The Indian Retail Sector

Industry Evolution

Traditionally retailing in India can be traced to

The emergence of the neighborhood Kirana stores catering to the convenience of the consumers

1980s experienced slow change as India began to open up economy Textiles sector with companies like Bombay Dyeing, Raymond's, S Kumar's and Grasim first saw the emergence of retail chains Later Titan successfully created an organized retailing concept and established a series of showrooms for its premium watches The latter half of the 1990s saw a fresh wave of entrants with a shift from Manufactures to Pure Retailers. For e.g. Nilgiris in food and FMCG; Planet M and Music World in music Post 1995 onwards saw an emergence of shopping centers,

Era of government support for rural retail: Indigenous franchise model of store chains run by Khadi & Village Industries Commission

Emergence of super markets trying to provide customer with 3 Vs - Value, Variety and Volume Expanding target consumer segment: The Sachet revolution - example of reaching to the bottom of the pyramid.

mainly in urban areas, with facilities like car parking targeted to provide a complete destination experience for all segments of society

Retailing formats in India

Malls: The largest form of organized retailing today, Located in metro cities, They give an ideal shopping experience with various product, service and entertainment, all under a common roof. Examples include Shoppers Stop
Specialty Stores: Chains such as the Bangalore based Kids Kemp, 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. . The product category can range from a variety of perishable/ non perishable goods

Department Stores: Departmental Stores are expected to take over the apparel business from exclusive brand showrooms. For e.g. Shoppers Stop, which started in Mumbai. Supermarkets: Large self service outlets, catering to varied shopper needs are termed as Supermarkets. These are located in or near residential high streets.

Department Stores: Large stores catering to a variety of consumer needs. Further classified into localized departments such as clothing, toys, home, groceries, etc.

Recent Trends

Retailing in India is witnessing a huge revamping exercise India is rated the fifth most attractive emerging retail market: a potential goldmine.

Recent Trends contd.

Traditionally three factors have plagued the retail industry:

Recent changes:

Unorganized : Vast majority of the stores are small "father and son" outlets Fragmented : Mostly small individually owned businesses. Rural bias: Rural retail industry has typically two forms: "Haats" and Melas". Haats are the weekly markets : serve groups of 10-50 villages and sell day-today necessities. Melas are larger in size and more sophisticated in terms of the goods sold (like TVs)

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. For e.g. 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. 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.

Recent Trends contd.

Multiple drivers leading to a consumption boom:

Favorable demographics Growth in income Increasing population of women

Food and apparel retailing key drivers of growth More successful in cities in the south and west of India. Reasons range from differences in consumer buying behavior to cost of real estate and taxation laws. IT is a tool that has been used by retailers ranging from Amazon.com to eBay to radically change buying behavior across the globe. Companies using their own web portal or tie-sups with horizontal players like Rediff.com and Indiatimes.com to offer products on the web.

Major Retailers

Indias top retailers are 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.

India vs. World

Indian retail is fragmented with over 12 million outlets operating in the country. This is in comparison to 0.9 million outlets in USA, catering to more than 13 times of the total retail market size as compared to India India has the highest number of outlets per capita in the world Wal-Mart - over 4,800 stores where as none of India's large format store (Shoppers' Stop, Westside, Lifestyle) can compare. Number of employees in Wal-Mart are about 1.3 million where as the entire Indian retail industry employs about three million people. Developed economies like the U.S. employ between 10 and 11 percent of their workforce in retailing (against 7 percent employed in India today). 60% of retailers in India feel that the multiple format approach will be successful here whereas in US 34 of the fastest-growing 50 retailers have just one format Inventory turns ratio: measures efficiency of operations. The U.S. retail sector has an average inventory turns ratio of about 18. Many Indian retailers have inventory turns levels between 4 and 10. Global best-practice retailers can achieve more than 95 percent availability on the retail shelves (translating into a stock-out level of less than 5 %).The stock-out levels among Indian retailers surveyed ranged from 5 to 15 percent.

Future direction: Positives

The modern retail is likely to grow from its current 2 per cent to 1520 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.

Thank You