3.8 3.9 2.6 2.4 2.0 1.6 1.4 1.4 1.8 1.3 1.3 1.3 1.2 0.8 0.6 0.7 33.1 100.0
2010 18.3 9.6 8.2 3.9 3.9 3.6 3.6 2.4 2.0 2.0 1.4 1.4 1.4 1.3 1.1 1.1 1.0 0.9 0.6 0.6 31.7 100.0
Table 18
Non-store Retailing Brand Shares: % Value 2007-2010
% retail value rsp excl sales tax Brand Company Amway Eureka Forbes Dell HomeShop18 Oriflame Tupperware Herbalife India Online Forever Living Modicare TVC Skyshop Indiatimes Shopping Telebrands Asian Sky Shop Amway India Enterprises Eureka Forbes Ltd Dell India Pvt Ltd TV18 Home Shopping Network Ltd Oriflame India Pvt Ltd Tupperware India Pvt Ltd Herbalife International India Pvt Ltd Rediff.com India Ltd Forever Living Products India Pvt Ltd Modicare Ltd TVC Skyshop Ltd Times Internet Ltd Telebrands India Pvt Ltd Asian Sky Shop Ltd
2007 16.4 13.4 4.7 3.1 4.8 1.9 1.6 2.5 3.5 1.5 1.0 1.7 1.4
2008 18.2 11.9 6.0 1.5 3.4 4.3 1.6 2.0 2.2 1.8 1.4 1.3 1.7 1.4
2009 18.5 10.6 6.9 2.8 3.8 3.9 2.6 2.4 2.0 1.6 1.4 1.4 1.8 1.3
2010 18.3 9.6 8.2 3.9 3.9 3.6 3.6 2.4 2.0 2.0 1.4 1.4 1.4 1.3
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Avon Hindustan Lever Network AMC Yahoo! Shopping Sify Indiaplaza Others Total
Source:
Avon Beauty Products India Pvt Ltd
1.5 2.0
1.3 1.6 1.4 0.7 0.6 0.7 35.0 100.0
1.3 1.3 1.2 0.8 0.6 0.7 33.1 100.0
1.1 1.1 1.0 0.9 0.6 0.6 31.7 100.0
AMC Cookware India Pvt Ltd Yahoo Web Services India Pvt Ltd Sify Ltd Indiaplaza India Pvt Ltd
1.7 0.6 0.5 0.8 35.3 100.0
Table 19 Rs bn
Forecast Sales in Retailing by Category: Value 2010-2015
2010 Store-based Retailing Non-Store Retailing Retailing

Source:
2011 14,487.3 106.1 14,593.4
2012 15,489.9 121.6 15,611.6
2013 16,503.4 139.1 16,642.6
2014 17,529.5 159.7 17,689.2
2015 18,636.0 184.1 18,820.1
13,507.5 93.0 13,600.5
Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources
Table 20
Forecast Sales in Retailing by Category: % Value Growth 2010-2015
% constant value growth 2010-15 CAGR Store-based Retailing Non-Store Retailing Retailing
Source:
2010/15 TOTAL 38.0 97.9 38.4
6.6 14.6 6.7
Table 21 Rs bn
Forecast Sales in Store-Based Retailing by Category: Value 2010-2015
2010 Grocery Retailers Non-Grocery Retailers Store-based Retailing

