retailing in india ppt_0
TRANSCRIPT
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RETAILING
IN INDIA
Presentation byShahnas ASyama K S
Sobymol Devasia
Sabitha Z.B
By: Prof. Nagendra Babuand Vijayakumar A B
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According to Philip Kotler “retailing includes allthe activities involved in selling goods or
Services directly to final consumers for personal ,
Non business use”.
“Every sale of Goods and Services to finalconsumer” – Food products, apparel, movie
tickets; services from hair cutting to e-ticketing.
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A retailer or retail store is any business enterprise
whose sale volume comes primarily fromretailing”.
A retailer may be defined, as a „ dealer or trader who sells goods in small quantities‟.
Any Organization Selling to final consumer
is retailing , whether they are
A Manufacturer
A Wholesaler A Retailer
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It does not matter how they sell or serve ( By)
• Person• Mail
• Telephone
• Vending Machine or
• Internet
Or
Where these are sold
• A store• A street
• Consumer‟s House
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Retailing may be understood as the final step in
the distribution of merchandise, for consumption by the end consumers.Retailers attempt to satisfy consumer needs by
having the right merchandise, at the right price,
at the right place, when the consumer wants it.Retailers are the final business in a distributionchannel that links manufacturers to consumers
Indian retail industry is the second largestemployer in the country with almost 12millionretail stores in India.
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It offers direct interactionSale volume is comparatively large in quantities
Customer service
Sales promotions are offered at this point onlyDifferent forms
Location and layout are critical factors
More employment opportunities
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• Department stores
• Specialty stores
• Convenience store
• Discount store
• Off-price retailer
• Super store
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• Sorting• Breaking Bulk
• Holding stock
• Communications• Assist small suppliers
• Customer service
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The Indian retail sector is highly fragmentedwith more than 90 per cent of its businessbeing carried out by traditional family runsmall stores.
This provides immense opportunity for largescale retailers to set-up their operations – aslew of organized retail formats likedepartmental stores, hypermarkets,
supermarkets and specialty stores are swiftlyreplacing the traditional formats dramaticallyaltering the retailing landscape in India.
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India is the third-most attractive retailmarket for global retailers among the 30largest emerging markets, according to US
consulting group AT Kearney‟s reportpublished in June 2010
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The total retail sales in India will grow fromUS$ 395.96 billion in 2011 to US$ 785.12billion by 2015
Indian retail sector accounts for 22 per cent of the country's gross domesticproduct (GDP) and contributes to 8 per
cent of the total employment.
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Weekly MarketsVillage Fairs
Melas
Convenience StoresMom and Pop/Kiranas
PDS OutletsKhadi Stores
Cooperatives
Exclusive Brand OutletsHyper/Super MarketsDepartment Stores
Shopping Malls
Traditional/PervasiveReach
GovernmentSupported
Historic/RuralReach
Modern Formats/International
Evolution of Indian retail
Source of Entertainment
NeighborhoodStores/Convenience
Availability/ LowCosts /
Distribution
ShoppingExperience/Efficiency
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Robust economic growth High disposable income with the end-consumer Rapid construction of organized retail
infrastructure are key factors behind the forecast
growth. Expansion in middle and upper class consumer
base Growth potential in India‟s tier -II and tier-III cities
as well.
The greater availability of personal credit and agrowing vehicle population providing improvedmobility also contribute to a trend towards annualretail sales growth of 12.2 per cent.
