retail management ver i

8/6/2019 Retail Management Ver i

1/43

Prof Vidhya Srinivas


2/43

` A dvantage India

`

Market overview` Investments

`

Policy and regulatory framework` Opportunities


3/43

` Increase in consumer class : Indias consumer class is estimated to grow nearly twelve-fold (from50 million at present)to 583 million by 2025, withmore than 23 million people likely to be listedamong the worlds wealthiest citizens.

` India Emergence of organized retail business: lowcost of operations, low cost and abundance of labour, potential untapped markets.


4/43

` R ising incomes and purchasing power: The per capita income in India in 20092010 more thandoubled to US$ 849 from US$ 348 in 200001.

` Changing consumer mindset: The mindset of theIndian consumer is changing dramatically, withtheir focus shifting from low price to convenience,high value and a superior shopping experience.


5/43

` B rand consciousness: There is high brandconsciousness among the youth 60 per cent of Indias population is below the age of 30.

` Easy consumer credit: With the emergence of concepts such as quick and easy loans, easymonthly installments (EMI), loan through creditcards and loan over phone, it has become easy

for Indian consumers to afford expensive products


6/43

` Indias retail market, valued at US$ 353 billion in 2010, isprojected to grow at a rate of 12 per cent per annum.

` The countrys retail sector is the second-largest employer after agriculture, with retail trade employing 35.06 million*and wholesale trade generating additional employment for 5.48 million people.

` Food is the largest segment in terms of its contribution tothe total value of the retail market, followed by fashion andfashion accessories.


7/43


8/43


9/43

` India is at an early stage of evolution in the organized retailspace, with the current penetration pegged at 4-5 per cent, whichindicates a huge growth potential.

` The share of organized retail in the total Indian retail trade pie isprojected to grow at 40 per cent per annum.` Organized retail formats, including departmental stores,

hypermarkets, supermarkets and specialty stores, are fastreplacing traditional retail formats such as kirana stores (small

mom-and-pop general stores) due to rising consumer expectations.


10/43


11/43


12/43


13/43

` The franchisee model has adapted well to Indian marketconditions, providing opportunities for a large number of entrepreneurs to work with the support of big brands.

` Global players, such as Tommy Hilfiger, SP AR International,Costa Coffee, Hertz, R adisson, Kentucky Fried Chicken (KFC),Dominos Pizza, T.G.I. Fridays, R uby Tuesday, Subway,Mothercare and McDonalds, have become forerunners in Indiathrough the franchisee route.

`

The franchising revolution is, however, not limited to globalbrands. Many Indian brands, such as Park A venue, Color Plus,Provogue, Nirulas, Sagar R atna, Woodlands and Liberty, havealso increased their market presence via this route.


14/43

` Presence of more than 600 active franchisors inthe country

` Presence of more than 40,000 franchisees (acrosssectors) in India

` The total manpower directly employed by thesefranchising businesses is about 300,000


15/43

` With the rise in disposable incomes and increasingurbanization, the number of luxury goods consumersin India is increasing rapidly.

` Currently valued at US$ 3.5 billion, the Indian luxuryretail market is expected to grow to US$ 30 billion by2015, an estimated growth rate of 25 per cent per annum, making India the twelfth-largest luxury retailmarket in the world.


16/43


17/43

R ural Consumption

` R obust consumption in the rural economy is one of the keyfactors that has contributed to Indias consistent growth, evenduring the 200809 global economic slowdown. This can beattributed to the fact that rural India accounts for more than 70per cent of all Indian households and close to two-fifths of thecountrys total consumption pie.

` A ccording to industry estimates, Indias rural economy constitutes45 per cent of its GDP.

` A large number of organizations derive a significant proportion of their overall sales from small cities, which reflects the growingeconomic importance of India's rural consumer.


18/43

` A large number of organizations derive asignificant proportion of their overall sales fromsmall cities, which reflects the growing economic

importance of India's rural consumer.