Source:
2011 9,913.7 4,573.6 14,487.3
2012 10,566.0 4,924.0 15,489.9
2013 11,167.8 5,335.6 16,503.4
2014 11,709.8 5,819.8 17,529.5
2015 12,226.4 6,409.6 18,636.0
9,212.4 4,295.1 13,507.5
Table 22
Forecast Sales in Store-Based Retailing by Category: % Value Growth 2010-2015
% constant value growth 2010-15 CAGR Grocery Retailers Non-Grocery Retailers Store-based Retailing
Source:
2010/15 TOTAL 32.7 49.2 38.0
5.8 8.3 6.6
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Table 23 Rs bn
Forecast Sales in Non-Grocery Retailing by Category: Value 2010-2015
2010 Clothing and Footwear Specialist Retailers Electronics and Appliance Specialist Retailers Health and Beauty Specialist Retailers Home and Garden Specialist Retailers Leisure and Personal Goods Specialist Retailers Mixed Retailers Other Non-Grocery Retailers Non-Grocery Retailers
Source:
2011 1,435.9 593.4
2012 1,550.8 646.8
2013 1,690.4 711.5
2014 1,859.4 789.8
2015 2,063.9 880.6
1,354.6 549.5
548.1 505.7 1,125.3
582.8 519.6 1,215.8
622.7 539.0 1,324.6
668.5 561.9 1,450.0
721.5 590.6 1,593.3
782.5 628.3 1,778.2
61.6 150.2 4,295.1
68.3 157.7 4,573.6
75.2 164.8 4,924.0
81.9 171.4 5,335.6
88.5 176.6 5,819.8
95.1 181.0 6,409.6
Table 24
Forecast Sales in Non-Grocery Retailing by Category: % Value Growth 2010-2015
% constant value growth 2010-15 CAGR Clothing and Footwear Specialist Retailers Electronics and Appliance Specialist Retailers Health and Beauty Specialist Retailers Home and Garden Specialist Retailers Leisure and Personal Goods Specialist Retailers Mixed Retailers Other Non-Grocery Retailers Non-Grocery Retailers
Source:
2010/15 TOTAL 52.4 60.3 42.8 24.2 58.0 54.5 20.5 49.2
8.8 9.9 7.4 4.4 9.6 9.1 3.8 8.3
Table 25 Rs bn
Forecast Sales in Non-store Retailing by Category: Value 2010-2015
2010 Direct Selling Homeshopping Internet Retailing Vending Non-Store Retailing

Source:
2011 53.0 9.7 43.4 106.1
2012 57.3 11.0 53.4 121.6
2013 62.4 12.7 64.0 139.1
2014 68.7 14.8 76.2 159.7
2015 76.2 17.6 90.3 184.1
49.6 8.8 34.7 93.0
Table 26
Forecast Sales in Non-store Retailing by Category: % Value Growth 2010-2015
% constant value growth 2010-15 CAGR Direct Selling Homeshopping 9.0 15.0 2010/15 TOTAL 53.8 100.8
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Internet Retailing Vending Non-Store Retailing