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8.90%9.0%
6.8%6.0%
6.0%5.6%
5.2%
6.4%
6.6%
5.4%
9.2%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
Projections of 8% sustainable real GDP growth rate till 2020promise high growth potential for Indian Retail…
R e a l G r o w t h R a t e
Source :Central Statistical Organization (CS0)
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2,630
916 979 1,068
2,374
4,367
13,245
10.7%
9.4%
6.7%
3.7%
2.0%2.8%
2.3%
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
China India Russia Brazil UK Japan US
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
9.4% growth rate makes India the second fastest growingeconomy in the world
G D P
( U S
$ b n )
R e a l G r o w t
h R a t e
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13% 14%
55%
21%
7%6%
21%
37%41%
107%
0%
20%
40%
60%
80%
100%
120%
Tourist Arrivals Passenger Cars
Sales
Commercial
Vehicle Sales
Domestic Air
Passengers
New Cell Phone
Connections
2005-06
2006-07
% Increase in growth over the previous year
Services sector adding to GDP in a significant manner
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5-7 million
Super Rich
70 – 80 million
Afford Cars, Private Healthcare &
Foreign travel
250 - 300 million
Afford goods like Refrigerators , Scooters& Colour TVs
600-700 million (Generally Rural)
Afford simple industrial productse.g. bicycles , radios , textiles
Poverty Line = income less than $ 1/day
Source: McKinsey,
60 % of India’s population are under 24 years
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GDPUS$ 935 billion
Private Consumption
US$ 580 Billion(62%)
Public Spending and CapitalFormation
US$ 355 Billion (38%)
RetailUS$ 342 Billion
(59%)
Non RetailUS$ 238 Billion
(41%)
Urban (5,100 towns)
US$ 154 Billion(45%)
Rural (6,27,000 villages)US$ 188 Billion
(55%)
Modern retail – US$ 12 billion8% of urban retail spends
Modern retailNegligible
Food
Apparel
Beverages
Footwear
Consumer
durables
Appliances
Stationery
Kitchen utensils
Furniture
Furnishings
Sports goods
Health & Beauty
Personal Care
Jewellery
Timing
Transport
Communication
Recreation
CulturalServices
Education
Rent
UtilitiesOther Services
Source: Central Statistical Organization (CS0) and Technopak AnalysisConversion rate: 1 US$ = 40.86 Rs.
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GDP*US$ 1,450 billion
Private ConsumptionUS$ 870 Billion
(60%)
Public Spending and CapitalFormation
US$ 580 Billion (40%)
RetailUS$ 530 Billion(61%)
Non RetailUS$ 340 Billion(39%)
UrbanUS$ 252 Billion
(47.5%)
RuralUS$ 278 Billion
(52.5%)
Modern retail – US$ 78 billion31% of urban retail spends
Modern retail – US$ 9 billion3% of rural retail spends
Source: Technopak Analysis *All figures are in nominal terms after taking into account inflation
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11 June 2013
Which Makes Indian Retail an Attractive Market
India tops the Global Retail Development Index
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The Indian retail market, over the lastdecade, has been increasingly leaningtowards organized retailing formats.
The pattern in domestic retailing is altering in
the favor of organized modern retailing, a bigchange from the traditional plethora of unorganized family-owned businesses.
Rapid urbanization, changes in shopping
pattern, demographic dividend and pro-activemeasures by the Government are abettingthe growth of the retail sector in India.
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Organised retail in India is expected to increase from 5per cent of the total market in 2008 to 14 - 18 per cent
of the total retail market and reach US$ 450 billion by2015
According to a report titled 'India Organised RetailMarket 2010', published by Knight Frank India, during
2010-12 around 55 million square feet (sq ft) of retailspace will be ready in Mumbai, national capital region(NCR), Bengaluru, Kolkata, Chennai, Hyderabad andPune. Besides, between 2010 and 2012, theorganised retail real estate stock will grow from the
existing 41 million sq ft to 95 million sq ft. Driven by the growth of organised retail coupled with
changing consumer habits, food retail sector in India isset to be more than double to US$ 150 billion by 2025.