` R etail and fast-moving consumer goods (FMCG)players have begun devising exclusive marketing

strategies to tap the rural consumer base


19/43


20/43

` T AT A : Landmark (books and music), Croma(multi-brand electronics), World of Titan (watches),Tanishq(jewellery), Titan Eye+ (eye wear),Westside (lifestyle retail store), Star B azaar (hypermarket chain), Fashion Yatra(family fashionstore)


21/43

` Future Group: Central (shopping mall), B ig B azaar (hypermarket), Pantaloons (fashion outlet), B lue Sky(sunglasses), B rand Factory (multi-brand readymadegarments), K B 's Fair Price (essential products),Navaras(jewellery), Planet Store (multi-brand sports andlifestyle speciality retail), aLL(fashion garments), Ethnicity(Indian ethnic wear), Home Town (home needs),eZone(electronics), Furniture B azaar (home furniture),Electronics B azaar (under B ig B azaar, electronics stores),Home B azaar (satellite version of Home Town), Collection I(lifestyle furniture), Gen M & One Mobile (mobile phones),M-Port (electronics), Shoe Factory (footwear) and Depot(books and music)


22/43

` R eliance: R eliance Fresh (neighbourhood store),R eliance Mart (supermarket), R eliance Super (mini-mart), R eliance Digital (consumer durables andinformation technology), R eliance Trends (apparel and

accessories), R eliance Wellness (health, wellness andbeauty), iStore( A pple products), R eliance Footprint(footwear), R eliance Jewels (jewellery), R elianceTimeOut(books, music and entertainment), R eliance A utoZone (automotive products and services) andR eliance Living (home ware, furniture, modular kitchens and furnishings)


23/43

` R PG Group: Spencers (multi-format retail store),Music World ( music and home video store) andB ooks & B eyond (book store)

` K R aheja Group: Shoppers Stop (clothing,accessories, fragrances, cosmetics, footwear andhome furnishing store), Crossword (book store),InorbitMall (fashion, lifestyle, food and

entertainment) and Hyper City (hypermarket)


24/43

` Landmark group: Lifestyle (garments and accessories), HomeCentre (household and furniture, garments and retail), Splash(high street fashion brand) and Fun city(family entertainmentbrands)

` B harti group: Field Fresh (fresh and processed fruits andvegetables multiple-format store)

` Mahindra group: Mom and Me (infant and maternity care)` A ditya B irla group: More (supermarket and hypermarket

formats, earlier known as Trinethra)` Vishal R etail: VishalMega Mart (multiproduct stores)


25/43

` Emergence of multiple franchisee model This model islargely adopted by companies offering products in thevalue and semi-premium branded segments in order toenable greater scale, limit dependence on a few players

and leverage local hands-on knowledge of the market.Jumbo King, the Mumbai-based snack major, and PepsiCoIndia are following this model.

` R ural retailing R ural India accounts for more than 70 per cent of all Indian households and close to two-fifths of thetotal retail consumption pie. R etail companies haverealised the importance of tapping the rural consumer base. Examples include DCM Shriram's H ariyali KisaanBazaarand ITC's Chaupal Sagar.


26/43

` Collaborative model for international products Jointventures (JVs) are emerging as the preferred modelfor new entrants, wherein foreign players leverage theknowledge of the local player and focus on key issuessuch as quality, pricing, promotions and brandmanagement. Key examples include the B hartiGroups JV with Wal-Mart for retail and wholesale

retail and Staples JV with Pantaloon R etail Ltd tolaunch Staples products in the Indian market.


27/43

` Vertical integration R etail companies are looking at integrating their business models vertically to explore additional sources of revenues.For example, Dabur India Ltds retail foray into the health and beautyretail business through a retail chain known as New U, and Nokiaslaunch of concept stores.

` Collaboration for back-end resource sharing A nother interestingtrend in the Indian retail market is the collaboration of back-endresources, where retailers align their sourcing operations and shareprivate label, logistics, warehouses and hiring details on a transactionalpayment model. For example, the Future Group, the A ditya B irla Group,the R PG Group and the R eliance Group have come together to reducetheir operational costs and improve margins.


28/43

` Increasing market reach R etail companies are looking to increasetheir footprint in Tier II, III and IV cities and towns to capture domesticdemand. For example, the R aymond Group plans to open more than200 stores across India by mid-2011, and the Tata Group's retailventure, Westside, is planning to expand its franchisee base in Tier II

and Tier III cities.` Innovation in new retail formats R etailers are not only investing in

their operations, but are also exploring the possibility of adopting newbusiness models or formats. For instance, R eliance R etail has deviseda new business model under which it will open small employee-friendlyretail outlets at the premises of large corporate organizations. TheNetwork18 group has ventured into online and on-air retail marketingand distribution through HomeShop18.