Source:
21.1 14.6
160.2 97.9
APPENDIX
Operating Environment
Foreign direct investment in retailing Prior to 1997, FDI was permitted in retailing, although applications were considered on a case-by-case basis. This enabled a few foreign retailers, such as Dairy Farm International, to enter the Indian retail environment with domestic tie-ups. Nevertheless, given the political clout of the small trading community, due to the enormous number of such operators, the government barred FDI in retailing in 1997. Consequently, foreign retailers can only enter the Indian retail environment through franchising agreements, which are generally seen as less lucrative. Foreign direct investment in retailing remains a widely debated and heated issue in Indias economic and political environment. Whilst the more liberal wing of the government has taken an open stand towards the opening up of retailing in India, there is strong opposition from left-wing parties to the entry of international retailers. However, the government is gradually opening up retailing. The first of such moves involved the opening up of cash and carry retailing to 100% foreign direct investment. In 2006, the government also allowed 51% foreign direct investment in single-brand retailers; however, this is subject to government approval. Approval for foreign direct investment in single-brand retailers needs to be obtained from the Foreign Investment Promotion Board, working under the Ministry of Finance. Despite increasing international pressure on India to deregulate its retail industry, lobbying by local political parties and retail associations resulted in the prohibition of foreign direct investment in multi-brand retailers up to the time of writing this report. The Department of Industrial Policy and Promotion (DIPP) refined its guidelines for cash and carry and wholesalers in April 2010. There were new guidelines, such as a guideline that the products which are sold by cash and carry and wholesalers should not exceed 25% of the total turnover of cash and carry and wholesalers to the same group companies. However, the definition of group companies is not yet clearly defined, and it is still a grey area and subject to different interpretations. Another refined guideline is that cash and carry and wholesalers cannot open retail shops which sell directly to consumers. The FDI regulation is applicable not only to store-based retailers, but also to retailers which engage in ecommerce activities, as per DIPP guidelines in 2010. Given the influence that can be exercised on retailing at state government level, some states have also flexed their muscles, forcing even domestic chained retailers either to close their outlets, or preventing them from opening outlets in particular states. For instance, in April 2007 the state government of Uttar Pradesh in North India forced retailers such as Reliance Fresh and Spencers to close shops. The regional government stated that growing opposition from smaller traders to such stores was creating a law and order problem. Small retailers, especially independent stores, are typically part of district/state-level associations. For example, there are numerous such shopkeepers associations in Delhi, each representing retailers in a particular locality. State-level associations are also common, with Kerala Vyapari Vyavasayi Ekopana Samithi (KVVES) being one such example, representing the interests of retailers and other businesspeople in the state of Kerala, South India. Large retailers, on the other hand, are represented by the Retailers Association of India, with members such as Pantaloon Retail, Shoppers Stop and Subhiksha Trading Services. The Retailers Association of India was set up in 2004, with a vision to develop, facilitate and propagate practices and processes which will develop Indian retailing. The opening up of retailing is generally seen as a political hot potato; hence the government had refrained from opening up retailing completely at the time of writing this report. Opposition from small retailers,
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even against the entry of large domestic corporates into retailing, is on the rise, and it would not be surprising if some state governments imposed restrictions on large-scale retailing over the forecast period. Nonetheless, the DIPP, which is the body to formulate FDI in India under the authority of the Ministry of Commerce and Industry, circulated a discussion paper on FDI in multi-brand retail trading in 2010. The feedback which has been received on allowing FDI in India is mixed. There had been no decision on FDI in multi-brand retailers at the time this report was written. Government policies on FDI aside, retail operations in India are mainly governed by the Shops and Commercial Establishment Acts of the various states. These prescribe the registration, opening and closing hours, working conditions, holidays, and health and safety measures, with the provisions varying from state to state. Where relevant, local/municipal, employment and contract labour legislation also applies. Retailers private label products fall under the legislation concerning the specific products, such as the Standards of Weights and Measures Act 1976 and Prevention of Food Adulteration Act 1954, which are applicable to products such as packaged food.
