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International Perspectiveon Developments in Retailing

Major Impact and Implications for India

Sue J F Evans

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Retailers belongRetailers belong to a place called… to a place called…

Retailers belongRetailers belong to a place called… to a place called…

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… a population of mastodons

… always ready for cannibalism

… invading green pastures worldwide

… healthier than ever

4

50

46

39

Nestlé

Unilever

P. Morris73

Suppliers

P&G

Retailers – A population of mastodons: Nine retailers belong to Global Fortune 100

Global Fortune 100- Ranking and 2001 revenues in $bn -Ranking

Wal-Mart

40

41

44

50

54

60

220

62

38100

93

89

83

72

68

56

55

46

38

35

24

1

Home Depot

Ahold

Kroger

Metro

Sears

Target

Albertson's

Carrefour

Retailers

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Retailers: Always ready for cannibalism

Wal-MartWal-Mart

CarrefourCarrefour

CasinoCasino

CBDCBD

AuchanAuchan

ASDAASDA

PromodPromodééssComptoirs ModernesComptoirs Modernes

LaurusLaurus

Jeronimo MartJeronimo Martiins ns (Brazil)(Brazil)

Docks de FranceDocks de France

…… have bought over …have bought over …

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Retailers: Invading green pastures worldwide

International presence of top 20 retailers

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Retailers: Healthier than ever

20%

13%11%

10%

Return On Capital Employed (ROCE)- 2001 -

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Cannibalism will accelerate

Retailers are pushed to look for new "green pastures”

Genetic mutation – retailers succeed in building brands

Major trends

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Cannibalism: Suppliers still have the largest slice of the cake, but retailers will fill the gap rapidly…

Comparison of ROCE among retailers and suppliers2001

Retailers Suppliers

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…And will emulate the concentration that has already taken place amongst suppliers

Leclerc16

L'Oréal41 P&G

25

Coca Cola66

Intermarché12

Private Label13

Unilever 9Unilever

25 Carrefour 12

Pepsi 8

Private Label 7

Henkel 20

Auchan 10

P&G 5

Colgate 10

Système U 6

Colgate 3

Private Label12

Géant 4Cora 3

Other37

Other 8Other13

Other35

Colas Shampoos Detergents

Suppliers Retailers

Market shares in France- 2001 volumes, in % -

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Green Pastures : Retailers have already entered the obvious geographies and reached critical mass

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To help retailers prioritize their expansion plans, A.T. Kearney has recently published the Global Retail Development Index

Based on expert interviews and extensive local data

Covering 180 countries worldwide

Driven by three major questions

• Economic stability

• Political risk

• Debt, credit balance

• …

Is the country economically viable?

• Modern retail area per inhabitant

• Number of international retailers in the country

Is the retail market attractive?

• Modern retail area growth rate compared to GDP growth rate

When do I have to go there?

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India ranks number 6… and is already very seriously on the radar screen of major retailers

GRDI 2002 Index between 0 and 100

70

76

61

62

63

65

69

69

70

61Egypt

Turkey

Chili

Vietnam

India

Morocco

Russia

Hungary

Slovakia

China

On the radar screen

57

61

52

57

56

56

55

55

54

52

Taiwan

Mexico

Romania

Colombia

Bulgaria

Venezuela

Thailand

South Africa

Korea, Rep.

Ukraine

To consider To avoid

51

24

51

50

49

46

46

42

26

Argentina

Poland

Indonesia

CzechRepublic

HongKong

Brazil

Philippines

Israel

Malaysia

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Genetic Mutation: When retailers succeed in building powerful brands

= 100% private label = big results

Part of the Casino Group

Surface : 1,000 sqm

# SKU : 2,800 (mostly food)

ONLY PRIVATE LABEL

Pricing : Nielsen index 90

Assortment : deep

Leader Price Concept

Leader Price

Leader Price

+10%

6%

Results

Sales evolution1st half 2002/2001

(pro forma)

Operating margin%

Global expansion(# stores)

•France (100)•Poland (70)•Thailand•Argentina•Benelux

Other supermarkets3.9%

Other supermarkets4.2%

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Implications for India

Be ready!

… retail mastodons will enter the Indian "green pastures"

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“Organised” retail in India will inevitably grow as income levels and urban concentration increase

0

25

50

75

100

0 2 000 4 000 6 000 8 000 10 000

Indonesia Thailand

China

Brazil

Poland

Malaysia

India0

25

50

75

100

0% 10% 20% 30% 40%

IndonesiaThailand

Poland

Brazil

China

India

Malaysia

By 2007, the Top 10 states in India would have an average per capita GDP c $5,000By 2007, the Top 10 states in India would have an average per capita GDP c $5,000

Organized retail penetration (%)

Organized retail penetration (%)

Per capita GDP ($)

Urban concentration (% of pop. In top 8 cities)

GDP URBANISATION

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Implications for India

Be ready! Be realistic!

…. Small players can flourish in the changing environment if they adapt themselves

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Evidence from other emergent markets shows that traditional outlets will survive

1996 1997 1998 1999 2000

Specialists

Independent grocers

Convenience stores

Discounters

Cooperatives

Hypermarkets

Supermarkets

Source: Euromonitor

CHINARetail structure in number of outlets (absolute numbers)

10,122,000

12,936,000

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Implications for India

Be ready!

Be realistic!

Be resilient!

… Indian retailers can benefit from adopting latest retail management techniques to improve efficiencies

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AND DON'T FORGET…AND DON'T FORGET…

… … dinosaurs sometimes disappear !!dinosaurs sometimes disappear !!