1998 handbook - college of intensive care medicine

Prepared For:

Prepared By:

,

IMRB International

February, 2009

INVESTMENT POTENTIAL IN RETAIL

SECTOR OF INDIA

INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 2

PREFACE

Thai-Indian business relations have improved considerably over the past decade.

Thailand and India are close to concluding a Free Trade Agreement (FTA) covering trade

in goods by 2010. The Free Trade Agreement between Thailand and India is expected to

improve trade relations between the two countries further. The FTA covering trade in

goods would lead to long term mutual benefits in trade and investment and the

partnership would be expanded further to cover technology knowledge and expertise

India's primary imports from Thailand are machinery, electronic appliances, textiles,

plastic material, transport equipment, vegetable oil and latex. The major items of imports

under FTA are polycarbonate, cathode-ray tubes, color-TVs, air conditioners and

Aluminum products. Thailand‘s main imports from India are jewelry, gemstones, steel,

pharmaceuticals and ferrous metal ores.

India's trade with Thailand could touch USD 7 billion by 2010-11 propelled by a

doubling in transaction under Free Trade Agreement (FTA). The EHS was implemented

on September 1, 2004, under which tariffs on 82 items were to be phased out by

September 1, 2006 by both the sides.

The trade between Thailand and India is estimated to be US $ 7 billion by 2010-11 from

US $ 2.2 billion in 2005-06.

The total trade of 82 items under Early Harvest Scheme (EHS) of the FTA was increased

by over 140 percent to about US $ 358.63 million in 2005-06 from US $ 149 million in

2003-04. The share of these 82 items in India-Thailand trade increased from 10.34

percent in 2003-04 to 15.68 percent in 2005-06.

Thailand‘s export to India of the identified 82 EHS items was increased from US $ 84.64

million to US $ 275 million during the period from 2003 – 04 to 2005 – 06. During the

same time, India‘s export to Thailand of these items increased from US $ 64.28 million to

US $ 83.03 million during the same period.


In 2007, Thailand‘s export for these 82 items was US $ 406.31 million. Due the FTA

between two countries, Thailand is able to manage the trade surplus of US $ 598 in 2007

in bilateral trade between Thailand and India.

With significant potential for growth of business between the two countries, the Ministry

of Commerce, Thailand and Royal Thai Embassy would like to understand the

investment potential in the following two sectors:-

1. Retail in India (with focus on Apparels & Fashion Accessories, Footwear, Food &

Grocery, Furniture & Furnishing, Personal Care, and Consumer Durables as

product verticals)

2. Logistics in India

In order to understand the trade potential across the above categories, the Ministry of

Commerce, Thailand and Royal Thai Embassy has commissioned Business and Industrial

Research Division (BIRD) of IMRB International to avail its research based consultancy

services.

Report for both the product categories are being submitted separately in two different

modules.

The following report ‘Investment Opportunities in Retail Sector of India’ is based on

the study conducted in Retail sector of India.


TABLE OF CONTENT

1. EXECUTIVE SUMMARY................................................................................................................. 8

2. RETAIL SECTOR IN INDIA ...........................................................................................................16

2.1. EMERGENCE OF MODERN (ORGANIZED) RETAIL IN INDIA ..........................................................16

2.2. INDIA: A PREFERRED RETAIL DESTINATION ...............................................................................17

2.3. KEY GROWTH DRIVERS FOR MODERN RETAIL IN INDIA .............................................................18

2.4. SIZE AND GROWTH OF RETAIL IN INDIA ......................................................................................21

2.4.1. Product Category-wise Break-up of Retail Market ...............................................................21

2.4.2. Organized Retail as Part of Total Retail ...............................................................................22

2.4.3. Product Category-wise Break-up of Organized Retail ..........................................................22

2.4.4. Category-wise Penetration of Organized Retail ....................................................................23

2.4.5. Food & Beverage based Servicing Retail in India ................................................................24

3. MODERN RETAIL STORE FORMATS ........................................................................................26

3.1. PREMIUM LIFESTYLE RETAILING ................................................................................................27

3.2. LIFESTYLE RETAILING ................................................................................................................28

3.2.1. Departmental Stores ..............................................................................................................28

3.2.2. Apparel and Fashion Stores ..................................................................................................28

3.3. VALUE RETAILING .......................................................................................................................29

3.3.1. Supermarkets .........................................................................................................................29

3.3.2. Hypermarkets.........................................................................................................................30

3.4. OTHER RETAIL FORMATS ............................................................................................................32

3.4.1. Specialty Stores......................................................................................................................32

3.4.2. Discount Stores/ factory outlets .............................................................................................33

3.4.3. Airport Retailing ....................................................................................................................34

3.4.4. Online, Telephone and Catalogue Buying .............................................................................34

3.4.5. Shopping Malls ......................................................................................................................34

3.4.6. Food Outlets as part of Modern Retail ..................................................................................36

4. CASH AND CARRY STORES .........................................................................................................38

4.1. GLOBAL RETAILERS ENTRY THROUGH CASH & CARRY FORMAT ...............................................38

4.2. DOMESTIC PLAYERS NOT FAR BEHIND .......................................................................................39


5. SUPPLY CHAIN INSIGHTS ...........................................................................................................40

5.1. SUPPLY CHAIN MODEL FOR MODERN RETAIL OUTLETS .............................................................40

5.1.1. Level 1: Product Sourcing .....................................................................................................41

5.1.2. Methods of Procurement........................................................................................................42

5.1.3. Level II: Storage and Distribution .........................................................................................46

5.1.4. Level III: Retail Stores ...........................................................................................................47

5.2. SUPPLY CHAIN FOR FOOD & BEVERAGE SERVICING RETAIL IN INDIA ........................................48

5.2.1. Level I: Suppliers ...................................................................................................................48

5.2.2. Level II: Distribution .............................................................................................................49

5.2.3. Level III: Outlets ....................................................................................................................50

5.3. LOGISTIC FACILITIES FOR RETAIL INDUSTRY IN INDIA ................................................................51

5.3.1. Cost of Logistics in Indian Retail ..........................................................................................52

6. RENT STRUCTURE IN RETAIL ...................................................................................................53

6.1. PREVALENT RENTAL MODELS IN INDIA ......................................................................................53

6.1.1. Fixed Lease Rental Model .....................................................................................................53

6.1.2. Revenue Sharing Model .........................................................................................................53

6.2. MAJOR COMPONENTS OF OCCUPANCY COSTS IN INDIA ..............................................................53

6.3. ANCHOR TENANTS VERSUS VANILLA RETAILERS ........................................................................54

6.4. INCREASE IN LEASE RENTAL .......................................................................................................54

6.5. ECONOMIC SLOWDOWN AND CHANGES IN STRATEGIES OF RETAILERS .......................................55

6.6. EXCESS SUPPLY OF RETAIL SPACE IN PIPELINE ...........................................................................56

6.7. CHANGING RENTAL MODELS ......................................................................................................56

6.8. THE ROAD AHEAD ......................................................................................................................57

7. PROFITABILITY ACROSS VERTICALS ....................................................................................58

7.1. A COMPARISON BETWEEN APPARELS, FOOD & GROCERY AND HOME APPLIANCES ....................58

8. LEADING RETAIL COMPANIES OF INDIA ..............................................................................61

8.1. STRENGTHS AND WEAKNESSES OF KEY ORGANIZED PLAYERS ...................................................62

9. INDIAN RETAIL INDUSTRY ANALYSIS ....................................................................................70

9.1. INDIAN RETAIL MARKET ANALYSIS BASED ON NINE FORCES MODEL ........................................70


9.1.1. Threat of New Entrants (High) ..............................................................................................70

9.1.2. Threat of Substitutes (High) ...................................................................................................74

9.1.3. Bargaining Power of Suppliers..............................................................................................74

9.1.4. Bargaining Power of Buyers (High) ......................................................................................76

9.1.5. Competitive Rivalry (Medium)...............................................................................................77

9.1.6. Government (Legal and Political Shifts) ...............................................................................78

9.1.7. Social Shifts ...........................................................................................................................79

9.1.8. Technological Shifts ..............................................................................................................80

9.1.9. Economic/ International Shifts ..............................................................................................80

9.2. MAJOR CONSTRAINTS FOR MODERN RETAIL IN INDIA ................................................................81

9.3. EMERGING TRENDS IN THE INDIAN RETAIL INDUSTRY ................................................................85

9.4. CRITICAL SUCCESS FACTORS IN RETAIL .....................................................................................89

10. RETAILERS’ PERCEPTION ABOUT THAI IMPORTS........................................................92

10.1. APPARELS ...................................................................................................................................92

10.2. PLASTIC GOODS ..........................................................................................................................92

10.3. HOME DÉCOR ITEMS & ELECTRIC GOODS ..................................................................................93

10.4. FURNITURE..................................................................................................................................93

10.5. FOOTWEAR ..................................................................................................................................94

10.6. PROCESSED FOOD .......................................................................................................................94

10.7. PERSONAL CARE ITEMS...............................................................................................................96

10.8. OTHER FACTORS RELATED TO THAILAND....................................................................................96

11. POSSIBLE WAYS FOR ENTRY OF FOREIGN RETAILERS IN INDIA ............................97

11.1. MANUFACTURING AND SOURCING...............................................................................................97

11.2. CASH-AND-CARRY OPERATION....................................................................................................97

11.3. FRANCHISING ..............................................................................................................................97

11.4. TEST MARKETING .......................................................................................................................98

12. CONCLUSIONS AND RECOMMENDATIONS ......................................................................99

12.1. LEVEL OF ATTRACTIVENESS VERSUS SUITABILITY FOR THAI INVESTORS ....................................99

12.2. PROPOSED ENTRY STRATEGY ...................................................................................................101

12.3. PHASE I .....................................................................................................................................102


12.3.1. As Suppliers ....................................................................................................................102

12.3.2. Look Out for Joint Ventures/ Franchisees/ 3 PL.............................................................103

12.4. PHASE II ....................................................................................................................................104

12.4.1. Single Brand Outlets .......................................................................................................105

12.4.2. Cash and Carry Stores ....................................................................................................108

12.4.3. Test Marketing ................................................................................................................109

12.5. PHASE III...................................................................................................................................110

12.5.1. Establishing Manufacturing Base in Select Product Categories ....................................111

12.5.2. Entering Theme / Specialty Malls ...................................................................................111

12.6. RECOMMENDATIONS ON FOCUS WITHIN EACH IDENTIFIED PRODUCT CATEGORY ....................112

1. ANNEXURE 1 ..................................................................................................................................113

1.1. COMPANY PROFILES IN RETAIL .................................................................................................113

2. ANNEXURE II .................................................................................................................................130

2.1. CITY-WISE RENTAL TRENDS .....................................................................................................130

3. REFERENCES .................................................................................................................................137


1. EXECUTIVE SUMMARY

1.1 Retail Sector in India

Retail business contributes around 11 percent of country‘s GDP and is the second largest

sector in India, only after agriculture. Retailing as a sector is witnessing revolution in

India. Modern retail has entered India as seen in sprawling shopping centres, multi-

storeyed malls and huge complexes that offer shopping, entertainment and food all under

one roof. Though at present, around 94-95% of India‘s retail market is unorganized, as

compared to unorganized retail, organized retail is experiencing much higher growth and

throwing open opportunities for new entrants to come and grow.

India: A Preferred Retail Destination

For three years in a row (2005-07), India has been ranked as the top retail destination

globally by a study from A T Kearney that measured retail investment attractiveness for

30 emerging markets in the world.

Key Growth Drivers for Modern Retail in India:

Higher disposable income coupled with favourable demographic changes (Increase in

working women population, rise in nuclear family, largest young population and higher

growth in urban and sub-urban population), changes in consumer needs, attitudes and

behaviour, and increased credit friendliness are some of the key growth drivers for

modern retail in India.

Size and Growth of Retail in India

Retail sales in India have grown from $US 230 billion in 2003-04 to $US 330 billion in

2007-08. Organized retail at present accounts for only around 5-6% of the total retailing

in India. However, growth experienced by organized retail (more than 35% against an

overall retail growth of around 11% in 2006-07) is much higher as compared to

unorganized retail within India. The graphs below depict the product category-wise

break-up of total and organized retail.


Coming to the category-wise share of organized retail out of total retail, timewear and

footwear are the categories with maximum organized retail (almost 50% of total retail in

each category). ‗Clothing & Textile‘ stands third with more than 20% of the trade in

organized retail.

1.2 Modern Retail Store Formats

Indian Retailers are experimenting with various modern retail formats customized to

customer categories and product mix. Following is a snapshot of various formats that

exist in India at present.

THE INDIAN RETAIL PIE (INDIA) 2007- 08 ( M a r k e t S i z e : $ US 3 3 0 bi l l i on)

Food &

Gr oc e r y

5 9 . 5 %

Foot wear

1.2%

Healt h & Beaut y

Services, 0.3%

Pharma

3.7%

Wat ches

0.3%

Jwellery

5.2%

Consumer

Durables

4.3%

Mobile&

Services

2.0%

Furnit ure &

Ut ensils

3.4%

Out -of -Home

Food Services

5.4%

Books, Music &

Gif t s

1.2%

Ent ert ainment

3.4%

Clot hing,

9.9%

THE ORGANIZED RETAIL PIE (INDIA) 2007-08 ( M arket Size: $U S 19 .4 2 b il i ion)

Food & Grocery

11.5%

Foot wear

9.9%

Beaut y Services

0.8%

Pharma

2.0%

Wat ches

2.7%

Jwellery

2.9%

Consumer

Durables

9.1%

Mobile, &

Services

3.5%

Furnit ure &

Ut ensils

6.4%

Out -of -Home

Food Services

7.3%

Books, Music &

Gif t s

2.8%

Ent ert ainment

3.1%

Clot hing,

38.1%

Source: F &R Research

Clothing Food & grocery Footwear

Pharmaceutical

Jwellery,

Accessories

Furniture &

Furnishing

Other Retail

Formats

Electrical &

Electronic

Equipments

Books & Stationery

Beauty &

Health Care Music &

Entertainment

Destination

Malls

Specialty

Stores

Modern Retail Store Formats

Discount stores

Airport retailing

Online/ telephonic &

catalogue buying

Key product

categories with

luxury brands:

Apparel

Jwellery

Time wear

Accessories

Furniture

Premium Lifestyle

based Retailing

Other Retail

Formats

Departmental

Stores

Apparel and

Fashion Stores

Lifestyle based

Retailing

Value based

Retailing

Supermarket

Hypermarket


This section discusses in details each of the above mentioned formats, average store

space under each format, preferred store locations and key players and their principal

fascia operating under these formats.

Cash and Carry Stores

As Government of India has allowed 100% FDI in cash and carry format, many foreign

companies are choosing to enter the market through this format. Amidst the increasing

interest from foreign players, domestic retailers have also been entering this format in

India.

1.3 Supply Chain of Modern Retail in India

Level I: Sourcing Level II: Storage

& Distribution

Level III: Retail Stores

Company-owned

outlets

Franchised Stores

Departmental stores

Specialty Stores

Hypermarket

Supermarket

Other formats

Products from other

countries

Local Manufacturers supplying to more

than one retailing company for selling

under private labels

Retail Company‘s own

procurement office in

other countries

Importer / Retail

company‘ Import

Partners

Companies Manufacturing Branded

Products

Local Manufacturers supplying to a

single retail company for selling under

private labels

Distribution Centres or Warehouses

owned by Retail Company or by its Logistic Partners

These may be central or regional distribution centres

depending upon the structure

adopted by the retailer

Retailer may have common or

separate warehousing

arrange-ments for its different

retail formats

Company‘s In-house

Inventory

Distribution Centre (Owned by Company‘s Franchisee or its

Logistic Partner)


The section discusses in details each of the three levels of supply chain alongwith details

on standard methods of procurement and margins enjoyed in case of select product

categories.

Logistic facilities for retail industry in India

While some of the modern retailers in India have been outsourcing their logistics needs to

specialist service providers, many large players with national footprint have opted to

develop in-house logistic systems. According to industry sources, level of satisfaction of

retailers with their logistic partners is mostly low in India and that speaks of the poor

level of logistic services.

1.4 Rent Structure in Retail

Two types of rental models are prevalent in India – fixed lease rental model and revenue

sharing model. Though mall developers have been chasing for fixed lease rentals, of late

the retailers are bargaining hard for revenue sharing rental model. Given the increasing

competition in retail industry, high lease rentals and the sudden economic slowdown,

many retailers have changed their business strategies to mitigate the negative impacts and

consolidate their position. Slump in real estate sector and excess supply of mall space in

pipeline has also forced real estate developers to either cut down on rentals or adopt

‗revenue sharing based rental‘ or any other rental models. The diagram below depicts

the rental models that are likely to be used more frequently in Indian retail sector in

future.

Zero Rent System

Retailer exempt from paying

rental charges during the initial

years of operation.

E.g.: Pantaloon is learnt to have

signed such an agreement with a

developer.

The Road

Ahead…

Franchisee Route

‗License‘ granted by a company

to a person or group allowing

them to use/ sell certain products

E.g: Trent in tier II cities

Sub-letting

Selling of space by retailers to

other brands (mostly happens as

part of Concessionaire model)

E.g.: Shopper‘s Stop sub-lets

some space of its store to brands

like FCUK and CK.

Revenue Sharing Model

A minimum guarantee on rental

and/or percentage share of the

revenue whichever is higher

E.g: Inorbit mall in Mumbai

‗Select City Walk‘ mall in Delhi


1.5 Profitability across Verticals

A comparison between Apparels, Food & Grocery and Home Appliances concludes that

apparels enjoy maximum gross margins, followed by food & grocery and home

appliances. Key reasons for higher gross margins in case of Apparels among the three

verticals are: Scope for higher share of private labels in case of Apparels, Cost of

developing & training manpower and wage inflation in case of Home Appliances higher

as compared to Apparels and Food & Grocery, Smaller ticket size in case of food &

grocery, and Store space largest in case of Home Appliances followed by Apparels and

then Food & Grocery

1.6 Leading Retail Companies of India

Pantaloon Retail is at present the largest retail company in terms of turnover, whereas

Vishal Retail leads in terms of presence and penetration across in India. Reliance and

Aditya Birla have forayed into the retail market only in 2006, however, they are poised to

grow big and expand aggressively. Bharti-Walmart is expected to set new standards for

supply chain and back end logistics management and has aggressive growth plans in cash

and carry format. Subhiksha is India's largest supermarket, pharmacy and telecom retail

chain. In terms of turnover, Subhiksha is only next to Pantaloon Retail (figures from

2007-08). Shoppers‘ Stop and Lifestyle are leading in Departmental store format.

1.7 Indian Retail Industry Analysis

1.7.1 Indian Retail Market Analysis based on Nine Forces Model

Threat of New Entrants is high. Retailing doesn‘t require huge capital investments

into owning machineries and other assets; required technology can be obtained by any

new entrant; Specialist Knowledge requirement is addressable through right

recruitment, training and technology support; New entrants can differentiate

themselves in multiple ways; Distribution Channel are largely standardized and

replicable by new entrants; However, for a foreign player, there are FDI related

restrictions.


Threat of substitutes is high. Neighbourhood mom & pop stores, and other outlets

as part of unorganized retail, all are close substitutes of various Modern retail

formats. Cost of substitution is also not high in this case.

Bargaining power of real estate suppliers can be perceived as high to medium.

Recent real estate slowdown has given modern retailers power to bargain for lower

rentals or adoption of alternate lease models (e.g. revenue sharing). Bargaining power

of vendors varies from product to product and depends hugely upon whether a

product is branded or unbranded and whether the relationship with supplier is

formalized or not.

Bargaining power of buyers is high in case of modern retail largely because of

increased level of awareness among buyers on brands, quality, pricing etc., high price

sensitivity among Indian buyers and availability of close substitute in form of

unorganized retail.

Competitive rivalry can be perceived as medium because of medium to low

industry concentration ratio, concentration of players in few pockets, presence of

untapped market with room for new players to enter and grow, and low exit barriers

Government of India allows FDI in retail under two categories: Up to 100 per cent in

cash-and-carry (wholesale) retail and Up to 51 per cent in single brand retail.

Government regulations related to licenses, permits and taxation require further

simplification. Please refer to the section for further details on social, technological

and international/ economic shifts.

1.7.2 Major Constraints for Modern Retail in India

Poor physical infrastructure coupled with lack of 3 PL players, Absence of cold chain and

proper storage, High lease rentals, Inadequate Human Resources, and Stringent

Government Regulations are some of the key constraints faced by modern retail in India.

1.7.3 Emerging Trends in the Indian Retail Industry

Key emerging trends in the Indian retail industry are aggressive future plans of leading

retailers with higher focus on value retailing, more cases of market entry through


inorganic route, tie-up with global retailers, focus on tier II & lower cities, increased

share of goods under private labels and advent of self service outlets.

1.7.4 Critical Success Factors in Retail

Three most critical success factors for modern retail in India are: Location, Merchandize,

and Knowledge & Information. Knowledge & Information stands for Knowledge about

customers‘ tastes & preferences and Information is with regard to Efficient Supply Chain

and Inventory Management through Proper Information System.

1.8 Retailers’ Perception about Thai Imports

Apparels, plastic goods including kids‘ toys, home décor items, furniture, footwears, and

personal care items are some of the product categories in which Thai imports are being

preferred by retailers in India

1.9 Possible ways for entry of Foreign Retailers in India

Franchising, Cash and Carry Format, Test Marketing, and Manufacturing & Sourcing are

the possible routes through which International players can enter India

1.10 Conclusions and Recommendations

Among all product categories, Apparel comes out as the most attractive from Thai

Investors‘ point of view. Furniture, Footwear, Personal Care and Plasticware are the other

high potential categories for Thailand.

Recommendations on Focus within Each Identified Product Category

Product Categories Category-wise Focus

Apparel All types of denim based apparels for men, women and kids; Other fashion and casual

apparels for men, women and kids

Footwear Female footwear (specially the stiletto heel sandals); Thai manufacturers need to keep higher

quality standards for female footwears

Personal Care Various available range of products (skin care, cosmetics & health care products)

Plasticware All types of plasticwares (including plastic containers)

Furniture Rubber-wood/ Parawood based furniture


Home Décor Artificial flowers, vases, lamp shades, electric lamps, paintings, wall hangings etc.