Informal retailing Informal retailing in India occurs mainly in the form of piracy and counterfeiting. A survey by the Federation of the Indian Chambers of Commerce and Industry (FICCI) has estimated the tax loss resulting from such counterfeit sales to be in the order of Rs10 billion annually, with companies losing a total of around Rs40 billion in sales each year. Counterfeit goods are present across a wide range of product types, with manufacturers of packaged food, alcoholic drinks, beauty and personal care products, clothing and pharmaceutical products being the major victims. Trade sources suggest that the manufacturing of counterfeit products takes place mainly in the large cities, with Delhi being a major centre. However, piracy of media products, such as CDs and DVDs, is prevalent even in the most remote of the countrys cities, given the low costs involved in replicating a disc. Industry bodies such as the Federation of Indian Chambers of Commerce and Industry (FICCI), have taken steps to stamp out counterfeit products. However, whilst FICCI has set up a Brand Protection Committee and a hotline to report counterfeits, very few checks take place in the country. For instance, as of October 2007, only the states of Kerala and Tamil Nadu, in South India, had anti-piracy units in place to check music and video piracy. Whilst India does have legislation such as the Copyright Act in place to tackle piracy and counterfeiting, legal procedures in the country are both costly and time-consuming, which results in slack enforcement. Most of these products are sold in shady and unorganised markets, rather than openly in branded stores, with consumers from the lowest income segments being the target.
Opening hours Opening and closing hours of shops in India are governed by the respective state Shops and Commercial Establishments Acts, which differ from state to state. Although each state has its own rules regarding opening and closing hours for retailers, shops in most states open at 09:00hrs and close at around 20:3021:00hrs. That said, there is widespread variation in store opening hours, with stores in major cities such as Mumbai and Delhi remaining open for longer than those in smaller cities and rural areas. The enforcement of opening and closing hours laws by state governments is often very weak, and is openly flouted by both large and small retailers. Many independent traditional retailers, particularly family-owned businesses, are open seven days a week from 07:00hrs to 23:00hrs, with longer opening hours during festival seasons in the second half of the year. Whilst there is no specific rule that shops need to close on any particular day of the week, the Shops and Commercial Establishments Act provides for the closure of shops on one day of the week. This is normally Sunday in most states, but varies from state to state, and enforcement is, in any case, poor. As of 2010, whilst legislation on opening hours remained a state subject, there were very few outlets which functioned round-the-clock. Twenty Four Seven is an example of a chain which remains open on a 24-hour basis. Legislation aside, safety and security concerns also arise, as a result of which most retail outlets in India tend to close by 22:00hrs at the latest.
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Retail landscape As shopping is increasing in popularity as a leisure activity for the family, the number of shopping malls established in Indian cities has steadily increased. Based on estimates from trade sources, there were over 400 shopping malls across the country at the time of writing this report, with Delhi and the surrounding National Capital Region and Mumbai accounting for two-thirds of all malls. Most retail players, anticipating that malls will be high-footfall locations, sign lease agreements with real estate developers around 3-4 years in advance of new malls being built. As shopping malls are seen as high footfall locations, most grocery and non-grocery retailers are moving towards opening shops in shopping malls, rather than independent stores. With a variety of shoppers looking for both grocery and non-grocery products attracted to these shopping centres, retailers consider them to be an ideal way to attract customers. Speciality malls, which sell only one kind of product, are also emerging in the country, with the most prominent being Gold Souks, which sell only jewellery. As of 2010, Gold Souks had malls in Delhi and Gurgaon, with new malls being established in cities such as Kochi, Chennai, Ludhiana, Jaipur and Amritsar. In 2010, the majority of store-based retailers were independent stores in streets which have high levels of footfall, with far fewer in locations such as shopping malls, hotels and railway stations. Each prominent city in the country also has major demand for the sale of products such as clothing and footwear, household linen and other non-grocery items, with Sarojini Nagar and Chandni Chowk in Delhi, and Linking Road in Mumbai for footwear being prominent examples. With cheaper and mostly unbranded products on sale in these markets, the target consumers are those looking for value for money. Luxury retailers, which are mostly independent, tend to also be located in high-end hotels. Louis Vuitton, for instance, has stores in the Taj Mahal Palace and Towers Hotel in Mumbai, and in the Oberoi Hotel in New Delhi. Visitors to such 5-star hotels are mainly in the high-income segment, such as business travellers who have the money to spend on high-value items. Furthermore, a luxury shopping mall opened in Delhi in 2008, called DLF Emporio, where the ambience and service (such as live piano and violin) are deemed to be similar to the finest hotels in India.
Cash and Carry

