RETAIL SECTORS Presented by :-Purval, Rashmi, Sandeep, JoyJayesh

Retail Sector

Evolution of Retail

Barter System was known as the first form of retail.

As time passed currency was exchanged with goods and services.

Hawkers carried out the first Retailing in Push Carts

Followed by Kirana Stores …….. Mom and Popup Stores

Finally Manufacturing era necessitated the small stores and Specialty stores

It was a seller market still than this point of time with the limited no of brands available

Barter chain Single brand franchise chain Standalone large store <_Chain of large stores And Finally Malls

• Economist says that Boom Has Started of Retail due to more spending Capacity of Indians • Emerging of retail started in brief in patterns like changing face of the Indian retail sector

• Provide customers with 3 V’s i.e. Value, Variety and Volume.

What is Retail?

“A retail is one who stocks the producers goods and is involved in the act of it to the individual consumer, at the Margin of Profit “.

As such retailing is the last link that connects the individual consumer with the manufacturing and distribution chain.

Selling Directly to consumer selling in smaller units / quantities the bulk.

Very high numbers near to neighborhood

Reorganized by the service levels

Retail Sector today is worth of 394 Billion Us $

Indian Consumption

Big PictureGDP 2005 -06 :-PictureGDP -$700 bn :-PFC -$220 bn (30%) Investment -$480 bn

(70%) 2012 -13 :- PictureGDP -$1200 bn :- PFC -$600 bn (50%) Investment -$600

bn (50%)

Heterogeneous country

29 states,12 different languages, 72 festivals

Internet era, not industrial Young country -60% below 30 years of

age Multi-format, multi-level Within the city, not suburbanIndian

Retail-Ground Realities

Consumption = Development

CREATIVE/ INNOVATIVE avenues for CONSUMERS to want to spend their money

BETTER INVESTMENT/ BUSINESS opportunities for our PARTNERS & INVESTORS

Food       

Books & Magazines

Fashion & Clothing  

Personal Care

Optical Consumer Electronics  

Sport & Leisure

Home Ware

Footwear & Leather 

Toys & Games

Jewellery & Watches

Furniture 

Petrol        

Different products involved in Retailing

Manufacturers

Whole seller

Distributor

Retailer

Organized Sector

Types of Retail Sectors

Unorganized Retailing Hawkers (Kirana) Weekly Markets Organized retailing Convenient / Departmental stores Factory outlets and discounts Market Supermarkets Wholesalers market Company and Franchises showroom

Disadvantages Of Retail Industry in India Margins are low High property cost Poor Infrastructure Expertise in logistics Couple of firms in retail sector have turn

over more than Rs 100 cr

Factors that attracted major industry players to enter the retail sector Phenomenal success of certain players in retail

sector Eg: Shopper’s Stop Hype created by management consultants and

media Phenomenal growth of service sector and

down turn in manufacturing sector A good way to leverage existing property Eg: Primals started developing Crossroads

after closing of Roche factory they have acquired on prime property in Mumbai

Cont…. Globalization Success of organized retail sector in

developed countries Changes in Consumer behavior and

increase in their purchasing power. Ever green demand for basic things like

food Negative working capital ; Companies

buy on credit and sell for cash

Importance

Largest and fastest growing sector in India.

Modern retailing forms one point stop for all shopping.

Consumer gets a large product variety of brands to choose from one roof.

First it was a sellers market and now its changing to buyers market.

By 2010 Indian retail sector would be generating 10 million employment opportunities.

Retail Sector in India

Some of the Key Players in Organised Retail

Analysis of Growth by ASSOCHAM

Organized retail growing at estimated 25%

It is expected that retail in India could be worth US$ 175-200 billion by 2016.

2008-09 Total retails contribution to GDP is between 8% which would further jump up to nearly 12% in next few years. By 2010, retails contribution to national GDP in totality is likely to be 22%.

2008 – Retail Growth rate – 25-28%, Unorganized and organized retail size – 300 billion US$

Opening 10 to 15 outlets by 2015, it plans to employ about 5,000 people selling groceries, consumer goods, fruits and vegetables. India's retail industry is worth $300bn (£148bn)

Eg: Bharti has invested 60 Billion with the largest retail Walmart (last year)

Retail Sector contribution to GDP sector is 8%-10%.

GROWTH OF INDIAN RETAIL SECTOR

Elasticity of Demand for Luxury and Necessities

0

0.5

1

1.5

2

2.5

3

3.5

0 0.5 1 1.5 2 2.5 3 3.5

Pri

ce

Demand

Government Policies The retail industry in India is growing at a significant pace.

However, there are several problems faced by the industry. The major challenges for the organized sector include:

Taxation laws that favor small retailers.

Multi-point octroi collection.

According to analysts, for this industry to thrive, Indian retailers need to emulate worldwide retail practices such as accuracy in financial reporting, increased levels of corporate governance and greater accountability among employees.

