Retail Sector in India 2 - Copy

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BY

S.WASEEM AHMED MOHAMMED YASEEN ANNUSHREE KHAREL

SYED FARAAZ

AMRITH

IMAN AHMED


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Retail is a French word which means to cut a pieceoff or break the bulk. In the present context, it

means sale to customer which means first handtransaction with the customer. So it includes all theactivities of selling goods or services directly to thefinal customer for personal or business use


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Barter System was known as the first form ofretail.

As time passed currency was exchanged with goodsand services.

Hawkers carried out the first Retailing in PushCarts

Followed by Kirana Stores .. Mom and PopupStores

Finally Manufacturing era necessitated thesmall stores and Specialty stores

It was a seller market still than this point of timewith the limited number of brands available now itis buyers market.


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Phenomenal success of certainplayers in retail sector

E.g.: Shoppers Stop Hype created by management

consultants and media Phenomenal growth of service

sector and down turn inmanufacturing sector


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Globalization

Success of organized retail sector in developedcountries

Changes in Consumer behavior and increase in theirpurchasing power.

Ever green demand for basic things like food

Negative working capital ; Companies buy on credit

and sell for cash


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2005 -06 :-PictureGDP -$700 bn

2012 -13 :- PictureGDP -$1200 bn


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Largest and fastest growing sector in India.

Modern retailing forms one point stop for allshopping.

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

First it was a sellers market and now itschanging to buyers market.

By 2013 Indian retail sector would be generating10 million employment opportunities.


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Higher competition would lead to higher quality inproducts and services.

Better lifestyle as better products would beintroduced.

Exports would increase due to greater sourcing ofmajor players.

Technology would be upgraded in terms of

logistics, production, and distribution channels. Employment would increase and skills &

manpower will develop.


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Margins are low

High property cost

Poor Infrastructure Expertise in logistics


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Unorganized Retailing Hawkers (Kirana)

Weekly Markets

Organized retailing

Convenient / Departmental stores

Factory outlets and discounts Market

Supermarkets

Wholesalers market Company and Franchises showroom


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Organized Retail is nothing but a retailplace all the items are segregatedand brought under one roof, unlikethe unorganized retail where there aredifferent things are sold in different

shops. It also aims to bring maximumof different brands making the sametype of product together.


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Unorganized retailing is defined as anoutlet run locally by the owner orcaretaker of a shop that

lacks technical and accountingstandardization. The supply chainand sourcing are also done locally to

meet local needs. Its organizedcounterpart may not obtain its suppliesfrom local sources.


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Increasing demand driven by the countrys youngworking population

Increase in per capita income which in turn

increases the household consumption

Create win-win situation for all links in valuechain ( suppliers, producers, retailers and

customers).

Improvement in the standard of living.

Technology intensive industry


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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.


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Change in consumer behavior pattern andincrease in disposable income.

It is estimated that 15 million people would beengaged 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.


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Indian taxation system favors small retailbusiness.

Competition from unorganized Sector to the

organized Sector.

Middle class Psychology.

Increasing Real Estate prices


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I i l il i


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Franchise

International company gives name and technologyto local partner. Gets royalty in return

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

Nike, Pizza Hut, Tommy Hilfiger, Marks andSpencer, Mango

Manufacturing

Company sets up Indian arm for production

Bata India. It also has right to retail in India

How theyare

present

International retailers inIndia: Strategies

I t ti l t il i


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Distribution

International company sets up local distributionoffice

Supply products to Indian retailers to sell Also set up franchised outlets for brand

Swarovski, Hugo Boss

Wholesale trading

Cash and Carry operations 100% FDI permitted

Metro Cash n Carry

How theyare

present

International retailers inIndia: Strategies


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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 inIndia

Provides access to global markets for Indianproducers

Benefitsof FDI

WhyFDI?


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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 playersusually

More product variety

Newer product categories

Economies of scale to help lower consumer price

Increased purchasing capacity of consumers

Benefitsof FDI

Why FDI?


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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 dutyexemptions, land and power subsidies, and otherenticements

How FDI ?

How FDI ?

2 yrs

2 yrs

2 yrs


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Low domestic competition

Because of fragmented nature of industry

Lack of exposure to global best practices

Low entry barriers for unorganized retailing

Moderate entry barriers for organized retailing

Wholesale system under-invested leading to 20-40%wastage

Non level playing field issues

Wide differences in treatment of small and largeretailers

IndustryChallenges

Challenges in the Industry


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Starts with his family business in textile.

1987 he launched first 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.


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Store did a business worth Rs 100 million.

2001 he introduced the hypermarket concept adaptedto Indian conditions in the form of BigBazaar(Mumbai).

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

Was able to pull out over1,00,000 people within 1st

week of its operation.


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Gave the Indian customers the feel of local marketplace narrow lanes, crowded market place andcustomers bumping into each other and intocommodities.

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

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

price of products.


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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 makingthe operations complex.


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Leveraging Future Groups presence across 70% ofcustomers wallet.

Objective is to create the experience of 26thJanuary onthe net.Futurebazaar.com to focus on deals, giftingand trust.

Beta testing underway


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FUTURE GROUP THE TATA GROUP

SANJIV GOENKAS RPG GROUP

DUBAI BASED MICKY JAGTIANIS LANDMARKGROUP


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This industry is expected to grow at a pace of about 25-30 per cent annually,

and is considered to be a great investment market. Whether it is real estate or

FMCG, the growth rates are escalating and marketers are looking at this space

more seriously than ever. According to a research conducted by Annual Global

Retail Development Index (GRDI), the retail business in the country has had a

share of about 10 per cent in the total GDP and rose to 12 per cent in 2009.

From Rs. 35,000 crore in 2004, the retail industry was expected to grow to

109,000 crore by the end of last year. This year has begun with a lot of new

initiatives and new marketing skills to understand the consumer psyche. It is

expected to go up to US$ 833 billion by the year 2013. It is further expected to

reach US$ 1.3 trillion by the year 2018 at a CAGR of 10%.


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Huge Scope for Development

Competitive Market

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

Greater opportunity for employment


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Documents

Retail Sector in India 2 - Copy