Processed & Fresh Food

Sauces, Ketch-ups, Spices based pastes, and few ready to cook items (preferably vegetarian);

Supply of fresh items such as lettuce leaf

Thai manufacturers need to change the product packaging in following ways: no shrimps or

fishes drawn on the packets; cooking instructions and other details to be in clear font; Green

and red labels standing for vegetarian, and non-vegetarian items respectively to be put

clearly on the packets

Food & Beverage Outlets Fast food Outlets and Coffee Chains

Proposed Entry Strategy : Thai Entrepreneurs should plan to invest in Indian Retail

Market in three phases that are briefed below:

Phase I: 1st Year

During the first year, it is being proposed that Thai investors explore the business

opportunities as suppliers to Indian retailers. In the meantime they should be at constant

look out for suitable business partners in India for opening of single brand outlets in

various product categories.

Phase II: 2nd

and 3rd

Year

Once the partner companies have been identified and the formal agreements have

happened, the branded products manufacturers of Thailand should then immediately

focus on opening of single brand outlets. Also, some of the leading Thai retailers,

preferably with past experience in the same categories, should plan to start Cash and

Carry business in India. In case of a few brands within select product categories, such

as Personal Care Items, Consumer Durables, and Processed food, Thai Manufacturers

may plan to enter India through the route of Test Marketing.

Phase III: 4th

Year onwards

To stay profitable in long term, establishing local manufacturing base, rather than

continuing to import, is a much desired step for select product categories. Also, this

would be the time to decide about putting up manufacturing facilities for the products that

were Test Marketed during Phase II. By the time phase III is entered, Theme malls

would have grown big on popularity. Thai Investors may plan to develop Thai Specialty

Malls.


2. RETAIL SECTOR IN INDIA

With a population fast approaching 1.2 billion and an economy that is likely to double in

size by 2015, India seems destined to become one of the largest consumer markets in the

world over the next decade.

Retailing as a sector is witnessing revolution in India. Retail business contributes around

11 percent of country‘s GDP. From employment perspective, retail is already the second

largest sector in India, only behind agriculture. India's retail market is expected to grow

tremendously in next few years. According to AT Kearney, The Windows of Opportunity

shows that Modern Retailing in India was at opening stage in 1995, and has been in

peaking stage in 2006.

2.1. Emergence of Modern (Organized) Retail in India

Retailing in India is gradually inching its way to becoming the next boom industry.

Modern retail has entered India as seen in sprawling shopping centres, multi-storeyed

malls and huge complexes that offer shopping, entertainment and food all under one roof.

The whole concept of shopping has altered in terms of format and consumer buying

behavior, ushering in a revolution in shopping. The Indian retailing sector is at an

Window of Opportunity Analysis (based on GRDI rankings for 1995-2006)

Source: A T Kearney


inflexion point where the growth of organised retail and growth in the consumption by

Indians is going to adopt a higher growth trajectory.

Though at present, around 94-95% of India‘s retail market is unorganized, as compared

to unorganized retail, organized retail is experiencing much higher growth and throwing

open opportunities for new entrants to come and grow.

2.2. India: A Preferred Retail Destination

With markets in most of the developed countries reaching the stage of saturation, India

has emerged as one of the most preferred destination for global retailers. This is evident

from the number of retailers across the globe that have already forayed into India‘s retail

market or planning to do so soon.

For three years in a row (2005-07), India has been ranked as the top retail destination

globally, ahead of Russia and China by a study that measured retail investment

attractiveness for 30 emerging markets in the world.

2007 ranking Country 2006 ranking

1 India 1

2 Russia 2

3 China 5

4 Vietnam 3

5 Ukraine 4

6 Chile 6

7 Latvia 7

8 Malaysia 14

Source: A.T. Kearney, June, 2007

The same study, however, also identifies few key issues that stand in the way of India‘s

retail industry reaching its full potential. These issues have been discussed under ‗Major

Constraints for Modern Retail in India‘.


2.3. Key Growth Drivers for Modern Retail in India

2.3.1 Higher Disposable Income and Economic Prosperity

Disposable income of Indian consumers has increased steadily. The proportion of major

consuming class (with income above Rs 90,000 per annum) is expected to reach 48% by

2009-10 from 20% in 1995-96.

2.3.2 Demographic Changes

Higher Level of Working Women

According to census 2001, working women population has increased to 26% in 2001 as

compared to 22% in 1991. This would lead to a higher retail spending as the buying

behaviour of working women differs from that of housewives because of low availability

of time. Also, working women‘ propensity for spending is higher by 1.3 times as

compared to Indian housewives.

Rise in Nuclear Family

The per capita consumption increases in case of a nuclear family. During the last few

years in India, nuclear family as a percentage of total household population has increased.

The average household size has reduced to 5.36 in 2001 from 5.57 in 1991 and is

0%

100%

1995-96 2001-02 2005-06 2009-10*

CHANGING INCOME DISTRIBUTION

(Income figures in '000 per annum at 2001-02 prices, households in '000

numbers)

10000+

5001-10000

2001-5000

1001-2000

501-1000

201-500

91-200

< 90

Source: NCAER


expected to decline further to 5.02 by 2011. This would further increase the consumption

and in turn, the retail industry.

Baby Boomer Effect

India has the lowest median age of 24 as compared to developed countries like USA, UK,

Japan etc. The composition of the Indian population is shifting towards the age group of

20-49 i.e. the working population with purchasing power. Approximately 60% of the

Indian population is below 30 years of age. Thus, India has the largest ‗young‘ population

in terms of sheer size and this young segment is the major driver of consumption as they

have the ability (disposable income) and willingness to spend.

Higher Growth in Urban and Sub-Urban Population

Over the last 10 years (1990-2000), urbanization has increased at a rate of 2.7 percent.

Around urban centres, huge sub-urban agglomerates are developing and expanding at a

huge scale. This trend is expected to continue and urbanization is likely to grow at 2.4

percent between 2000 and 2015. Over the next 10 years, growth in organized retailing is

likely to be concentrated in urban and semi-urban areas.

2.3.3 Changes in Consumer Needs, Attitudes and Behaviour

The growth of modern retail is linked to consumer needs, attitudes and behaviour. Rising

income levels, education and global exposure have contributed to the evolution of the

Indian middle class. As a result, purchasing and shopping habits have been inculcated

and are increasing day by day.

Today, Indians are willing to try new things and look different, which has increased

spending on health and beauty products apart from apparels, food and grocery items.

Also, in the last 4-5 years, Indian markets have witnessed a strong shift towards

branded products.


2.3.4 Increased Credit Friendliness

The use of plastic money (credit and debit cards) has increased significantly in the last 3-

4 years. In fact the ease of payments (ability to spend without cash) due to the use of

credit and debit cards, has also led to an increase in total spending on shopping and eating

out. With the acceptance of and the increase in the number of electronic data converter

machines installed in retailing outlets, credit and debit cards will provide further fillip to

organised retail.


2.4. Size and Growth of Retail in India

Indian Retail Market has experienced enormous growth during the last few years. Retail

sales in India have grown from $US 230 billion in 2003-04 to $US 330 billion in 2007-

08.

2.4.1. Product Category-wise Break-up of Retail Market

Out of the total market size in retail, Food & Grocery is the dominant category (valued at

$US 196.47 billion in 2007-08) followed by Clothing, Textile & Fashion Accessories

(valued at $US 32.57 billion in 2007-08).

THE INDIAN RETAIL PIE (INDIA) 2007- 08

(Market Size: $ US 330 billion)

Food & Grocery

59.5%

Footwear

1.2%

Health & Beauty Services

0.3%

Pharmaceuticals

3.7%

Watches

0.3%

Jwellery

5.2%

Consumer Durables &

Home Appliances

4.3%

M obile, Accessories &

Services

2.0%

Furniture, Furnishings &

Utensils

3.4%

Out-of-Home Food

(Catering) Services

5.4%

Books, M usic & Gifts

1.2%

Entertainment

3.4% Clothing, Textile & Fashion

Accessories

9.9%


Source: Images F & R Research


2.4.2. Organized Retail as Part of Total Retail

Organized retail happens to be a very small part of total retail market in India. At present,

it accounts for only around 5-6% of the

total retailing in India. However, growth

experienced by organized retail (more than

35% against an overall retail growth of

around 11% in 2006-07) is much higher as

compared to unorganized retail within

India. Owing to high growth rate,

organized retailing has finally emerged

from the shadows of unorganized retailing

and is contributing significantly to the growth of Indian retail sector.

2.4.3. Product Category-wise Break-up of Organized Retail

In the organized retail segment, the category-wise shares are very different from the

THE ORGANIZED RETAIL PIE (INDIA) 2007-08

(Market Size: $US 19.42 biliion)

F o o d & Gro cery

11.5%

F o o twear

9.9%

H ealth & B eauty

Services

0.8%

P harmaceuticals

2.0%

Watches

2.7%

Jwellery

2.9%C o nsumer D urables &

H o me A ppliances

9.1%

M o bile, A ccesso ries

& Services

3.5%

F urniture,

F urnishings &

Utensils

6.4%

Out-o f-H o me F o o d

(C atering) Services

7.3%

B o o ks, M usic & Gif ts

2.8%

Entertainment

3.1%

C lo thing, T extile &

F ashio n A ccesso ries

38.1%




GROWTH OF TOTAL AND ORGANIZED

RETAIL MARKET IN INDIA

330298

256231

1914

97

0

500

2004 2005 2006 2007

Ret

ail M

arke

t

(Uno

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rgan

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)

(in

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S b

illio

n)

0

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Org

aniz

ed R

etai

l

(in $

US

bill

ion)


overall retail picture. Clothing, Textile & Fashion Accessories is the largest category

followed by Food & Grocery. Footwear and Consumer Durables happen to be the third

and fourth largest categories followed by Consumer Durables in organized retail at

present.

2.4.4. Category-wise Penetration of Organized Retail

Coming to the category-wise share of organized retail out of total retail, timewear and

footwear are the categories with maximum organized retail (almost 50% of total retail in

each category). ‗Clothing & Textile‘ stands third with more than 20% of the trade in

organized retail.

CATEGORY-WISE SHARE OF ORGANIZED RETAIL OUT OF TOTAL RETAIL IN INDIA

0%

10%

20%

30%

40%

50%

Clo

thin

g

Jwel

lery

Watc

hes

Foo

twea

r

Hea

lth &

Bea

uty

Ser

vice

sPhar

mac

eut

ical

s

Cons

um

er D

ura

ble

s

Mobile

, Acc

essor

ies

& S

ervi

ces

Fur

nitu

re, F

urn

ishi

ngs

& U

tensi

lsFoo

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cery

Out

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e Food

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ices

Book

s, M

usi

c &

Gift

sEnte

rtai

nm

ent

Ove

rall

2007 2006

2005 2004

100%



2.4.5. Food & Beverage based Servicing Retail in India

The Indian F&B services sector is estimated to be worth US $ 15.56 billion in 2007, out

of which about US $ 1.28 billion is

accounted for by the organized sector.

This is roughly 8.2 percent of the

market being organised as compared to

just 6.9 percent of the market being

organized in the previous year.

India currently has more than 1000 fast

food restaurants and coffee joints as

part of modern retail and there exists

huge potential for more number of

similar outlets to come in different

parts and different cities of India. All key players have major expansion plans in the

coming few years. Organized food outlets are expected to grow at the rate of 20 - 25%

even under the present situation of economic slowdown.

SIZE OF F & B (SERVICING) RETAIL (in US $ billion)

0

18

2004 2005 2006 2007

To

tal M

ark

et

0

3

Org

an

ize

d S

eg

me

nt

Total F&B (Serv icing) Retail

Organized F&B (Serv icing) Retail

Source: Business Standard

Mc Donald‘s has 160 restaurants in India at present (in 2008). With an aim to

achieve 30-35 per growth per annum, the company plans to add 40-60 outlets each

year nationally and also intends to invest Rs 400 Crores over the next three years

(that is 2009-2011).

Cafe Coffee Day, part of the Bangalore-based Amalgamated Bean Coffee Trading

Company Limited (ABCTCL), is planning to spend Rs 120-150 crore for expansion

during next year to take its number of cafes to around 1,000 from the current 700.

Cafe Coffee day is also working towards creating more formats like selling coffees

through dine-ins (for lunch and dinner) and coffee pubs for youths to hang out in

strategic locations. (Source: Business Standard, Dec 23, 2008)


Domino‘s intends to increase its outlets to 250 by March 2009 from the present

number of 230. The company has announced an investment of Rs220-230 crore in

India over the next three years for expanding its retail fast-food chain and

manufacturing capacities. (Company Sources, 17 Nov, 2008)

Over the past 10 years, Yum! has become the largest and fastest growing restaurant

company in India. As of the first quarter 2008 earnings, the company had 140 Pizza

Huts in 35 cities and 33 KFCs in nine cities. Yum plans to scale up Pizza Hut to 175

by 2010 and also add 15-20 new restaurants every year. (Source: Business Wire)


3. MODERN RETAIL STORE FORMATS

Indian Retailers are experimenting with various modern retail formats customized to

customer categories and product mix.

Key product

categories with

luxury brands:

Apparel

Jwellery

Timewear

Accessories

Furniture

Pharmaceutical

Food &

grocery

Clothing Footwear Jwellery,

Watches/

Accessories

Furniture &

Furnishing

Other Retail

Formats

Electrical & Electronic

Equipments

Books, Magazine

& Stationery

Beauty & Health

Care

Modern Retail Store Formats

Premium

Lifestyle based

Retailing

Lifestyle based

Retailing

Value based

Retailing

Departmental

Stores

Apparel and

Fashion

Stores

Specialty

Stores

Supermarket

Hypermarket

Other Retail

Formats

Discount

stores

Airport

retailing

Online/

telephonic

& catalogue

buying

Destination

Malls

Music & Entertainment


Following section deals in detail with these broad categories and sub-categories within

them:

3.1. Premium Lifestyle Retailing

The premium lifestyle retailing caters to the affluent by providing them the high-end

luxury brands/ services. Under premium lifestyle based retailing, key product categories

are accessories, electronics, apparel, Jwellery and Furniture. The brands in this category

have a unique appeal and touch upon psychological needs such as esteem, status and

pride in owning expensive items.

Given the constant rise in affluence with the GDP growth and boom in capital markets in

the last few years, many retailers are looking at tapping this segment. However, main

challenges for the sustenance of these luxury brands are high import duty structures and

lack of appropriate real estate.

Opening up of FDI up to 51 percent in single brand retailing coupled with the boom in

luxury retailing has led international luxury brands such as Loius Vitton, Chanel, Ralph

Lauren, Armani, Dolce and Gabbana to enter the country and the already present brands

such as Gucci, Tommy Hilfiger and Hugo Boss to expand their operations

Average size of retail outlets in this category ranges between 20,000 sq ft & 75,000

sq ft

Major concentration of Premium Lifestyle based Retail outlets are in some select

locations of the top 4-5 cities of India such as South Mumbai, South Delhi, Chennai

and Bangalore

S. No. Verticals Luxury Brands

1 Clothing Gucci, Calvin Klein, La Perla, Jimmy Choo, Fcuk, Nine West, Promod,

Crocodile, Daks, Saville Row, Trussardi, Gas and S Oliver

2 Jwellery Tiffany, Cartier, Zales and Harry Winston

3 Watches Seiko, Fendi, Rado, Omega, Breguet, Christian Dior, Tag Heuer, Corum

4 Furniture Baker and Henredon, Bernhardt and McGuire


3.2. Lifestyle Retailing

Higher disposable income, increased level of awareness, international exposure, and

higher aspiration, all this has influenced the consumption pattern of the Indian

consumers. The Upper, Upper Middle and Middle class Indian customers are willing to

pay more for a brand or better product that keeps him/her up-to-date and in style. Major

growth drivers for Lifestyle retailing are: rising lifestyle aspirations, increasing

urbanization and changing mindset of Indian consumers

Two popular formats under this category are: Departmental stores and Apparel and

Fashion stores

3.2.1. Departmental Stores

Departmental stores are large stores having a wide variety of products, organized into

different departments such as clothing, houseware, furniture, appliances, toys, accessories

and cosmetics, among others. They offer value in terms of being a one-stop shop with

different brands in each category, catering to varied consumer needs. These stores target

primarily the SEC A, where the ticket size is larger in spite of a footfall lower than other

store types.

Major Players

Pantaloon, Shoppers‘ Stop, Lifestyle (Landmark Group), Ebony, Indiabulls Retail (Piramyd)

3.2.2. Apparel and Fashion Stores

These are stores with prime focus on apparel and will a small percentage of their mix

being fashion accessories, trinkets and home décor items. These may be multi-brand

stores or exclusive showrooms.

Average size of apparel and fashion stores in India is 20,000 sq ft

These stores are targeted primarily at high end consumers, primarily SEC A & B


Major Players

Pantaloon, Lifestyle (Max retail), Shoppers‘‘ stop, Westside, Globus, Provogue, Raymonds,

Madura Garments, Arvind brands, Guess, Fab India, and Koutons

The apparel segment, which is fairly organized, is profitable in comparison to other

product segments. This segment sees the presence of more international players than

most other retail segments.

3.3. Value retailing

Value retailing covers stores offering lower prices, better variety and a convenient and

improved shopping experience. It is based on the concepts of ‗Value for Money‘ and

‗Ways to Convenient Shopping‘.

The popular formats under this category are: Supermarkets and Hypermarkets

3.3.1. Supermarkets

A supermarket is a self-service one stop shopping store offering a wide variety of food

and household merchandise, organized into sections. It is larger in size and has a wider

selection than a traditional grocery store but is smaller than a hypermarket or superstore.

Supermarkets primarily cater to nearby residential areas and therefore throw a direct

competition to neighbourhood grocery stores and fresh fruits & vegetables retail mandis.

The basic appeal of supermarkets is the availability of broad selection of goods of

multiple brands as well as store‘s private labels under a single roof at relatively low

prices (possible on account of ‘Economy of Scale’ and ‘Efficient Warehousing and

Merchandizing’). Many of the superstores have discount and promotional offers on

various products at different points of time in a year. The concept of ‗Value retailing‘ is

catching up fast among middle class urban families.

Average size of supermarkets ranges from 3,000 to 10,000 sq ft and in some cases it

is upto 25,000 sq ft as well


Supermarkets of various Retail Companies are now present in many pockets of top

6-7 cities of India catering to the daily requirements of nearby residential areas. There

is an increasing focus on opening such outlets in Tier II cities (such as Ludhiana,

Patna, and Chandigarh etc.)

Key Players at National Level

Food Bazaar (Future Group), Reliance Fresh (Reliance), More (Aditya Birla Retail), Spencer

-Fresh, Daily and Super (RPG Group), Subhiksha , Indiabulls‘ Mart and Indiabulls‘

Megastore (Piramyd retail)

Modern Retail Players with presence in some specific regions and planning to grow big

Spinach (including Sabka Bazaar), Big Apple, Nilgiris, Marginfree, MK Retail, Namdhari‘s

Fresh, Easyday

3.3.2. Hypermarkets

Hypermarket is a large outlet which combines the format of a supermarket and a

department store. The result is a very large retail facility with an enormous range of

products catering to a spectrum of segments such as food and grocery, FMCG, apparel &

accessories, consumer durables, furniture & furnishing, entertainment & leisure, books

& stationery and other household items. Generally, they are located in the outskirts of

cities or as anchors in shopping malls. Hypermarkets offer lot of discount and

promotional offers to promote sales.

Margins depend on the product mix, volumes and supply chain management. A higher

share of food and grocery would mean lower margins. On the other hand, apparel and

furniture could increase margins.

Hypermarkets are becoming popular among consumers because products are available at

prices lower by 5% to upto 50% than the regular market price. Consumers are fine

traveling little far to shop in hypermarkets because of the price advantage they get.

Average size of hypermarkets ranges from 50,000 to 70,000 sq ft or more. Retail

outlets prefer to have their hypermarkets on one floor. However, in few cases the

space might be split into two or more floors as well.


There is an increasing focus on opening hypermarkets in Tier II cities. Retail

companies like Vishal Megamart and Big Bazaar are already operating their

hypermarkets in various tier II cities in India. Most of the Retail Outlets that are

present as supermarkets are now foraying into hypermarket format as well.

Key Players at National Level

Big Bazaar (Future Group), Reliance Hypermarket (Reliance), Spencer -Hyper (RPG Group), Star

Bazaar (Trent – Retail Arm of Tata) Subhiksha , Indiabulls‘ Mart & Megastore (Piramyd retail)

Business Break up of Big Bazaar (Pantaloon Retail)

F ruits &

Vegetables

2%

Live Kitchen

1%

F M C G_N o n-

fo o d

12%

F o o d B azaar

40%

Staples

12%

C lo thing

30%

General

M erchandise

16%

Electro nics,

F urniture,

F urnishing &

Others

14%

F M C G_F o o d

13%

Business break up of Vishalmart

Others, 1%

N o n-apparel

18%

A pparel

59%

F M C G

22%

Business break up of Aditya Retail in Staples

CategorySpices & Dry Fruits,

12%

Sugar & Salt, 8%

Edible Oil, 30%

Pulses, 20%

Cereals, 30%

Break up of General Merchandise

(Pantaloon Retail)

Utensils

& Steel

Items, 25%

P last ic

Items,

17%

F o o twear,

16%Luggage &

Other

Items, 42%

Source: Primary Data


3.4. Other Retail Formats

3.4.1. Specialty Stores

Specialty stores are category specific stores and are meant to cater to some specific needs

of consumers. A specialty store offers different brands of any specified category under

one roof. Specialty store can be dedicated to any of the following categories – Food &

grocery, Apparel, Footwear, Jwellery & Time wear & related accessories, Furniture &

Furnishing, Electrical & Electronic Equipments, Books & Stationery, Personal Care

(Beauty & Health Care), Consumer Durables (including home appliances),

Pharmaceuticals, Entertainment, Mobile Handsets & Accessories & Services, and

Others.

