The Indian Retail Sector

Contents

Industry evolution. Retailing formats in india. Major retailers in india. Recent trends. India vs world. Key challenges in industry. Future directions- positive Conclusion. Thanks.

Industry Evolution

Traditionally retailing in India can be traced to The emergence of the neighborhood Kirana stores catering to the convenience of the consumers Era of government support for rural retail: Indigenous franchise model of store chains run by Khadi & Village Industries Commission 1980s experienced slow change as India began to open up economy. Textiles sector with companies like Bombay Dyeing, Raymond's, S Kumar's and Grasim first saw the emergence of retail chains Later Titan successfully created an organized retailing concept and established a series of showrooms for its premium watches The latter half of the 1990s saw a fresh wave of entrants with a shift from Manufactures to Pure Retailers. For e.g. Food World, Subhiksha and Nilgiris in food and FMCG; Planet M and Music World in music; Crossword and Fountainhead in books. Post 1995 onwards saw an emergence of shopping centers, mainly in urban areas, with facilities like car parking targeted to provide a complete destination experience for all segments of society

Retailing formats in India

Malls Specialty stores. Discount stores. Department stores. Hypermarket/Supermarket. Convenience stores. Mobs.

Retailing formats in India

Indias number of Domestic grocery chains and Early Foreign Entrants

Major Retailers

Retail Market Break-Up in 2008

Modern Retail Only Now Entering Expansion Phase .

Initiation Conceptualization

Expansion and Entry of Global Retailers

Consolidation
Large Scale Consolidation Stiff Competition

I
Size of Industry
Manufacturers opening their own outlets

II
Pure play Retailers, realizing the potential start to test waters,

Entry of large global retailers

III

IV

Movement to Smaller Cities and Rural Areas

More Aggression from International Players

Expansion by leading Product Brands

Large Investment Commitments by large Indian corporates

More than 5-6 Players with Revenues in excess of US $ 700 mn Specialty Formats based on finer segmentation of the market Private brands getting established

a
Pre 1995 1995 to 2005 2005 to 2010 2010 Onwards

Recent Trends
Traditionally three factors have plagued the retail industry:

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. Though 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.

Recent changes:

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. sub-urban discount stores, Cash and carry etc. Emergence of discount stores: They are expected to spearhead the organised retailing revolution. Stores trying to emulate the model of WalMart. Ex. Big Bazaar, Bombay Bazaar, RPGs. 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.

India vs. World

Indian retail is fragmented with over 12 million outlets operating in the country. This is in comparison to 0.9 million outlets in USA, catering to more than 13 times of the total retail market size as compared to India India has the highest number of outlets per capita in the world - widely spread retail network but with the lowest per capita retail space (@ 2 sq. ft. per person) Annual turnover of Wal-Mart (Sales in 2001 were $219 billion) is higher than the size of Indian retail industry. Almost 100 times more than the turnover of HLL (India's largest FMCG company). Wal-Mart - over 4,800 stores (over 47 million square meters) where as none of India's large format store (Shoppers' Stop, Westside, Lifestyle) can compare. The sales per hour of $22 million are incomparable to any retailer in the world. Number of employees in Wal-Mart are about 1.3 million where as the entire Indian retail industry employs about three million people. One-day sales record at Wal-Mart (11/23/01) $1.25 billion - roughly two third of HLL's annual turnover.

Key challenges in industry

Large geographic area. Infrastructure constraints. Distribution cost. Fragmented market. Lack of national distribution network. Lack of distribution hubs.

Future direction: Positives

Indias total retail market at US$ 202.6 billion which is expected to grow at a compounded 30 per cent over the next five years. The share of modern retail is likely to grow from its current 2 per cent to 15-20 percent over the next decade Wal-Mart : huge plans for India. Moving a senior official from its headquarters in Bentonville, Arkansas, to head its market research and business development functions pertaining to its retail plans in India. New York-based high-end fashion retailer Saks Fifth Avenue has tied up with realty major DLF Properties to set up shop in a mall in New Delhi. Tommy Hilfiger, retailer of apparels, expects to open one store each in Delhi, Ahmedabad, Lucknow and Bangalore in the next four months

Conclusion

For a start, retailers need to invest much specific market. The retailers also need to make substantial investment in understanding/acquiring some advanced expertise in developing more accurate and scientific demand forecasting model. As the retail marketplace changes shape and competition increases the potential for improving retail productivity and cutting cost is likely to decrease. Therefore it will become important for retailers to secure a distinctive position in the marketplace based on value relationship or experience.