Retail Last Updated: June 2011 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. India is the third-most attractive retail market for global retailers among the 30 largest emerging markets, according to US consulting group AT Kearneys report published in June 2010. 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, according to the BMI India Retail report for the third quarter of 2011. Robust economic growth, high disposable income with the end-consumer and the rapid construction of organised retail infrastructure are key factors behind the forecast growth. Along with the expansion in middle and upper class consumer base, the report identifies potential in Indias 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. 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. Rural Retailing on a High Rural retailing enjoys an intense focus from big brands. Future Group and Godrej Agrovet's joint venture (JV) in rural retailing, 'Aadhar', is all set for a revamp. The group promoter Kishore Biyani has revealed that the JV is planning to come up with wholesale distribution centers across different districts and franchisees would be rolled out to local entrepreneurs who would have a better understanding of the concerned area. They would be able to source the products from these wholesale centers and then sell it in their villages. 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. Meanwhile, 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

Saurashtraregion, 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. On similar lines, 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. Also, FMCG and retail giants are making good use of technology to reach out to rural India. From low-cost handsets to tablet PCs, the Indian FMCG and retail sector is latching on to technology and applications to reach out to rural India. For instance, 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. This helped the agri-representative to get the exact route and also saved on time. The mobile application can also get real-time data from farmers. Pictures of crop and soil taken from the camera are used for monitoring progress of contract farming, seed information and weather condition. Since the data is available online, this also helps the company analyse and take decisions quickly. Meanwhile 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 years 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.

OrganisedvsUnorganised Retailing The Indian retail market, over the last decade, has been increasingly leaning towards organised retailing formats. The pattern in domestic retailing is altering in the favour of organised modern retailing, a big change from the traditional plethora of unorganised family-owned businesses. Rapid urbanisation, changes in shopping pattern, demographic dividend and pro-active measures by the Government are abetting the growth of the retail sector in India. 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 McKinsey & Company report titled 'The Great Indian Bazaar: Organised Retail Comes of Age in India'. Furthermore, according to a report titled 'India Organised Retail Market 2010', published by Knight Frank India, during 2010-12 around 55 million square feet (sqft) 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 sqft 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, according to a report by KPMG. Retail Investment Trends Foreign direct investment (FDI) inflows between April 2000 and December 2010, in singlebrand retail trading, stood at US$ 66.69 million, according to the Department of Industrial Policy and Promotion (DIPP).
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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. Reliance Retail will enter the cash and carry market with "Reliance Market" in Ahmedabad; the first one to be opened by August 2011. 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. 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. 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. Max Hypermarkets, the food retailing chain of the Dubai-based Landmark Group is investing US$ 122.14 million for its store expansion business across 30 cities in India.

Retail - Government Initiatives India will announce new rules for foreign investment in retail by April 2012, paving the way for companies such as Wal-Mart Stores and Carrefour to open stores, according to Junior Trade Minister JyotiradityaScindia. A government panel has issued a report that recommends easing a law that prohibits non-Indian companies from operating multi-brand outlets. Allowing foreign investment in multi-brand retail may help moderate food prices, said KaushikBasu, chief economic adviser in the finance ministry, who sits on the panel. India currently allows 51 per cent FDI in single-brand retail and 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 India through a joint venture (JV) or a technical collaboration. Now, the foreign company will not have to seek a no-objection certificate (NOC) from the Indian partner for investing in the sector where the joint venture operates. The government has also relaxed norms for downstream investments and convertible instruments, giving foreign companies more powers. The changes are part of the third revision of the Consolidated FDI Policy. Retail Road Ahead There is a huge untapped opportunity in the retail sector, thus having immense scope for new entrants, driving large investments into the country. A good talent pool, huge markets and availability of raw materials at comparatively cheaper costs are expected to make India lead one of the worlds best retail economies by 2042. The industry is also slated to be a major employment generator in future. Exchange Rate Used: 1 USD = 44.97 INR (as on June 27, 2011)

Organised retail accounts for less than 10% of India's retail market estimated at close to $400 million. The Boston Consulting Group estimates the size of organised retail market at $28 billion and expects it to grow nine times to $260 billion in 10 years.