Retail Industry

Amit Rai
Ankit Surana
Anish Pandey
Abhishek Tiwari
Anubhav Srivastava

Retail Industry

Evolution of Indian Retail Industry

Barter system was known as the first form of Retail
Followed by Kirana Stores and Mom & Pop Stores
Finally Manufacturing era necessitated the small stores and specialty

stores
It was a sellers market till this point of time with limited number of
brands available
1980s experienced slow change as India began to open up economy.
The latter half of the 1990s saw a fresh wave of entrants with a shift
from Manufactures to Pure Retailers.
Post 1995 onwards saw an emergence of shopping centers
Emergence of hyper and super markets trying to provide customer
with 3 Vs - Value, Variety and Volume
Expanding target consumer segment

Overview

Industry Description
Indian retail Industry is

Fifth largest
world.

in

the

The current penetration

pegged at 5-7 per cent.

Accounts

for 24% of
countrys GDP and 8%
of
the
total
employment.

Food

is the largest
segment in terms of its.
5

Tax Impacts and Regulatory Environment

The retail sector has not been conferred an industry status till now.
Hence, there are no specific rules and regulations governing the
sector. However, there are certain laws pertaining to the
establishment of stores and conduct of activities, which retailers
need to follow:
The Shop and Establishments Act
The Standards of Weights and Measures Act
The Provisions of the Contract Labor(Regulations and Abolition)
Act
The Income Tax Act
The Customs Act
The Companies Act
In addition to the above law: Retail companies have to follow certain
regional rules and regulations on the basis of their stores location;
different states have different laws to regulate the retail trade.
6

Tax Impacts
Presently, there are multiple indirect taxes:
Customs

duty
Central Value Added Tax (CENVAT)
Service tax
Central Sales Tax (CST)
State value added tax
Central value added tax
Entry tax

GST implementation :-In order to integrate all of these taxes into

a single unified tax system and bring about broad-based
reforms in the indirect tax regime, the government of India
has envisaged The introduction of a uniform Goods and
Services Tax (GST) across the country.

Regulatory Environment
FDI Policy with regard to Retailing in India:

FDI up to 100% for cash and carry wholesale trading and

export
trading allowed under the automatic route.
FDI up to 100 % with prior Government approval (i.e. FIPB) for
retail trade of Single Brand products.
India allowed FDI of up to 51% in multi-brand sector.

Single brand retailers such as Apple and Ikea, can own 100%
of
their Indian stores, up from previous cap of 51%.
The retailers (both single and multi-brand) will have to source
at
least 30% of their goods from small and medium sized Indian
suppliers.

Regulatory Environment Contd..

Multi-brand retailers must bring minimum investment of US$

100 million.
Half of this must be invested in back-end infrastructure
facilities such as cold chains, refrigeration, transportation,
packaging etc. to reduce post-harvest with 3 years of setup.
Losses and provide remunerative prices to farmers.
The opening of retail competition (policy) will be within
parameters of state laws and regulations.
Overseas companies must put half of their investment in
infrastructure such as processing, manufacturing, storage,
warehouses and packaging

Structure & Phase of The Industry

Retail formats in India:

Hyper marts/supermarkets
Mom-and-pop stores
Departmental stores
Convenience stores
Shopping malls
E-trailers
Discount stores
Vending
Specialty stores

Stage
The retail Industry is still in its nascent stage of growth
The foreign direct investment (FDI) inflows in single-brand retail

trading during April 2000 to June 2012 stood at US$ 42.70 million
Cash and carry represents an opportunity worth around Rs 8,250

billion (US$ 149.19 billion) of the Rs 27,500 billion (US$ 497.29

billion) annual retail business in India
India's e-retail industry is likely to touch Rs 7,000 crore (US$

1.26 billion) by 2015, up from Rs 2,000 crore (US$ 361.66

million)
Focus on rural sector increasing

Size
The Indian retail market is currently estimated at USD 450 billion.
Food segment contributes largest part of total value of retail

market, followed by fashion, leisure & entertainment and fashion

accessories.
India's organized retail space is evolving fast and achieve
penetration level of 7%, which signifies huge potential growth.
Indian luxury market currently stands at USD 3.5 billion and
expected to grow to make India the twelfth-largest luxury retail
market in the world by 2016.
Retail has become largest source of employment and has deep
penetration into rural India. Retailing contributes to 22% of GDP
and around 8% of the employment.