Average space for a Specialty Store ranges between 8,000 – 10,000 sq ft

Verticals Key Players and their Principal Fascia

Food & Grocery Pantaloon (Brew bar, Café Bollywood, Chamosa)

Shoppers‘ Stop (Desi Café, Brio)

Clothing

Pantaloon (All, Brand Factory, Fashion Station, Top 10)

Shoppers‘ Stop (Mother Care)

Reliance Retail (Reliance Trendz)

Footwear Pantaloon (Shoe Factory)

Reliance Retail(Reliance Footprint)

Jwellery & Watches/

Accessories

Pantaloon (Blue Sky, Navaras)

Shoppers‘ Stop (Arcelia)

Furniture & Furnishing Pantaloon (Collection-i, Furniture Bazaar, Home Town)

Shoppers‘ Stop (Home Stop)

Electrical & Electronic

Equipments

Pantaloon (Electronics bazaar, e-zone, Got It)

Tata Trent (Croma)

Reliance Retail (Reliance Digital)

Videocon (Next)

Books, Magazine & Pantaloon (Depot)


Stationery Shoppers‘ Stop (Crossword)

Personal Care (Beauty &

Health Care)

Pantaloon (Health Village, Star Sitara, Tulsi, Turmeric)

Shoppers‘ Stop (MAC Cosmetics)

Reliance Retail (Reliance Wellness)

Music & Entertainment

Pantaloon (Bowling Co., F123, Sports Bar)

Shoppers‘ Stop (Time Zone)

Videocon (Planet M)

Mobile Handsets,

Accessories & Services

Pantaloon (Gen M, M Bazaar, M-port)

Spencer‘s Retail (RPG‘s Cellucom)

Subhiksha (Subhiksha Mobile)

Essar Group (Mobile Store)

3.4.2. Discount Stores/ factory outlets

These are sales outlets offering goods at a discounted price. Goods sold by discount

stores are generally the unsold or excess stock or slightly defective pieces. In general,

Manufacturers have their factory outlets. Discount outlets help manufacturers and

retailers to dispose of the excess or unsold stock while consumers get the benefit of

branded products at affordable prices.

Name of Store Key Players

The Loot Jay Retailing and Merchandizing Pvt. Ltd.

Megamart Arvind Brands

Shoe Factory Liberty Shoes and Pantaloon Retail (JV between two parties)

Globus Factory Outlet Globus

Maxretail Landmark group

Brand Factory JV of Pantaloon with Planet M, Globus, Staples and Dollar stores


3.4.3. Airport Retailing

Airport retailing is a new concept in India. Retailers are now capitalizing on the

increasing traffic at Indian airports. Domestic players are tying up with global retailers

having relevant experience in airport retailing in other countries.

However, the recent economic slowdown has impacted many of the retailers‘ plans in

Airport retailing.

3.4.4. Online, Telephone and Catalogue Buying

These are some other retail formats and are in their take off stage in India. There are

challenges in growth of these retail formats because of the ‗touch and feel‘ based buying

culture in India.

Indiatimes, rediff and ebay are some of the popular portals for online purchase

Pantaloons have ventured into e-tailing through their portal futurebazaar.com

Shopper‘s Stop has tied up with the UK based Home Retail group to develop the

Agros format of catalogue retailing in India

3.4.5. Shopping Malls

They are enclosures having different formats for retailers, both value and lifestyle based,

all under one roof. These are sophisticated versions of old shopping centres with huge

space, air-conditioned ambience, elevator and escalators. A variety of shops

(departmental stores, hypermarkets, and specialty stores), food court, parking space, and

entertainment (cine-multiplex and gaming zones) all together make it a One Stop

Shopper‘s Stop has tied up with Nuance from Switzerland whereas Tata‘s Consumer

Durable and Electronic Retail Company – Croma has tied up with Woolworth‘s to set up

retail stores at airports.

Pantaloon Retail had tied up with UK‘s Alpha Retail. However, because of major losses

faced by Alpha Retail, Pantaloon Retail has recently divested from the company and the

tie-up has ended.


destination. Mostly, shopping malls have anchor tenants, who cover large areas in the

mall and are important from the point of attracting footfalls.

In India, there is a new culture towards Specialty malls (also known as Theme Malls) –

catering to specific needs of customers. Specialty malls for luxury goods and premium

lifestyle segment is expected to catch up in India. At present, there are only few specialty

malls in India, but the Retailers Association of India (RAI) expects to push specialty

malls constituting nearly 10 per cent of the total malls in India.

The first specialty mall was the Gold Souk in Gurgaon. Dedicated entirely to the

Jwellery collection, the mall houses some of the big brands in the Jwellery business in

India as well as abroad.

‘Central’ is a first of its kind seamless mall in India. It is an initiative of Pantaloon

Retail. Pantaloon Retail (India), is expanding its retail chain ‘Central’ by setting up

new mall stores in metro cities like Mumbai and Bangalore and tier-II and tier-III

cities like Ahmedabad, Nashik, and Vashi.

There are divided opinions about success of specialty malls in India – while one

segment feels that Specialty malls are a step towards adding value to retailing in

India, the other segment feels that Indian market is still not mature enough and it is a

bit early to introduce this concept here.

DISTRIBUTION OF MALL SPACE

ACROSS ZONES IN INDIA (2011)*

(Total Supply: 236 mn sq ft)

East Zone, 9% South

Zone, 24%

West Zone, 28%

North Zone, 39%

DISTRIBUTION OF MALL SPACE

ACROSS ZONES IN INDIA (2007)

(Total Supply: 47.4 mn sq ft)

East Zone,

7%

South Zone, 14%

West Zone, 44%

North Zone, 35%

Source: Images F & R Research


3.4.6. Food Outlets as part of Modern Retail

Home-grown as well as international restaurant chains present in both high street

locations and malls represent the organised food and beverages (F&B) services retail

sector. Major categories in which modern food & beverage outlets can be put basis front

end formats are discussed below.

While some of the specialty restaurant chains are based only on take away or home

delivery format and don‘t have any seating arrangements, most of these modern

restaurant chains have both types of arrangements – home delivery as well as on the spot

consumption option.

Food Outlets as part of Modern Retail

Specialty

Restaurant Chains

Hot Beverage/

Coffee Chains

Food Courts Multi-cuisine

Restaurant Chains

These are restaurant

chains with wide range

of menu catering to

different cuisines.

Example:

- Ohri‘s

- Blue foods

- Indijoe

Some regional Indian

chains that are

growing fast:

- Nirula‘s

- Haldiram‘s

These are restaurant

chains with focus on a

single cuisine or with

some specialty to

offer. They may be

chains based on a

particular concept or

theme. Fast food

chains would also fall

in this category.

Example:

- Mc Donald‘s

- Pizza Hut

- KFC

- Subway

- Jumboking

- Yo! China

- Pizza Corner

- Papa John‘s

These are outlets with

coffee or other hot

beverage in different

flavours and varieties

as their major

offerings. Alongside,

they generally serve

some some snacks or

bakery items. In some

cases, there may be

more food items to

offer, however, coffee

or other hot beverage

remains at the core.

Example:

- Café Coffee Day

- Barista

- Mocha

- Costa Coffee

These are areas where

counters of multiple

food vendors are

present with a

common space for

self-serve dining. Food

courts are mostly

found as part of

shopping malls. In

some cases they may

be standalone

development as well.

Food courts may have

food stalls belonging

to various cuisines,

concepts and brands.

Coffee chains may

also present as part of

food courts.


Apart from the above mentioned categories, there are many traditional and regional

Indian restaurants that are now expanding their presence in different parts of India and

growing as Chain restaurants. However, their supply chain models are not exactly on

same lines as modern restaurant chains. Example: Sarvana Bhavan, Karim‘s, Hyderabadi

Biryani House, Vasanta Bhavan

Modern restaurant chains in India compete against the traditional vegetarian and non-

vegetarian restaurants and food stalls which constitute almost 92-93% of the total food &

beverage servicing segment in India. Some of the traditional cuisines of India are:

Kashmiri, Punjabi, Mughlai, Bengali, Gujarati, Rajasthani, and Hyderabadi.

Entry and Operating Format

Most of the modern food outlets are either franchised or company-owned. Most of the

global food chains have entered India either through franchise route or through JVs with

any existing Indian players. An international company can get into JVs with different

local players for opening and operating outlets in different parts of India.

Example: Mc Donald's India is a joint-venture company managed by Indians. In Western and

Southern India, Hardcastle Restaurants Private Limited owns and manages McDonald's

restaurants. In Northern and Eastern India, McDonald's Restaurants are owned and managed

by Vikram Bakshi‘s Connaught Plaza Restaurants Private Limited. Almost all the outlets of

Mc Donalds are company owned.

Pizza Hut has entered Indian market through Franchise route in 1996. The pizza franchise

soon expanded itself in India and now has the KFC brand beneath its umbrella.

Domino's entered India in 1996 through a franchise agreement with Vam Bhartia Corp. Vam

Bharti Corp. acts as master franchisee and in turn further extends franchises to different sub-

franchisees


4. CASH AND CARRY STORES

Targeted at and open only to business customers - cash and carry scheme focuses on

small-wholesale customers who buy in bulk and pay in cash. Unlike hypermarkets where

any consumer can walk-in and buy goods, cash-and-carry outlets allow only

authenticated bulk buyers to transact business. Medium-sized businesses such as retail

stores, hotels, restaurants, caterers, exporters etc can buy from cash-and-carry outlets at

prices much cheaper than market rate.

In its original form, owners of cash and carry outlets (i.e. large retail chains) buy from

producers directly at very high volume, dispensing with middlemen like wholesalers and

stockiest. They also establish their own brands - asking producers to manufacture as per

their product and packaging specifications. Volume purchase and removal of middlemen

result in substantial cost reduction - a part of which is passed on to b2b customers. So,

b2b customers get products of assured quality throughout the year at less than market

price.

Wholesale cash-and-carry operations would provide small retailers and business owners a

wide range of products at the wholesale prices.

4.1. Global Retailers Entry through Cash & Carry Format

As Government of India has allowed 100% FDI in cash and carry format, many foreign

companies are choosing to enter the market through this format. Global retailers plan to

use the opportunity to set up wholesale stores in India to understand the market. Opening

of 'Cash and Carry' stores throughout the country shall provide a golden opportunity to

these global retailers to make in-roads into India. When the restrictions on the retail

industry are lifted, international retailers will be in a prime position to easily convert their

'Cash and Carry' stores into highly profitable supermarkets and hypermarkets.

German wholesale major Metro Cash and Carry has already forayed into Indian

market and is taking its stores to Mumbai, Kolkatta, NCR and Punjab.

Bharti-Walmart is expected to roll out its first store in Punjab (One of the North

Indian States of India) between April and June, 2009.


French Retailer Carrefour has announced its entry in cash and carry segment of India

in 2009

Britain‘s largest retailer Tesco Plc announced its investment (in August, 2008) to

develop a wholesale cash-and-carry business in India. Also, Tesco has tied-up with

Trent Ltd, the retail arm of the Tata group, to help develop the Indian company‘s Star

Bazaar hypermarkets.

Costco, one of the largest retail chains of US has also shown interest in joining the

bandwagon

Australian retail giant Woolworths is in discussion with Future Group (Pantaloon

Retail) for an equal equity joint venture for entry into Cash and Carry format in India

4.2. Domestic Players Not Far Behind

Amidst the increasing interest from foreign players, domestic retailers have not been

left behind. Videocon Industries has floated a separate subsidiary company for its

cash and carry retailing business — Bolld Cash & Carry.

While Bharti has already stuck a deal with Wal-mart, Pantaloon is exploring the

options to foray into cash and carry business.

Wadhawan Food Retail, which owns Spinach, Sabka Bazaar and Home Store retail

formats, is also eyeing the cash and carry format.

Reliance is also planning to launch its B2B format


5. SUPPLY CHAIN INSIGHTS

5.1. Supply Chain Model for Modern Retail Outlets

The given supply chain model exists across various product verticals with slight

modifications

Level I:

Sourcing

Level II: Storage

& Distribution

Level III:

Retail Stores

Company-

owned outlets

Franchised

Stores

Departmental

Stores

Specialty

Stores

Hypermarket

Supermarket

Other formats

Products from

other countries

Local Manufacturers

supplying to more than one

retailing company for selling

under private labels

Retail

Company‘s own

procurement

office in other

countries

Importer / Retail

company‘ Import

Partners

Companies Manufacturing

Branded Products

Local Manufacturers

supplying to a single retail

company for selling under

private labels

Distribution Centres or

Warehouses owned by

Retail company or by its

Logistic Partners

These may be central

or regional distribution

centres depending

upon the structure

adopted by the retailer

Retailer may have

common or separate

warehousing arrange-

ments for its different

retail formats

Company‘s In-house

Inventory

Distribution Centre

(Owned by Company‘s

Franchisee or its Logistic

Partner)


5.1.1. Level 1: Product Sourcing

Modern retailers in India largely procure branded products in various categories

(apparels, consumer durables, electrical & electronic equipments, furniture and furnishing

items, footwear etc.) directly from companies‘ factories and send the procured lots to

their distribution centres. Procurement is done centrally for all the retail outlets. In case of

private label items also sourcing is done directly from manufacturing points and the lots

are sent to distribution centres. From the distribution centres, the lots are further

distributed across various retail outlets.

There are two ways in which retailers usually import goods from other countries:

Maintaining their own offices in other countries: The offices act as procurement

points (from manufacturing units), quality check points and they take care of

shipment of procured goods to India. This method is mostly adopted for countries

from where large volume imports are happening on regular basis.

Sourcing from importers: In many cases, retailers don‘t import directly from

manufacturing points in other countries, rather source the products from already

existing importers present in India. This method is adopted if volume of procurement

is neither huge nor on regular basis.

India is a country of diverse culture, lifestyle and food habits. Taste and preferences of

buyers vary from region to region. Retailers in India need to maintain in their retail

outlets some products and brands that are locally popular in the regions where the retail

stores are present. Procurement of these locally popular products are done only in the

specific regions with the procured goods mostly moving to the specific regional

warehouse or in some cases directly to the specific retail stores.


5.1.2. Methods of Procurement

6.1.2.1. Product Category-wise Standard Methods of Procurement & Margins

Apparels

Mode of Procurement: In Apparels, model of procurement varies depending upon

the source and product labels.

Apparels Procurement Model Remarks

Private labels 100% outright All procurements from local manufacturers are

on outright basis (make to order basis)

New brands/

less known

brands

Consignment is

preferred (however, it

may be Outright as well)

Retailers avoid taking risk with new or less

known brands

Established

brands

Consignment or

Concessionaire (In some

cases, it may be Outright

as well)

In case of established brands, consignment is

a preferred way. Alongwith retailer, this is

preferable for brand vendors as well. In case

a supplied stock is not selling in any retail

There are three ways of getting supplies from vendors in case of retail stores:

Outright: Under this method of procurement, a retailer places an order with any vendor

and buys the entire ordered merchandize from the vendor. Inventory management and

risk of sale/non-sale of the merchandise is entirely on the retailer.

Consignment: Under this method of procurement, vendor shares the risk of non-sale of

any merchandize items along with the retailer. In case any merchandize doesn‘t sell,

the vendor takes it back and tries to clear the stock through some other channels.

Concessionaire: Under this model, retailer rents out some space of its store to a

vendor. The vendor is in charge of managing the provided space to display and sell its

products. Managing the inventory of its product is entirely the vendor‘s responsibility.


store, then the vendor takes the stock back

and tries selling it through other channels.

This helps in placing of fresh stock.

Retailers prefer Concessionaire model as they

don‘t need to maintain any inventory of

vendor‘s supplies. Example: Brands FCUK

and CK operate in Shopper‘s Stop stores

under Concessionaire model.

Imports 100% outright All imports in apparels are largely based on

supply orders or Outright

Margins on Apparels: As found during the study, margins on apparels in Indian

retail vary depending upon

whether it is a private label product or a brand

within brands, markup varies depending upon the popularity of the brand and

the brand‘s market share

Also, it varies from one retailer to another depending upon the ticket size and

mark up policy of the retailers

Apparels

Mark up on Product

Stores with big ticket size

(Example: Shopper’s Stop)

Stores with small ticket size

(Example: Vishalmart)

Private labels 250% - 350% 80 – 100%

Brands

25% - 60%

(25% markup indicates that the

brand is very strong and 60%

markup indicates that the brand is

new or less popular)

20% - 60%

(Stores with small ticket size avoid

keeping big brands and their product

mix has very high share of private

labels)


Furniture and Furnishing

Furniture

Mode of procurement: For a non-manufacturer retailer in furniture segment,

around 90% of the furniture procurement happens on ‗Outright‘ basis whereas

only the balance 10% is on vendor ‗consignment‘ basis. In case of

consignment based sourcing, money is paid to the vendor only on the final

purchase of the product from the retail stores.

Margins on Furniture: Both for wooden as well as metal furniture, Indian

retailers in general, are enjoying margins in between 30% - 50%.

Soft furnishing

Mode of procurement: For a non-manufacturer multi-brand retailer in

furnishing segment, ‗Outright‘ buy and ‗Concessionaire‘ model are the two

main modes of operation.

Margin on soft furnishing: In soft furnishing vertical, the share of private

labels is the range of 35-40% for large retailers. Private labels in soft

furnishings provide retailers a higher (gross) margin of 35-40% as compared

to 25-30 % in case of national level brands.

Consumer Durables

Method of procurement: In case of consumer durables, due to fast changing

technology, most retailers have an arrangement with brand manufacturers to take

back the unsold inventory. In other words, they follow the ‗consignment‘ based

procurement.

Margins on Consumer Durables: On branded products, the retailers enjoy a

margin of 10-14%. In case of private labels, the margin lies in the region of 15 -

20%


Footwear

Mode of procurement

Footwear Mode of Procurement

Private labels 100% outright

Brands Consignment

Imports 100% outright

Margins on Footwear

Footwear Margin

Private labels 50-100%

Brands (such as Red Tape, Lee Cooper etc.) 30-40%

Food and Grocery

Method of procurement: In food and grocery, almost all the procurement in case

of both branded as well as private labels happens on ‗Outright‘ basis.

Margins on Food & Grocery

Food & Grocery

Product Margin

Modern stores (such as

Big Bazaar, More etc.)

Discount stores (such as

Subhiksha)

Branded 10-15% 2-3%

Private Labels 15-25% 5-7%


5.1.3. Level II: Storage and Distribution

Most of the leading retailers or their logistic partners in India have been maintaining

regional warehouses or distribution centres (DCs) at state level, for stocking and

movement of their goods. With Central Sales Tax (CST) in place, it is cheaper to have

distribution centres in each state than pay CST for inter-state movement of goods.

However, with the introduction of VAT and phasing out of CST, there is a growing trend

towards larger and consolidated warehouses.

6.1.2.2. Product Specific Insights into Inventory Management

‘Apparels’ as a category require huge investment towards inventory management, as

apparel stocks in general are churned around five times a year.

Retailing in ‗Consumer Durables and other Electrical & Electronic Equipments‘,

requires comparatively lesser investment in inventory. Due to fast changing

technology, most retailers have an arrangement with brand manufacturers to take back

unsold inventory.

Supply chain management in case of furniture is a challenge in India given the

constraint of poor physical infrastructure. Furniture are prone to lot of damages while

transporting. Also, to make various types of furniture available at the selling point at

the right time requires very intelligent inventory management.

Fresh food: In case of fresh and highly perishable food items (example: dairy items)

retailers generally maintain very little or no inventory. This is largely because of

Shift from Regional to Central Warehouses/ Distribution Centres

Now, with the introduction of VAT system, Central sales tax (CST) is being phased out.

With CST going away, it is no longer pertinent to have a warehouse or DC in each state.

Retailers or their logistic partners are now encouraged to consolidate their warehouses/

distribution centres at a few strategic locations in India. There is a growing trend towards

having few consolidated and larger warehouses or DCs. With warehouses/ DCs becoming

larger the processes, infrastructure and technology has to be more sophisticated.


absence of well developed chain of cold storages and cold storage based logistic

facilities.

Fruits and Vegetables: Most organized retailers follow a three-tier system of

operation compromising the farmer, commission agent at the APMC and themselves.

In some states, players such as Reliance, Subhiksha, and Pantaloon directly source the

produce from the farm gate, further shortening the chain. The extent to which they can

shorten the chain also depends on the state legislation for procurement

5.1.4. Level III: Retail Stores

(Please refer to section for details on modern retail store formats in India)


5.2. Supply Chain for Food & Beverage Servicing Retail in India

5.2.1. Level I: Suppliers

Suppliers of semi-cooked/ semi-finished products:

They are the manufacturers of semi-cooked or semi-finished food products. Suppliers

may be different for Non-Vegetarian and Vegetarian products depending upon their

capabilities. All the specifications for raw materials and standards for the products to be

supplied by these suppliers are provided by the concerned restaurant chain management.

Typically a growing restaurant chain has 4 to 5 suppliers for semi cooked and finished

Level I: Suppliers Level II: Distributors Level III: Restaurant

Chain Outlets

Cook – Assemble - Serve

Imports (including fruits

and vegetables)

Items that are either not

available or in shortage

within India e.g: Lettuce

leaf, some sauces etc.

Suppliers of processed

food ingredients

Food Outlet 1

Food Outlet 2

Food Outlet 3

Suppliers of Beverages

(Directly to the Outlets)

Distribution

Centres/

Warehouses

It can be company

owned or

outsourced to any

logistic player

Suppliers of semi finished/

semi cooked products


food products located at different places all across India. The concerned restaurant chain

management provides demand projections and negotiates with the vendors/ suppliers for

prices accordingly. Prices may be negotiated yearly or half yearly.

Few examples of semi cooked food product: Frozen chicken tikka, Frozen veg

patty for burgers, Frozen dimsums

Few examples of finished food products: Burger buns, Breads, Pastries etc

A few examples of semi cooked suppliers: Vista foods, Chatta foods, Innovate

foods etc.

Suppliers of processed food Ingredients and other dry products

These generally include suppliers of Pastes (of spices and flavour), Ketchups, and other

sauces. Some special sauces may also be imported

Suppliers of imported items (including vegetables & fruits)

They supply imported vegetables. For example: lettuce etc according to the specifications

provided by the parent company. These are generally different for various regions

Suppliers of beverages

These are generally the big players in the market. In contrast to other suppliers they

supply directly at the outlet level as they have wide distribution network of their own

across India.

5.2.2. Level II: Distribution

Warehouses or distribution centres are put at strategic locations. These are generally

located in cities having considerable number of outlets. These act as nodal hubs or

storage houses and facilitate easy supply to outlets. These may be company owned or

outsourced to a distributor. Generally the distributors are Franchisee‘s with multiple

outlets.


Supply of semi finished food products from manufacturer to the distributor is outsourced

to cold chain service providers. For a big chain these are generally the ones who have a

PAN India network.

Supply from distributor to the outlets is either done by the distributors themselves using

their own vans or outsourced to a logistics/cold chain service provider. Typically a

distributor maintains inventory for 3 to 7 days. This may vary from location to location.