The Indian government permits 100% foreign direct investment in cash and carry, and some multinational and domestic retailers are present in the cash and carry environment in India. Cash and carry is a businessto-business channel in India, servicing retailers and other businesses, rather than end consumers. In April and October 2010, the Department of Industrial Policy and Promotion (DIPP) refined its guidelines for cash and carry and wholesalers. There were new guidelines, such as a guideline that the products which are sold by cash and carry and wholesalers should not exceed 25% of the total turnover of cash and carry and wholesalers to the same group companies. However, the definition of group companies is not yet clearly defined, and it is still a grey area and subject to different interpretations. Another guideline is that cash and carry and wholesalers cannot open retail shops which sell directly to consumers. In 2010, cash and carry companies were visible in terms of planning to expand their outlets across cities in India. Furthermore, strengthening the distribution network, from rural areas to the wholesale centres, is key for these players to prepare themselves, should the Indian government relax the FDI regulation on multibrand retailers in the forecast period. Building a positive image for cash and carry was also amongst the efforts of these companies, because most of these cash and carry operators are multinational retailers, which are perceived to have had a negative impact on small and mid-sized companies in India. Most of the prominent cash and carry operators are multinational companies such as Metro, Wal-Mart, Tesco, Woolworth, Booker and Carrefour. However, domestic companies such as Future Group were also visible in the review period. Metro was the first retailer to start cash and carry operations in India, in 2003. As of the end of 2009, Metro had several outlets in operation in India, with two in Bangalore and one each in Hyderabad, Kolkata and Mumbai. Furthermore, Metro is expected to open six more wholesale centres in Punjab, of which four of them are expected to be fully operational by the end of 2011. The expansion was slowed down because of the slowdown in the economy in Europe. Metro targets hotels and business process outsourcing (BPO) as potential consumers. According to trade sources, hotels contributed around 25% of value sales for Metro in the review period.
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Meanwhile, Wal-Mart commenced its cash and carry operations in India in 2009. Bharti Wal-Mart is planning to open seven outlets by end of 2010, to reach around 15 outlets by the end of 2011. In the review period the company focused on building its supply chain directly to farmers by providing a cold supply chain and credit facilities to its vendors. This is claimed to be part of the companys consumer relations programme to help Indian farmers. The company is projected to continue to focus on North India, before it moves to South India in the forecast period. Woolworth Wholesale India mainly focuses on consumer appliances and electronic products by having an agreement to provide the back-end support for Infiniti Retail, which owns the Croma brand, which focuses on consumer appliances and electronic products. Nonetheless, it does also supply to its members, some of which were independent appliance and electronics retailers in the review period. Booker India uses a slightly different strategy compared with the other cash and carry operators. The company has its own cash and carry outlets in Mumbai, but franchises its operation in other cities, which will help to fuel its expansion plans. According to trade sources, Booker India is expected to focus on franchising more in other cities, but will still own some cash and carry outlets itself in the forecast period. Tesco is planning to open its first outlet in Mumbai by the end of 2010. Tesco is working with Trent Retail for the franchise agreement on the Tesco wholesale arm in India. Carrefours first cash and carry outlet is projected to open in Seelampur, near New Delhi, by end of 2010. Furthermore, Carrefour is still looking for a franchise partner in India to open its retail arm in the forecast period. There was no confirmation on who will be the partner for the Carrefour franchise. In April 2010, DIPP issued guidelines on cash and carry definition and operation in India. Small and large entities such as independent small grocers and chained hotels are the biggest customers of cash and carry. However, different cash and carry operators have different internal guidelines on granting membership, which is normally based on the VAT registration number. In the forecast period, strengthening the cold supply chain from rural to the wholesaler centre or cash and carry outlets are expected to be more prevalent especially most of the feedback on the FDI for multi brand retailers seems towards improving the back end infrastructure of retailers should the FDI for multi brand allowed, particularly when agriculture is one of the important economy for India and with the interest of farmers being of key concern. Considering cash and carry as well as FDI in multi-brand retailers is a well watched area in India, portraying a good image of multinational cash and carry outlets will be key in order to ease the pressure from the local community to restrict such investment in the forecast period, other than investing in the backend infrastructure to prepare for the easing of FDI in multi-brand retailers in the forecast period. Expanding to more cities in order to reach economies of scale will be the other important factor to create a profitable venture in cash and carry in India.
Cash and Carry: Number of Outlets by National Brand Owner: 2009-2010
Table 27 Outlets
Company (NBO) Woolworth Wholesale (India) Pvt Ltd Metro Cash and Carry India Pvt Ltd Bharti Wal-Mart Pvt Ltd Booker India Pvt Ltd
Source:
Brand(s) Woolworth Metro Best Price Modern Booker 4 5
2009 6 5 1 1
2010
5 3
Trade press (including Economic Times, Business Standard, Hindustan Business Lines), company research, trade interviews, Euromonitor International estimates
DEFINITIONS
This report analyses the market for retailing in India. For the purposes of the study, the market has been defined as follows:
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Store-based retailing Grocery retailers Hypermarkets Supermarkets Discounters Small grocery retailers Convenience stores Forecourt retailers Chained forecourt retailers Independent forecourt retailers Independent small grocers Food/drink/tobacco specialists Other grocery retailers Non-grocery retailers Mixed retailers Department stores Variety stores Mass merchandisers Warehouse clubs Health and beauty specialist retailers Chemists/pharmacies Parapharmacies/drugstores Beauty specialist retailers Other healthcare specialist retailers Clothing and footwear specialist retailers Home and garden specialist retailers Furniture and furnishings stores DIY, home improvement and garden centres Electronics and appliance specialist retailers Leisure and personal goods specialist retailers Media products stores Stationers/office supply stores Traditional toys and games stores Sports goods stores Pet shops and superstores Jewellers Other leisure and personal goods specialist retailers Other non-grocery retailers
Non-store retailing Vending Homeshopping Internet retailing Direct selling
Explanations of words and/or terminology used in this report are as follows: Kirana stores: Neighbourhood small independent grocery store;
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Paan / betel stores: Small road-side stores selling largely confectionery, cigarettes, etc; Dhanteras: Local Indian festival which involves buying precious metals and utensils made of the same as items of gifting; Kundan, kangans, and jadau: Traditional Indian jewellery designs.
Other terminology: GBO refers to Global Brand Owner, which is the ultimate owner of a brand. NBO refers to National Brand Owner, which is the company licensed to distribute a brand on behalf of a GBO. The NBO may be a subsidiary of a GBO or it may be a completely separate company. Share tables at both GBO and at NBO level are provided in the report. Reference to shares in the report analysis is at NBO level.
Sources used during research include the following:

Summary 1 Official Sources Research Sources Medplus Health Services Pvt Ltd Ministry of Statistics & Programme Implementation Trade Associations Clothing Manufacturers' Association of India, The Indian Direct Selling Association Internet & Mobile Association of India (IAMAI) Retailers Association of India Trade Press Business Standard Domain B E Retail Biz Economic Times, The Equity Master, The Financial Express Food & Beverage News Hindu Business Line ICICI Direct Images Retail IndiaRetailBiz Inside Franchising Money Control News 4 sites Newsvision Retail Report Pitch Retail Yatra Retailbiz Telegraph
Source: Euromonitor International
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Retailing - India

Euromonitor International : Country Market Insight March 2011

List of Contents and Tables

FDI in Multi-brand Retailing Is A Hot Topic

Inflation Drives Sales in Grocery Retailers

Modern Grocery Retailers Are Niche, But Growing Strongly

Opportunity Awaits Retailers

KEY TRENDS AND DEVELOPMENTS

Retailers Stretch the Limits of Conventional Marketing

Manpower Concerns Loom in Retailing

(%) (% of total employment)

Sales in Retailing by Category: Value 2005-2010

2006 8,535.0 39.3 8,574.4

2007 9,631.2 48.8 9,680.0

2008 10,820.0 61.9 10,881.9

2009 11,972.7 76.0 12,048.7

2010 13,507.5 93.0 13,600.5

7,695.1 32.1 7,727.2

Sales in Retailing by Category: % Value Growth 2005-2010

% current value growth 2009/10 Store-based Retailing Non-Store Retailing Retailing

2005-10 CAGR 11.9 23.7 12.0

2005/10 TOTAL 75.5 190.1 76.0

12.8 22.4 12.9

Sales in Retailing by Grocery vs Non-Grocery 2005-2010

2006 65.5 34.5 100.0

2007 63.5 36.5 100.0

2008 62.0 38.0 100.0

2009 61.5 38.5 100.0

2010 62.0 38.0 100.0

67.5 32.5 100.0

Sales in Store-Based Retailing by Category: Value 2005-2010

2005 Grocery Retailers Non-Grocery Retailers Store-based Retailing

2006 5,710.9 2,824.1 8,535.0

2007 6,382.1 3,249.1 9,631.2

2008 7,240.1 3,579.9 10,820.0

2009 8,109.5 3,863.2 11,972.7

2010 9,212.4 4,295.1 13,507.5

5,251.4 2,443.7 7,695.1

Sales in Store-Based Retailing by Category: % Value Growth 2005-2010

% current value growth 2009/10 2005-10 CAGR 2005/10 TOTAL

Grocery Retailers Non-Grocery Retailers Store-based Retailing

13.6 11.2 12.8

11.9 11.9 11.9

75.4 75.8 75.5

Sales in Non-Grocery Retailing by Category: Value 2005-2010

2006 889.4 359.0

2007 1,027.3 412.9

2008 1,130.0 454.1

2009 1,220.4 495.0

2010 1,354.6 549.5

327.3 332.8 586.5

366.2 375.9 695.8

410.7 423.7 815.4

454.5 454.7 907.4

496.0 473.8 989.2

548.1 505.7 1,125.3

22.9 98.1 2,443.7

30.9 106.9 2,824.1

43.2 116.0 3,249.1

52.7 126.5 3,579.9

52.2 136.6 3,863.2

61.6 150.2 4,295.1

Sales in Non-Grocery Retailing by Category: % Value Growth 2005-2010

11.0 11.0 10.5 6.7 13.8 18.0 10.0 11.2