Foreign Equity does not go beyond 51 percent.

Additions to the product categories to be sold under ‘single brand’ require fresh govt. approval.

International Retail: At a Glance

38%

27%

13%

8%3% 2% 9%

USA EU Japan China

India Russia Others

Share of Organized Retail

Key Players

Highly evolved US market has WalMart taking only 8% market share UK market has Tesco with only 13.4% market share China market still does not have a clear leader

USA = US$ 2,350 Bn UK = US$ 406 Bn China = US$ 313 Bn

SWOT Analysis

Strength Increasing demand driven by the country’s

young working population

Increase in per capita income which in turn increases the household consumption

Create win-win situation for all links in value chain ( suppliers, producers, retailers and customers).

Improvement in the standard of living.

Technology intensive industry

Weakness

Lack of expertise in Supply Chain Management

Inadequate Infrastructure

Stringent Labor Laws

Lack of specialized professionals in Industry

Lack of industry status.

Government Restrictions on FDI

Non-Availability of Government Land.

Opportunities

Change in consumer behavior pattern and increase in disposable income.

It is estimated that 15 million people would be engaged in Retail and Retail support activities by 2010

Indian rural markets offer a sea of an opportunity for the retail sector.

Upcoming international Players

Healthy prospect for the fashion industry.

Threats

Indian taxation system favors small retail business.

Competition from unorganized Sector to the organized Sector.

Middle class Psychology.

Increasing Real Estate prices

Factors which the new entrant into retail sector failed to verify For FMCG giants the proposition of their

sales through organized retail remains small

Failed to learn from the failures in organized retailing like TVS group’s Stop & Shop.

Growth rate of small retailers. Trading Inefficiencies which forces the

manufactures to increase the price

Cont…. Small retailers can compensate this by

personalized services like credit and free home delivery.

Unsupportive nature of few manufactures like not printing the bar codes, despite this being so important for retail logistics.

Franchise International company gives name

and technology to local partner. Gets royalty in return

In case master franchise is appointed for region or country, he has right to appoint local franchisees

Nike, Pizza Hut, Tommy Hilfiger, Marks and Spencer, Mango

Manufacturing Company sets up Indian arm for

production Bata India. It also has right to retail in India

How they are present

International retailers in India: Strategies

Distribution International company sets up local

distribution office Supply products to Indian retailers

to sell Also set up franchised outlets for

brandSwarovski, Hugo Boss

Wholesale trading Cash and Carry operations 100% FDI permitted

Metro Cash n Carry

How they are present

International retailers in India: Strategies

Improve competition Develop the market Greater level of exports due to

increased sourcing by major players Sourcing by Wal-Mart from China

improved multifold after FDI permitted in China

Similar increase in sourcing observed for Metro in India

Provides access to global markets for Indian producers

Benefits of FDI

Why FDI?

Investment in technology Cold storage chains solve the perennial

problem of wastage Greater investment in the food

processing sector technology Better operations in production cycle and

distribution Better lifestyle

Greater level of wages paid by international players usually

More product variety Newer product categories Economies of scale to help lower

consumer price Increased purchasing capacity of

consumers

Benefits of FDI

Why FDI?

FDI should be allowed in stages Initial stages: 26% FDI

Establishment Phase: 49% FDI

Mature Phase: 100% FDI

FDI policy No incentives needed to attract FDI Market size and potential are

sufficient inducers No need for costly tax breaks, import

duty exemptions, land and power subsidies, and other enticements

How FDI ?

How FDI ?

2 yrs

2 yrs

2 yrs

Wal-Mart’s Productivity Loop

Consequences of Wal-Mart’s Productivity Loop

Step 1: Reduce CostsA. Squeeze suppliers

1. Extracts producer revenues2. Relocated manufacturing overseas3. Increase foreign debts

B. Erodes Wages and Benefits1. Low wages in a low-wage sector2. Working off the clock3. Skimps on benefits, e.g., health care

Consequences of Wal-Mart’s Productivity Loop

Step 2: Reduce Retail PricesA. Improves consumer living standards

1. Increases consumer purchasing powerB. Displaces existing retailers

1. Drives out small chains and independent producers

C. Displaces existing suppliers1. Excludes local businesses from internal Wal-Mart

supply systemsD. Triggers retail price wars

1. Pressures industry rivals to imitate its operative behavior

2. Extends to national and global markets

Consequences of Wal-Mart’s Productivity Loop

Step 3: Increase Sales

A. Increases efficiency of supply systems1. Higher sales volume means greater economies of

scale

B. Facilitates additional consumer debt

Kishore Biyani and Big Bazaar Starts with his family business in textile. 1987 he launched frist ready-made

trousers brand- Pantaloon. 1992 Pantaloon Fashion went public. Started manufacturing garments under

two more brands – John Miller and Bare. The business seems unviable due to high

distribution cost and margins. 1997 – opened his first store at Kolkata.