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Organized retail INR 28,000 crore
Clothing, Textiles &Fashionaccessories
39%
Footwear 9%
Jewellery & Watches 7%
Mobile handsets & accessories 3%
Health & Beauty (including services) 2%
Food & Grocery 18%
Durables 13%
Books, Music & Gifts 3%
Home 3%
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11 June 2013
Modern Retail – Organized Channels
• The share of organized retail is less than 3% of the total retail market
• The size of modern retail is about US$ 8 Billion and has grown by 35% CAGR in lastfive years
85% 81%
55%40% 36% 30% 20% 20% 3%
0%
20%
40%
60%
80%
100%
US Taiwan Malaysia Thailand Brazil Indonesia Poland China India
Traditional Channel Modern Channel
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11 June 2013
.. but Rapid Transformation is Anticipated
Current Size & Future Projections for Indian Retail Market
342 373408
445486
530
800
12 18 26 39 59 87
200
0
100
200
300
400
500
600
700
800
900
2007 2008 2009 2010 2011 2012 2017
U S $
B i l l i o n
Total Retail Organized Retail
And may reach a share of 25% by 2017
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11 June 2013
RECENT TRENDS
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11 June 2013
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11 June 2013
Recent Trends
Experimentation with formats: Retailing inIndia is still evolving and the sector is witnessinga series of experiments across the country withnew formats being tested out. Ex. Quasi-mall,sub-urban discount stores, Cash and carry etc.
Store design : Biggest challenge for organizedretailing to create a “customer -pull” environment
that increases the amount of impulse shopping.Research shows that the chances of sensesdictating sales are upto 10-15%. Retail chainslike MusicWorld, Baristas, Piramyd and Globusare laying major emphasis & investing heavily instore design.
Emergence of discount stores: They areexpected to spearhead the organized retailingrevolution. Stores trying to emulate the model of Wal-Mart. Ex. Big Bazaar, Bombay Bazaar,RPGs.
Unorganized retailing is getting organized: Tomeet the challenges of organized retailing suchas large Cineplex's, and malls, which are backedby the corporate house such as 'Ansals' and'PVR„ the unorganized sector is gettingorganized. 25 stores in Delhi under the banner of Provision mart are joining hands to combinemonthly buying. Bombay Bazaar and Efoodmartformed which are aggregations of Kiranas.
Recent changes:
Unorganized : Vast majority of the twelve million
stores are small "father and son" outlets
Fragmented : Mostly small individually owned
businesses, average size of outlet equals 50 s.q.
ft. Though India has the highest number of retailoutlets per capita in the world, the retail space
per capita at 2 s.q. ft per person is amongst the
lowest.
Rural bias: Nearly two thirds of the stores are
located in rural areas. Rural retail industry has
typically two forms: "Haats" and “Melas". Haats
are the weekly markets : serve groups of 10-50villages and sell day-to-day necessities. Melas
are larger in size and more sophisticated in terms
of the goods sold (like TVs)
Traditionally three factors have plaguedthe retail industry:
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11 June 2013
Retail Market not limited to metros but widely across India
• The classic ”skimming” strategy in the
metros is not longer sufficient – 100 cities strategy
• Over 250 large size shopping mallsare currently under construction
• Leading cities 2030 areforecasted to be
– Mumbai
– New Delhi
– Chandigarh
New Delhi
Bangalore
Mumbai
Chennai
Kolkata
Ahamabad
HyderabadPune
Above 10 Mn inhabitants
Above 4 Mn inhabitants
Above 2 Mn inhabitants
Above 1 Mn inhabitants
Kanpur
Lucknow
Jaipur
Nagpur
Coimbatore
Bhopal
Madurai
Kochin
Varanasi
Visakhapatnam
Patna
Indore
Surat
Vadodara
Ludhiana
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Future Group and Godrej Agrovet's jointventure (JV) in rural retailing, 'Aadhar', is allset for a revamp. The alliance operatesstores in Gujarat, Maharashtra, Haryana andPunjab and mainly sells wheat and paddyapart from daily need products. The company
also provides farmers with solutions toproblems regarding their agricultural output,which includes what kind of crop can theyplant and when, along with techno-
commercial suggestions to help them give a
RURAL RETAILING
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Rajkot based Champion Agro Ltd is planningto come up with single window shoppingfacility for farmers.