Retail Growth In
India

Organized Retail Growth In

India

Key Success Factors for the industry

Effective forecasting
Strong balance sheet
Stock control
Market position
Proximity to market
Creating Systems In Retail
Hiring the Right Employees
Marketing
Buying The Right Merchandise
Customer Service

Risks for Retail Sector

Low-growth consumer markets
Regulation and compliance
Inability to control costs/rising input prices
Inability to benefit from e-commerce
Wrong price image
Supply chain disruptions
Inability to penetrate emerging markets
Failure to respond to shifting consumer behavior
Sourcing
Volatility in commercial real estate markets

Opportunities for Retail Sector

Rising emerging market demand and rise of global

middle class
New marketing channels and social media
Competitive differentiation via CSR and green branding
Multichannel approach
Demographic change
Private label
Launching new products and services
Global urbanization
Competitive differentiation via local branding
Enhancing efficiency in the supply chain

Porters Five Force Model

Threat of New Entrants

Power of Suppliers

Historically, retailers have tried

95% of the market is made up to exploit relationships with
of
small,
uncomputerised supplier.
family run stores.
The
ability
to
establish In retail industry suppliers tend
favorable supply contracts, to have very little power.
leases and be competitive is
becoming virtually impossible.
Following examples explain the
The vertical structure and same.
centralized buying gives chain
stores
a
competitive Sears in 1970 set very high
advantage over independent standards for quality; suppliers
retailers.
that did not meet these
standards were dropped from
On the whole threat from new the Sears line.
entrants in retail industry is
high.
Walmart places strict control
on its suppliers.

Power of Buyers

Availability of Substitutes

The tendency in retail is not to

Customers
have specialize in one good or
comparatively high bargaining service, but to deal in wide
power in unorganized sector range
of
products
and
than in organized sector.
services.
As the customer will demand What one store offers is likely
products from organized units to be same as that offered by
he will be more focused another store.
towards quality aspect
The threat from substitutes is
high.

Competitive Rivalry
Retailers always face stiff competition and must fight with
each other for market share and also with unorganized
sector.
They have tried to reduce cut throat pricing competition by
offering frequent flier points, memberships and other
special services to try and gain the customers loyalty.
Thus retailers give each other stiff but healthy competition
which is evident from their aggressive marketing strategies
and segment policies.

SWOT Analysis
Strengths
Major contribution to GDP: the retail sector in India is hovering
around 33-35% of GDP as compared to around 20% in USA.
High Growth Rate: High Potential: since the organized portion
of retail sector is only 2-3%, thereby creating lot of potential for
future players.
High Employment Generator
Low Labor Cost
Technology intensive industry
Rising disposable income
Urbanization
Shopping convenience
Changing consumer habits and lifestyles
High availability of quality retail space

Weakness
Policy related issues
Lack of industry status for retail.
Numerous license, permits and registration requirement.
Limited consumer insight

Lack of detailed region specific customer data.

Lack of Skilled Labor
Taxation hurdle

Inconsistent octori, entry tax structure, vat and multiple taxation issues.

large grey market presence.

Underdeveloped supply chain

Underdeveloped logistics infrastructure &absence of national cold

chain networks.
Lack of adequate utilities

Lack of basic infrastructure like power, transport and communication.

Opportunities
Potential for investment.
Locational advantage.
Sectors with high growth potential.
Fastest growing formats.
Rural retail.
Create transparency in the system
Healthy Competition will be boosted and there will be a

check on the prices (inflation)

Intermediaries and mandi system will be evicted, hence
directly benefiting the farmers and producers
Quality Control and Control over Leakage and Wastage
Heavy flow of capital will help in building up the
infrastructure for the growing population

Threats
Political issues.
Social issues.
Inflation.
Nostalgia
Lack of differentiation among the malls that are coming.
Poor inventory turns and stock availability measures.
Big players can knock-out competition
Current Independent Stores will be compelled to close
India does not need foreign retailers
Remember East India Company it entered India as trader and

then took over politically.

The government hasnt able to build consensus.