Cont…

Store did a business worth Rs 100 million.

2001 he introduced the hypermarket concept adapted to Indian conditions in the form of Big Bazaar(Mumbai).

For further expansion Biyani went for a loan of Rs 1.2 billion.

Was able to pull out over1,00,000 people within 1st week of its operation.

Cont….

Gave the Indian customers the feel of local market place – narrow lanes, crowded market place and customers bumping into each other and into commodities.

He understood that Indian like the hustle-bustle of the market place, which gives them a feeling that the goods are sold at a lower price.

Exploited the Economics of scale. Tie up with manufactures to bring down

the selling price of products.

Cont….

2002 Biyani started Food Bazaar within Big Bazaar.

Focused on “Farm To Plate“ concept in Food Bazaar (Farm next to the store).

Sold In House products. Used traditional supply chain management. His principle was “KIS” Keep It Simple; ie not

making the operations complex.

CONSUMPTION IDEAS INVESTMENT IDEAS

WHO? FUTURE RETAIL Everyone that constitutes consuming India

WHERE? FUTURE SPACES Creating property & public retail infrastructure everywhere in India

WHAT? FUTURE BRANDS Identify, mentor, invest and grow INDIA centric brands Plan

HOW? FUTURE CAPITAL Property, Brands, Insurance & most importantly easy access to money for consumers

LINE OF BUSINESS

HEALTH, BEAUTY & WELLNESS FINANCIAL PRODUCTS FASHION HOME FOOD COMMUNICATIONS GENERALMERCHANDISE LEISURE &ENTERTAINMENTL

Pantaloon Retail (I) Limited

Fashion Pantaloons 25,000(sq.ft.) Lifestyle(format) Central 1,25,000(sq.ft.) Lifestyle Big Bazaar 50,000(sq.ft.) Value Fashion Station 15,000(sq.ft.) Value

FoodFood Bazaar 10,000(sq.ft.) Lifestyle & Value

GMBig Bazaar 50,000(sq.ft.) Value Books & MusicDepot 1,000-6,000(sq.ft.)

Lifestyle & Value

Type Health, Beauty & Wellness

Star & Sitara(Beauty Products) 1,000-2,000(sq.ft.) Value

Star & Sitara(Beauty Salons) 2,500(sq.ft.) Value

Health Village 25,000(sq.ft.) Lifestyle & Value

Communication :-Gen M500-1,000 (sq.ft.) LifestyleM Port 1,500-2,000(sq.ft.) LifestyleM Bazaar 250-500(sq.ft.) Value

Electronic Goods & Consumer AppliancesE-Zone 12,500 (sq.ft.) LifestyleElectronics Bazaar 3,000-6,000 (sq.ft.)

ValueFurniture, Furnishings & Accents Collection

I10,000 (sq.ft.) LifestyleFurniture Bazaar3,000-6,000 (sq.ft.) ValueHome Improvement Home Town1,25,000

(sq.ft.) Lifestyle & Value

Restaurants, Leisure & EntertainmentBlue Foods (50:50) --Fine Dining Restaurants Galaxy Entertainment (15.73 % stake) Bowling Company 30,000Lifestyle F123-Arcade & Games 7,000-20,000

Lifestyle Sports Bar 2,500 Lifestyle Chamosa 100 Value Footwear Retailing –Foot Mart Retail (I) LimitedLiberty Shoes (51:49)Shoe Factory

6,000-15,000 Value

Fashion & SportswearPlanet Retail (49:51)Lifestyle KidswearRetailing GJ Future Fashions Limited (50:50)Gini& Jony1,500-5,000Lifestyle Health, Beauty & Wellness :-ManipalHealth Systems ManipalCure &

Care (50:50)Lifestyle & ValueTalwarkar’s(50:50)

ONLINE RETAIL

Leveraging Future Group’s presence across 70% of customer’s wallet.

Objective is to create the experience of 26thJanuary on the net.Futurebazaar.comto focus on deals, gifting and trust.

Beta testing underway

Subsidiary

•73% HSRIL (Home) •74% FCH (Capital) •100% F/Media (OOH) •100% F/Bazaar (E-Tailing) •100% F/Logistics (SCM) •100% PFP (Sourcing) •100% Pantaloon Food Solutions (F&B)

Joint Ventures

•49% Planet Retail •51% Liberty •50% GiniJony •50% Blue Foods •50% Talwalkar •50% Manipal •50% CapitalLand(REIT & MM) •50% Alpha GroupConsolidated

Conclusion

Huge Scope for Development

Competitive Market

Organized retail is fast growing at a rate of 30% YOY

Greater opportunity for employment

Recession Strategy

Offering more & more special discounts.

The Great Indian Shopping Festival.