5.2.3. Level III: Outlets

The outlets can either be company owned or owned by the franchisees. Some franchisees

may be having multiple outlets. The outlets have a kitchen or an assembly area from

where the finished food products are served hot to the customers. There is a small

refrigerated store room present at the outlets to store the semi finished/cooked products.

The idea is to minimize the cooking at the outlet level. This reduces the variation in taste

as the human element in cooking is reduced to the extent possible. Some non core things

like seasonal vegetables, salt etc can be procured at the outlet level. Typical inventory at

the outlet level (for frozen products) may vary from 2 to 5 days depending upon the outlet

sales.


5.3. Logistic Facilities for Retail Industry in India

While some of the modern retailers in India have been outsourcing their logistics needs to

specialist service providers, many large players with national footprint – including Bharti,

Birla, Reliance, Future Group, and RPG- have opted to develop in-house logistic systems.

The existing logistics partners of modern retailers are in most of the cases not proper 3

PL players. These logistic partners in many cases are ‗Integrated players with

Warehousing Facilities‘. According to industry sources, level of satisfaction of retailers

with their logistic partners is mostly low and that speaks of the poor level of logistic

services.

The key market players in the Indian logistics industry can be broadly classified into the

following three segments:

Pure Transporters

- Involved only in the physical movement of goods

- Highly unorganised

- Larger transporters serve as freight consolidators and

form part of organised segment

Integrated

Transporters with

Warehousing

Facilities

- Larger transporters with sufficient scale to diversify their

operations to include total logistics management

3 PLs

- Offer complete value chain of logistics management

- Provide value added services

- Typically MNCs with experience in handling

international logistics

Source: DHL Asia Pacific Customer Conference, 20 March 2007

72%

2%

26%


Major reasons for leading modern retailers in India to develop their own logistic services

Lack of 3 PL players with adequate business understanding

Poor level of services from most of the existing logistic services suppliers

High costs involved

5.3.1. Cost of Logistics in Indian Retail

Globally the logistics cost component of the total retail price is 4 -5%, while in India it is

as high as 7-10%. The higher cost for an industry, which operates on wafer thin margins

of 2-3% globally, makes it imperative for retailers to internalize most operations and cut

costs.

3 PL market is still at a nascent stage in India, with most use occurring in automotive, IT

hardware, and electronics. There is relatively low penetration in pharmaceuticals and fast-

moving consumer goods and one of the important reasons for this is ‗strained profit margins‘.

- Frost and Sullivan

―Unlike the mature western markets, retail growth in India is expected to be dominated by

large retailers owning the logistics rather than outsourcing it to third and fourth party logistic

providers, in near future simply due to the highly fragmented nature and lack of national as

well as international logistics providers in the country‖

- Managing Director, Frost and Sullivan


6. RENT STRUCTURE IN RETAIL

During the initial years of modern retail in India (that is during late 1990s and early

2000s), real estate builders were more into the practice of selling out mall spaces to

retailers. However, this practice has become less prevalent now and renting out is the

norm of the day.

6.1. Prevalent Rental Models in India

Two types of rental models are prevalent in India – fixed lease rental model and revenue

sharing model

6.1.1. Fixed Lease Rental Model

The most traditional model in India is the fixed rental model, wherein the retailers pays a

fixed sum of money (as mentioned in the lease agreement) to the mall developer

6.1.2. Revenue Sharing Model

Also known as the ‗turnover model‘, this is a progressive model built on the ‗sharing of

risks and rewards strategy‘. This model requires the retailer to pay either a

Percentage of revenue or

Combination of rent and percentage of revenue

Payment of a minimum guarantee and/or proportion of revenue, whichever is higher

6.2. Major Components of Occupancy Costs in India

Lease rentals: Lease rentals are the occupancy cost that retailers have to pay to the

mall developer on a monthly basis.

Common Area Maintenance: In India, mostly mall developers are responsible for

the management of entire mall. Major constituents of CAM charges are the air

conditioning and electricity charges for the main area, elevators and escalators,


cleaning and maintenance charges and parking charges. Till recent time, CAM

charges have been in the range of 20-25 percent of the lease rentals.

Service Tax: A service tax of 12.36% is levied on renting of immovable property.

Service tax on input costs like lease rentals is allowed to be set off against service tax

on output costs like costs of advertisements, hoardings, etc.. The remainder, that is,

the unabsorbed loss, which was previously allowed to be carried forward indefinitely,

now has to be charges off in the current year itself.

6.3. Anchor Tenants versus Vanilla Retailers

Anchor tenants may be defined as the stores occupying largest space in a mall or

shopping complex. They are termed as ‗anchors‘ because they are the major crowd

pullers in any mall. Anchor tenants, being the crowd puller and also because of

occupying the largest space in any mall, get discounts on lease rental. They also enjoy

other benefits such as special area for promotion and advertisings, etc. Following are the

comparisons between Anchor tenant and Vanilla retailers

Parameters Anchor Tenants Vanilla Retailers

Rental (% revenue) 6 – 10 per cent Above 12 per cent (This figure

varies depending upon the cities)

Rent differential in

absolute terms

1/3 rd lower than the

market value Charged as per market value

Lease tenure Long term lease

arrangement (9-18 years)

Short term lease arrangement (3

– 5 years)

Source: Crisil and Primary Data

6.4. Increase in Lease Rental

The growth in organized retail penetration in India over the past 5 years led to major

expansion plans being announced by existing players and cash-rich conglomerates such

as Reliance, Bharti and Birlas. The immediate fallout of strong demand for retail has been

the increase in rental rates across most large cities, where supply of retail space has been

limited.


The escalation in lease rental cost has led to cost pressure for many retailers. As revenue

growth has not kept pace with this increase in cost, their EBITDA margin has been

negatively impacted.

6.5. Economic Slowdown and Changes in Strategies of Retailers

India‘s economy has also been adversely impacted because of the current meltdown in

global market. With the suddenly disturbed economy, consumers have gone conservative

and are spending with care. Though, the expenditure on daily need items (such as food &

grocery, FMCG etc.) are not found to be impacted till now, the bigger expenses such as

buying of home appliances, furniture etc. are on hold for many. Retailers have started

correcting their future plans in light of this recent economic crisis.

Given the increasing competition in retail industry, issues of high lease rentals and the

sudden economic slowdown, many retailers have changed their business strategies to

mitigate the negative impacts and consolidate their position.

Change in Strategy Retailers Initiatives

Downsizing Croma

Reduction in average store size Crossword

Re-location

Levi Strauss Mall exit and movement to smaller towns

Mc Donald‘s, KFC Mall exit and movement to hi-street

Nike, Adidas, A O‘s

Indiabulls Retail Moved out from major cities to small towns

Shut Shop Globus Shut two stores in Bangalore

Etam Shut shops in Ahmedabad, Surat and Delhi

Slowing expansion

Cotton by Centuary Slowing down expansion in metros and focusing

on smaller towns

Adidas Slowing down its expansion plans

Raymonds

Focus on other

verticals Aditya Birla Retail

Slowing down expansion of ‗F&G‘ format

‗More‘ and shifting focus on the ‗apparels‘

vertical


Increased focus on

value formats and

low cost models

Pantaloon Retail

Concentrating more on Big Bazaar and KB‘s Fair

Price Stores

Also, diversified small convenience store formats

called Big Bazaar Best Deals, rural retail venture

Aadhar, and home solutions venture Home Town

Increasing revenue

from existing stores Arvind Brands

Cross sell other brands through existing exclusive

outlets and widening the product range

Source: Primary Research, Crisil Report, and Business Standard

6.6. Excess Supply of Retail Space in Pipeline

Lease rentals increased due to limited supply of retail space and increase in number of

retailers. However, the change in the regulatory environment, which allows 100 percent

FDI in construction, and rising investments in real estate companies and projects, is

aiding an increase in supply of retail real estate space.

6.7. Changing Rental Models

Till some time back, when real estate was booming, mall owners had been chasing the

retailers for ‗fixed lease rental‘. That time, even for retailers engaging the space with

brands was the top most priority and thus flat rates were being charged. But as the market

has slowed down, retailers are under pressure of making profits and hence are finding it

difficult to sustain the ‗high fixed rental rates‘. Retailers have slowed down their growth

plans and many of the mall spaces that were planned to be occupied are left vacant.

Excess of retail space supply coupled with the recent economic slowdown, have now

become a cause of worry for mall owners as well. They have realized that occupancy

rates have to be made more affordable and are now being forced to either cut down on

rentals considerably or adopt ‗revenue sharing rental model‘ or any other rental

models.


6.8. The Road Ahead

Please refer to Annexure II for rental trends in top Indian cities during the second quarter

of 2008.

Zero Rent System

Retailer exempt from paying

rental charges during the initial

years of operation.

Example: Pantaloon is learnt to

have signed such an agreement

with a developer.

The Road

Ahead…

Franchisee Route

‗License‘ granted by a company

to a person or group allowing

them to use/ sell certain products

Example: Trent in tier II cities

Sub-letting

Selling of space by retailers to

other brands (mostly happens as

part of Concessionnaire model)

Example: Shopper‘s Stop sub-lets

some space of its store to brands

like FCUK and CK.

Revenue Sharing Model

A minimum guarantee on rental

and/or percentage share of the

revenue whichever is higher

Example: Inorbit mall in Mumbai

‗Select City Walk‘ mall in Delhi

Source: Crisil & Primary Survey


7. PROFITABILITY ACROSS VERTICALS

7.1. A comparison between Apparels, Food & Grocery and Home

Appliances

Gross margins across all verticals are determined by the share of private labels and extent

of commoditization of products. Accordingly, apparels enjoy maximum gross margins,

followed by food & grocery and home appliances.

Parameters Apparel Home Appliances Food & Grocery

Share of

private

label

products

Apparels is the most

commoditisable vertical,

which means there exists

enormous potential for

players to differentiate

from others in terms of

style, fabric, cut, design,

etc. Besides, players can

succeed if they are able to

identify gaps and enter

into areas where national

brands do not exist. Thus,

apparels offer maximum

scope for private labels.

Almost all organized

players have increased the

proportion of private

labels in their total product

mix. While private labels

constitute 75% of

At present, almost all

household appliance retailer

have multi-brand outlets. As

the average ticket size of

products is quite high, there is

considerable preference for

branded goods, especially in

the white and brown goods.

Also, lack of expertise limits

provision of after-sales

services in case of private

labels. This restricts the scope

of increasing the share the

share of private labels for

these goods. Organized

retailers have tried to

introduce private labels in the

kitchen and small appliances.

Though kitchen and small

appliances constitute only

In food & grocery, the focus

has been on increasing the

share of private labels and to

have an edge over branded

FMCG producers. Private

labels in processed foods and

staples can be the only

differentiator through which

retailers can attract more

buyers and increase its

conversion rate. Margins on

fresh produce, such as fruits

and vegetables are typically

low and wastages are high.

Private labels, at present,

constitute more than 10% of

the products in food&

grocery category for players

such as Pantaloon, Spinach

and Subhiksha. There is a


Pantaloon‘s revenues from

apparels, it is as low as 20

per cent in case of

Shoppers‘ Stop.

30% of their total products and

their ticket size is not very

large.

growing trend towards

increasing the share.

Average

Store Size

In apparels, store sizes are

in general larger than food

& grocery but comparable

or smaller as compared to

Household appliances.

Retailers stock a wide

variety of casual, formal,

traditional and ethnic wear

for different usages and

occasions. In addition,

they generally also stock

accessories such as sock,

caps, belts, stole,

handbags etc.

Household appliances entail

the largest store size owing to

the need for displaying a

variety of models. In this

segment, retailers generally

operate multi-brand outlets.

Items such as home theatre,

plasma TVs, Laptops, music

systems etc. of different

brands and different models

within the same brands are

displayed to offer a wide range

of selection to potential

customers.

Consumers still prefer

convenience for their food

and grocery requirements.

Competing against local

Kirana stores, modern

retailers have come up with

stores in the vicinity so as to

be accessible and cater to

buyers within a catchment of

3-5 kms. Store space

dedicated only to food &

grocery is generally smaller.

Some of the retail stores are

bigger as the floor space is

also occupied by home care

and personal care items.

Manpower

Training

and Wage

Inflation

Customers are well

informed in case of

apparels regarding quality,

prices, utility etc. and they

don‘t need much of

salesmen‘s guidance to

make their purchase

decisions.

Also, wage inflations are

lower in this category as

compared to Household

Salesmen play a key role in

helping the consumers‘

decision in case of household

appliances. The sales force

needs to be aware of various

product options, features and

should be constantly updated

with the fast changing

technology in various

products. The costs of

developing and training

Customers are well informed

in case of food & grocery

and are sure about their

buying decisions. They don‘t

need much guidance from

salesmen.

Wage inflations are lowest in

this category among the three

categories.


appliances. manpower in this vertical are

therefore higher as compared

to other two verticals.

Household appliances industry

also faces relatively higher

manpower attrition as

compared to other two

verticals. As a result, wage

inflation witnessed by this

industry is on a higher scale as

compared to other two

verticals.

Gross

Margins/

Profitability

Apparels require higher

investment towards

inventory as stocks are

churned out around 5

times a year. However,

high gross margin on

account of higher share of

private labels and other

factors, more than

compensate the initially

high overhead costs.

Investment in inventory in

case of household appliances

is lower as compared to

apparels. Due to fast changing

technology, most retailers

have an arrangement with

brand manufacturers to take

back unsold inventory.

Despite this, because of other

factors, Gross margins in case

of household appliances are

mostly lowest among the three

Investment in inventory is

lowest and stock turns are

highest in case of food and

grocery (among the three

verticals). However, because

of small ticket size, high

wastages due to perishable

nature of products, lower

margins and other factors,

gross margins in this vertical

are lower than Apparels

Source: Crisil and Primary Data


8. LEADING RETAIL COMPANIES OF INDIA

Key players operating as part of modern retail in India are:

Please refer to Annexure I for detailed profile of some of these companies. Apart from

the above listed companies, there are many regionally strong players and a few upcoming

players (such as Mahindra Retail, Hero Group, and others) as part of modern retailing in

India.

1202

512

269

250

225

182

159

44

0 1500

Pantaloon Retail

Subhiksha

Shopper's Stop(Raheja Group)

Lifestyle India (Landmark Group)

Vishal Retail

Spencer's (RPG Group)

Trent (Tata)

India Bulls Retail

Annual Turnover of Leading Retail Companies in India (in $US million; 1 $US = 45 INR)

2007-08

Source: Company Sources


8.1. Strengths and Weaknesses of Key Organized Players

Companies Strengths Weaknesses

Pantaloon

Retail

India‘s leading retailer (highest turnover

among all modern retail players)

Operates in almost all types of modern

retail format (Hypermarkets,

Supermarkets, Specialty Stores, Discount

Stores, Destination Malls, E-tailing &

others)

Very strong in ‗Value and Lifestyle

segments‘

Adopting very aggressive marketing

strategy and experiencing high growth in

business (CAGR of around 69% over FY

2006-08)

Product mix of Pantaloon retail has higher

share of Brands against Private labels.

However, the company is working

towards developing more of private labels

in all product categories with an aim to

enjoy higher margins

As India‘s largest retail player, the

company holds high bargaining power

with brands (Reputed Chocolate brand –

Cadbury‘s and Snacks brand – Frito-Lay

Lays have been refused space in

Pantaloon Retail Stores because of issues

like pricing, and supply chain)

One of the biggest advantages with

Pantaloon retail is its in-house logistic

Pantaloon retail doesn‘t have

much to offer in luxury and

premium segments

Because of market slowdown

and losses incurred, Pantaloon

retail had to recently divest from

Airport retailing


team. Future group has ‗logistics‘ as one

of its separate business line in the name of

‗Future logistics‘. Future logistics

manages logistic for the retail formats of

Pantaloon

Vishal

Retail

Strongest player as far as presence in

different cities is concerned (present in

104 cities across 24 States & UTs of

India)

It differentiates itself in terms of its low

cost offerings and its target customers -

focuses on Middle class and below

Strong in hypermarket format; recently

ventured into specialty store format with

‗Fashion Mart‘ as exclusive apparel stores

Vishal retail is innovating with franchise

model for its specialty store ‗Fashion

Mart‘

Product mix in case of Vishal Stores has

very high share of private labels –

— They already have 400 FMCG products

under their label and are in the process

of adding more

— Company has 100% private labels in

apparels (Vishal retail manufactures

15% of its apparels and sources the

balance from other manufacturers and

sell under private labels)

To save on rentals/ cost of real

estate, Vishalmart outlets are

generally not opened as part of

any shopping malls. They are

rather present as standalone

stores mostly in some ‗not so

prime locations‘ – requiring the

customers to travel extra to reach

Vishal Stores

Except for hypermarkets and

recent venturing into apparel

based specialty stores, the

company is not present in any

other retail formats

Vishal retail doesn‘t have a very

smooth supply chain and vendors

management system in place.

They have to struggle to ensure

tighter margins on products and

are on constant look out for

committed vendors/ supply

partners.

Shopper‘s

Stop

(Raheja

Company‘s strength lies in its

departmental store format namely

‗Shopper‘s Stop‘

Shopper‘s Stop, Home Stop,

Hypercity and other retail

formats of Raheja Group are


Group

Retail)

The group operates in other retail formats

and are aiming at growing big in all these

formats– hypermarket (Hypercity),

specialty stores (Homestop, Crossword,

Mother Care, MAC, Brio, Desi Café),

airport retailing and others

The company operates in ‗Premium

lifestyle and Lifestyle‘ domains and has a

strong customer base in 35 years plus

business and senior executive classes

Shopper‘s Stop and the other retail

formats are present in prime locations of

Metros, Tier I and very few Tier II cities.

They are generally present as anchors in

shopping malls

As per industry sources, Shopper Stop &

its other retail formats have highest ticket

size and conversions rates

Company‘s strength also lies in its strong

supply chain and logistic management-

they operate on advanced ERP system and

focus on fast and efficient movement of

merchandize

present mostly in Metros and

select Tier I cities. Except for a

few cases, they don‘t have

presence in Tier II cities and

below

Hypercity, the hypermarket

format of Raheja Group till now

has not been able to mark its

presence much against stores like

Big Bazaar. Unlike Bigbazaar,

Hypercity is not positioned as a

value store for masses

Company‘s private labels are a

small percentage of its entire

range of merchandize (80-85%

brands and 15-20% private

labels)

Trent

(Tata)

Trent is very strong in apparels. The

product mix in case of apparel retailing is

95% private labels and balance as brands

Trent‘s most popular retail format is

‗Westside‘ which is a lifestyle based

apparel and accessories store – Westside is

very famous for its ethnic collection

Recent initiatives in form of ‗Fashion

Many of the retail related

initiatives of Trent such as Star

Bazaar, Fashion Yatra etc are in

initial stages and are still to

establish themselves as popular

stores


Yatra‘ aims at value for money apparel &

accessories

Trent owns ‗Landmark‘ which is India‘s

largest books, stationery and music retail

Croma, a specialty store in consumer

durables and electronic items, is one of its

kind and at present very few other retail

stores on similar concept are present in

India – one of them being ‗Next‘

Trent has also started its initiatives in

‗Value based retailing‘ through its

hypermarket format namely ‗Star Bazaar‘.

Star Bazaar are targeting at Tier II cities

For efficient back end operations and

supply chain management, Trent has

recently partnered with UK retailer

‗Tesco‘

Lifestyle

India

(Landmark

Group)

Lifestyle India stores compete closely

against Shopper‘s Stop and other similar

concepts in India. As compared to

Shopper‘s Stop, Lifestyle is more focused

on ‗Youth and Fashion‘

‗Home Centre‘ stores are catching up on

popularity and are growing big way

Lifestyle stores are present out of prime

locations in Metros, Tier I and select Tier

II cities and in big malls mostly as anchor

tenants

Lifestyle stores also work on large ticket

size and higher conversion rates, however,

not as high as Shopper‘s Stop

The group has limited presence

with outlets in top 10-12 cities

within India

They are not present in

supermarket or hypermarket

format


Spencer‘s

(RPG

Group)

Spencer‘s stores are among the oldest

retail chain initiatives in India and over the

years they have earned high trust of its

customers

The company has very strong presence in

super and hypermarket formats in India

and are established as ‗Good value for

money outlets‘

They are present in more than 65 Indian

cities (including tier II cities and below)

and are available in two mini-supermarket

formats as well (Spencer‘s daily and

Spencer‘s express)

Product mix of Spencer Stores

(even in case of hypermarkets)

have very high share of food &

grocery items and fresh fruits &

vegetables – all these are low

ticket items.

Spencer‘s stores compete very

closely against neighbourhood

‗Kirana stores‘ and therefore they

are forced to run on tight margins

Reliance

Retail

The biggest strength of ‗Reliance Retail‘

lies in the fact that it is a part of Reliance

Industries, India‘s biggest private sector

company with high capital investment

potential and huge risk appetite

Reliance retail has forayed into

supermarket, hypermarket, and specialty

store formats in various product categories

– clothing, Jwellery, healthcare, consumer

durables, footwear, automotive, time wear,

IT products, furniture, food & grocery

including fresh fruits and vegetables. They

have also entered into business to business

format – ‘Ranger Farms’

— As per company sources, the

hypermarket of Reliance namely

‗Mart‘ will be very huge stores (First

Mart store is being opened in a space

Reliance retail has slowed down

on growth plans because of

recent economic crisis

Reliance Fresh has been facing

issues related to supply chain

management and merchandizing

Most of the initiative of Reliance

in retail are very new and their

success or failure depends on

multiple factors


of 230,000 sq ft)

Reliance retail has very aggressive growth

plans and the company has employed huge

number of people to implement these

plans

Unlike many other retail companies,

Reliance comes with an advantage of

being a textile manufacturing company.

Reliance already has retail outlets of

VIMAL (company‘s flagship brand)

across India

Aditya

Birla Retail

Aditya Birla retail has ventured into two

formats – Supermarket and Hypermarket

and at present plans to grow bigger and

stronger in these two formats only

Aditya retail also comes with an inherent

advantage of being a part of ‗Birla Group

of Companies‘ and therefore with a

capacity for huge investment and higher

risk appetite

The company aims at differentiating itself

as a ‗spend friendly store‘ with much

superior shopping experience

The company has huge growth plans in

retail

Recent economic slowdown has

impacted the growth plans of the

company

Aditya Retail will face tough

competition from Reliance and

Bharti Retail

Subhiksha Subhiksha is India's largest supermarket,

pharmacy and telecom retail chain

Subhiksha is recognized as ‗Discount

Stores‘ targeting at ‗middle, lower middle

class and below‘

It has multi-locational presence with more

Subhiksha being a discount store

runs on very tight margins and

are profitable only because of

‗economies of scale‘

They often face supply chain and

merchandizing related problems


than 1000 stores in over 90 cities across 9

States

Indiabulls‘

Retail

Indiabulls‘ Retail has acquired Piramyd

retail to mark its foray into retail business.