The company already has 35 agri-retailingoutlets in the Saurashtra region, and isexpected to open around 400 outlets at ataluka level across Gujarat by 2016.
It will open 50 new outlets by the end of 2011with an investment of US$ 3.3 million.The overall investment planned is betweenUS$ 66.7 – US$ 88.94 million.
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Vadodara based ACIL Cotton Industries isall set to come up with around 40 outlets of 'ACIL Krishi Store' in Gujarat. Of these,
four outlets got operational in April - May2011. As for 2011, ACIL has decided tofocus on the Gujarat market. ACIL stores
will sell all types of seeds, fungicides,fertilisers, micronutrients.
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Marico is using mobile technologyinnovatively to arm its field representativesin their procurement process. The IT team
at Marico developed a mobile-basedapplication for Nokia 5235 serieshandsets. The company gave these GPS-
enabled phones to 120 of its fieldrepresentatives, with mapped routes.
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Hindustan Unilever Ltd (HUL) isexperimenting with tablet PCs in its
attempt to increase its rural reach. It hasbeen able to reach to 500,000 outlets in ayear‟s time. According to Nitin Paranjape,managing director, HUL, “We put all the
villages on an IT map. The name of thevillage, its total strength, nearestdistributors available, whether it has a
school, a hospital, a primary health centre,all of this was mapped. We used thisinformation to determine the opportunitythe village presented to us.
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Joint Ventures Product Range Retail Formats
Bharti-Walmart (with $2.5
Billion investment byBharti)
Food & grocery, electronics & appliances, clothing &
footwear, furniture & furnishing, household articles.
Hypermarkets, Supermarkets and
Convenience
Carrefour-Landmark Food and groceries, FMCG, apparel and electronics Hypermarkets
Home Retail Group plc -Shopper's Stop Ltd andHypercity Retail India
Private Ltd
Franchising the Argos concept under the terms of thearrangement, Argos will be providing its brand,catalogue and multi-channel expertise and IT support
Multi Channel propositions
Tata-Woolworths Sourcing agreement for Consumer durables andFoods under brand name CROMA
Multi brand retail chain
Staples Inc – PantaloonRetail
Global Sourcing of Office equipments across variousbusinesses
Cash and carry
Reliance Food & grocery, electronics & appliances, clothing &footwear, furniture & furnishing, household articles.
Multi format and Multi Category
Birla Food & grocery, electronics & appliances, clothing &footwear, furniture & furnishing, household articles.
Convenience and Supermarket
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At present, the government allows 51% foreigndirect investment in a single-brand retailventure while 100% is permitted in wholesale
cash-and-carry.Under single-brand retailing a store can stockgoods that have the same brand. In thewholesale cash-and-carry route, which most
foreign retailers use, there is restriction onsale to individuals. These stores are onlypermitted to sell to outfits such as restaurantsand kirana stores
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Foreign direct investment (FDI) inflowsbetween April 2000 and December 2010,in single-brand retail trading, stood at US$
66.69 million, according to the Departmentof Industrial Policy and Promotion (DIPP).
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India's multi-brand retail sector, isestimated to be worth $28 billion (Rs125,000 crore) according to a Boston
Consulting Group (BCG) study.The government is likely to permit foreign
direct investment (FDI) in the multi-brand
retail sector from April 2012.
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The government prepared a draft in July2011, which says 49 per cent FDI in multi-brand retail will be allowed in a phased
manner which will be effective from the nextfinancial year i.e. April 2012. The Committee of Secretaries (CoS) headed
by Cabinet secretary Ajit Kumar Seth met on
July 22 to finalise the blueprint of theproposal for political clearance. One of themajor outcome of the discussion is raising49% to 51%.
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According to the the economic advisor to thePrime Minister, Kaushik Basu , the governmentwill allow FDI in three phases. In the first phase,foreign multi-brand retail chains will be allowed in
the metros Delhi, Mumbai, Kolkata and Chennai.In the second phase other metros like Bangalore,Hyderabad and Pune will be included.