29/43

` Direct sourcing arrangements R etailers are directly procuringproduce from farmers in order to offer quality products at prices that arelower than the market price and also to secure a larger number of clients. Wal-Mart sources around 35 to 40 per cent of its producedirectly from approximately 130 small and marginal farmers. It is also

educating farmers about transplanting, nutrient management and theuse of low cost innovations to obtain better and higher yields.

` Focus on private labels R etailers are increasing their focus on high-margin verticals, such as private labels, and are looking to increaseprivate labels contribution to total revenue. On average, in India,private label contributes between 10 and 20 per cent of total retailindustry revenue. Spencers R etail Ltd plans to increase its private labelcontribution from 15 per cent currently to 30 per cent over a period of 18 months.


30/43

The organized retail industry is at a nascentstage of development and is witnessingconsiderable activity in terms of investments and

expansions.` Model I : Investments / expansion plans` Model II : Mergers & A cquisitions` Model III : Strategic alliances/JVs for market entry


31/43


32/43


33/43


34/43


35/43


36/43


37/43


38/43

` GST, which is expected to be introduced in India witheffect from A pril 1, 2011, aims to establish an economicallyefficient tax system that is neutral in its application,attractive in terms of distribution and removes the tax

cascading that is prevalent in the existing system.` A mong other things, the implementation of GST is

expected to simplify the supply chain for consumer goods,make cash flow improvements by removing the excise dutyon goods manufacturing, lower business input costs andenable enhanced profitability due to the elimination of taxcascading.


39/43

` Production and distribution structure: The abolition of Central Sales Tax (CST) is likely to warrant a re-evaluationof procurement and distribution arrangements.

` R emoval of excise duty on products may result in cash flowimprovements, since GST will be paid on sale/supply rather

than on the product.` Pricing and profitability :The elimination of tax cascading is

expected to lower business input costs and improveprofitability. The application of tax at all points of the supplychain is likely to require adjustments to profit margins,especially for distributors and retailers.


40/43

` Cash flow` Tax refunds on goods purchased for resale implies a

significant reduction in the inventory cost of distribution.Distributors are also expected to enjoy cash flow fromcollection of GST in their sales, before remitting it to the

government at the end of the tax-filing period.` Sy stem changes and transition management : Changesneed to be made to accounting and IT systems to recordtransactions in line with GST requirements. A ppropriatemeasures need to be taken to ensure smooth transition tothe GST regime, for example, through employee training,compliance under GST, customer education and inventorycredit tracking.


41/43

` India has one of the largest number of retail outlets in the world. Thesector is witnessing exponential growth, with retail development takingplace not only in major cities and metros, but also in Tier-II and Tier-IIIcities.

` In the next phase of the retail revolution in India, retail companies areexpected to tap the rural segment as their key driver of growth. With per capita income having grown by 50 per cent over the last 10 years, ruralIndia is set to witness an economic boom, which promises appreciablegrowth in rural markets.FMCG players are focusing on the rural market as it constitutes over 33per cent of Indias FMCG consumer base. For example, ITC is tappinginto the rural retail market through its e-Choupal and Choupal Sagar rural hypermarkets.


42/43

` The organized Indian retail industry has also begun witnessingan increased level of activity in the private label space, which isexpected to grow further in the near future. Private labelstrategy is expected to play a dominant role in the yearsahead, since its share in the US and the UK markets is 19 per cent and 39 per cent, respectively, whereas its share inemerging markets (i.e., BR IC countries) is only 6 per cent.

` India is also receiving greater attention as it is a price-competitive sourcing base for large retail players. Globalretailers, such as Wal-Mart, G A P, Tesco and JC Penney, arestepping up their sourcing from India and are moving fromthird-party buying offices to establishing their own wholly-owned/wholly-managed sourcing and buying offices.


43/43

` There are retail opportunities in most productcategories and for all types of formats in India. Foodand grocery constitutes the largest category, andcurrently, is largely unorganized. The homeimprovement and consumer durables segments areexpected to grow at a C A GR of more than 20 per centover a period of 10 years. The apparel and eating out

segments are expected to grow at a C A GR of morethan 13 per cent over a 10-year period.

retail management ver i

Documents