RETAILING IN INDIA

1. RETAILING IN INDIA RETAILING IN INDIA Presentation by Shahnas A Syama K S Sobymol Devasia Sabitha Z.B

2. Retailing • According to Philip Kotler “retailing includes all the activities involved in selling goods or Services directly to final consumers for personal , Non business use”. • “Every sale of Goods and Services to final consumer” – Food products, apparel, movie tickets; services from hair cutting to e-ticketing.

3. A retailer or retail store is any business enterprise whose sale volume comes primarily from retailing”. • 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

4. 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

5. 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 distribution channel that links manufacturers to consumers • Indian retail industry is the second largest employer in the country with almost 12million retail stores in India.

6. Characteristics of retailing • It offers direct interaction • Sale volume is comparatively large in quantities • Customer service • Sales promotions are offered at this point only • Different forms • Location and layout are critical factors • More employment opportunities

7. Retailers Types • Department stores • Specialty stores • Convenience store • Discount store • Off-price retailer • Super store

8. Functions of Retailing • Sorting • Breaking Bulk • Holding stock • Communications • Assist small suppliers • Customer service

9. INDIAN RETAIL-BRIEF OVERVIEW • The Indian retail sector is highly fragmented with more than 90 per cent of its business being carried out by traditional family run small stores. • This provides immense opportunity for large scale retailers to set-up their operations – a slew of organized retail formats like departmental stores, hypermarkets, supermarkets and specialty stores are swiftly replacing the traditional formats dramatically altering the retailing landscape in India.

10. India is the third-most attractive retail market for global retailers among the 30 largest emerging markets, according to US consulting group AT Kearney’s report published in June 2010

11. RETAIL-MARKET SIZE • The total retail sales in India will grow from US$ 395.96 billion in 2011 to US$ 785.12 billion by 2015 • Indian retail sector accounts for 22 per cent of the country's gross domestic product (GDP) and contributes to 8 per cent of the total employment.

12. Evolution of Indian retail Modern Formats/ International Historic/Rural Reach Traditional/Pervasive Reach Government Supported Exclusive Brand Outlets Hyper/Super Markets Department Stores Shopping Malls PDS Outlets Khadi Stores Cooperatives Convenience Stores Mom and Pop/Kiranas Weekly Markets Village Fairs Melas Source of Entertainment Availability/ Low Costs / Distribution Shopping Experience/Efficiency Neighborhood Stores/Convenience

13. REASONS FOR THE GROWTH • 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 a growing vehicle population providing improved mobility also contribute to a trend towards annual retail sales growth of 12.2 per cent.

14. Indian Retail – Buoyed by high GDP growth Real Growth Rate Source :Central Statistical Organization (CS0) Projections of 8% sustainable real GDP growth rate till 2020 promise high growth potential for Indian Retail…

15. India Experiencing Rapid Economic Growth GDP (US$ bn) Real Growth Rate 9.4% growth rate makes India the second fastest growing economy in the world

16. Led by Growth in Services Sector % Increase in growth over the previous year Services sector adding to GDP in a significant manner

17. Driven from Consumption Throughout the 1.1 Billion Population 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 products e.g. bicycles , radios , textiles Poverty Line = income less than $ 1/day 60 % of India’s population are under 24 years Source: McKinsey,

18. With High Private Consumption GDP US$ 935 billion Food Apparel Beverages Footwear Consumer durables Appliances Stationery Kitchen utensils Furniture Furnishings Sports goods Health & Beauty Personal Care Jewellery Timing Private Consumption US$580 Billion (62%) Public Spending and Capital Formation US$ 355Billion (38%) Transport Communication Recreation Cultural Services Education Rent Utilities Other Services Retail US$ 342 Billion (59%) Non Retail US$ 238 Billion (41%) Urban (5,100 towns) US$ 154 Billion (45%) Modern retail – US$ 12 billion 8% of urban retail spends Rural (6,27,000 villages) US$ 188 Billion (55%) Modern retail Negligible Source: Central Statistical Organization (CS0) and Technopak Analysis Conversion rate: 1 US$ = 40.86 Rs.