The draft has laid out strict norms such as
earmarking 40 per cent investment for backendinfrastructure, such as cold storage, soil testinglabs and seed farming, for prospective entrants.
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The move has paved the much-required wayfor international retailer like Bentonville, Arkansas-based Wal-Mart Stores Inc. and
Paris-based Carrefour SA to open their retailstores through strategic partnerships.
According to Business Monitor International,retail sales in India may jump from $396billion in 2011 to $785 billion in 2015,representing a growth of around 100 per cent.
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to harm self-employment opportunitiesadversely affect the manufacturing sector harm small traders across the country.
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consumers will soon more options tochoose products
more and more investment in the backend Improve the standard of efficiency of
supply chain management.
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Singapore-based CapitaMalls Asia, whichdevelops, owns and manages malls across
Asia, has pledged US$ 400 million to its
growth in India up till 2014. Mr Kevin Chee,CEO and Country Head of CapitaMalls
Asia, has said that apart from funding the
two malls that are operational now, thismoney would be used to develop sevenmore malls in India.
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Reliance Retail will enter the cash andcarry market with "Reliance Market" in
Ahmedabad; the first one to be opened by
August 2011.
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Ujala fabric whitener maker JyothyLaboratories has bought Henkel AG's 50.97 per cent stake in its Indian subsidiary
for US$ 137.02 million, including debt andpreference shares, the two companiesrevealed. The deal includes Henkel'sentire portfolio that includes Henko and
Chek detergents, Pril dish cleaners and Fadeodorant, and rights to the multinational'sfuture launches.
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With the launch of its first 'ArvindExperience Store' in Gujarat at Vadodara,denim major Arvind Ltd. is looking at 100
stores by the end of the financial year 2011-12. The store in Vadodara is thecompany's eighth in the country after
seven stores in Andhra Pradesh.
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Quick food service restaurant chainSubway will set up 45 outlets across thecountry by 2011-12 entailing an investment
of around US$ 9 million. The company hasnow 205 outlets in India and plans to takeits count to 250 by the end of 2011-12.
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Max Hypermarkets, the food retailing chainof the Dubai-based Landmark Group isinvesting US$ 122.14 million for its store
expansion business across 30 cities inIndia.
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India will announce new rules for foreigninvestment in retail by April 2012, paving the wayfor companies such as Wal-Mart Stores andCarrefour to open stores, according to Junior
Trade Minister Jyotiraditya Scindia. A governmentpanel has issued a report that recommendseasing a law that prohibits non-Indian companiesfrom operating multi-brand outlets. Allowing
foreign investment in multi-brand retail may helpmoderate food prices, said Kaushik Basu, chief economic adviser in the finance ministry, who sitson the panel.
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India currently allows 51 per cent FDI in single-brand retailand 100 per cent in wholesale cash-and-carry operations.
In a landmark decision, the government has eased norms for investments by foreign companies that are present in Indiathrough a joint venture (JV) or a technical collaboration. Now,the foreign company will not have to seek a no-objectioncertificate (NOC) from the Indian partner for investing in thesector where the joint venture operates.
The government has also relaxed norms for downstreaminvestments and convertible instruments, giving foreigncompanies more powers. The changes are part of the thirdrevision of the Consolidated FDI Policy.
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CRM practice Known about the customer‟s families Credit and home delivery Consumer familiarity runs from
generation to generation Open longer hours and stock most of thegoods Consequently, a large number of
customers are not willing to pay apremium for the shopping experiencepromised by large format retailers.
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High expenses to organized sector .The lease cost up to 6-10 percent of salesManpower cost is lower at 5-6 percent of
salesCapital costs are more in retail business
due to major renovations needed every 5-7years.