Demand-Supply Dynamics, Demand Trends

The global demand has been falling consistently due to crisis in

US and Europe.

On the supply side, retailers are slowing down their expansion

plans and many real estate developers are falling behind

schedules in their shopping mall projects, considering the credit
crunch.

However in Future Indian retail is expected to grow 25 per cent

annually. Modern retail in India could be worth US$ 175-200

billion by 2016.
The Food Retail Industry in India dominates the shopping basket.
The Mobile phone Retail Industry in India is already a US$ 16.7
billion business, growing at over 20 per cent per year.
The Retail sector in the small towns and cities will increase by

50% to 60% pertaining to easy and inexpensive availability of

land and demand among consumers.

Markets for the Products

India has emerged as the fifth most favourable destination for

international retailers.

Rural marketing through direct channel contributes about 23

per cent of the firm's total sales, which it expects to increase

to more than 35 per cent in the next three years.

India's franchise market is growing at a healthy pace with tier

II and tier III cities gradually getting attracted to the network of

retailers and franchisers.

Indian apparel retailers are increasing their brand presence

overseas in developed markets. While most have identified a

gap in countries in West Asia and Africa, some majors also
looking at US and Europe.

India will be a high potential market with accelerated retail

growth of 15-20 per cent expected over the next five years
according to a report.

Company Name

Net Sales(Billion
$)

Country

Walmart

$421,849.00

USA

Carrefour

$120,297

French

Tesco

$94,185

UK

Metro AG

$89,081

German

The Kroger Company

Schwarz
Unternehmens
Treuhand KG

$82,189

USA

$77,220.00

German

Costco Wholesale

$77,946

USA

Home Depot

$67,997

USA

Target
Aldi GmbH & Company
oHG

$67,390

USA

$58,000

German

Company Name

Net Sales(Billion $)

Pantaloon Ret

0.79

Shoppers Stop

0.37

Trent

0.16

Brandhouse

0.14

REI Six Ten

0.11

Provogue

0.11

Koutons Retail

0.10

Kewal Kiran

0.05

Cantabil Retail

0.03

Arunjyoti Enter

0.01

Prozone Capital

0.00

Major Players

Pantaloons Retail India Ltd. is market leader with 43% of the

market share in terms of turnover
Followed by Shoppers stop, Brandhouse, Trent, Provogue
Source Moneycontrol.com

Cost Structure

Profit Trend

ROCE

Trent
The Companys operations consist of Westside stores, Star Bazaar and

Landmark stores.
The Westside stores include a private label fashion apparel format.
During fiscal year ended March 31, 2012 (fiscal 2012), 13 stores were
opened, including the Bhopal (DB City Mall), Pune (Phoenix Market City),
Mumbai (Infinity Mall), Varanasi (Dhanushree Complex ), New Delhi
(Moments Mall), Mumbai (R-City Mall), Bilaspur (City Mall), Udaipur (Rkay
Mall) and Bangalore (Orion Mall).
The Star Bazaar is the discount hypermarket format. As of March 31,
2012, there were 15 operational stores (three in Mumbai (Andheri,
Dahisar and Thane), four in Bangalore, two in Ahmedabad and Pune, one
each in Aurangabad, Surat, Chennai and Kolhapur).
The Landmark stores include the format retailing inter-alia books, music,
toys and gaming, which are managed by a subsidiary of the Company,
Landmark Limited.
The company disclosed rise of 24.70% in standalone net profit on y-o-y
basis to Rs 127.64 million, while total income rose 12.65% y-o-y basis to
Rs 2.20 billion for the quarter ended June 2012.

Key Financials (Trent)

Period & months

2012/03 2011/03

2010/03

2009/03

2008/03

Net Operating Income

Cost of Sales
Reported PBDIT
Other Recuring Income
Adjusted PBDIT
Depreciation
Other Write-offs
Adjusted PBIT

