ORGANIZED RETAIL SECTOR IN INDIA

Prepared By:Arun Goel

MBA (4th Sem.)05015603909

Meaning of Retail:

Derived from from the French word retaillier meaning 'to cut a piece off' or 'to break bulk

Means to sell product or services to final consumers in small quantities

Also adds value to products & services sold for final consumption

International Retail: At a Glance One of the world’s largest industry exceeding US $ 9 trillion

47 Global Fortune 500 companies & 25 Asia's Top 200 companies are retailers

Dominated by developed countries

US, EU & Japan constitutes 80% of world retail sales

38%

27%

13%

8%3% 2% 9%

USA EU Japan China

India Russia Others

Share of Organized Retail

Percentage of Organized Retail

85 81

5540 36 30

20 204.6

0

20

40

60

80

100

US

A

Taiw

an

Mala

ysia

Thaila

nd

Bra

zil

Indonesia

Pola

nd

Chin

a

India

International Learning Total retail contribution in World GDP is 27% Organized retail in US accounts for 22% of GDP Share of organized retail in developing markets ranges between 20% to 55% Retail markets are organizing faster In developed markets, dominant player (Wal-Mart in US, Tesco in UK) has a significantly higher share; enjoying up to 8-13% market share Departmental stores growth is declining while ‘All-under-one-roof` & ‘neighborhood’ convenience is gaining strength

Retail Landscape in India

Indian Retail - dominated by unorganized sector Approximately 2 million Mom and Pop Shops Share of organized retail sector is only 4.6% FDI in the retail sector not permitted to protect local retailers (excepting for single brand & cash and carry formats. In this FDI is 51%.) Indian retail sector is one of the least concentrated in the world. The top five companies hold a combined market share of less than 2% India is third largest market in Asia behind Japan and China.

Retail consumption by

Indian retail is dominated by food & grocery which contributes > 65% of Rs 9.3t retail market, almost 99% of this is dominated by kirana stores.

Organized Retail in India

The share of organized retail in total retail pie is set to increase from 3% to about 10 - 12 % by 2015.

Key Trends Existing players expanding to smaller towns

Number of existing players like Big Bazaar, Shopper’s Stop, Piramyd are planning expansion in smaller cities

Indian business houses in retail Many business houses are planning retail entry

/ expansion either on their own or through partnerships

Global Players planning entry in India Some of world’s largest retailers - evaluating

entry in India including Wal-Mart, Carrefour,Tesco, IKEA, Best Buy, Lowe's, Kingfisher Group, Auchan, Woolworth, NTUC etc.

Shop Rite, Metro, Marks & Spencers, & Spar are already here

Some have setup Sourcing / Back-office centers e.g. Tesco, Wal-Mart, etc.

Rural opportunity - becoming interesting for organized retailers

Current Retail Growth

Indian retail industry ~ Rs 990,037 Cr (USD 300 bn), growing at 5-6% p.a.

Organised retail industry ~ Rs 35,000 Cr (USD 7.7 bn), growing at 25-30% p.a.

943990

10401092

11461203

1264

28

35

44

55

68

85

107

0

200

400

600

800

1000

1200

1400

2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

Rs '000 C

r

0

20

40

60

80

100

120

Rs '000 C

r

Total Retailing Market ( Rs '000 Cr) Organized Retailing (Rs '000 Cr)

SWOT ANALYSIS…………… Strengths

Increasing demand driven by the country’s young working population Increase in per capita income Technology intensive industry

Weaknesses Inadequate Infrastructure Government Restrictions on FDI

Opportunities Upcoming international Players Indian rural markets offer a sea of an opportunity for the retail sector Healthy prospect for the fashion industry

Threats Competition from unorganized Sector Increasing Real Estate prices

Gaps in Current Organized Retail Lack of right formats catering to needs especially “All Under One Roof” formats

Absence of single trusted player with pan-India presence

No investment in supply-chain infrastructure.

Sole focus on front-end with minimal back-end linkages (DC, logistics, cold chain, vendor & farmer development, etc.)

Inconsistent availability, quality & pricing

Transactional approach, minimal focus on customer service over the life-cycle

CONCLUSION…… The future for organized retail in India is a bright one The retail industry needs to get organized and drive its own destiny

The government needs to relax norms on foreign direct investment

Keep in mind buying habits of Indian consumer