Analysis of Retail Sector - India

Group 6
Anant Poddar (15P186)
Debolina Bhattacharya (15P196)
Karan Jain (15P206)
Nitish Shrivastava (15P216)
Sanil Shah (15P226)
Vaibhav Pahuja (15P236)

Evolution of retail in India

Retail in India

2013
Market Value
USD 4.9 Billion

2020E
Market Value
USD 1.3 trillion

Retail in India
Innovation
in financing

Increasing
Investments

Advantage
India

Demand
Potential

Policy
support

Retail Formats in India

Retail Categories in India

Retail Category
Food & Beverage
Cloth and Textile
Consumer Durables
Home Dcor & Furnishing
Beauty , personal care
Footwear

Retail Brands in India

Retail Landscape in India

Organized Retail in Nascent stage

Organized retail penetration 2013
8%
Organized retail penetration
Unorganized retail
penetration

92%

Organized Retail in Nascent stage

The Indian retail market is in its nascent

stage
Unorganized Significant scope for
expansion in organized retail players
accounted for 92 per cent of the market
during 2013
There are over 15 million mom-and-pop
stores
Between FY09-13, organised retail in India
witnessed a CAGR of 19-20 per cent
Organised retail is expected to account for
24 per cent of the overall retail market by
2020

Two sided market structure

Two-sided markets, also calledtwo-sided networks,
areeconomic platformshaving two distinct user groups that
provide each other with network benefits
Supermarkets face a two-sided demand for shelf space:
consumers demand variety and suppliers demand shelf space

Consumer

Supermarkets

Supplier

Growth Drivers
Demand factors

Changing consumer preferences and growing urbanization

Rising Incomes and increasing Purchasing powers

Growing youth segment and working women population

Easy consumer credit and increase in quality products

Rising Internet penetration

Supply factors

Rapid Real estate and infrastructure development

Growing Interest of Investors

Increased efficiency due to development in supply chain

Easier access to credit

Organized Retail by Category

Retail by Category

8%

Food and Beverage

2% 3%

Clothing & Textile

3%
4%

Consumer durables
Home Dcor and
Furnishing

11%

Beauty, Personal care

69%

Footwear
Others

Organized Retail by Category

Retail Category

Gross Margin
(approx.) %

Trends

Food & Beverage

3-14

Large Market
Robust opportunities

Cloth and Textile

35-50

High Margins
Private Labels

Consumer Durables

10-20

Wide range of price points

Home Dcor & Furnishing

40-50

Housing Boom
Increasing aspirations

Beauty , personal care

20-40

New product launches

Consumer aspiration

Footwear

25-35

Increased offering by lifestyle

brands

Others

10-15

Pharmacy retailer
Stationary retailers etc

Boston Consulting Matrix

Cash Cow
High market
share & slow
growing industry
Ex:- Appliances,
Kitchen tools

Stars
High market share
and fast growing
industry
Ex:- Groceries

Dog
Low market share
& slow growing
industry
Ex:- jewellery

Question
Marks
High market
growth but low
market share
Ex:- Health care
products

Price Points
When a vendor increases a price beyond a price point (say to a price
slightly above price point B), sales volume decreases by an amount
more than proportional to the price increase
Causes

Substitution price points - price points occur at the price of a close

substitute
Perceptual price points - raising a price above 99 rupees will cause
demand to fall disproportionately

Pricing Strategy
Cost plus pricing
This involves adding up of markup amount to the retailers cost.
Suggested retail pricing
This simply involves charging the amount suggested by the
manufacturer and usually printed on the product by the
manufacturer.
Value based pricing
Value-based pricing is a pricing strategy which sets prices primarily,
but not exclusively, on the value, perceived or estimated, to the
customer rather than on the cost of the product or historical prices.
The approach is most successful when products are sold based on
emotions (fashion), in niche markets, for indispensable add-ons (e.g.
printer cartridges, headsets for cell phones).