8698.8
8827.3
-128.5
902.5
774
159.5
0
614.5

6861.5
6789.3
72.2
695.8
768
136.3
0
631.7

5633.3
5479.1
154.2
430.7
584.9
118.5
0
466.4

5117.3
5029.7
87.6
259.7
347.3
92.3
0
255

5141.6
4958.6
183
42.9
419
88.5
0
330.5

Finanical Expenses
Adjusted PBT
Tax Charges
Adjusted PAT

77.1
537.4
100.7
436.7

123
508.7
172.3
336.5

95.1
371.4
105.7
265.7

43.3
211.7
30.7
181

42.9
287.6
47.4
240.2

Non-recurring Items
Other Non-cash
Adjustments
REPORTED PAT

-91.6

94.7

122

66.1

85.6

127.6
472.7

-0.8
430.4

14.5
402.2

20.5
252.1

2.9
325.8

Shoppers Stop
Incorporated as a private limited company on June 16, 1997
The foundation was made by K Raheja Corp
Shopper's Stop Limited (SSL) is engaged in the business of

retailing variety of household and consumer products and

books through departmental stores.
As of March 31, 2012, SSL operated through 51
departmental stores.
As of March 31, 2012, it opened 13 departmental stores,
which includes two stores in Chennai and Pune and one
each at Indore, Vijayawada, New Delhi, Mysore, Latur,
Ahmedabad, Mumbai, Bengaluru and Gurgaon.
During the fiscal year ended March 31, 2012, the Company
also opened seven HomeStop one each at Lucknow,
Vijayawada, Pune, Bengaluru, Ahmedabad, Mumbai,
hydrebad taking its tally to 11 stores.
In May 2012, it opened Shoppers Stop store at Jalandhar.

Key Financials (Shoppers Stop)

Period & months
Net Operating Income
Cost of Sales

2012/03

2011/03

2010/03

2009/03

2008/03

20,347.60 19,290.00 15,683.70 13,275.10 11,460.10

17,134.20 16,264.90 13,122.20 11,478.70

9874.2

Reported PBDIT

3213.3

3025.2

2561.5

1796.4

1585.9

Other Recuring Income

186.9

90.8

43.2

79.5

1131.1

Adjusted PBDIT

3400.2

3116

2604.7

1875.9

1669.4

Depreciation

377.2

310

310.3

631.3

392.7

Other Write-offs

Adjusted PBIT

3023

2806

2294.4

1244.6

1276.7

Finanical Expenses

2039.1

1668.3

1601.1

1556.4

1131.1

Adjusted PBT

983.9

1137.7

693.4

-311.8

145.6

Tax Charges

335.5

386.5

211.3

58.9

62.8

Adjusted PAT

648.4

751.2

482.1

-370.7

82.8

Non-recurring Items
Other Non-cash
Adjustments

-5.8

0.5

38.6

-266.5

-0.5

-18.4

-12.7

REPORTED PAT

642.6

751.8

502.3

-637.2

69.7

Provogue
Provogue (India) Limited (PIL) was incorporated on 17th November

1997 as Acme Clothing Private Limited.

Divisions of the company include accessories, women's wear and
men's wear.
The EPS of company has dropped from 12.56 in 2012 to 2.17
currently.
The sales and Net worth have also dropped significantly.
PAT has come down to -25.08 crores from 17.85 crores from last
year.
The
tactical
marketing
policies,
aggressive
promotional
campaigns, and unique distribution techniques through malls,
stores have helped Provogue grow to become a leader in the
garments segment in India.
This concept of being different has carved out a definite niche in
the hearts of the buyers.
Overall the outlook looks very strong and positive and is the best
bet in the companies among retail.

Key Financials (Provogue)

