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Retail opportunities in East India January 7, 2011

Agenda
Indias retail sectorSnapshot Selected observations East India Snapshot East Indias retail market

PwC

January 7, 2011 2

Indias retail sector Snapshot

Statistics Market size ORP Unorganized market Growth rate

USD350 billion 58% 12 million mom&pop stores 15-20%

Expansion

Sector is not yet fully liberalised Unorganised trade, Indian players and foreign retailers can co-exist Growth opportunities across categories Indian consumers are value-conscious Retailers have aggressive expansion plans Demographic dividends Changing attitudes to consumption and spending

Consumers demands

GDP

Income growth

Consumer confidence

New entrants

New products
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Indias retail penetration Growth opportunities in most categories

3.10% 2.80% 7.30% Textiles Jew ellery Watches Footw ear 11.50% 38.10% Health & Beauty Pharmaceuticals Consumer Durables 6.40% 3.40% 9.10% 2% 0.80%
70% 60% 50% 40% 30% 20% 10%

Indian retail sectorquick facts Market size Organised retail penetration Unorganised retail market Growth rate Retail density USD 350 billion 58% 12 million kiranas 15 20% 6%

Mobiles Furnishing Food & Grocery 2.90% 9.90% 2.70% Catering Services Books, Music & Gifts Entertainment

Estimated investment by 2011 USD 412 billion

Books, Music & Gifts

Pharmaceuticals

Food & Grocery

Health & Beauty

ORP Grow th of ORP Source: Images F&R Research

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Entertainment

0%

Consumer Durables

Furnishing

Textiles

Mobiles

Jewellery

Footwear

Catering Services

Watches

The Indian retail sector is dynamic, exciting and challenging

Selected trends Improving operational effectiveness Focusing on innovation Sophisticated consumers Embarking upon a green agenda Key challenges Infrastructure Workforce management Value-conscious consumers Supply chain

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Network redesign to reap benefits of Goods and Services Tax (GST)

The GST regime is scheduled to be implemented in April 2010 (although it might be delayed). With the simplification of the indirect tax structure, there is an opportunity to realign supply chain management purely on business needs. Selected benefits that retailers can avail include In the GST regime the tax paid by the logistics company can be offset later on in the chain, reducing the cost of outsourcing and providing an impetus to thirdparty logistics players. Tax efficiency considerations will not overwhelm other factors in warehouse location decisions. This will allow rationalisation of the locations to improve supply service levels to the stores.
PwC

High

Better service, same cost Better service, better cost Better service, lower cost

Cost/service performance curve in Post GST regime Current cost/service performance curve in current fiscal regime

Customer service

current performance

T Low Low T

Supply chain exchange curve (Illustrative)

Supply chain costs

High

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Use of advance IT systems and tools

The use of advance IT systems and tools in Indian retail sector is still limited, a more enhanced utilisation of these IT tools can help in achieving significant benefits such as: Integration of various partners within the supply chain Information sharing among different partners in real time Effective monitoring and reporting through BI (Business Intelligence) tools IT Planning tools to improve effectiveness of supply chain planning Specific advance systems such as warehouse management or transport management systems to improve supply chain efficiencies

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January 7, 2011 9

Private label products A major growth driver for retailers

While low-price private labels exist, retailers are changing their focus from a price game to one that involves developing a portfolio of brands with distinct positioning for each brand. Retail chains are trying to understand unfulfilled demands existing in Indian market through need-gap analysis and are incorporating demographic and psychographic indicators. Indias major retailers expect to embark upon the following strategies for their private label products Increase the range of offerings Derive an increased share of revenue from the sales of products Embark upon promotional offers and sales Increase the visibility of products in store outlets Offer selected products through other retailers outlets

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Our observations

Diverse market, consumer dynamics

Private label products

Localisation works!

Supply chain, infrastructure

Bullish expectations, aggressive expansion plans

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PwC

East India At-a-glance

Opportunity in a relatively untapped market

Educational centers of excellence

Strong base for industrial activities

Development of the IT and real estate sectors

At this time, Kolkata is the main economic hub

Emerging hubs of economic activity

Aspirational and demanding consumers

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East Indias retail market

Untapped retail market Entering East India enables retailers to Aspirational consumers Grow their pan-India footprint

Better retail real estate rentals

Franchising opportunities

Serve new consumers

Expansion plans

Drive sales
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PwC

Thank you

debdas.sen@in.pwc.com

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