Retail Revolution In India

ByArun Kumar Sahu

RETAILER

• A business or person that sells goods to the consumer, as opposed to a wholesaler or supplier, who normally sell their goods to another business.

Indian Retail on the Fast-track

• India’s GDP growth of 9.4% for 2006-07, was the highest

ever in 18 years, reflecting the booming economy of the

country.

• India’s retail sector, in tandem with the economy, is on a

high growth trajectory; expected to grow by over 27% in

the next 5 -6 years.

Cont……

•Retail contributes to 10% of India’s Gross Domestic

Product and provides employment to 8% of India’s

working population.

•Higher disposable incomes, easy availability of

credit and high exposure to media and brands has

increased average propensity to consume

considerably over the years.

Indian Retail Revolution

• India’s retail market has more than doubled in size to USD

311.7 billion in 2005-06.

• Sector revenues increased by about 93.5% between 2000 and

2006, translating to an average annual growth rate of 13.3%.

•Market witnessing a migration from traditional retailing to

modern/organized retailing formats, with an explosive

proliferation of malls and branded outlets.

Cont….

•Organized retail segment contributes to over USD 12.9 billion

of retail revenues, with penetration growing from 3% in 2004-

05 to 4.15% in 2005-06.

• Share of organized retail is to grow to USD 43.8 billion out of

the total retail sector revenues at USD 460.6 billion in 2010-11.

•Modern retailing outlets are increasingly matching up to

global standards and witnessing intense competition.

Total Retail Sales

186.3205.4

230.3

261.8

311.7

0

50

100

150

200

250

300

350

2001-02 2002-03 2003-04 2004-05 2005-06

USD

billi

on

Growth Across Segments• Food and Beverages segment accounts for the largest share, over 74%,

of the total retail pie.

• Traditional retail dominates food, grocery and allied products sector,

with grocery and staples largely sourced from the “Kiranas” and push

cart vendors.

• Apparel and Consumer Durables verticals are the fastest growing

verticals.

• Mobile phones, one of the highest growth product categories, with

deep telecom penetration into towns and villages and the sector

adding 5 million new users every month.

• With the reducing average age of Indians buying homes, the Home

Décor sector is growing rapidly.

• Beauty Care, Home Décor, Books, Music and Gifts segments are

gaining traction predominantly in the urban areas and emerging cities.

FDI

• FDI is defined as cross-border investment by a resident entity in one economy with the objective of obtaining a lasting interest in an enterprise resident in another economy. The lasting interest implies the existence of a long-term relationship between the direct investor and the enterprise and a significant degree of influence by the direct investor on the management of the enterprise.

Impact of FDI in india

     Benefits------1. Capital Infusion2. Boost Healthy Competition and check inflation3. Improvement in Supply Chain4. Improvement in Customer Satisfaction5. Improved technology and logistics6. Benefits for the Farmers7. Creation of More And Better Employment

Opportunities

Major threats

1)Domination of Organized Retailers2) Create Unemployment 3) Loss of Self Competitive Strength4) Indirectly Leads to Increase in Real Estate

Cost 5) Distortion of Culture

Multi-brand 

• Marketing of two or more similar and competing products by the same firm under different and unrelated brands.

Benefits of multi-channel retailing

1) Improved customer perception2) Increased sales3) Better data collection4) Enhanced productivity

Benefits of single brand stores

• more freedom and flexibility in pricing• more control over product attributes and quality• higher margins (or lower selling price)• eliminates much of the manufacturer's promotional costs

The advantages to the manufacturer are:• reduced promotional costs• stability of sales volume (at least while the contract is operative)

Controversy of Foreign retailers

• Independent stores will close, leading to massive job losses. Walmart employs very few people in the United States. If allowed to expand in India as much as Walmart has expanded in the United States, few thousand jobs may be created but millions will be lost.

• Walmart's efficiency at supply chain management leads to direct procurement of goods from the supplier. In addition to eliminating the "middle-man", due to its status as the leading retailer, suppliers of goods are pressured to drop prices in order to assure consistent cash flow.

Cont….

• India doesn't need foreign retailers, since homegrown companies and traditional markets have been able to do the job.

• Work will be done by Indians, profits will go to foreigners.

• Like the East India Company, Walmart could enter India as a trader and then take over politically.

Cont……

• There will be sterile homogeneity and Indian cities will look like cities anywhere else.

• The government hasn't built consensus.• The government claims modern retail will create 4 million new jobs. This cannot be true because Walmart, with over 9000 stores worldwide, has only 2.1 million employees.

Expected future of retail market

•Thank you….