The Indian Retail Sector –

Business Understanding
Kirana Store

Kirana Store
Case Study

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 Retail the largest private industry globally, is
still in its nascent stages in India

Over 12
8 Million
Outlets i
n India
#1
Global Retail
industry is of size Unorgan
ize
USD 8 Trillion Organiz d Retail
Fortune #1 ed
“Wal-Mart” Retail <
3%
is a Retailer
50

Set to gr
Over 50 of ow to 8-
2010 10% by
the Fortune 25
500
companies Organize
are retailers d Retail
25 of the Asian be aroun expected
d Rs.110 to
Top 200 Cr(USD 2 ,000
companies, are 5 b) by 2
010
retailers

Source: CII Mckinsey, HSBC

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Retailing formats in India
• Malls:
The largest form of organized retailing today. Located
mainly in metro cities, in proximity to urban outskirts.
Ranges from 60,000 sq ft to 7,00,000 sq ft and above.
They lend an ideal shopping experience with an
amalgamation of product, service and entertainment,
all under a common roof.Examples include Shoppers
Stop, Piramyd, Pantaloon.
 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
strongly in their sectors.
 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
 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.
 Department Stores:
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!.
 Hypermarts/Supermarkets:
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.
 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.
 MBO’s :
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.
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Retailing formats in India
India’s number of Domestic grocery chains and Early Foreign Entrants

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Recent Trends

Retail Sales in India

• Retailing in India is witnessing a
huge revamping exercise as can
be seen in the graph

• India is rated the fifth most

attractive emerging retail market:
a potential goldmine.

• Estimated to be US$ 200 billion, of

which organized retailing (i.e.
modern trade) makes up 3 percent
or US$ 6.4 billion

• As per a report by KPMG the

annual growth of department
stores is estimated at 24%

• Ranked second in a Global Retail

Development Index of 30
developing countries drawn up by
AT Kearney.

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Recent Trends contd.
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. Melas are larger in size
and more sophisticated in terms of the goods sold (like TVs)
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. Quasi-mall, sub-
urban discount stores, Cash and carry etc.
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, Baristas, Piramyd and Globus are laying major
emphasis & investing heavily in store design.
Emergence of discount stores: They are expected to
spearhead the organised retailing revolution. Stores trying to
emulate the model of Wal-Mart. 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.
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Major Retailers

• India’s top retailers are Leading Retailers

largely lifestyle, clothing
and apparel stores
• This is followed by grocery
stores
• Following the past trends
and business models in the
west retail giants such as
Pantaloon, Shoppers’ Stop
and Lifestyle are likely to
target metros and small
cities almost doubling their
current number of stores
• These Walmart wannabes
have the economy of scale
to be low –medium cost
retailers pocketing narrow
margin

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Kirana Store
Kirana Store
Indian Organised Retail is set to explode
with Food & Lifestyle retail as major
segments
Pharma
Entertainment Durable 2%
1% 10%
Home
3%

Clothing and Textile

36%
Food & Grocery
14%

Health & Beauty

1%

Books, Music & Gifts

3%
Footwear
Watch & Jewellery 13%
17%

3 SBU’s covering 88% of market segment!!

Kirana Store
Future direction: Positives

• AT Kearney has estimated India’s total retail market at US$ 202.6 billion which is
expected to grow at a compounded 30 per cent over the next five years.
• With the organised retail segment growing at the rate of 25-30 per cent per annum,
revenues from the sector are expected to triple from the current US$ 7.7 billion to
US$ 24 billion by 2010.
• The share of modern retail is likely to grow from its current 2 per cent to 15-20
percent over the next decade
• Over next two years India will see several Indian retail businesses attaining a critical
mass as growth in the industry picks up momentum driven by two key factors:
– Availability of quality real estate and mall management practices
– Consumer preference for shopping in new environments
• 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.