This acquisition gives Indiabulls‘ an

infrastructure and an established system to

start with.

Indiabulls‘ retail targets at opening value

lifestyle based departmental stores and

convenience stores. Their focus is on

‗Middle and Lower Middle classes‘.

— They are differentiating themselves

from Shopper‘s Stop and Lifestyle

(Landmark Group) by not targeting the

‗Premium and lifestyle segments‘ of

society

Indiabulls‘ is positioning itself differently

by also venturing into a chain of wholesale

stores

Indiabulls' entry into retail comes

after big groups like Reliance,

Aditya Birla, RPG and Future

Group have already got a head

start and are busy consolidating.

The company may face stiff

competition while trying to

establish itself in Indian retail

market

Entry of Indiabulls into retail has

unfortunately been at a time of

economic slowdown and it had to

face losses on acquisition of

‗Piramyd Retail‘.

The company is facing some

vendor related problems as well

Bharti-

Walmart

Retail

Bharti Wal-Mart Private Limited will bring

modern supply chain and back-end

logistics expertise to India, bringing Wal-

Mart‘s global best practices in such areas

as just-in-time inventory, retail information

systems, cold chain infrastructure, GPS for

truck and trailer tracking, and fuel

management systems.

Entry of Wal-Mart would create new

benchmarks for supply chain management

in India and the benefits would be passed

on to the consumers

Bharti-Walmart has still not

started operating any stores till

now. They still have to capitalize

on their strengths and meet out

the constraints to earn success in

their plans.


While Wal-Mart brings with it global

expertise in supply chain and logistics,

Bharti has a better understanding of the

local market

Bharti Enterprises‘ 100% subsidiary Bharti

Retail, has entered into a franchise

agreement with Wal-Mart which will

provide technical support to Bharti Retail.

Thus Bharti retail format will also reap the

benefits out of this business tie-up

Bharti Wal-Mart in a Public Private

Partnership (PPP) with the Government of

Punjab has recently started a Training

Centre in Amritsar (Punjab), India‘s first

special skills training centre aimed at

bridging the shortage of skilled workers for

cash-and-carry and organized retail

formats. This is a smart move by Bharti-

Walmart to build human capital and would

pay off in long terms significantly. This is

all the more relevant as Bharti-Walmart is

planning to open its first cash and carry

outlet in Punjab during April – June, 2009.


9. INDIAN RETAIL INDUSTRY ANALYSIS

9.1. Indian Retail Market Analysis based on Nine Forces Model

9.1.1. Threat of New Entrants (High)

Time and Cost of Entry: Can be a constraint as new entrant should be capable

of managing high operating costs. However, exiting this business is not very

difficult

Entering the modern retail market in India is cost intensive. Opening and

operating the retail stores, maintaining inventory of goods and managing the

supply chain requires moderate initial investment and large operating cost. Large

operating costs are on account of:

High lease rental for retail space in urban India

Government (Political/ Legal

Shifts) Liberalized, need further

improvement Restricted FDI in retail

Multi-taxation and licensing

Technological Shifts

Many technology related

improvements underway

International/ Economic

Shifts

India fast emerging as a major

destination for global retail giants

Bargaining Power of Buyers

(High) Many players

Availability of substitutes

High price sensitivity

Informed buyers

Concentration of modern retail in

few pockets

Bargaining Power of Suppliers

High to Medium for retail spaces

Medium to Low for products &

services

Social/ Consumer Shifts

Opposition from small traders/

shopkeepers Changing outlook of Indian

consumers

Competitive Rivalry (Medium)

Medium to low industry

concentration ratio

Scope for many players to grow

Low Exit Barriers

Concentration in few pockets

leading to competition

Threat of New Entrants (High)

Doesn‘t require buying of assets

Low technology protection Products & services differentiation

possible in many ways

Distribution channels replicable

Huge untapped market & high

growth rate

Threat of Substitute Products &

Services (High)

Unorganized retail-closest substitute

Multi-level marketing – another

substitute

Cost of substitution is low


Large work force that requires to be hired to manage and operate a modern

retail business

However, unlike any manufacturing units, retailing doesn‘t require huge capital

investments into owning machineries and other assets. Retailing can be done in

rented spaces (both for retail stores as well as for warehousing) with outsourced

logistics. Therefore, exiting this business at any point of time is not very

difficult

For any new retail store, it takes around 3-5 years to breakeven. Therefore, any

new entrant would require having strong finances to wait for these many years

before starting to earn from its retail initiative

Economies of scale: Important and difficult to attain in initial phases by a new

entrant

Margins in retail sector in India is reducing because of increasing overhead costs

(high lease rental, high component of wages and salaries, cost of logistics etc.)

and growing competition among organized players, and already existing

competition from huge unorganized retail segment.

Because of reducing margins, ‗economies of scale‘ has become very important to

become profitable in this business. For new entrants, it is difficult to attain

economies of scale in the initial phases with less number of stores and lower

volume of sales.

Technology Protection: Not a constraint as the required technology can be obtained

by a new entrant as well

Moving the right merchandise, at the right time, at the right price – to the right

location, for the right customer, in the right quantity requires real time

optimization of product flow and proper integration of front and back end

operations. An ERP system for logistics and warehousing coupled with front end

IT support (for fast billing, updating store stocks, etc.) are required to be invested


into by any new retail player. However, any retail player can possess the

required technology provided the player is ready to invest in it.

Specialist Knowledge: Not a constraint; addressable through right recruitment,

training and technology support

Efficient back end (inventory and supply chain) and front end management (retail

store) requires skill, knowledge and experience. However, hiring right kind of

people and adequate training of workforces aided by technology may

adequately serve this requirement.

Cost benefits: Manufacturers & Companies with well managed logistic teams can

manage cost benefits

Existing manufacturers of any products would have an advantage in retailing of

those products. This is because the manufacturers would be in a position to enjoy

higher margins for their in-house manufactured products.

For example: Godrej as a retailer in furniture segment has an advantage in terms

of margins because it is also into manufacturing of furniture.

Companies with well managed logistic teams are bound to have cost as well as

operational advantages over other retail companies. This is because in India, third

party logistics is in its nascent stage and it‘s difficult to find right logistic partners

with sufficient knowledge of the retailer‘s business.

For example: Pantaloon Retail India Ltd. is a part of Future Group. Future

Group has ‘Future Logistics’ as one of its business verticals. Pantaloon retail

gets an advantage because of this.

Products & Services Differentiation: New entrants can differentiate themselves in

multiple ways

Retailing as a concept is not limited to any specific products or services. Retailers

may differentiate themselves in terms of having specialty stores dedicated to any

specific product type or service. They may at the same time operate in


hypermarket, supermarket or departmental store formats. Retailers may

differentiate themselves in terms of their target customers, their business strategy

and their ticket size. From this point of view, any new entrant in retail market has

multiple options.

At present, in each modern retail formats within India, there operate only a

few players and enough scope exists for new players to enter and operate.

However, within some specific formats such as hypermarket or supermarket

products and services offerings can be differentiated only to a limited extent.

Access to Vendors: Developing a set of dedicated vendors can be a challenge for a

new entrant

For branded products, sourcing points are common for all players. What varies is

the bargaining on margins depending upon the strength of brands and the strength

of retail players.

In case of unbranded supplies (to be sold under private labels) few of the vendors

may be common for many retailers, however, there may be many retailer specific

vendors (one vendor dedicated to only one retailer). For any new entrant in Indian

retail market, developing a set of dedicated vendors is a slight challenge and may

take some time and efforts.

Distribution Channel: Largely standardized and replicable by new entrants

Distribution channels are largely standardized in modern retail formats. For most

of the product categories such as apparels, furniture, consumer durables etc. the

distribution models adopted are standardized and replicable. However, in case of

some specific product types such as fresh food, fruits & vegetables, the

distribution channels are little different (largely on account of perishable nature of

these items) and may vary from one player to another.


Other Barriers to Entry

Barriers related to Foreign Direct Investment and government clearances/

licensing have been discussed under ‗Government Shifts‘

Some Social barriers have also been discussed as part of Social/ Consumer Shifts

9.1.2. Threat of Substitutes (High)

Neighbourhood mom & pop stores, standalone shops selling readymade garments,

electronic equipments, consumer durables, fruit & vegetable vendors, cluster of shops

and other outlets as part of unorganized retail, all are close substitutes of various

Modern retail formats. With the advent of modern retailing in India, the so called

unorganized retail is also challenged to improve and get more structured. This

increases the threat of substitution even more.

Multi level marketing (also known as network marketing) is another format of selling

that can act as a substitute to modern retail formats to some extent and in some

specific product categories

Different modern retail formats can act as substitutes to each other as well (intra-

segment substitution). For example: A hypermarket can substitute a supermarket or a

specialty store and vice-versa.

Cost of substitution: As most of the modern as well as unorganized retail spaces are

operating on lease only, therefore cost of substitution would not be high. However,

multi-level marketing for any product category would consume lot of time and efforts

to develop and grow.

9.1.3. Bargaining Power of Suppliers

(High to Medium for retail spaces; Medium to Low for products and services)


Suppliers of Retail Space

Before the recent economic slowdown hit Indian market, real estate was booming and the

modern retail space rentals were touching sky. Availability and affordability of spaces

have stayed as critical issues for modern retailers. Builders have been in a strong position

to bargain for higher lease rental. However, the recent slowdown is now forcing builders/

real estate developers to reduce the lease rentals to some extent. Also, speculating the

high growth potential for modern retail in India, real estate developers started with

multiple projects and now there seems to be excess of retail space supply in pipeline. All

this is gradually giving modern retailers some power to bargain against Real estate

developers for lower rentals or adoption of alternate lease models such as revenue

sharing.

Suppliers of Products/Services

Bargaining power of vendors varies from product to product and depends hugely upon

whether a product is branded or unbranded and whether the relationship with supplier is

formalized or not.

For most of the product categories, there exist many suppliers and multiple

sourcing options. From this consideration, bargaining power of suppliers is low

except in cases of very established brands.

Branded products suppliers are in a better position to bargain as compared to

local/unbranded products suppliers.

One factor that adds to the bargaining power of suppliers is the option of

supplying to unorganized retail shops, which account for around 94-95% of the

total retail market value in India. Margins enjoyed by suppliers in case of supplies

to unorganized stores are higher as compared to organized ones. However, bigger

size of orders (economies of scale) and long term relationship make supplies to

organized retailers profitable.

In modern retail, there is a growing trend towards formalizing the relationship

with suppliers in terms of joint venture or partnership. Formalizing of supply


relationship makes it a binding upon suppliers to supply to the undersigned

retailer for a certain period at the decided margins and agreed upon terms and

conditions. This restricts suppliers from lobbying against any modern retailer or

from erratic and unexpected behaviour. Altogether, it can be said that bargaining

power of suppliers remains medium to low for most of the product categories in

case of modern retail.

9.1.4. Bargaining Power of Buyers (High)

Bargaining power of buyers is high in case of modern retail. This is largely on account of

Many Existing and New Players

Presence of multiple players as part of modern retail, entry of more and more new players

and increasing options among buyers to choose for various product and services

Availability of Substitutes

Presence of large unorganized retail sector with numerous players offering products at

competitive prices and other benefits such as neighbourhood location of shops are a close

substitute for modern retail and therefore a reason for higher bargaining power of buyers

Increased Buyer Information

Increased level of awareness among consumers on brands, quality, and prices etc. across

different products is another major reason for their higher bargaining

Higher Price Sensitivity

Various market surveys suggest that Indian buyers are very particular about ‗Good value

for money‘ and this factor influences volume as well as frequency of purchase from any

retail store.

Modern Retail Concentrated in Few Pockets

Modern retail at present is largely limited to top cities of India and very few tier II cities.

Also, only the middle class and above are being largely targeted. This has led to higher

competition between players to catch more buyers.


All this is resulting into higher gains of buyers in terms of better prices, regular discounts

and offers, improved shopping experience, better services such as free home delivery etc.

9.1.5. Competitive Rivalry (Medium)

Medium to Low Industry Concentration Ratio

Modern retail industry is in its initial stages in India. The size of tapped market is a very

small proportion of total market potential. In last few years many players have entered

the market. Future group, Raheja Group, Landmark Group, Reliance retail, Aditya retail,

Vishal retail, Bharti-Wal-Mart and a few others are being seen as big players with huge

potential and aggressive plans in retail sector; however none of them can be said to be

enjoying significant market share at present. In other words, at present the industry

concentration ratio is medium to low and therefore not a situation of high competitive

rivalry. It will take a few more years for the market to mature and for clear cut trends on

market share to emerge.

Space for Existence and Growth of Large Number of Players

Modern retail in India has just taken off and by value it is only 5-6% of the total retail

market in India at present. In terms of penetration, it is concentrated mostly in metro

cities and select tier I & tier II cities. Though the existing base is small, modern retail has

been growing at a high rate. It is expected to grow at a rate of 25-30% or more annually

even during the prevailing phase of economic slowdown. As far as the size of untapped

market is concerned, there exists enough room for new players to enter and grow. The

present level of competition exists because all the players are operating in few urban

pockets only. Infact, the existing players welcome competition because they feel that

increased competition might help in maturing the buyers and in creating a benchmark for

further improvements in modern retail within India.

Low Exit Barriers

In modern retail, the prevalent practice is to take retail space on lease. Even the

warehouses are on lease. There are no other huge capital investments as well. All this


results in lower exit barriers. This also helps in reducing the level of competitive rivalry

as a non-performing player might exit the market without much loss.

Concentration of Players in Metros and Tier I Cities

Modern retail at present is limited to top metros and tier I cities. As they are all trying to

grow and grab business in the same geographies, it is leading to relatively higher

competition among players.

9.1.6. Government (Legal and Political Shifts)

Indian Government has liberalized its policies in many ways over the years to incentivize

growth of Modern Retail in India. However, there is an increasing pressure for further

relaxation.

FDI in Indian Retail

The government of India allows FDI in retail under the following two categories:

Up to 100 per cent in cash-and-carry (wholesale) retail by global retail chains

(e.g. Metro AG, Shoprite, and Wal-Mart). The cash-and-carry format is a business

to business model, wherein stores sell large volumes of products to the retailers

and not directly to consumers.

Up to 51 per cent in single brand retail (e.g. Nike, Lee Cooper, Loius Vuitton and

others). FDI up to 51% has been allowed in retail trade of ‗Single Brand‘

products, with prior government approval and under certain conditions:

Products to be sold should be of a ‗Single Brand‘ only.

Products should be sold under the same brand internationally.

‗Single Brand‘ product-retailing would cover only products which are branded

during manufacturing.

The government has taken this stance with the objective to attract investments in

production and marketing, improving the availability of such goods for the

consumers, encouraging increased sourcing of goods from India, and enhancing


competitiveness of Indian enterprises through access to global designs,

technologies and management practices

Government Regulations on Licensing, Taxation etc. (Need to be simplified

further)

At present, retailers in India need to obtain licenses and permits such as basic

trading licenses, product specific licenses, pollution clearances etc for every retail

outlet (even if it‘s a chain store). According to retailers, this delays the opening

of stores and increases cost.

Introduction of VAT is a favourable step from Government of India to remove

double taxation and to bring uniformity in taxes across states. However, many

states have still not implemented VAT fully and therefore differential sales tax

system still continues across different states. Multi-point octroi/entry tax

collection is also leads to differential taxing. All this act as constraints for the

retailers in adopting uniform prices for same products in different states.

9.1.7. Social Shifts

Opposition from Small Traders and Shopkeepers

Retail is the second-largest employer in the country. Entry of large companies as part of

modern retail in India is feared to cause exit of the smaller stores that account for around

95% of the country‘s estimated 12 million retail outlets in India. Many of the small

traders, shopkeepers, wholesalers and vendors are of the belief that Indian government

should stop large corporations from entering the retail segment until it puts in place a

national policy that is agreeable to all the stakeholders. In recent past, there have been

protests, backed by some of the political parties, in some of the Indian states such as Uttar

Pradesh, West Bengal and Kerela that led to closing down of some modern retail outlets

in these regions. Analysts see an element of political opportunism behind these protests.

However, these protests are slowly dying out because of growing realization basis several

studies that India‘s market is big enough to accommodate modern retail alongside the

small shops and kirana stores that will continue to flourish.


Changing attitude of Indian consumers

Please refer to section on ‗Growth Drivers for Modern Retail in India‘ for details on this

topic

9.1.8. Technological Shifts

Many technology related improvements underway

Modern retail in India is experiencing higher usage of ERP systems and other IT

infrastructure for efficient material handling at back and front end of retail supply chain.

Material handling equipments usage also has gone higher. Efficient supply chain

management in turn is resulting in smaller inventory and real time flow of goods.

Improved technology for goods storage, especially establishment of chains of cold

storage for storing fruits, vegetables and other highly perishable food items, are also

required and are gradually being established.

All the above mentioned technology related initiatives are in their initial stages and have

been adopted by leading players. There is a need for higher level of adoption of improved

technologies.

9.1.9. Economic/ International Shifts

India is fast emerging as a major destination for global retail giants to meet the needs of a

growing breed of middle-class Indians with more disposable income to spend on

consumer goods. As some major markets globally show signs of saturation, India has

certainly emerged as the preferred market for big retailers. The lack of consolidation and

modern retail concepts in India present great opportunities for global retailers.


9.2. Major Constraints for Modern Retail in India

The major roadblocks or constraints for Modern retail in India have been identified as

follows:

Supply Chain Bottlenecks: Distribution and logistics are major bottlenecks for the

Indian industry, especially for the food industry.

Poor infrastructure (road, rail and communication infrastructure), coupled with

lack of third party logistic providers makes operations difficult.

Absence of cold chains and proper storage, and transportation methods (suitable

vehicles and containers) leads to a high wastage and increased transaction and

product costs.

Key Constraints

Supply

Chain

Bottle-

necks

Multiple Taxation

Complicates

Uniform

Pricing Pressure on

Margins: Risin

g

Cost

Multiple Legislative

Laws

APMC Acts:

Reforms Still Required in

Few States

Inadequate

Human Resources

Real Estate:

Availability &

Affordability

Key Constraints

Supply

Chain

Bottle-

necks

Multiple Taxation

Complicates

Uniform

Pricing Pressure on

Margins: Risin

g

Cost


Laws

APMC Acts:


Few States

Inadequate

Human Resources

Real Estate:

Availability &

Affordability

Key Constraints

Supply

Chain

Bottle-

necks

Multiple Taxation

Complicates

Uniform

Pricing Pressure on

Margins: Risin

g

Cost


Laws

APMC Acts:


Few States

Inadequate

Human Resources

Real Estate:

Availability &

Affordability


Real Estate: Availability and Affordability

The availability of real estate is a critical issue that would influence the rate of

growth and profit margins of retailers. Unavailability of government land, zoning

restrictions and lack of clear ownership titles further add to the problems

Delays in delivery of malls are the other constraints that retailers are facing. Many

projects are running 6-12 months behind schedule, with properties not being

delivered on time.

Limited physical infrastructure. India has one of the largest road networks in the

world, yet less than half of the roads are paved and less than 2,000 kilometers are

express highways. These national highways account for less than 2 percent of the total

road network, but carry 40 percent of the traffic. This is one reason the average speed

in India is 20 miles per hour, compared to the West‘s 60 miles per hour. The poor

condition of roads translates directly to shorter vehicle lifespan, which increases

operating costs and reduces efficiency. Off the highways, firms can only run trucks

smaller than 20 feet. As of now, India invests less than 4 percent of its GDP in

infrastructure, compared to China‘s 9 percent.

Over-burdened ports. India has a long coastline, but its port system isn‘t well

utilized. Seventy percent of the seaborne trade is handled by 2 of its 12 major ports,

while 180 minor ports go virtually unutilized. As a result, turnaround time far lags

other global ports with vessels taking up to 3½ days to debark. Many of the secondary

ports have infrastructure problems that aren‘t a quick fix. Even within its large ports,

India can‘t support 6,000 TEU containerships, which make up 25 percent of today‘s

shipping volume. In addition to constraining India‘s growth in offshore production,

this makes it difficult for manufacturers hoping to import, rather than produce

products for Indian consumers.


Pressure on Margins: Rising Costs: Already prevailing thin margins of retailers are

facing further pressure from the following:

Lease rentals: On an average, lease rentals have been accounting for 7-8% of

revenues of retailers. Rental values at prime locations are very high. Imposition of

service tax @ 12.36% with effect from 2007-08 is another cost component for

retailers

Employee costs: Training costs constitute a huge component of total employee

costs of retailers. Manpower expenses have been accounting for 6-7% of total

revenues of retailers

Multiple Legislative Laws

Multiple licenses and clearances required for setting up and operating a retail store add to

the impediments faced by the organized retail industry. They reduce the flexibility of

operations, hinder fast expansion and increase the overall cost. There is a need for

government to reduce the licenses requirements from the current 37-45 licenses to

moderate levels, besides reducing contact points.

Multiple Taxation Complicates Uniform Pricing

The retail industry attracts a variety of taxes from both Central and State governments.

They include the CST, sales tax (state), entry taxes for inter-state sales and octroi,

depending upon the area of operation and procurement, and the type of goods sold. While

most states have abolished octroi, it still exists for some large city markets in Karnataka,

Maharashtra and Gujarat. Multiple taxation makes it difficult for retailers to maintain

similar prices across geographies. The introduction and implementation of value added

tax has resolved this problem for retailers to some extent.

Inadequate Human Resources

Growing concern about paucity of trained personnel, both at store and managerial levels,

is evident in the sector. With the advent of foreign players, the problem is likely to

worsen.


Retailers are increasing salary levels and offering employee stock options to contain the

high attrition rates. Seeing this as an opportunity, various institutes have begun to offer

courses specializing in retail segment

APMC Act: Reforms Still Required in Few States

APMC act in its original form restricted any organized retailer from sourcing directly

from farmers. However, growing need for change in the mode of operation of the current

system by inviting investments and competition from the private sector, has led to

drafting of new Model APMC Act, 2003. Based on new recommended model, some

states now are amending their individual state APMC acts and are allowing direct

procurement by retailers from farm gates. Recommended amendments, however, have

not been introduced in all states and also the reforms in some ways are not adequate for

direct and hassle free sourcing from farmers.