Period & months

2012/03 2011/03 2010/03 2009/03 2008/03

Net Operating Income

6095.9

5622.6

4806.7

3567.6

3361.4

Cost of Sales

5499

4921.6

4287.1

3211.6

2885.4

Reported PBDIT

596.9

701

519.6

356

476

Other Recuring Income

152.7

151

187.4

231.7

164.2

Adjusted PBDIT

749.6

852

707

587.8

565.5

Depreciation

118.1

119.3

122.8

95.1

81.1

Other Write-offs

Adjusted PBIT

631.5

732.7

584.2

492.7

484.4

Finanical Expenses

322.1

260.4

199.5

149.7

164.2

Adjusted PBT

309.4

472.3

384.7

343

320.2

Tax Charges

45.8

85.6

119.4

109.5

63.5

Adjusted PAT

263.6

386.8

265.3

233.5

256.7

Non-recurring Items
Other Non-cash Adjustments

-13.3
0

-48.3
-4.4

13
5.3

60.1
1

7.5
-6.1

REPORTED PAT

250.3

334.1

283.5

294.6

259.7

Brand House Retail

Brandhouse Retails was established as a pure play retail

organization. As a company that caters to the entire

spectrum of the socio-economic stratum in the Indian
market
BHRLs retail expertise extends from mid-price to the
lifestyle and luxury segment.
HRL is amongst the leading fashion retailers in India. It
currently manages the retailing of the following brands
through exclusive brand outlets across India Reid & Taylor,
Belmonte, Carmichael House and dunhill.
A network of 784 company-operated and franchise stores
across the country of approximately 8.93 lac sq ft. each one
focus on garments, fashion accessories and home
furnishings offering international & domestic brands.
91 Cities, 784 Stores and 6.6 Sq. Ft of retail area covered.

Key Financials (Brand House Retail)

Period & months

2012/0
3
2011/03

2010/03

2009/03

2008/03

Net Operating Income

7834.8

7374.5

6574.6

5523.5

3137.9

Cost of Sales

7286.5

6777.8

6010.2

5108.2

2833.8

Reported PBDIT

548.3

596.6

564.4

415.3

304.1

Other Recurring Income

0.9

2.7

22.9

0.6

38.8

Adjusted PBDIT

549.2

599.4

587.3

415.9

311.6

Depreciation

97.4

98.8

85.6

82.8

47.1

Other Write-offs

Adjusted PBIT

451.8

500.6

501.7

333.1

264.5

Finanical Expenses

297.7

283.1

191.6

87.8

38.8

Adjusted PBT

154.1

217.5

310.1

245.3

225.8

Tax Charges

54.3

60.5

113.8

104

95.1

Adjusted PAT

99.7

157

196.4

141.3

130.7

Non-recurring Items
Other Non-cash
Adjustments

-0.2

0.1

-4.1

0.5

-14.7

44.4

-34.4

-3.4

-0.1

REPORTED PAT

85

201.2

162.1

133.9

131.1

Pantaloon Retail (India) Ltd

Pantaloon Retail India Limited (PRIL), a retailer was incorporated in

12th October of the year 1987, headquartered in Mumbai

Company operates through primarily the Lifestyle' and Value' formats
through multiple delivery mechanisms and lines of business, some of
them being, fashion, food, general merchandise, home, leisure and
entertainment, financial services, communications and wellness.
The Company has stores in 51 cities across the country, constituting
over 6 million square feet of retail space.
Caters to the Lifestyle' segment through its 35 Pantaloons Stores and
5 Central Malls, as well as through 78 Big Bazaar hypermarkets, 113
Food Bazaars.
In the year 1991, the company had launched BARE, the Indian jeans
brand. Initial public offer (IPO) was made in May of the year 1992
Multiple retail formats including Collection i, Furniture Bazaar, Shoe
Factory, EZone, Depot and futurebazaar.com are launched across the
nation in the year 2006

Key Financials (Pantaloon Retail (India) Ltd)

Financial Year Ending

2012/06

2011/06

2010/06

2009/06

2008/06

Net Sales

4,326.79 4,840.96 5,630.21 7,026.81 5,941.22

Cost of Sales

3,966.22 4,385.83 4,953.65 6,346.09 5,449.77

Reported PBDIT

785.56

455.13

676.56

680.72

491.45

PBDT

486.99

261.66

375.52

356.28

279.01

PBIT

593.1

308.76

514.68

540.67

408.06

PBT

294.53

115.29

213.64

216.23

195.62

PAT

285.05

76.67

179.56

140.58

125.97

Future Prospects

Future Prospects Cont.

Uncertain macroeconomic environment
Prices of apparel also surged concomitantly with the

increase in cotton prices and the levy of excise duty on

branded apparel
Store expansion to drive revenue growth
Retail consumption growth to remain strong
The overall retail market is likely to grow at healthy
compounded rate of 15 per cent from Rs 24 trillion in
2011-12 to Rs 47 trillion in 2016-17
Organized retail penetration to cross 10% by 2016-17
Food , Grocery & Beauty products to grow faster
Slower growth expected in books, home dcor, and
consumer durables.
Focus on reducing store-level operating expenses