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Future direction: Concerns

• 68 million square feet of mall space is expected to be available by end of 2007, which
might lead to over-capacity of malls
• Lack of differentiation among the malls that are coming up. One option may be to look
at specialization.
• Poor inventory turns and stock availability measures - retailers clearly need to
augment their operations.
• Operations of retailers and suppliers are not integrated. Efficient replenishment
practices practiced in the Indian auto and auto-component industry can be leveraged
to implement efficient supply chain management techniques.
• Supplier maturity, in terms of adherence to delivery schedules and delivering the
quantity ordered, is an issue
• Sales tax laws - lead to retailers having state-level procurement and storage leads to
Indian retailers having higher inventories. VAT has helped alleviate this a bit.
• Increased adoption of IT and shrinkage management will be a critical area.
• Supply chain and customer relations followed by merchandising, facilities
management and vendor development are areas which have significant gaps and
proactive training is a key imperative for overcoming these.

Kirana Store
Our Business Model
Four Axis of Retail Growth
Home
Solution (Indicative)
Electronics

Products
Apparel &
Accessorie
s
Food

Markets +4020Stores Customers

+100
2009 –Store
Stores
2008-10 Lower
= 60 Middle
Global National Regional Local09 Upper Upper
2010 – 11
Departme
= 140
Stores Stores
Middle Middle Class
nt Stores
Formats
Supermarket
s
Convenience
Stores

Hypermarket

Kirana Store
 Various Retail Formats

• Department store: Large retail store offering a variety of services and merchandise, organised in separate
departments. Occupy prominent positions in the heart of town or as anchor stores in out-of-town malls eg.
Shopper’s Stop.

• Supermarket: A store that sells a wide variety of goods including food, medicine and household products.
Often part of a chain that owns or controls other supermarkets in the same or other towns; thus going for
economies of scale. The chains are often supplied from the distribution centres of a larger business eg.
FoodWorld.

• Hypermarket (from the French term hypermarche) : A store that combines a supermarket and a department
store. A gigantic retail facility that carries a big range of products under one roof, including fresh groceries and
apparel. When planned, constructed and executed correctly, hypermart caters to all routine weekly shopping
needs in one trip eg. Big Bazaar.

• Category killers: Large format stores that specialise in a narrow line of merchandise eg. Vivek, Vijay Sales.

• Convenios: 24X7 convenience stores situated close to homes to generate high footprints. Convenios carry a
limited stock of daily use goods with a special focus on food products eg. In & Out petrol pump outlets.

• Specialty malls: Consortium of retailers that carry a certain category of products. They are usually situated
some distance from the city centre. Consumers have to make a special visit to pick up the goods.Kirana
eg, Gold,Store
…CONTD.
• Seamless malls: Consortium of retailers without walls separating the individual
stores. One
enormous shop, with hundreds of popular brands sharing space with each other. Eg.
Pantaloon’s
Central Mall.
• Outlet mall: Shopping centre with national brand-name retailers selling discounted
merchandise. Eg. Huma Mall.
• Lifestyle centres: Shopping centres or malls whose array of retail outlets are designed to appeal
to a particular segment of the population. Typically, lifestyle centres feature upscale specialty
stores, services, and restaurants. Eg. Centrestage Mall.
• Anchor clients: The most important elements in a large format mall. An anchor is among the first
clients to enter a mall, and occupies at least 25-30% floor space. Eg. Big Bazaar in Sahara Mall
Gurgaon.
• Draw tenant: A store that attracts a large number of potential customers to a shopping centre,
often an anchor store.
• Food court: Separate area of a shopping centre containing fast-food outlets and a common,
seating area.
• Gross leaseable area (GLA): Total floor space available for retail sales, usually in
square feet.
• Irregulars: Saleable merchandise with minor imperfections sold at discount.

Kirana Store
Our Business Model

Franchise Model •Food

•Groceries
•Household items
•Personal-care products

Company Owned •Brands in apparel

•Watches
•Accessories
•Cosmetics and other `lifestyle' segments

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 Key Challenges

Key
Challenges to
overcome

Internal External
• Attracting & retaining qualified • High real estate cost
manpower • Anarchic laws
• Implementing SOP’s & best • Shortage of qualified manpower
practices • Poor infrastructure
• Focus on improving operational • Unorganized & poor supply chain
efficiency
• Cost control
• CRM & Service levels

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Sources

• AT Kearny
• Forrester Research 2006
• KPMG-FICCI Report
• http://www.indiainbusiness.nic.in/

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Thank You !

Kirana Store
SAURABH GUPTA

M: +91 - 98106 – 53330

21 Kirana Store