9.3. Emerging Trends in the Indian Retail Industry

Aggressive Future Plans with Due Corrections on Account of Economic

Slowdown

Most of the modern retailers in India have aggressive growth plans. In light of present

economic slowdown, these retailers have corrected down their targets, reduced their pace

and have started investing carefully; however, they continue to be ambitious, optimistic

and are planning big.

Emerging Trends in the Indian Retail

Industry

Aggressive Growth Plans

with Due Corrections on Account of Economic Slowdown

Increased Share of

Goods under Private

Labels

New E

ntra

nts Ty

ing-

up with

Glob

al

Playe

rs

Focus on Tier II & Lower

Cities

Self-S

ervic

e Ret

ail

Outlets

Inorganic Route for

Market Entry

Emerging Trends in the Indian Retail

Industry

Aggressive Growth Plans

with Due Corrections on Account of Economic Slowdown

Increased Share of

Goods under Private

Labels

New E

ntra

nts Ty

ing-

up with

Glob

al

Playe

rs

Focus on Tier II & Lower

Cities

Self-S

ervic

e Ret

ail

Outlets

Inorganic Route for

Market Entry


Future Plans of Some of the Leading Retailers

By 2011, Future Group (Pantaloon Retail) plans to have 300 stores expecting revenues of

Rs 13,000 crore. It plans to reach 24 million sq feet of retail space by June 2011, up from

8.6 million sq feet right now. The Group has maintained its pace while expanding its reach

despite the sluggish growth in the economy presently.

Shopper's Stop plans to invest Rs 1,000 crore for expanding its existing store space of 1.3

million square feet to 2.7 million square feet and move from 25 stores at present to 50 stores

over the next 3-4 years (by 2012-13).

Tata Group's retail arm Trent, which operates Westside, plans to add 8-10 stores every year.

Currently, it has 31 stores in India

Spencer's Retail, which closed down and relocated 56 of its unviable stores recently, will set

up 300 more stores till 2010 for an investment of Rs 500 crore. Currently, Spencer's has 700

stores, commanding a retail space of 2.5 million, which will see addition of another 1.3

million sq ft by 2010.

Apart from the measures discussed in section, few other strategies adopted by retailers to

beat Economic slowdown:

Cost cutting by focusing on improving employee productivity, cutting down on

raises of senior employees, reducing spends on advertising and communication,

recruitments, etc.

Focusing on value and discount retail formats

Planning to add to their number of stores by capitalizing on the prevailing lower

lease rentals on account of slowdown in real estate sector

Increased focus on consolidation of already existing stores and targeting to earn

higher profits through them


Inorganic Route for Market Entry

Lucrative opportunities in Indian retail sector have encouraged many companies with

different backgrounds to enter the sector. Because of lack of any retail related experience,

many of these companies have marked their foray in retail sector through acquisition of

some already existing smaller retail companies.

Aditya Birla forayed into retail by acquiring Trinethra, the South India based chain of

stores

Indiabulls entered the retail market by acquiring piramyd retail

Reliance retail started its first acquisition by buying out the retail wing of Adani.

Adani group had forayed into retail by acquiring a leading supermarket store V Ravjis

in 2000.

New Entrants Tying-up with Global Retailers

As many Indian companies with no prior experience in retail are entering the sector, there

is a growing trend towards tying up with global retailers to share their knowledge,

experience and expertise.

Two-wheeler manufacturer, Hero Group has entered the Indian retail industry

through lifestyle and home décor stores called OMA. Towards this, the company

has entered into supply arrangements with Danish firm, Villa Collection, Thailand

government‘s Royale Porceliel and UK‘s DK Living

For efficient back end operations and supply chain management, Tata Trent has

partnered with UK retailer ‗Tesco‘

Focus on Tier II & Lower Cities/ Towns

Though the top metro and tier I cities would continue to be the centres for retail business

during the next few years, retailers have started focusing on tier II and lower cities and

towns to make an early mover advantage and acquire big gains in long term. Also, with


increasing focus on ‗Value retailing‘, tier II and lower towns and cities become potential

market for modern retailers.

Increased Share of Goods under Private Labels

Retailers enjoy far lesser margin in branded products as compared to private label

products. As the competition is increasing and profit margins are getting smaller, there is

a growing effort by retailers to have more and more products of various quality and

grades under private labels. Share of private label goods are generally very high in case

of apparels and FMCG. Supermarket and Hypermarket Retailers are to some extent

competing against FMCG brands.

Self-Service Retail Outlets

The global economic downturn has opened up opportunities for self-service cash

transaction and check-out kiosks at retail stores in India. Retail majors like Reliance

Retail, Pantaloon Retail, Tata‘s Trent, and others have showed significant interest in

installing self-service billing counters and check-out kiosks within their hypermarkets

and other retail formats. Deploying self-service cash transaction kiosks might be a good

cost-cutting exercise for retailers, as it will enable pruning of employees and cashiers

might be then shifted on the shop floor. Also, this will solve the issue of long customer

queues at billing counters.

Our competition is with the Levers and the P & Gs of the world. Their strength has been

through the Kirana Stores that are selling these products. 60% of retail market is FMCG

(food and non-food) and that business has been in hand of 7-8 players. We aim at

increasing our private label products in our stores.

-- As stated by one of the senior officials of Vishal Retail


9.4. Critical Success Factors in Retail

For modern retail industry in India, various critical success factors have evolved over a

period of time

Location

Well placed stores with high visibility and easy access, have potential to attract higher

footfall. Location is a key factor in India for

yet another reason. Poor infrastructure

(particularly, roads and ports) leads to

inefficiency in the supply chain, which

impacts profitability. The retailer has to

ensure proximity to his/her source as well as

customers. In deciding the location of a retail

store, it is important to consider the following

parameters

Types of customers

Visualizing the building,

Merchandise expected to be sold

Expected image/brand

Retail space and storage area

Source: David Oliver, Partner,

Kurt Salmon AssociatesUK

Knowledge & Information

Merchandize

Geography (location)

EVOLUTION OF CRITICAL SUCCESS FACTORS

Superstores need to be

located near residential areas

rather than in a shopping

mall or in commercial areas

to allow easy access to

customers for their daily

need items.

Specialty goods are more

unique than most products

and customers generally

won't mind traveling out of

the way to purchase these

types of products. Specialty

stores may also do well near

other shopping stores.

Furniture, Consumer

Durables & Upscale

clothing are examples of

higher prices items and for

these items customers will

want to compare prices

before making a purchase.

Therefore, retailers will do

well to locate their store near

similar stores.


With the arrival of improved technology and betterment in infrastructure, location of

store has started becoming less of a constraint in India. In addition to a good location,

now Merchandize has also evolved as a key success factor.

Merchandize

Merchandize panning is critical to meet the sales target and achieve higher margins by

ensuring optimal inventory levels.

Knowledge and Information

Knowledge about Customer Tastes and Preferences

India is a country of people belonging to different cultures and lifestyles. It is very

important for retailers to understand the variations in tastes and preferences across

geography, gender, age groups and various economic classes within India.

Real Time Inventory Management through Proper Information System

Efficient inventory management is key to successful retailing and it can be achieved

through proper Information system in place backed by technology such ERP system, and

other IT infrastructure. Proper inventory management becomes all the more critical in

India because of poor physical infrastructure conditions in most of the regions.

Apart from the above three factors, other critical success factors for successful retailing in

India are:

Review of past

performance

Strategic

Planning

Channel Sales

Budgeting

Category Level

Margin

Planning

Range

Planning

Space

Planning


Customer Satisfaction and Retention

By making available to the customers the

desired products, investing in CRM, and

running loyalty programmes.

Proper Product Display/ Placement

With an idea to achieve high visibility of shelves. Three important aspects considered for

product placements in retail stores are ‗Eye Level Shopping‘, ‗Timing of Shopping‘ and

‗Spontaneous Purchase‘.

Building Traffic: By working on the concept of ‗More of the Right People for More

Time‘.

Physical Layout: It is an important component in creating a vibrant retail experience

for customers. Proper store layout is important

To guide the customer around the store and entice increased purchases

To create balance between sales and shopping space

To create effective merchandise presentation

Keeping Pace with Technology

One key differentiator between the successful and not-so-successful retailers is primarily

technology. Customer knowledge management through CRM software, and supply chain

management (both back and front end) through ERP system, RFID based tracking, web

technologies, and other supporting IT infrastructure, are very critical for successful

retailing.

Loyalty Programmes in Retail Pantaloons Green Card Program

Shoppers‘ Stop First Citizens Club

Globus Globus Privilege Club

Westside Club Westside

Crossword Book Rewards Program

Planet M M-xtasy World


10. RETAILERS’ PERCEPTION ABOUT THAI IMPORTS

Some of the leading retailers in India are, at present, already sourcing or planning to

source apparels, plastic goods including kids‘ toys, home décor items & electric goods,

furniture, footwears, processed food, personal care items and some other items, in limited

quantities, from Thailand.

10.1. Apparels

According to Indian retailers, Thailand is very strong in readymade denim garments

(Jeans, T-shirts, and Shirts etc.) and other fashion apparels in men‘s, ladies‘ as well as in

kids categories.

Many of the leading retailers such as Shopper‘s Stop (Raheja group), Pantaloon retail

(Future group), Vishal Retail, and Lifestyle (Landmark Group) are already sourcing

denims and other fashion apparels from Thailand. However, quantities of imports are

very low at present. For example: In 2007-08, Shopper’s Stop sourced two containers of

men’s and ladies’ readymade denim garments from Thailand.

10.2. Plastic Goods

Plastic containers, water bottles, plastic utensils, kid‘s toys, and other plastic based

general merchandize items are also being imported from Thailand in limited quantities by

some of the leading retail players. According to industry sources, plastic goods of

Thailand are high on quality and relatively cheaper. Example: Big bazaar (part of

Pantaloon group) at present imports around 1/3 rd of its plastic ware, plastic containers

and other plastic based products from Thailand.

―Thailand is famous for washed denim. Thailand manufacturers have very good

understanding of denim wash and they are good at stitching and packaging as well. The

quality of Thai denim is better than that of brands like Lee & Levi‘s‖

- Head Merchandiser for Apparels in One of the leading Departmental Stores in India


10.3. Home Décor Items & Electric Goods

Thailand home décor items are very popular in India. They are perceived as good in style,

quality and reasonably priced as well. Artificial flowers, flower vases, display paintings,

electric lamps and lamp shades are some of the products already being imported by a few

modern retailers in India. However, these product categories don‘t contribute much to the

value based retailing in India (hypermarket and supermarkets) at present. Example:

Vishalmart, which targets at lower middle buyers in India, has discontinued keeping

artificial flowers in its stores as they didn‘t sell much.

10.4. Furniture

Rubber wood, also known as parawood, based furniture of Thailand are in demand in

India. Thailand furniture are perceived as high end stuff with good quality and finish.

According to some of the leading retailers dealing in furniture, Chiangmai and Bangkok

are the two major sourcing hubs for furniture in Thailand. However, at present only a

select retailers procure from Thailand and that too in lower volumes. Value and volume

of imports from China and Malaysia are higher in furniture segment than Thailand.

Break up of Supplies to Pantaloon Retail in Furniture Segment (2007-08)

Indian Manufacturers, 50%

Thailand (Rubber/ Parawood Furniture),

3.5%

Indonesia (Synthetic Ratan, Cane, Particel

Board, MDF Furniture), 5%

Malaysia (Rubber Wood Furniture), 15%

Denmark & Italy, 1.5%

China(Glass Furniture & Sofa), 25%


10.5. Footwear

Major sourcing for footwear retailing is happening from within India. Imports are

happening largely from China and in small volumes from Italy and Brazil. At present,

hardly 1-2 retailers in India are importing Thailand footwears and that too in very small

volumes. However, retailers in India appear to be interested in procuring more of

footwears from Thailand. According to some of the leading retailers, Thailand can be a

preferred sourcing hub for ladies‘ footwears. According to these retailers, Thailand

manufactured ladies‘ footwears have a typical style and look and stiletto sandals happen

to be one of Thailand‘s specialties with huge potential to sell in Indian markets. Apart

from ladies' footwears, some of the Indian retailers also appear to be interested in

sourcing Q & Q sole sheets and some other footwear accessories. However, Thailand

footwears are rated low on quality and this is one factor that discourages imports from

Thailand.

10.6. Processed Food

According to some of the modern retailers, Thai cuisines are picking up fast in India.

However, at present the base is very very small and that is why even high growth rate is

not adding much volume till now. Thai cuisines are tangy and spicy and therefore hold

fair chances to be accepted by Indians at large. Most of the Chinese cuisines have been

Indianized and that is one big reason for their wide level acceptance among Indians. Thai

food would also require to be tuned to Indian taste. This process will be gradual and take

sometime.

―We have visited Thailand and explored the footwear market there. We checked all kinds

of footwear over there- high end, mid as well as low end. Men‘s footwears are okay in

quality, however, appearance-wise not very appealing for Indian buyers. On the other

hand, female footwears carry great style, excellent finish and potentially high appeal for

Indian buyers, however, not upto mark on our quality parameters. We would need to get a

lot of things changed, such as shoe sole, in case we get into sourcing from Thailand.‖

- As stated by the Merchandiser of one of the leading footwear retailers in India

-


As identified during the study, some important factors that may influence the

acceptability and popularity of processed or ‗ready to cook‘ Thai cuisines in India are:

Packaging: Thai food packets mostly have lot of shrimps drawn on them (even in

case of vegetarian items), largely because of high popularity of seafood in Thailand.

Also, Thai fonts are very different and not very clear for Indians. Product labels and

other relevant information and instructions on the food packets, even if printed in

English language are not very clear because of the typical Thai font type used. All

this alienate Indian buyers.

Green, White and Red Dots: Around 70% of world‘s vegetarians are Indians. Even

the non-vegetarian Indians are very selective about what they may consume. Indian

buyers are very particular about green, white and red labels on the food packets

standing for vegetarian, eggetarian and non-vegetarian food types respectively. This

is another critical factor for selling of packaged food in India.

Cooking Instructions: Most of the Indian consumers are not very experimenting and

many refrain from retrying any dish in case it doesn‘t appeal to them in first trial.

Clearly mentioned cooking instructions become very critical for less known food

items. In case of some Thailand based packaged food, the specific instructions on

quantities of various add-ons are missing and that discourages buyers from buying

them.

Thailand pastes and sauces are growing in popularity among Indians. However, Thai

noodles are different and Indians don‘t have a taste for that.

―Indians straightaway compare any noodles with Nestle‘s Maggi. And now with an

evolved Indian taste for Indianized version of Chinese noodles, Thai noodles will have a

tougher challenge in establishing itself in Indian market.‖

- As stated by Senior Research Manager, Food Bazaar


10.7. Personal Care Items

Many of the leading brands in personal care category have emerged from Thailand.

Thailand is known to have high quality products in items such as soap, packs, face and

body cream, aroma oil, massage cream etc. Some of the leading retailers (such as

Pantaloon Retail) in India are of late focusing on increasing their share of business under

this category and are planning to import these items from Thailand in considerable

volume. However, except for the brands that are already popular in India, what type of

response does the other personal care products from Thailand get from Indian buyers is

still to be seen.

10.8. Other factors related to Thailand

Importing from Thailand is more convenient as compared to countries like China

because they speak in English and communication is smooth

Both Thai and Indian Currency fluctuate a lot against US dollar. This creates

uncertainty about the actual payments to be made for import of various products.


11. POSSIBLE WAYS FOR ENTRY OF FOREIGN

RETAILERS IN INDIA

International players can enter India through multiple routes:

11.1. Manufacturing and sourcing

Foreign players are allowed to enter India if they manufacture or source products locally.

International companies such as Levi‘s and Tommy Hilfiger source their products from

domestic manufacturers like Arvind Mills, whereas Benetton, Sony and Samsung have

manufacturing units in the country. We feel the impact of opening up FDI on this route

would be minimal, as cost advantages as against high import costs would compel

international players to source or manufacture their products in India.

11.2. Cash-and-carry operation

Players are allowed to sell goods only for business purposes like hoteliers, commercial

organizations and retailers, and not for personal consumption. Since 100 per cent FDI is

not allowed in India, foreign players have entered India through this route. (Please refer

to section for details on foreign players that have entered or planning to enter India

through this route)

11.3. Franchising

This is the most preferred mode through which foreign players have entered the Indian

market. Franchising entails granting of rights by one party, the franchiser, to another, the

franchisee, in return for a sum of money. The franchiser invests his/her assets in a system

to utilize the brand name, operating system and ongoing support of the franchisee.

Lacoste, Pizza Hut, Mango, Nike and Marks & Spencer have entered India through this

route. With the opening of FDI, many franchisees may lose their franchising rights as

franchisers may chose to change their mode of operation. On the contrary, many existing

franchisees may also enter into JVs with the franchisers with the opening up of FDI.


11.4. Test Marketing

This route allows foreign players to test the demand for their products in India for 2 years

before undertaking investment through setting up of manufacturing facilities in India.

Players such as Amway, Oriflame and Nokia have entered India through this route.

Players may continue to enter India through this route even if FDI in retail is allowed,

because they can test demand for their products before undertaking any major

investment.


12. CONCLUSIONS AND RECOMMENDATIONS

Organized retailing in India is at present in its initial stages and experiencing high

growth. High growth rate is on account of existing lower penetration of organized retail

and presence of huge untapped market. The market is expected to grow at more or less

the same pace till it reaches the stage of maturity. Almost all modern retail formats in

various product verticals are poised to grow fast during the next few years.

Under the wake of present global slowdown, organized retail market in India has seen

some corrections in entry and growth plans by the prospective and existing players.

However, most of them continue to be aggressive and plan huge investments with an

intention to make early mover advantage and increase their presence pan India.

As far as Thai entrepreneurs are concerned, they can plan to enter organized retail in

India under many product verticals.

12.1. Level of Attractiveness versus Suitability for Thai Investors

Level of Attractiveness

High Low

High

Low

Su

itab

ilit

y t

o T

hai

In

ves

tors

/ S

upp

lier

s

Fashion

Accessories

Footwear,

Furniture &

Furnishing

Plastic ware/

Kitchenware

Personal Care Home

Décor

Items

Apparel

Stores

Theme Malls/

Specialty Malls

Restaurant

Chains (fast

food outlets,

and coffee

chains)

Consumer

Durables/ Home

Appliances

Food &

Grocery

Cash &

Carry Stores


In terms of attractiveness, Value Retailing scores over Lifestyle Retailing and

Premium Lifestyle Retailing. Apart from metro and tier I cities, value retailing has

higher potential to grow in tier II and lower cities. Also, value retailing is the least

impacted segment under the present situation of economic slowdown and all retailers

have aggressive growth plans in supermarket and hypermarket formats. However, due

to FDI restriction, it is not possible for foreign players to enter any multibrand outlet

formats (such as hypermarket, supermarket, departmental stores, specialty stores etc.)

and therefore these options can‘t be considered by Thai Investors at present.

Apparel as a category is among the highest on profitability and highly suitable for

Thailand as well. There exists very high potential for Thailand in this category.

Thailand ranks high on personal care products. Modern Retailers in India are of late

focusing on growing their business in personal care category. There is a growing

opportunity for Thailand in this category.

Though Thailand has many things to offer under home décor category (artificial

flowers, flower vases, lamp shades, electric lamps, paintings and wall hangings etc.),

the share of these items as part of modern retail in India is comparatively lower.

However, the category provides reasonable opportunity for Thailand to explore

further.

Restaurant chains (especially the Fast food outlets and Coffee chains) are one the

fastest growing categories of modern retail in India. They are spreading fast into tier

II cities as well. There exists high opportunity for Thailand based fast food outlets

and coffee chains to foray into Indian market. However, for successful entry and

expansion, they need to ensure that their offers are Indianized and suitable to Indian

platter.

Food & grocery stores are very high on attractiveness as far as modern retailing in

India is concerned. However, except for some sauces and pastes, there are not many

processed and packed food items where exists high potential for Thai offerings at

present. Most of the sourcing in Food & grocery category happens from within India


and the study suggests that it would continue to happen the same way atleast for next

few years.

Modern retailing in India is still not mature enough for wide acceptance of Theme

malls or specialty malls. There have been big plans on part of real estate developers

as well as leading retailers to come up with such malls in India. However, many of

these plans have been stalled in wake of global slowdown. Also, there has been a

realization that it will take sometime before Indian buyers develop an orientation to

shop from specialty malls.

12.2. Proposed Entry Strategy

Thai Entrepreneurs should plan to invest in Indian Retail Market in three phases as

depicted below:

Time Horizon: 1st Year 2nd & 3rd Year 4th Year Onwards

Phase I Phase II Phase III

Thailand’s Entry Strategy

As

Sup

plie

rs

(und

er f

orm

al a

gree

men

t)

Lo

ok

Out

fo

r

JV

Par

tner

s/ F

ranc

hise

es/

Lo

gist

ic P

artie

s

Sin

gle

Bra

nd O

utle

ts

thro

ugh

JVs/

Fra

nch

isee

s

Cas

h an

d C

arry

Sto

res

Tes

t M

arke

tin

g in

Sel

ect

Pro

duc

t Cat

ego

ries

Man

ufac

turi

ng B

ase

in

Sel

ect

Pro

duc

t Cat

ego

ries

The

me

or

Sp

ecia

lty M

alls

Bas

ed o

n T

hai P

rod

ucts

Time Horizon: 1st Year 2nd & 3rd Year 4th Year Onwards

Phase I Phase II Phase III


As

Sup

plie

rs

(und

er f

orm

al a

gree

men

t)

Lo

ok

Out

fo

r

JV

Par

tner

s/ F

ranc

hise

es/

Lo

gist

ic P

artie

s

Sin

gle

Bra

nd O

utle

ts

thro

ugh

JVs/

Fra

nch

isee

s

Cas

h an

d C

arry

Sto

res

Tes

t M

arke

tin

g in

Sel

ect

Pro

duc

t Cat

ego

ries

Man

ufac

turi

ng B

ase

in

Sel

ect

Pro

duc

t Cat

ego

ries

The

me

or

Sp

ecia

lty M

alls

Bas

ed o

n T

hai P

rod

ucts


As

Sup

plie

rs

(und

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12.3. Phase I

During the first year, it is being proposed that Thai investors explore the business

opportunities as suppliers to Indian retailers. In the meantime they should be at constant

look out for suitable business partners in India for opening of single brand outlets in

various product categories.

