Made by ARJUN BALAN ARJUN BALI MBA-3RD SEM(GEN)

RETAILING IN INDIA

The Indian retail sector is highly fragmented with more than 90 per cent of its business being carried out by traditional family run small stores. This provides immense opportunity for large scale retailers to set-up their operations a slew of organized retail formats like departmental stores, hypermarkets, supermarkets and specialty stores are swiftly replacing the traditional formats dramatically altering the retailing landscape in India.

The total retail sales in India will grow from US$ 395.96 billion in 2011 to US$ 785.12 billion by 2015 Indian retail sector accounts for 22 per cent of the country's gross domestic product (GDP) and contributes to 8 per cent of the total employment.

The Wheel of Retailing

2. Outlet now has: Higher prices Higher margins Higher status 3. Outlet now has: Still higher prices Still higher margins Still higher status

As more time passes, outlet adds still more services

As time passes, outlet adds services

1. Outlet starts with: Low prices Low margins Low status

Passage of time

4. New form of outlet enters retailing environment with characteristics of outlet in Box 1

10% 9% 8%
Real Growth Rate

9.0%

9.2% 8.90%

6.4% 6.6% 5.4% 5.2% 5.6% 6.0% 6.0% 6.8%

7% 6% 5% 4% 3% 2% 1% 0%

Source :Central Statistical Organization (CS0)

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

Organized retail

INR 28,000 crore

Clothing, Textiles &Fashion accessories Footwear Jewellery & Watches Mobile handsets & accessories
Health & Beauty (including services) Food & Grocery Durables Books, Music & Gifts Home

39%
9% 7% 3% 2% 18% 13% 3% 3%

5-7 million Super Rich 70 80 million Afford Cars, Private Healthcare & Foreign travel 250 - 300 million Afford goods like Refrigerators , Scooters & Colour TVs 600-700 million (Generally Rural) Afford simple industrial products e.g. bicycles , radios , textiles

Poverty Line = income less than $ 1/day

60 % of Indias population are under 24 years

Source: McKinsey,

RURAL RETAILING

Future Group and Godrej Agrovet's joint venture (JV) in rural retailing, 'Aadhar', is all set for a revamp. The alliance operates stores in Gujarat, Maharashtra, Haryana and Punjab and mainly sells wheat and paddy apart from daily need products. The company also provides farmers with solutions to problems regarding their agricultural output, which includes what kind of crop can they plant and when, along with techno-commercial suggestions to help them give a better output.

The classic skimming strategy in the metros is not longer sufficient

100 cities strategy

Over 250 large size shopping malls are currently under construction Leading cities 2030 are forecasted to be
Mumbai New Delhi Chandigarh

At present, the government allows 51% foreign direct investment in a single-brand retail venture while 100% is permitted in wholesale cash-and-carry. Under single-brand retailing a store can stock goods that have the same brand. In the wholesale cash-and-carry route, which most foreign retailers use, there is restriction on sale to individuals. These stores are only permitted to sell to outfits such as restaurants and kirana stores

India's multi-brand retail sector, is estimated to be worth $28 billion (Rs 125,000 crore) according to a Boston Consulting Group (BCG) study. The government is likely to permit foreign direct investment (FDI) in the multi-brand retail sector from April 2012.

adversely affect the manufacturing sector to harm self-employment opportunities harm small traders across the country.

consumers will soon more options to choose products more and more investment in the backend Improve the standard of efficiency of supply chain management.

Processes

Complex Processes - Multiple MRP, Deals & Promotions, Forecasting & Replenishment, Lean supply chain JIT inventory, flow through warehouse Evolving processes in Supply chain & merchandising Global Best Practices not adopted High disposable income Changing consumer preferences 28 states, 100+ religion, 250+ festivals Supply chain not reliable. Cold storage infrastructure evolving Outsourced transportation Low level automation in warehouses Little or no collaboration between vendor & retailer Low fill rates from vendors Highly localized assortments leading to relationship with multiple vendors Complex trading contracts and off invoice discounts Multiplicity of disparate Systems & Data Formats No architecture roadmap Base ERP and home grown POS solutions. Low investments in store systems No investments in planning & optimization technologies

Consumer

Infrastructure

Supplier/ Vendor

Current IT

Organizing Retail in India-Challenges

Heterogeneous market Product offerings in different stores across the country will be very different No standard mode of operation across formats Market not mature (has to be validated)

Infrastructure will bring about logistical challenges Though, improvements in road networks, power supply are underway

Retail Challenges

Trained employees with understanding of retail business are inadequate compared to the needs of organized retail Barriers to Entry High taxes, bureaucratic clearance process and labour laws

High cost of real estate

though over 600 malls are to come up all over the country by the next 4 years

Indian retailers are deeply entrenched, are expanding and building on logistics and technology initiatives

Joint Ventures Bharti-Walmart (with $2.5 Billion investment by Bharti) Carrefour-Landmark

Product Range Food & grocery, electronics & appliances, clothing & footwear, furniture & furnishing, household articles. Food and groceries, FMCG, apparel and electronics

Retail Formats Hypermarkets, Supermarkets and Convenience Hypermarkets

Home Retail Group plc Shopper's Stop Ltd and Hypercity Retail India Private Ltd

Franchising the Argos concept under the terms of the arrangement, Argos will be providing its brand, catalogue and multi-channel expertise and IT support

Multi Channel propositions

Tata-Woolworths

Sourcing agreement for Consumer durables and Foods under brand name CROMA

Multi brand retail chain

Staples Inc Pantaloon Retail Reliance

Global Sourcing of Office equipments across various businesses Food & grocery, electronics & appliances, clothing & footwear, furniture & furnishing, household articles. Food & grocery, electronics & appliances, clothing & footwear, furniture & furnishing, household articles.

Cash and carry

Multi format and Multi Category

Birla

Convenience and Supermarket

Key Challenges to overcome Internal

Attracting & retaining qualified manpower Implementing SOPs & best practices Focus on improving operational efficiency Cost control CRM & Service levels

External
High real estate cost Anarchic laws Shortage of qualified manpower Poor infrastructure Unorganized & poor supply chain

 Supply Chain Investments Setting up logistics and supply chain infrastructure

Import of know how and logistics techniques from developed retail countries

IT Infrastructure

IT is the enabler behind communication, collaboration with suppliers, and an efficient supply chain

Manpower Potential tie-ups with universities and setting up dedicated retail institutes Utilize experience of international retailers to train local talent

Large Rural market