Pricing Strategy
Threshold pricing
Psychological fixing of prices to entice a buyer up to a certain
threshold like Rs. 199
Anchoring and adjustment
Whats the best way to sell a Rs. 2000 wristwatch? Right next to a
Rs. 12000 watch.
Offering different options
People were offered 2 kinds of beer: premium beer for Rs. 250 and
bargain beer for Rs. 180. Around 80% chose the more expensive
beer. Now a third beer was introduced, a super bargain beer for Rs.
160 in addition to the previous two. Now 80% bought the Rs. 180
beer and the rest Rs. 250 beer. Nobody bought the cheapest option.

Rising prominence of online Retail

Online retail business is the next generation format which has high potential for
growth in the near future.
After conquering physical stores, retailers are now foraying into the domain of eretailing E-commerce is expected to be the next major area for retail growth in
India.
The industry is projected to touch USD200 billion by 2020 With growth in the ecommerce industry, online retail is estimated to reach USD70 billion by 2020 from
USD2.24 billion in 2013

Key Drivers
Young Population
Internet penetration
24x7 accessibility
Options like Cash on Delivery
Promotional prices
Easier access to credit and
other payment options

Porters Five Forces Analysis

Threat of
New
entrants
(High)

Bargaining
Power of
Customers
(High)

Competitive
Rivalry
(Moderate-High)

Bargaining
Power of
Suppliers
(Low)

Threat of
Substitutes
(High)

Threat of
substitutes
Threat of substitutes is high
Customers may purchase a product from a local store as against a retailer

Entry as a retailer is simple

However, players need to establish strong distribution and achieve
economies of scale to compete

Entry of foreign players in the market and e-tailers has intensified

competition
Customers low switching cost increases competition
Indian retail sector is highly fragmented which increases competition

Threat of
new entrants

Competitive
Rivalry

Porters Five Forces Analysis

Bargaining

Power of

Customers
are
price
sensitive
and
have
info
about
the
product
and
its
Customers
price
Low switching cost gives customers high bargaining power

Retailers have low switching costs

This makes the supplier power low
Larger retailers can easily switch to different suppliers

Bargaining
Power of
Supplier

Porters Five Forces Analysis

Strategies Adopted

Enhancing internal efficiencies

Decoding consumer behavior
Entering into alliances and leveraging expertise
Developing private labels
Venturing into under penetrated markets : Rural retailing
Building a competent supply chain management
Innovating categories, services and Business models
Creating players focused to a particular segment
Omni- channel retailing

Emerging Opportunities
Retail Infrastructure
The number of expected trade stores by 2016 is 67100
Expected CAGR in value terms is 13 percent (2013 - 19)

Luxury Retail
Indian luxury market is expected to grow at a CAGR of 25% on the base of
consumer splurge on luxury items

Sourcing Base
Global retailers such as Walmart, tesco, Gap are increasing their sourcing from India
and are establishing their own wholly owned buying and sourcing offices

Rural retailing
Rural market constitute 70% of total population base, account for only 40% of
consumption; this highlights the huge potential

FDI in Retail
Opportunities
100% FDI in single brand retail and wholesale cash and carry
trading
51% FDI in multi-brand retail

Key Riders
30% sourcing preferably from small scale enterprise

Out of the first 100 billion investment 50% should be utilized for
backend development

Expected High Growth categories

Food and grocery retailing
Apparel retailing
Luxury retailing

Simplified Tax Structure - GST

Introduction of the GST will simplify the supply chain
structure of the retail sector
Removal of excise duty from products would result in
cash flow improvements
Profitability will be improved by eliminating the tax
cascading effect
GST will facilitate creation of supply chain methods
based on transportation models rather than taxation
models

Challenges

Highly diverse demographics of Indian consumer

Escalating real estate prices due to high demand in large
cities
Multiple and stringent FDI regulation
Challenge of finding, training and retaining talent
High competition on un organized sector

Thank You