12.3.1. As Suppliers

Product Categories Apparel & Fashion Accessories, Footwear, Personal Care (especially skin

care items), Furniture and Furnishing, Plasticware/ Kitchenware, Home

Décor Items, Processed and Fresh Food Items

Concerns/ Constraints

(if any)

One of the factors that discourage retailers in India from importing is

that most of the sourcing happens on ‗Outright basis‘. Unless and until

the retailers are very sure of sale or get reasonably high margins, they

don‘t import goods in large volumes.

Frequent currency value fluctuation is another factor that discourages

retailers in India from importing from Thailand

Recommendations

Thai manufacturers/ suppliers should work on establishing formalized (through JVs, partnership

etc.) and long term supply relationship with the existing retailers in India in the mentioned product

categories.

To ensure supplies in large volumes, Thai manufacturers should be ready to adopt consignment

model of supply for select non-branded as well as branded goods and concessionaire model of

supply for high end branded goods.

Supply of ‗made to order‘ goods is likely to happen under ‗Outright‘ model only. To establish long

term supply relationship for this type of supplies, Thai manufacturers should focus on delivering as

per the required specifications, implementing strict quality check norms and on time delivery.

Thai manufacturers require taking retailers in India under confidence through proper mutual

planning coupled with clarity on currency exchange value at which the supplies may take place

even at any later point of time in future.


12.3.2. Look Out for Joint Ventures/ Franchisees/ 3 PL

Product Categories Apparel, Footwear, Personal Care (especially skin care items), Furniture,

Plasticware/ Kitchenware, Home Décor Items, Food Outlets

Concerns/Constraints

(if any)

Selecting the right JV partners or Franchisees in each of the product

categories

Awareness about various laws of the land

Proper formalization of relationship on mutual agreement

Selecting the appropriate 3PL logistic party

Recommendations

Selecting the Right JV

Partners

In each of the product verticals, Thai investors should select such

companies for partnership/ JVs within India that complement their

strengths. Selected partners should

be knowledgeable about Indian customers

preferably have experience in retailing in the given product

categories

preferably have presence in all the zones – South, North, West and

East within India

Under the present situation of lack of proper 3PL logistic players in

India, it is preferable if the JV partners have their own well

developed in-house logistic arrangements.

Preferring ‘Master

franchisee & Sub

franchising’ over

‘Direct Franchising’

It is recommended that in place of direct franchising, Thai Investors

should first get into JVs with Indian partners in each of the product

categories (including food outlets). After finalizing the JVs, company

owned single brand outlets should be opened. It is only after a

considerable number of company owned outlets are established that

franchising option should be exercised. This mode of operating is also

known as to ‗Master franchisee and Sub-franchising model‘. This


approach will aid Thai investors in exercising better control over its

outlets in initial phases and manage them in the desired manner.

Once a few ‗joint venture company‘ owned outlets get established,

further expansion may be planned through franchisee route.

Formal Agreements

and Clarity on Terms

& Conditions

All the agreements should preferably be formalized or legalized with

clear understanding of terms and conditions.

To ensure good deals, Thai investors must be well aware of various

laws of the land including the property laws (such as Transfer of

Property Act, 1882, The Indian Contract act, 1872, The Registration

act, 1908).

Building in-house

Logistic Facilities or

Selecting Appropriate

3 PL Party

In case the JV partners do not have well developed in-house logistics

team, then the Thai investors alongwith their JV partners should look

out for proper 3 PL Players with required business knowledge in each

of the product categories. The logistic party may be common for more

than one product category.

For food and beverage outlets, there is a need for cold chain based

logistic and warehousing arrangements

Also, for food and beverage outlets, suppliers of various semi-

processed/ semi-cooked food items, and processed food items need to

be identified and tied-up with. In this case also, it is recommended to

have formalized agreements.

12.4. Phase II

Acting as suppliers would provide good insights about the type of demand that exists in

India, variations in choice and preferences that prevail across different zones/regions, and

specific Thai goods (in various product categories) that have potential to sell within India.


Also, it will make the Thai suppliers more knowledgeable about the existing retailers in

India.

Once the partner companies have been identified in different product categories, and the

formal agreements have happened, the branded products manufacturers of Thailand

should then immediately focus on opening of single brand outlets.

While some of the branded products manufacturers of Thailand shall be busy opening

Single brand outlets in Joint venture with Indian companies, a few leading Thai retailers

may plan to start Cash and Carry business in India.

In case of a few brands within select product categories, such as Personal Care Items,

Consumer Durables and Home Appliances, and Processed food, Thai Manufacturers may

plan to enter India through the route of Test Marketing.

12.4.1. Single Brand Outlets

Single Brand Outlets in Non-food Categories

Product Categories Apparel, Footwear, Personal Care (especially skin care items), Furniture

Plasticware/ Kitchenware, Home Décor Items


(if any)

As specified by Govt. of India, ‗Single Brand‘ outlets can be opened

only for products which are branded during manufacturing and are

sold under the same brand name internationally. This condition

would require to be strictly followed.

Target customers, store locations and type of lease agreement for

opening of stores are some of the critical factors

Poor physical infrastructure coupled with lack of proper logistic and

warehousing facilities are the other major concerns.

Recommendations

Identifying Target

Customers

Target customer base within India should be clearly identified for

each of the selected brands in each of the product categories before

opening of single brand outlets.


Store Location Store location should largely be decided based on target customers.

In case any brand aims at premium/ high end customers, the

brand outlets may be opened as standalone stores in the vicinity

of posh residential areas or as part of high end shopping malls.

If the brands target at lifestyle category customers, it is

preferable to open them as part of shopping malls with potential

to attract high footfall or as standalone stores in High streets

For brands targeting at extremely value conscious customers

(middle or lower middle income groups), the first priority should

be to have low rentals. The outlets may be stand alone stores

located at not so prime streets or shopping malls in not so prime

areas.

Store location related recommendations, specific to some of the

product categories have also been discussed in the later part of this

section

Recommended Rental

Model

It is recommended that Thai investors should bargain with builders

for lease agreement under ‗Revenue sharing model‘. They should

also bargain for lower fixed rental component under revenue sharing

model.

Focus on Building

Efficient Supply Chain

Efficient supply chain management needs to be ensured through

proper use of technology both at front and back end and through

strong logistics and warehousing arrangements (either company

owned or outsourced)

Thai investors should, if required, be willing to invest in developing

their in-house logistics and warehousing facilities.


Single Brand Food & Beverage Outlets

Product Category Restaurant Chains & Coffee Shops


(if any)

Type of cuisines offered and their acceptance by Indians residing in

different parts of the country is the first concern. Study findings

suggest that at present Thai cuisines in their present form are not

widely accepted in India.

Lack of cold chain based proper logistics and warehousing facilities

and the chances of high wastages are the other major concerns

Recommendations

Type of Food Outlets,

their Location and

Geographical Spread

It is recommended that during the initial phases, Thai investors, in

JV with identified Indian players, open fast food joints and coffee

chains.

These fast food outlets and coffee chains may be opened first in

Metro and tier I cities. Later on they should be taken to lower tier

cities as well. Preferred locations for these outlets would be near

office complexes, shopping malls, institutional areas, townships, and

high streets.

Thai specialty restaurant chains may be started only at very select

locations of the top metropolitan cities of India. Initially, a higher

focus should be at serving Thai specialties through counters as part

of food courts in shopping malls.

Indianization of Thai

Cuisines

Also, for Thai cuisines to be a hit in India, it is required to Indianize

them by adding flavours and spices that suits Indian taste buds. This

should be on similar lines of Indianization of Chinese Cuisines

which resulted in wide acceptance and huge popularity of these

cuisines in India


Minimizing Wastages

through Efficient

Supply Chain

Management

Thai investors need to focus at minimizing the wastages during

supply and in inventory of the various semi processed/ semi-cooked,

processed and fresh food items that would be sourced for various

types of preparations. This can be done through proper use of

technology both at front and back end of supply chain, having

extensive arrangements for cold storages and temperature controlled

fleet, and by maintaining optimal level of inventory. Thai investors

should, if required, be willing to invest in developing in-house

logistic and cold storage chain facilities.

12.4.2. Cash and Carry Stores

Product Categories All products that typically go into a Hypermarket (as sourcing of goods

from within India is allowed under this format)


(if any)

No major concerns

Recommendations

Experience in Cash &

Carry Format

(preferable)

Thai investors, preferably with similar experience, should plan to

enter India through Cash and Carry b2b sales format.

Opening of 'Cash and Carry' stores throughout the country shall

provide a golden opportunity to Thai investors to understand the

market and to make in-roads into India. Also, when the restrictions

on retail industry are lifted within India, Thai investors will be in a

strong position to easily convert their 'Cash and Carry' stores into

highly profitable supermarkets and hypermarkets.


Tying-up with Local

Indian Players

Recommended

Thai investors would require to source goods in bulk directly from

manufacturers across various product categories from within as well

as from outside India including Thailand. Sourcing decisions need to

be well informed. Also, the business requires good local market

understandings. To facilitate all this, it is recommended that Thai

investors enter Cash and Carry business in tie-up with any local

Indian retailers or manufacturers.

Geographical Spread of

Stores

To start with, it is recommended that cash and carry stores are

opened in some prime market locations of all the four metropolitan

cities. Further the presence should be expanded to tier I and tier II

cities.

Logistics &

Warehousing

It is recommended that central warehousing (distribution centre)

system is adopted for most of the product categories except for

perishable food items.

Thai investors may plan to outsource the logistics and warehousing

activities by identifying the right 3PL or 4PL parties. However, if

required they should be ready to develop in-house logistics and

inventory management capabilities.

12.4.3. Test Marketing

Product Categories Personal Care Items, Consumer Durables (including Home Appliances),

and Processed food

Concerns/ Constraint

(if any)

A major decision of whether to invest in manufacturing facility or not

needs to be taken based on Test Marketing. Test marketing is allowed for

a maximum period of 2 years within India. Hence, there is pressure to best

utilize this time span to understand the market response and to estimate

the actual demand for any given product.


Recommendations

It is recommended that Thai investors conduct test marketing for some of their innovative and

new products in Personal care category and consumer durables (including Home appliances).

Some of the processed food items could also be test marketed for their popularity in India

It is recommended that a few wholly owned subsidiaries are established that will import items

in the mentioned categories from Thailand for test marketing.

Test marketing should be carried out in a way that it encompasses all the zones within India-

South, North, East, West and Central. It is very critical to understand the variations (if any) in

demand across geographies.

12.5. Phase III

With the passage of time, competition would grow in modern retail market within India.

To stay profitable in long term, it is important to cut down on cost of shipment and

transportation. Establishing local manufacturing base, rather than continuing to import, is

therefore a much desired step for select product categories. Also, this would be the time

to decide about putting up manufacturing facilities for the products that were Test

Marketed during Phase II. Manufacturing decision would remain non-impacted and

advantageous even if the FDI route is cleared by Government of India in future.

Theme or specialty malls had started catching up in India when the recent real estate

slowdown hit it negatively. However, by the time phase III is entered, Theme malls

would have grown big on popularity. Thai Investors may plan to develop Thai Specialty

Malls.


12.5.1. Establishing Manufacturing Base in Select Product Categories

Product Categories Denim based Apparels, Personal Care Items, Consumer Durables,

Processed Food (Sauces, pastes etc.), Home Décor Items

Concerns/ Constraints

(if any)

Establishing manufacturing base requires huge capital investment

Also establishing manufacturing base depends upon multiple factors

such as allotment of land, government clearances, availability of

finances, various government incentives etc.

Recommendations

It is recommended that Thai manufacturers plan to invest in setting up of manufacturing base

in India only for those Thai products that generate huge demand in India such as Denim based

Apparels.

Manufacturing bases also need to be established for products with positive response during test

marketing phase

It is recommended that Thai investors foray into manufacturing in partnership/ JV with any

existing local manufacturers within India.

12.5.2. Entering Theme / Specialty Malls

Product Categories Apparel, Footwear, Personal Care (especially skin care items), Furniture,

Plasticware/ Kitchenware, Home Décor Items, Food Outlets

Recommendations

It is recommended that Thai investors collectively take entire mall space on lease at select

locations (preferably in main market areas) of the top metropolitan cities. Each of the shop

spaces within these malls should then be occupied by single brand outlets across various

product categories. Some of the identified Food and beverage outlets of Thailand would also be

allowed space in these malls. Altogether, these would be malls dedicated to Thai products and

Thai specialties.

Once this concept gets popular in metro cities, there can be step by step expansion plans to tier I

and lower cities.


12.6. Recommendations on Focus within Each Identified Product

Category

Product Categories Category-wise Focus

Apparel and Fashion

Accessories

All types of denim based apparels for men, women and kids

Other fashion and casual apparels for men, women and kids

Footwear

Female footwear (specially the stiletto heel sandals)

There is a need for Thai manufacturers to keep higher quality standards

for female footwears

Personal Care Various available range of products (skin care and cosmetic items, and

health care products)

Plasticware/

Kitchenware All types of plastic wares (including plastic containers)

Furniture Rubber-wood/ Parawood based furniture

Home Décor Artificial flowers, flower vases, lamp shades, electric lamps, paintings,

wall hangings etc.

Processed and Fresh

Food

Sauces, Ketch-ups, and Spices based pastes, and few ready to cook

items (preferably vegetarian); Supply of fresh items such as lettuce leaf

Thai manufacturers need to change the product packaging in following

ways:

no shrimps or fishes should be drawn on the packets

cooking instructions and other details should be in clear font

Green, white and red labels standing for vegetarian, eggetarian and

non-vegetarian items respectively should be clearly put on the

packets


1. ANNEXURE 1

1.1. Company Profiles in Retail

1.1.1 Pantaloon Retail (India) Limited (The future Group)

Year of Incorporation 1987

Ownership Public Limited Company

Retail Sector Activity Department stores, hypermarkets, supermarkets, malls, specialty retail

Principal Fascia Pantaloon, Big Bazaar, Central, Food Bazaar

Corporate Structure

The future group operates through six group companies: Future Retail; Future Capital; Future Brands;

Future Space; Future Logistics; Future Media

Future Retail – Formats

The Company‘s principal formats are Pantaloon, Big Bazaar, Food Bazaar, and the mall concept ‗Central‘.

It is targeting a higher share of the customer‘s wallet by expanding its formats. For most formats, it has

adopted a dual strategy of opening smaller versions in its flagship stores of Food Bazaar, or Big Bazaar,

and opening larger independent stores. It plans to have Pantaloon, Central, Big Bazaar and Food Bazaar

operate as separate companies under the holding company, Future Retail.

Pantaloon Retail

Retail Operations Joint Ventures Subsidiaries and other

ancillary business

Big Bazaar Pantaloon

Food Bazaar

Central aLL

Home Town

Electronic Bazaar Ezone

Furniture Bazaar

Collection I

Liberty (51%)

Alpha (50%)

Galaxy Entertainment (16%) Staples (50%)

Blue Foods (50%)

Talwalkars (50%) AxiomTelecom(50%)

Generali (74%)

Etam (50%) Lee Cooper (50%)

Manipal Heath Services (50%)

Aero Term Logistics (50%)

Future Capital Future Media

Futute Brands

Future Logistics Future Knowledge

Future Bazaar


Table 2: Future Group – Formats

Pantaloon Central Big Bazaar Big Bazaar Super

Centre Food Bazaar BB Wholesale Club

Business

Description

Lifestyle

store

targeting

middle and

upper

middle class

Lifestyle

seamless mall,

housing 300

brands across

different

categories

A hypermarket

targeted at the

middle and lower

income groups,

retailing products

at discounted

prices.

A format larger than

the Big Bazaar

stocking a larger

number of SKUs

A supermarket aimed

at replicating a local

market

simultaneously

providing superior

ambience and storing

over 50,000 stock

keeping units (SKUs)

A store managed by Food

Bazaar catering to the needs of

price sensitive consumers as

well as small retailers by

selling multi packs and bulk

packs of a select range of

FMCG goods at wholesale

prices

Line of Business Lifestyle Lifestyle Value Value Value Value

Product

Offering

Garments,

Accessories

Apparel,

Footwear,

accessories,

entertainment

and recreation

facilities

Food and

Beverage, apparel,

accessories,

consumer durables,

home care and

personal products

Food and Beverage,

apparel, accessories,

consumer durables,

home care and

personal products

Food and Beverage,

FMCG

Food and Beverage, FMCG

Avg Store Area

(sq ft) 20,000 125,000-250,000 30,000-1,00,000 1,00,000 and above 8,000 and above 10,000 and above

No of Stores

(Dec 2007) 40 5 68 5 102 6

Source: Company and Media reports


Other Formats

Table 3: Future Group - Other Formats

Brand Factory Depot Fashion

station

aLL Blue Sky Top 10 Ethnic City

Business

Description

A chain of stores

offering branded apparel

at discounted prices

ranging between 15-

25%.

A store that

retails books,

music,

multimedia,

toys, stationery

and gifts.

Stores that

offer apparel

and other

accessories.

A store

catering to

plus-size

men and

women

Stores offering

branded

accessories like

sunglasses and

watches

Stores catering

to youngsters.

Stores catering to the

working women

population.

Line of

business

Value Lifestyle Value Lifestyle Lifestyle Lifestyle Lifestyle

Product

Offering

Apparel, accessories,

footwear

Books, toys,

stationery and

music

Apparel and

accessories

Apparel

and

accessories

Sunglasses and

watches

Apparel and

accessories

Apparel and accessories

Labels

Offered

Diesel, Espirit, Levi's,

Wrangler, Pepe, Lee,

Louis Philippe,

Bossinni, Arrow, Van

Heusen

None n.a. n.a. n.a. n.a. n.a.

Avg Store

Area (sq ft)

60,000-100,000 300-12,000 7,000-10,000 500-2,000 500-1,000 700-1,000 n.a.

No of

Stores (Dec

2007)

6 78 2 30 34 2 n.a.



Home Solutions Retail Limited

With an investment of Rs 300 million, PRIL set up its 100 percent subsidiary, Home Solutions Retail (India) Ltd. The company

operates formats such as e-zone, Electronic Bazaar, Collection I, Furniture Bazaar and Home Town under this venture.

Table 4: Home Solutions Retail Limited

e-zone Electronics Bazaar Collection i Furniture Bazaar Home Town

Business

Description

A format selling branded

electronic goods and appliances

targeted at the middle and

upper middle class

A format selling

branded electronic

goods and appliances

targeted at middle

class and low income

groups

Store selling

home décor

and

furnishings

Stores selling furniture Stores selling home décor,

furnishings and providing

services such as electrical,

plumbing, painting and

interior decoration

Line of

business

Lifestyle Value Lifestyle Value Lifestyle

Avgas

Store Area

(sq ft)

15,000-30,000 3,000-10,000 10,000 2,000-10,000 1,25,000-2,50,000

Source: Company and Media Reports


1.1.2 Shopper’s Stop

Profile

Shopper‘s Stop Limited was established in 1991 by K Rhea group of companies. The group entered the retail

business with the opening of its first department store at Adhere in Mumbai in 1991. The K Raheja group is a

reputed player in the residential real estate business

Table 5: Shopper's Stop Ltd



Retail Sector Activity Department stores, specialty - books, home products, cosmetics, F&B, baby

care, accessories

Principal Fascia Shopper's Stop, Crossword, Home Stop, Mother Care, MAC, Brio's Arcelia

Shopper’s Stop Limited- Formats

Shopper‘s Stop Limited primarily caters to Sec A and B classes of society through its departmental stores. It has

gained a foothold in the market with a gamut of offerings such as apparel, accessories, footwear, furnishings and

leather products which are retailed through Shopper‘s Stop, cosmetics through MAC stores, music and books by

Crossword and infant wear by Mother Care.


Table 6: Shopper's Stop Limited - Formats

Shopper's Stop Mother Care Arcelia Home Stop MAC Crossword Desi café Brio

Business

Description

These are

departmental

store with strong

focus on lifestyle

retailing

Specialty stores

operating under the

franchisee of Mother

Care Plc, UK to

retail infant wear and

apparel to expectant

mothers

Exclusive

store for

accessories

Premium home

concept stores

The company has tied

up with Estee Lauder

and operates stores

under the brand

name, MAC, in

Mumbai. It was

launched in 2005

These are the

company's

books and

music retail

stores

A fast food

concept

within its

stores

named 'Desi

Café'

These are Café

Bistro's

operated by

the company

within its

outlets

Vertical Departmental

store

Baby care Specialty

accessories

Home Furniture

and Furnishings

Cosmetics Books and

Music

Catering Catering

Product

Offering

Apparel, Home

Furnishings,

accessories,

footwear

Mother's to be

apparel, infant wear,

accessories,

footwear, toys

Cosmetics,

jeweler,

sunglasses,

footwear,

watches,

bags

Furniture,

furnishings,

home

accessories,

Crockery and

home appliances

Cosmetics(Clinique

and Estee Lauder)

Books,

magazines,

CD-ROMs,

music

stationery and

toys

Indian food Coffee and

Pastries

Avg Store

Area (sq ft)

50,000-80,000 3,000-6,000 8,000-

10,000

30,000 n.a. 3,000-8,000 n.a. n.a.

No of Stores

(Dec 2007)

23 13 2 2 3 43 5 18



Hypercity Retail (India ) Ltd

The Raheja group made a foray into the food and grocery business through HyperCity Retail (India) Ltd in March

2007. Shopper‘s Stop has an option to buy 51 per cent stake in HyperCity Retail by 2009. Spread over 120,000 sq ft,

HyperCity stocks a wide range of products such as groceries, fresh foods,. Home needs, garments and other

consumer durables.

Table 7: Hypercity

Business Description Hypermarkets catering to middle and upper class markets

Line of Business Hypermarket

Avg store area (sq ft) 120,000


HyperCity – Argos

SSL and HyperCity Retail India Ltd have jointly signed a memorandum of understanding (MOU) with UK based

Home retail group to develop the Argos format (catalogue retailing format) in India. The venture will be called

HyperCITY – Argos. Home retail Group will franchise the Argos concept to the joint venture company. The Argos

format will provide the joint venture its brand catalogue, multi channel experience and IT support, along with

expertise in developing sales through the Internet. SSL has subscribed to a 51% stake in Gateway Multi Channel, a

home and general merchandising retailer, in June 2007, to support this venture. In India, the business model would

involve display centres, online, and call and collect counters that would cater to customers in a particular area.