Organizing Retail in India-Challenges
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Retail Challenges
g g g
Heterogeneous market
• Product offerings in different stores across the country will be
very different
• No standard mode of operation across formats
• Market not mature (has to be validated)
Infrastructure will bring about logistical challenges
• Though, improvements in road networks, power supply are
underway
Trained employees with understanding of retail business are
inadequate compared to the needs of organized retail
Barriers to Entry
• High taxes, bureaucratic clearance process and labour laws
High cost of real estate
• though over 600 malls are to come up all over the country by
the next 4 years
Indian retailers are deeply entrenched, are expanding and
building on logistics and technology initiatives
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Processes
• Complex Processes - Multiple MRP, Deals & Promotions, Forecasting &Replenishment, Lean supply chain – JIT inventory, flow through warehouse
• Evolving processes in Supply chain & merchandising
• Global Best Practices not adopted
Consumer
Infrastructure
• High disposable income
• Changing consumer preferences
• 28 states, 100+ religion, 250+ festivals
• Supply chain not reliable. Cold storage infrastructure evolving• Outsourced transportation
• Low level automation in warehouses
Supplier/Vendor
Current IT
• Little or no collaboration between vendor & retailer
• Low fill rates from vendors
• Highly localized assortments leading to relationship with multiple vendors• Complex trading contracts and off invoice discounts
• Multiplicity of disparate Systems & Data Formats
• No architecture roadmap
• Base ERP and home grown POS solutions. Low investments in store systems
• No investments in planning & optimization technologies
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Weakness of Player Retail not being recognized as an industry in india. The lack of recognition as an industry hampers the availability of finance to
the existing and new players. This affects growth and expansion plansThe high cost of real estate: Real estate price in some cities in India are amongst the highest in the
world. The lease or rent of the property is one of the major areas of expenditure, high lease rentals eat into the profitability of a project.Lack of adequate infrastructure Poor roads , lack of a cold chain infrastructure, etc , hamper the
development of food and fresh grocery retail in india. The existing supermarkets and food retailers have to invest a substantial
amout of money and time in building a cold chain network.
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Multiple and complex taxation system The sales tax rates very from state to state while organised
players have to face a multiple point control and taxsystem,there is considerable expense to transfer good from
one store to another.Foreign direct investment:- The fact that foreign direct investment(FDI)is not permitted in
pure retailing is seen as one of the prime reasons for theslow growth of
retail in India. A global retailer can enter India only by way of a franchise
with an Indian partner or through technological alliances.Purchasing power of money As the Indian population mostly consist of middle class
families andlow wages worker they don't want to go in the super market
or retail market
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India is amongst the least saturated of all major global markets in terms of penetration of modernretailing formats
Many strong regional and national players emergingacross formats and product categories
Most of these players are now gearing up to expandrapidly after having gone through their respectivelearning curves
Real Estate Developers are also moving fastthrough the learning curve to provide qualitativeenvironment for the consumers
The Shopping Mall formats are fast evolving
Partnering among Brands, retailers, franchisees,investors and malls
Improved Infrastructure
In view of a compressedevolution cycle, retailers need to
simultaneously address issues of speed,
Execution and efficiency
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Key Challenges
to overcome
• Attracting & retaining qualified manpower• Implementing SOP’s & best practices
• Focus on improving operational efficiency• Cost control• CRM & Service levels
Internal
• High real estate cost• Anarchic laws
• Shortage of qualified manpower• Poor infrastructure• Unorganized & poor supply chain
External
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Supply Chain Investments
• Setting up logistics and supply chain infrastructure
• Import of know how and logistics techniques from developed retail countries
IT Infrastructure
• IT is the enabler behind communication, collaboration with suppliers, andan efficient supply chain
Manpower
• Potential tie-ups with universities and setting up dedicated retail institutes
• Utilize experience of international retailers to train local talent
Large Rural market
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There is a huge untapped opportunity in theretail sector, thus having immense scope for new entrants, driving large investments intothe country.
A good talent pool, huge markets andavailability of raw materials at comparativelycheaper costs are expected to make India
lead one of the world‟s best retail economiesby 2042. The industry is also slated to be a major
employment generator in future.