International Perspective

on Developments in Retailing
Major Impact and Implications for India

Sue J F Evans

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Retailers belong
to a place called…

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… a population of mastodons
… always ready for cannibalism
… invading green pastures worldwide
… healthier than ever
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Retailers – A population of mastodons: Nine retailers
belong to Global Fortune 100

Global Fortune 100

Ranking - Ranking and 2001 revenues in $bn -
1 220 Wal-Mart

24 73 P. Morris
Carrefour
35 62
Ahold
38 60
Home Depot
5054
46
Nestlé
55 Retailers
Kroger
56 4650 Unilever Suppliers

68 Metro

72 44 Sears
Target
83 41
39 P&G
89 40
Albertson's
93 4
Retailers: Always ready for cannibalism

… have bought over …

 Wal-Mart  ASDA

 Carrefour  Promodés

 Casino
Comptoirs Modernes
 Laurus
 CBD
 Jeronimo Martins
 Auchan
(Brazil)
 Docks de France

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Retailers: Invading green pastures worldwide

International presence of top 20 retailers

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Retailers: Healthier than ever

Return On Capital Employed (ROCE)

- 2001 -

20%

13%
11%
10%

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Major trends

 Cannibalism will accelerate

 Retailers are pushed to look for new "green pastures”

 Genetic mutation – retailers succeed in building brands

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Cannibalism: Suppliers still have the largest slice
of the cake, but retailers will fill the gap rapidly…
Comparison of ROCE among retailers and suppliers
2001

Retailers Suppliers
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…And will emulate the concentration that has
already taken place amongst suppliers

Market shares in France

- 2001 volumes, in % -
Suppliers Retailers
Other Other 8
13 Private Label
Other Other
Pepsi 8 12
35 37
Private Label Colgate 10
13
Colgate 3 Henkel Cora 3
P&G 5 20 Géant 4
Private Label 7 Système U 6
Unilever 9 Auchan 10
Unilever
Coca Cola
25 Carrefour 12
66
L'Oréal Intermarché
41 12
P&G
25 Leclerc
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Green Pastures : Retailers have already entered the
obvious geographies and reached critical mass

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To help retailers prioritize their expansion plans,
A.T. Kearney has recently published the Global
Retail Development Index

 Based on expert interviews and extensive local data

 Covering 180 countries worldwide
 Driven by three major questions
Is the country economically
viable?
• Economic stability
Is the retail market attractive?
• Political risk
• Modern retail area per
• Debt, credit balance
inhabitant When do I have to go there?
• …
• Number of international • Modern retail area growth
retailers in the country rate compared to GDP
growth rate

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 India ranks number 6… and is already very
seriously on the radar screen of major retailers

GRDI 2002
Index between 0 and 100
On the radar screen To consider To avoid
Hong
Ukraine 61 51
China 76 Kong
Malaysia 51
Slovakia 70 Korea, Rep. 57
Czech
Hungary 70 South Africa 57 50
Republic
Israel
Russia Thailand 56 49
69

Morocco 69 Venezuela 56 Indonesia 46

Philippines
India 65 Bulgaria 55 46

Vietnam 63 Colombia 55 Poland

Brazil
42

Chili 62 Romania 54 26

Turkey 61 Mexico 52 Argentina 24

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Genetic Mutation: When retailers succeed in
building powerful brands

Results
= 100% private label = big results
+10%

Sales evolution Other supermarkets

1st half 2002/2001 4.2%
Leader Price Concept
(pro forma)
 Part of the Casino Group
Leader Price
 Surface : 1,000 sqm
6%
# SKU : 2,800 (mostly Operating margin Other supermarkets
food) 3.9%
%
 ONLY PRIVATE LABEL
Leader Price
 Pricing : Nielsen index 90
• France (100)
 Assortment : deep
Global expansion • Poland (70)
(# stores) • Thailand
• Argentina
• Benelux
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Implications for India

 Be ready!
… retail mastodons will enter the Indian "green
pastures"

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 “Organised” retail in India will inevitably grow as
income levels and urban concentration increase

Organized retail Organized retail

penetration (%) GDP penetration (%) URBANISATION

100 100
Brazil Brazil

75 75

China
China
Poland
50 50
Poland

Malaysia Malaysia
Thailand 25 Thailand Urban
25 Indonesia concentrati
India Indonesia
India Per capita on (% of
GDP ($) pop. In top
8 cities)
0 0
0 2 000 4 000 6 000 8 000 10 000 0% 10% 20% 30% 40%
By 2007, the Top 10 states in India would have an average per capita GDP c $5,000
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Implications for India

 Be ready!
 Be realistic!
…. Small players can flourish in the changing
environment if they adapt themselves

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Evidence from other emergent markets shows that
traditional outlets will survive
CHINA 12,936,000
Retail structure in number of outlets
(absolute numbers) Specialists
10,122,000 Independent grocers

Convenience stores

Discounters

Cooperatives

Hypermarkets

Supermarkets

1996 1997 1998 1999 2000

Source: Euromonitor
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Implications for India

 Be ready!
 Be realistic!
 Be resilient!

… Indian retailers can benefit from adopting latest retail

management techniques to improve efficiencies

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 AND DON'T FORGET…

… dinosaurs sometimes disappear !!

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