Topic 2

Innovations in Indian Retail Industry

 INTRODUCTION

By 2020, Indian retail industry will improve drastically.

Demographics Annual Growth Challenges

Per sq/ft Sales India- 1500-2000
Income- 70% Overall Retail - 12%
Per sq/ft sales International 8000-12,000
Urbanization 9% Organized Retail -20%
Gross Margin India vs International 7-8%
Spend /capita 25-30% E-commerce- 40-50%
Rental India vs International - 1.5 -3%

*Source: CII-BCG Study (Mint)

POTENTIAL IMPACT OF FDI IN RETAIL
1100-1200 * Figures in $ billion

915-990
630

560
140-160 2015
60
8-12 45-50 2020
Total Retail
Market Organised
Retail E-commerce
Unorganised
Retail

Huge FDI in next 5 years

~1.5 million direct and indirect employment opportunities
Investments in back-end infrastructure
Benefits to consumers through lower price points and better shopping experience
Access to new technology and capital from international players for existing retailers.

*Source: CII-BCG Study (Mint)

 ORGANISED RETAIL IN 2015

Segments Total Value Growth rate

(in $ bn) Between 2005-15 (in%)
Food and grocery 396 12

Clothing and accessories 56 13

Jewelry 37 20

Consumer durables and mobile 36 13

Food services 35 12
Healthcare 18 13
Personal accessories 18 15
Home and interior 18 12

Beauty and personal care 12 15

*Source: CII-BCG Study (Mint)

 GROWTH IN E-COMMERCE

Category Online share by 2019 (in %)

Groceries <1

Home 8

Beauty 8

Clothes and shoes 10-12

Consumer durables 10-12

Books and media 13-15

Electronics 25-30

Travel >60

*Source: CII-BCG Study (Mint)

 KEY CHALLENGES FACED BY INDIA RETAILERS

Particular % Responses, RAI-Booz Retailer Survey 2013

Real estate rental 74%

Real estate quality 52%
Slowing consumerism 26%
MRP* constraints 25%
Poor consumer sentiments 25%
Strength of kiranas 24%
Low supplier fill rate 21%
Relative strength of supplier 16%
Competition frm foreign retailer 14%

*Source: RAI-Booz survey was conducted in January 2013: total no. of respondent was 410
EVOLUTION OF ORGANISED RETAIL IN INDIA
Early Entrants in Expansion mainly in Large Investments
Apparel & Footwear Fashion & Lifestyle in F&G led Retail

services Retail
F&G

F&G Retail
Trends in Organized Retail

Food
Size of Organized Retail

Growth in organized retail has

been led by non-Food &

Services
Grocery segments in India

Food
Apparel
e.g. apparel, footwear

Apparel
Liberalization led to an
exponential increase in
Apparel

Jewellery Foot-

organized retail across

& Watches wear

Foot-
wear
categories
However, it is only in the
Footwear

past 6-7 years that Food &

Grocery has witnessed
the entry of large domestic
and foreign players
Growth Growth Growth
Wave I Wave II Wave III
(Pre- (1991- (2005-
1991) 2004) 2012) Fashion Lifestyle F&G

Note: List of players/categories is not exhaustive a representative list of major players (with at least 4-5 retail outlets) in key retail categories has been depicted
Source: Secondary research, Booz & Company analysis
CRITERIA FOR INNOVATION

Tangible benefit to
consumer in terms Helps meet challenges
of price, service and which are even
Identified
experience applicable today
Innovations

A
Consumer Key
B Relevance
Impact Learnings
C
D
E
F
.. Economic
Implications
Impact Scalability
~40 for Retailers
ideas

Delivered Has been

results to implemented
the company across a sizable
business
 IMPACT OF INNOVATION

Innovation Levers The What?

Price
Context the Why? Impact

Business Challenge/
Opportunity Unique Consumer Value
Proposition
(Market share loss, low profits/ (Value, Experience,Trust )
growth, market whitespace )

Convenience

Culture and Capabilities

Enablers the How?

PARADIGM SHIFT INNOVATION
ParadigmShift
Paradigm Whatconsumers
thought
Air conditioning, big & clean stores,
English speaking staff...modern retail is
more expensive and not for me
VALUE
An international restaurant is
expensive and products are not for my
Indian tastes
I buy jewellery only from my family
jewellerbecause we know him
EXPERIENCE
Buying online is not for me; I like to
touch and feel the product and pay cash
after delivery
Ethnic and handloom apparel is not
trendy and inconsistenton quality and
fit/size
TRUST
Shopping ata busy mithai shop is a
chaotic experience
Paradigm Breaker What innovation Examples
delivered
Non-intimidating bazaar type format
drove penetration and acceptance in
mid-marketconsumers
Product innovation, pricing and
marketing drove high acceptance
across consumer segments
The karat meter and differentiated retail
experience delivered trust and a strong
value proposition to jewellery buyers
Cash on delivery offers options to see the
product and pay in cash on delivery
Ethnic and handloom apparel is trendy and
consistent in quality and size, through
reliable supply base of artisans.
Amithai shop can deliver streamlined /
smooth store experience through
technology