19. About US $530 Billion Retail Market by 2012 GDP* US$ 1,450 billion Private Consumption US$ 870 Billion (60%) Public Spending and Capital Formation US$ 580 Billion (40%) Retail US$ 530 Billion (61%) Non Retail US$ 340 Billion (39%) Urban US$ 252 Billion (47.5%) Modern retail – US$ 78 billion 31% of urban retail spends Rural US$ 278 Billion (52.5%) Modern retail – US$ 9 billion 3% of rural retail spends *All figures are in nominal terms after taking into account inflation Source: Technopak Analysis

20. Which Makes Indian Retail an Attractive Market India tops the Global Retail Development Index

21. ORGANISED v/s UNORGANISED • The Indian retail market, over the last decade, has been increasingly leaning towards organized retailing formats. • The pattern in domestic retailing is altering in the favor of organized modern retailing, a big change from the traditional plethora of unorganized family-owned businesses. • Rapid urbanization, changes in shopping pattern, demographic dividend and pro-active measures by the Government are abetting the growth of the retail sector in India.

22. Organised retail in India is expected to increase from 5 per cent of the total market in 2008 to 14 - 18 per cent of the total retail market and reach US$ 450 billion by 2015 • According to a report titled 'India Organised Retail Market 2010', published by Knight Frank India, during 2010-12 around 55 million square feet (sq ft) of retail space will be ready in Mumbai, national capital region (NCR), Bengaluru, Kolkata, Chennai, Hyderabad and Pune. Besides, between 2010 and 2012, the organised 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 is set to be more than double to US$ 150 billion by 2025.

23. Organized Retailing in India (2006)

26. 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 last five years

27. .. but Rapid Transformation is Anticipated And may reach a share of 25% by 2017

28. RECENT TRENDS

30. Recent Trends Recent changes: Traditionally three factors have plagued the retail industry: • Experimentation with formats: Retailing in India is still evolving and the sector is witnessing a series of experiments across the country with new formats being tested out. Ex. Quasi-mall, sub-urban discount stores, Cash and carry etc. • Store design : Biggest challenge for organized retailing to create a “customer-pull” environment that increases the amount of impulse shopping. Research shows that the chances of senses dictating sales are upto 10-15%. Retail chains like MusicWorld, Baristas, Piramyd and Globus are laying major emphasis & investing heavily in store design. • Emergence of discount stores: They are expected to spearhead the organized retailing revolution. Stores trying to emulate the model of Wal-Mart. Ex. Big Bazaar, Bombay Bazaar, RPGs. • Unorganized retailing is getting organized: To meet the challenges of organized retailing such as large Cineplex's, and malls, which are backed by the corporate house such as 'Ansals' and 'PVR‘ the unorganized sector is getting organized. 25 stores in Delhi under the banner of Provision mart are joining hands to combine monthly buying. Bombay Bazaar and Efoodmart formed which are aggregations of Kiranas. • 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 retail outlets 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 10-50 villages and sell day-to-day necessities. Melas are larger in size and more sophisticated in terms of the goods sold (like TVs)

31. Ludhiana New Delhi Lucknow Varanasi Patna Jaipur Kanpur Ahamabad Indore Vadodara Bhopal Kolkata Nagpur Surat Pune Visakhapatnam Hyderabad Mumbai Bangalore Chennai Above 10 Mn inhabitants Above 4 Mn inhabitants Kochin Above 2 Mn inhabitants Coimbatore Above 1 Mn inhabitants Madurai 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 malls are currently under construction • Leading cities 2030 are forecasted to be • Mumbai • New Delhi • Chandigarh

32. AADHAR RURAL RETAILING • Future Group and Godrej Agrovet's joint venture (JV) in rural retailing, 'Aadhar', is all set for a revamp. The alliance operates stores in Gujarat, Maharashtra, Haryana and Punjab and mainly sells wheat and paddy apart from daily need products. The company also provides farmers with solutions to problems regarding their agricultural output, which includes what kind of crop can they plant and when, along with techno-commercial suggestions to help them give a better output.