Large catalogue stores: Spanning across 5,000-10,000 sq ft, these stores enable customers to view products by

browsing through catalogues. There is also a special section in the store, where customers can see products and

enjoy a demonstration.

Call and collect stores: These stores span across 300-500 sq ft. They enable customers to make purchase

decisions by browsing through catalogues. Products will be home delivered from these stores.


1.1.3 Reliance Retail Ltd

Profile

Reliance Retail Ltd(RRl) is the wholly-owned subsidiary of Reliance Industries Limited, pioneered by Mukesh

Ambani. The launch of ‗Reliance Fresh‘ at Hyderabad in October 2006 marked its direct entry in the retail sector.

Prior to this it experimented by operating Mumbai-based Sahakari Bhandar in 2006. The company operates formats

such as hypermarkets, supermarkets and convenience stores, along with specialty stores in apparels, consumer

durables, wellness and healthcare, footwear and Jwellery.

Table 8: Reliance Retail Limited


Ownership Private Limited Company

Retail Sector Activity Hypermarkets, supermarkets, convenience stores, specialty retail

Principal fascia Reliance Fresh, Reliance Mart, Reliance Digital, Reliance Trendz,

Reliance Footprint, Reliance Jwellery



Reliance Retail Formats

Table 9: Reliance Retail Formats

Reliance Fresh Reliance Digital Reliance Mart Reliance Mini

Mart

Reliance

Trendz

Reliance

Wellness

Reliance

Home

Reliance

Footprint

Reliance

Jewels

Vertical Food &

Grocery

Specialty-

Consumer

durables

Hypermarket Supermarket Specialty-

Apparel

Specialty-

Wellness

Products

Specialty -

Home

Specialty-

Footwear

Specialty-

Jewels

Line of

Business

Value Lifestyle Value Value Lifestyle Value Lifestyle Value Lifestyle

Area 3,000-5,000 15,000-30,000 50,000-2,50,000 10,000-50,000 30,000 1,500-3,500 40,000-60,000 8,000-

10,000

2,000-

20,000

Product

Offering

Fresh fruits,

vegetables and

dairy products

Electronic goods

and household

appliances

Apparel, consumer

durables, footwear

Apparel,

footwear

Food &

Grocery,

Apparel

Pharmaceutica

ls and medical

services

Furniture and

furnishings

Footwear Jwellery

Private

Labels

Reliance Street none Reliance Select,

Reliance Dairy,

First Class, Spirit,

Contra, Hero,

DNM-X, Cyber

Gear, Buzz, Sparsh,

Networks, Netplay,

Panda

Reliance

Select,

Reliance Dairy

Pure

Spirit, Contra,

Hero, Cyber

Gear, Buz,

Sparsh,

Networks,

Netplay, Panda

n.a. n.a. Viviana,

Tosca,

Mancini,

Monza,Hi

-Attitude

None



Supply Chain

RRL is launching captive cargo services by entering into a sales and buyback agreement of a ‘50

cargo aircraft‘ order with Boeing. This will facilitate transportation of fruits, flowers, and

perishables to the company warehouses.

State agri-distribution hubs: These hubs will act as collection centres in their respective states,

routing the bulk produce to the central distribution hub in its SEZs, from where it can be exported

as well as dispatched to various retail outlets across the country.

Farm Supply Hubs: The Company is setting up 1,600 farm supply hubs across the country.

These UBS will facilitate the purchase of farm produce and sale and provision of farm supplies

such as fertilizers, seeds, fuel and credit to farmers. Farmers can also avail of the benefit of selling

their produce in these hubs. Hubs will benefit the company by connecting farms and the

unorganized retail through a distribution system.

Creation of Retail Space

RRL is following a twin model of expansion, which includes both owning and leasing retail space. It has

acquired 1,260 properties for Reliance Fresh stores and Reliance Mart across the country. It is planning to

lease out 100,000 acres of farmland at a fixed price in Pune to grow vegetables, flowers and produce. That

apart, it is also acquiring properties across the country to set up captive vegetable and fruit mandis.

Private Labels

RRL is entering into exclusive agreements with textile companies such as Arvind Mills, Celebrity Fashions

Ltd and Indus League Clothing Ltd to develop exclusive brands for its retail outlets.

Table 10: Exclusive Brands

Name Manufacturer

Spirit Indian Terrain

Contra Indigo Nation

Hero Arvind Mills- Wrangler

Cyber Gear Vibe Private Ltd

Buzz Blackberry

Source : Media Reports

The company has other private labels which it currently retails through its hypermarkets as well as

specialty store, Reliance Trendz. It plans to maintain the share of private labels at 35-40 percent.


1.1.4 RPG Enterprises

Profile

One of India‘s large conglomerates, RPG Enterprises has business interests in retail, technology,

entertainment, power and transmission, tyres and life sciences. It entered the retail sector in 1996 by setting

up Food World Supermarkets inn a joint venture with Dairy Farm International prior to FDI restrictions

were levied in India.

The joint venture with Dairy Farm International (DFI) was called off in 2005. After the split:

RPG retained 48 out of the 93 Food World (FW) stores under the brand, Spencer‘s. It set up additional

formats such as Spencer‘s-Express, Fresh, Daily, Super and Hyper. Music World (MW) was also

retained under the group.

The healthy and beauty chain, Health and Glow (HG), and remaining stores of FW were retained by

Dairy Farm International.

The Company‘s shifted its headquarters from Chennai to Kolkata.

The Company‘s retail business currently operates through the following three formats: Spencer‘s Retail,

Music World and Books & Beyond.

Table 12: RPG Enterprises- RPG Retail


Ownership Private

Retail Sector Activity Convenience Stores, supermarkets, hypermarkets, specialty stores

Principal fascia Spencer's - (Express, Fresh, daily, Supermarket, Hypermarket):

Music World; Books & Beyond



1.1.5 Spencer’s Retail

Part of RPG group, Spencer‘s retail operates a chain of supermarkets across the country. It has a network of

320 stores across 45 cities, spanning 1 million sq ft. Spencer‘s Retail runs food and grocery outlets across

the country under the following formats:

Table 13: Spencer's Retail Formats

Spencer's Express Spencer's Daily Spencer's Super Spencer's Hyper

Business

Description

A convenience

store format,

stocking fresh

produce

A format larger than the

Express store with

similar product offerings

at discounted prices

A supermarket

format with a larger

basket of product

offerings

A hypermarket format offering

products at low costs

Vertical Value Value Value Value

Product

Offering

Fresh Produce,

dairy and bakery

products

Fresh produce, dairy-

bakery products

Fresh produce, dairy-

bakery products,

FMCG, home care

and personal products

and frozen foods

Fresh produce, dairy-bakery

products, FMCG, home care and

personal products and frozen

foods

Avg Store

Area (sq ft)

1,000 4,000-7,000 8,000-15,000 25,000

No of Stores

(Dec 2007)

66 231 11 12


Centralized Purchase: Spencer‘s Retail runs a consolidated centre near Bangalore for the bulk purchase of

fruits and vegetables directly from farmers. This enables the Company to maintain low prices and offer

discounts.

Specialty Stores

Music world

Music World started its operations in November 1997 by taking over Saregama. Its main competitor is

Planet M, belonging to the Videocon Group. Its retail business operates under the following formats:

Destination Stores- These stores, admeasuring more than 4,000 sq ft, stock different types of

music.

Express/Franchisee Stores- These are 300-600 sq ft stores located independently in malls or as

shop in shops within large departmental stores.


Unplugged- These are small gondolas, which are run as concessionaires in other departmental

and large stores.

Books & Beyond

It is a new format conceptualized by the Company during the year, offering books, toys, gifts and

stationery, along with music and home videos. It also has a dedicated section for music and home videos

from Music World. The first store was launched in 2007 at the Megacity Mall in Gurgaon.


1.1.6 The Tata Group

Profile: Established in 1998, Trent is part of the Tata Group, one of India‘s large business

conglomerates. It started its retail operations by acquiring the UK-based Littlewoods department store

in Bangalore in 1998. Its chain of stores is called ‗Westside,‘ which operates 28 stores in major Indian

cities. It also runs a hypermarket, Star India Bazaar, and a specialty store retailing books and music

called Landmark. The group also runs a chain of electronic and appliance store, Croma, under the

group company, Infiniti Retail.

Table 14: Tata Trent Ltd



Retail Sector Activity Apparel stores, specialty-Books,Music, Hypermarket

Principal fascia Westside, Landmark, Star India Bazaar


Corporate Structure of Tata Trent

Tata Trent – Formats

Table 15: Trent Ltd-Formats

Westside Star India Bazaar Landmark

Business

Description

A departmental store format

primarily retailing apparel

Hypermarket format of the company aimed at

offering products at discounted prices

Specialty store retailing

books, music, etc

Line of

Business

Lifestyle Value Lifestyle

Product

Offering

Apparel, home accessories,

artifacts, furnishings

Fresh fruit and vegetables, staples, FMCG,

health and beauty products, home products,

footwear, jeweler, consumer durables

Books, stationery, greeting

cards, gift items, toys, music

Avg Store

Area (sq ft)

15,000-30,000 50,000 12,000-45,000

No of Stores

(Dec 2007)

60 25 29


Tata Ltd

Trent Ltd Infiniti Retail Ltd

Westside Star India Bazaar Landmark Croma


Trent acquired Landmark, a Chennai based books and music retail chain, in 2006 for Rs 1, 085 million. The

bookstore, which commenced operations with a single store in 1987, now has 10 stores across the country.

Private Labels

Private labels contribute to most of the revenue, with their share being over 80 per cent. The store caters to

the middle class through quality and mid-price segments, providing value for money along with fashion

Table 16: Private Label

Men's Wear Indian Wear Kids Wear

Edward Navya Tammy

France Giovanni

Spike

Fashion Street

Source: Company Reports

Infiniti Retail

Croma

The Company has initiated a new venture called ‗Infiniti Retail Ltd‘(a wholly-owned subsidiary of Tata

Sons) by entering into a technical-cum-sourcing agreement with Woolworths, an Australian retailer. Under

this venture, the company retails multi-brand consumer electronics and consumer durable store, Croma.


1.1.7 Subhiksha Trading Services

Profile

Chennai based Subhiksha Trading Servcoces, a private limited company, operates a chain of supermarkets-

cum-pharmacies called ‗Subhiksha‘. It was established in March 1997 as a chain of 10 stores in Chennai by

banker turned businessman, R Subramaniam. Initially its main operations were confined to South India,

particularly Tamilnadu. This chain primarily targets the middle and lower income population.

Table 17: Subhiksha Trading Services

Ownership Private

Retail Sector Activity Supermarkets, Pharmacies, Mobile Stores

Principal Fascia Subhiksha, Subhiksha Pharmacy, Subhiksha Mobile

Source: Media reports

Subhiksha is a food chain offering discounts in the range of 8-10 percent. It follows a bulk sourcing

strategy, coupled with low operating costs, to make discounts possible. On an average, Subhiksha stores

span across 1,500-2,000 sq ft and offer a discount of 8-10 per cent. The company operates in four areas:

fruits and vegetables, pharmacy, FMCG and telecom through three formats- Subhiksha, Subhiksha

Pharmacy and the newly introduced Subhiksha Mobile.

New Format

Subhiksha Mandi: This new format offers only fruits and vegetables. Its average size is around

600 sq ft. Currently, the company operates 12 store in Delhi and plans the concept in Pune.

Subhiksha Mobile: Subhiksha has started retailing mobiles through stores titled ‗Subhiksha

Mobile‘. These stores offer low prices on branded mobile phones.

Strategy

In order to facilitate a strong supply chain, the company has tied up with farmers to purchase their

produce at current price levels under a preferred buying arrangement

The company has set up a Centralised Processing Unit(CPU) at Nashik, as it sources 50 per cent

of fruits and vegetables under Contract farming to meet the requirements of all its stores.

At Ahmedabad, apart from retailing fruits and vegetables, the company operates two new

verticals, pharmacy and telecom, which involve retailing handsets and phone connections.


1.1.8 Aditya Birla Retail

Profile

The Aditya Birla Group, one of the largest Indian conglomerates, is valued at $24 billion. The group has

interests in varied sectors such as metals, cement, fertilizers, textiles and insurance. It has a presence in

over 20 countries. It made a foray into the retail industry by acquiring south-based retail chain, Trinethra.

Currently, it operates around 300 outlets across the country.

Strategy

Aditya Birla Retail acquired 170 stores of the south-based retail chain, ‗Trinethra,‘ for Rs 1.5

billion in 2006 which is being rebranded to ‗More‘ by the Company.

The company has launched two ‗More‘ hypermarkets in Baroda and Mysore, with a floor space of

70,000 sq ft each.

The acquisition of Trinethra has provided the company wit an employee base of 4,000 people. It

plans to hire between 10,000 and 15,000 employees by 2012.

It would maintain a mix of hypermarkets (avwerage75,000 sq ft) and supermarkets (average

10,000 sq ft) in its portfolio.

As part of its sourcing strategy, the company has set up a sourcing centre for fresh farm products

such as fruits and vegetables, and has established direct linkages with farmers and suppliers.

The chain is also covering categories such as groceries, processed foods, bakery products and

personal care products through its private labels, More and Select.

It has tied up wit Apollo hospitals to set up pharmacies within its supermarkets.


2. ANNEXURE II

2.1. City-wise Rental Trends

Following is the rental trend for top Indian cities during the second quarter of August-November, 2008

(Source: India Retail Report, 2009)

2.1.1 Delhi

Prime Main Street Rents-2008

Location Rent % Growth Short

Term

Trend

/sq.ft/mth Measurement

INR US$ EURO 3 Month 1 Year

Khan Market 1,335 31.26 20.05 0% 12%

Connaught Place (Inner Circle) 800 18.74 12.02 0% 3%

South Extension 1 & II 1,055 24.71 15.85 5% 23%

Karol Bagh 550 12.88 8.26 24% 24%

Basant Lok 806 18.88 12.11 0% 0%

Greater Kailash I, M Block 1,075 25.18 16.15 2% 17%

Prime Mall Rents-2008


Term

Trend



South Delhi 662 15.5 9.94 0% 6%

West Delhi 410 9.6 6.16 0% -4%

Noida 478 11.19 7.18 0% 0%

Gurgaon 385 9.02 5.78 0% 16%

Exchange rate: USDI = INR 42.70, EURU I = INR 66.58

LEGEND:

Market Rising Market Falling Market Stagnant likely to Strengthen

Market Stagnant Likely to Weaken Market Stagnant


2.1.2 Mumbai



Term

Trend



Linking Road 1,350 31.62 20.28 0% 123%

Kemps Corner/Breach Candy 950 22.25 14.27 0% 84%

Colaba Causeway 960 22.48 14.42 0% 195%

Lokhandwala Andheri 390 9.13 5.86 0% 37%

Fort Fountain 450 10.54 6.76 0% 91%



Term

Trend



Lower Parel 700 16.39 10.51 0% 36%

Malad 525 12.3 7.89 0% 35%

Link Road Andheri (W) 415 9.72 6.23 0% 19%

Mulund 360 8.43 5.41 0% 18%

Goregaon 600 14.05 9.01 58% 107%

Vashi 300 7.02 4.51 0% 4%

Ghatkopar 350 8.2 5.26 5% NA

Exchange rate : USDI = INR 42.70, EURU I = INR 66.58

LEGEND:




2.1.3 Pune



Term

Trend



MG Road 400 9.36 6.01 0% 33%

JM Road 400 9.36 6.01 5% 135%

FC Road 240 5.62 3.6 0% 55%

Koregaon Road 250 5.85 3.75 11% 100%

Aundh 200 4.68 3 0% 54%

Bund Garden 240 5.62 3.6 0% NA



Term

Trend



MG Road 380 8.9 5.71 9% 27%

Bund Garden 350 8.2 5.26 0% 75%

Kalyani Nagar 225 5.27 3.38 0% NA

Ganesh Khind Road 220 5.15 3.3 0% 19%

Nagar Road 180 4.22 2.7 0% NA


LEGEND:




2.1.4 Ahmedabad



Term

Trend



CG Road 190 4.45 2.85 0% 21%

Law Garden 130 3.04 1.95 0% 13%

Satellite Road 105 2.46 1.58 0% 14%

SG Highway 90 2.11 1.35 0% 20%



Term

Trend



Vastrapur 200 4.68 3 0% 14%

SG Highway 153 3.58 2.3 0% 20%

Drive-in Road 105 2.46 1.58 0% 7%

Kankaria Lake 100 2.34 1.5 0% 18%


LEGEND:




2.1.5 Bengaluru



Term

Trend



MG Road 240 5.62 3.6 0% 5.50%

Brigade Road 375 8.78 5.63 7% 14%

Commercial Street 250 5.85 3.75 10% 10%

100 Feet Road, Indiranagar 250 5.85 3.75 -6% 5.30%

Jaya Nagar 4th

Block, 11th

Main 260 6.08 3.91 -1% 13%

Sampige Road, Malleswaram 135 3.16 2.03 2% 6%

Koramangala 80 Feet Road 185 4.33 2.78 1% NA

Vittal Mallya Road 300 7.02 4.51 -6% NA

New BEL Road 140 3.27 2.1 2% NA



Term

Trend



Koramangala 485 11.35 7.28 0% 0%

Magrath Road 368 8.6 5.53 0% 0%

Cunningham Road 225 5.26 3.38 0% 0%

Mysore Road 165 3.86 2.48 0% 10%

Exchange Rate : USDI = INR 42.70, EURU I = INR 66.58

LEGEND:




2.1.6 Hyderabad



Term

Trend



NTR Gardens 110 2.58 1.65 0% 5%

Himayathnagar 140 3.28 2.1 12% 14%

Banjara Hills Road No.1 225 5.27 3.38 0% 34%

2.1.7 Chennai



Term

Trend



Nungambakkam High Road 160 3.75 2.41 0% 60%

Khadar Nawaz Khan Road 200 4.68 3 0% 33%

Cathedral Road – RK Salai 150 3.51 2.25 0% 33%

Usman Road – South 140 3.28 2.1 4% NA

Usman Road – North 100 2.11 1.35 11% NA

Adyar Main Road 150 3.51 2.25 0% 50%

Anna Nagar 2nd

Avenue 150 3.51 2.25 0% 41%

Purasavakkam High Road 90 2.11 1.35 0% 13%



Term

Trend



CBD 250 5.85 3.75 -2% 33%

Suburbs 188 4.1 2.82 0% 25%

Exchange Rate: USDI = INR 42.70, EURU I = INR 66.58

LEGEND:




2.1.9 Kolkatta



Term

Trend



Park Street 268 6.3 4.02 0% 15%

Camac Street 268 6.3 4.02 0% 15%

Elgin Road 233 5.5 3.5 0% 27%

Theatre Road 233 5.5 3.5 0% 27%



Term

Trend



South Kolkata 395 9.3 5.94 6% 39%

Salt Lake 500 11.71 7.51 0% 24%

Rajarhat 190 4.45 2.85 57% 111%

Elgin Road 404 9.5 6.07 0% 24%

Exchange Rate: USDI = INR 42.70, EURU I = INR 66.58

LEGEND:




3. References

Primary Research – Expert Interviews

List of Companies with whom Depth Interviews were conducted as part of Primary

Research on this Study:

Metro Shoes Ltd., Mumbai

General Merchandize, Pantaloon Retail India Ltd., Mumbai

Big Bazaar, Pantaloon Retail (India) Ltd., Mumbai

Food Bazaar, Pantaloon Retail (India) Ltd., Mumbai

Staples – Buying & Merchandizing, Aditya Birla Retail Ltd., Mumbai

Processed Food – Buying & Merchandizing, Aditya Birla Retail Ltd., Mumbai

Shoppers‘ Stop Ltd. (Raheja Group), Mumbai

Home Stop (Raheja Group), Mumbai

Vishal Retail Ltd., New Delhi

Mc Donald‘s India, Connaught Plaza Restaurants Pvt. Ltd., New Delhi

Café Coffee Day, Bangalore

Furniture - Home Solutions – Pantaloon Retail (India) Ltd., Mumbai

Durian, Mumbai

Style Spa, Mumbai

Godrej Interio, Mumbai

Odyssey India Ltd., Chennai

Landmark (Tata Group), Chennai

Ansal properties & Infrastructure Ltd., Gurgaon

Mohann‘s Estate Consultant – Retail, Mumbai

Franchising Association of India, Mumbai

One or more than one interviews were conducted with each of the above mentioned

companies to capture the required details.


Secondary Research Sources

The India Retail Story, India Retail Report 2009, Images F & R Research

Hiscock Geoff, India‘s Store War, Retail Revolution and the Battle for the Next 500

Million Shoppers, August 2008

Industry Monitor, Retail, Cygnus – Business Consulting & Research Pvt. Ltd., 2008

Investment in India - Overview, Paras Kuhad and Associates, Advocates, 2008

Reports on Modern Retail in India, CRISIL Research Pro, 2008

Joseph Mathew, Soundararajan Nirupama, Gupta Manisha and Sahu Sanghamitra, May

2008, Impact of Organized Retailing on the Unorganized Sector, ICRIER

Economic Survey of India and Technopak analysis, March 2008

The Logistic Challenges of Doing Business in India, Logistics Management, Feb 2008

Indian Food Retailing, Cygnus – Business Consulting & Research Pvt. Ltd., 2007

Industry Insight- Apparel Retailing, Cygnus Business Retailing & Research, July 2007

Global Retail Development Index 2007, AT Kearney, June 2007

The C Factor, Solving the Supply Chain Puzzle in India, March 2007, DHL

Retail in India – Getting organized to drive growth, AT Kearney, 2007

IMAGES Malls in India Study, 2007

India Retail Report 2007 (www.indiaretailing.com), January 2007

Press Release of India Retail Report 2007, Ministry of Commerce & Industry,

Department of Commerce, Government of India, January 2007

The Great Indian Retail Story, Ernst & Young India, 2006-07

F&B (Servicing) Retail India in India, Food Forum India, 2006-07

http://www.indiaretailing.com/


Government of India, Census and Projections, 2001

Retail Marketing Research – India, Research Wikis

Retail FAQ, Propagent

Lease Terminology, REALTECH Real Estate Services

Articles from India Real Estate Monitor

Various News Updates and Study Articles on Retail Sector from The Hindu, The

Economic Times, The Times of India & Others

1998 handbook - college of intensive care medicine

Documents