33. Champion Agro Ltd • Rajkot based Champion Agro Ltd is planning to come up with single window shopping facility for farmers. • The company already has 35 agri-retailing outlets in the Saurashtra region, and is expected to open around 400 outlets at a taluka 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 between US$ 66.7 – US$ 88.94 million.

34. ACIL Cotton Industries • Vadodara based ACIL Cotton Industries is all set to come up with around 40 outlets of 'ACIL Krishi Store' in Gujarat. Of these, four outlets got operational in April - May 2011. As for 2011, ACIL has decided to focus on the Gujarat market. ACIL stores will sell all types of seeds, fungicides, fertilisers, micronutrients.

35. OTHER VENTURES • Marico is using mobile technology innovatively to arm its field representatives in their procurement process. The IT team at Marico developed a mobile-based application for Nokia 5235 series handsets. The company gave these GPS-enabled phones to 120 of its field representatives, with mapped routes.

36. Hindustan Unilever Ltd (HUL) is experimenting with tablet PCs in its attempt to increase its rural reach. It has been able to reach to 500,000 outlets in a year’s time. According to NitinParanjape, managing director, HUL, “We put all the villages on an IT map. The name of the village, its total strength, nearest distributors available, whether it has a school, a hospital, a primary health centre, all of this was mapped. We used this information to determine the opportunity the village presented to us.

37. Global Heavyweights in Indian Retailing

38. FDI in Retail At present, the government allows 51% foreign direct investment in a single-brand retail venture while 100% is permitted in wholesale cash-and-carry. Under single-brand retailing a store can stock goods that have the same brand. In the wholesale cash-and-carry route, which most foreign retailers use, there is restriction on sale to individuals. These stores are only permitted to sell to outfits such as restaurants and kirana stores

39. FDI in Retail • Foreign direct investment (FDI) inflows between April 2000 and December 2010, in single-brand retail trading, stood at US$ 66.69 million, according to the Department of Industrial Policy and Promotion (DIPP).

40. FDI in Multi Brand Retailing • India's multi-brand retail sector, is estimated to be worth $28 billion (Rs 125,000 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.

41. The government prepared a draft in July 2011, which says 49 per cent FDI in multi-brand retail will be allowed in a phased manner which will be effective from the next financial 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 the proposal for political clearance. One of the major outcome of the discussion is raising 49% to 51%.

42. According to the the economic advisor to the Prime Minister, KaushikBasu , the government will 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 backend infrastructure, such as cold storage, soil testing labs and seed farming, for prospective entrants.

43. The move has paved the much-required way for international retailer like Bentonville, Arkansas-based Wal-Mart Stores Inc. and Paris-based Carrefour SA to open their retail stores through strategic partnerships. • According to Business Monitor International, retail sales in India may jump from $396 billion in 2011 to $785 billion in 2015, representing a growth of around 100 per cent.

44. to harm self-employment opportunities • adversely affect the manufacturing sector • harm small traders across the country.

45. consumers will soon more options to choose products • more and more investment in the backend • Improve the standard of efficiency of supply chain management.

46. Latest Information on Indian Retail Scenario • Singapore-based CapitaMalls Asia, which develops, 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, this money would be used to develop seven more malls in India.

47. Reliance Retail will enter the cash and carry market with "Reliance Market" in Ahmedabad; the first one to be opened by August 2011.

48. Ujala fabric whitener maker Jyothy Laboratories has bought Henkel AG's 50. 97 per cent stake in its Indian subsidiary for US$ 137.02 million, including debt and preference shares, the two companies revealed. The deal includes Henkel's entire portfolio that includes Henko and Chek detergents, Pril dish cleaners and Fa deodorant, and rights to the multinational's future launches.

49. With the launch of its first 'Arvind Experience 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 the company's eighth in the country after seven stores in Andhra Pradesh.

50. Quick food service restaurant chain Subway will set up 45 outlets across the country by 2011-12 entailing an investment of around US$ 9 million. The company has now 205 outlets in India and plans to take its count to 250 by the end of 2011-12.