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Retail in India

Click to edit Master subtitle style Prepared by: Cintoomoni Hazarika

Introduction

The retail industry in India gathered a new momentum with the establishment of different international brand outlets, hyper or super markets, shopping malls and departmental stores. The organised retail segment in India is projected to be 9 per cent of total retail market by 2015 and 20 per cent by 2020. Hypermarkets would be the largest retail segment, accounting for 21 per cent of the total retail space by 201314. India has one of the largest numbers of retail outlets in the world.

The retail sector is experiencing exponential growth, with retail development taking place not just in major cities, but also in Tier-II and Tier-III cities. India's growing population and urbanization provides a huge market for organized retail. Growing economic prosperity and transformation in consumption pattern drives retail demand. India ranks fourth among the 30 countries that were surveyed in Global Retail Development Index and ranked sixth in the 2011 Global Apparel Index.

Evolution of Indian retail Industry


Barter System was known as the first form of retail. As time passed currency was exchanged with goods and services. Hawkers carried out the first Retailing in Push Carts Followed by Kirana Stores .. Mom and Popup Stores Finally Manufacturing era necessitated the small stores and

Specialty stores It was a seller market still than this point of time with the limited no of brands available Barter chain Single brand franchise chain Standalone large store <_ Chain of large stores And Finally Malls

Barte r syste m

Weekly market Village melas

Super Government markets Stores Kirana Hyper Stores markets Conveni Malls ence Brand store outlets

Evolution till date..

Market Size

The BMI India Retail Report for the fourth quarter of 2011 forecasts that total retail sales will grow from US$ 411.28 billion in 2011 to US$ 804.06 billion by 2015. Robust economic growth, population growth, the increasing wealth of individuals and the speedy construction of organized retail infrastructure are key factors behind the forecast growth. As well as an expanding middle and upper class consumer base, there will also be opportunities in India's Tier-2 and Tier3 cities. The greater availability of personal credit and a growing vehicle population providing improved mobility also contribute to a trend of 11.9 per cent annual retail sales growth. Tourism is also a major contributor to the Indian retail sector.

The country's franchise market is growing at a healthy pace of over 30 per cent per annum with Tier-2 and Tier-3 cities gradually getting attracted to the network of retailers and franchisers. "Franchising in India has witnessed impressive growth of around 30-35 per cent year-after-year over the last 4-5 years with an estimated turnover of $4 billion. The FRO serves as a platform to identify, foster and commercialize innovative business start-up ideas and to meet the demands of today's dynamic entrepreneurial arena." according to Gaurav Marya, President, Franchise India.

Government Initiative

Foreign direct investment (FDI) up to 100 per cent is allowed under the automatic route in cash & carry (wholesale). Government is planning to remove the old tax systems to simplify the tax calculation and avoid double taxation in Indian retail. New Goods and Service Tax (GST) will simplify the tax structure The Cabinet finally paved way for the entry of global retail giants such as Wal-Mart, Tesco and Carrefour to open independent multi-brand retail outlets in India. The Cabinet has allowed foreign direct investment (FDI) of up to 51 per cent in multi-brand retail. Simultaneously, the Cabinet also gave the nod for raising the FDI limit in single-brand retail ventures to 100 per cent

Investments

Foreign direct investment (FDI) inflows in single-brand retail trading during April 2000 to December 2011 stood at US$ 44.45 million, according to the Department of Industrial Policy and Promotion (DIPP) Illinois-based firm, Kitchen Holding Company LLC, which markets and distributes high-end kitchenware brands like Corelle, Corning ware and Pyrex cutlery, has recently announced the setting up a wholly-owned subsidiary in India to be called World Kitchen (India). Italian luxury major Canali has entered into a 51:49 joint venture (JV) with Genesis Luxury Fashion, which currently has distribution rights of Canali-branded products in India.

The company also plans to invest Rs 7.65 core (US$ 1.53 million) in India. The JVcompany will now sell Canali branded products in India exclusively Germany-based Metro AG will invest an additional Rs 560 core (US$ 112.12 million) in 2012 to set up eight wholesale stores in India to take advantage of the growth in consumption in Asia's third-largest economy Mukesh Ambani-controlled Reliance Brands will bring British shirt brand Thomas Pink to India, as it looks to rapidly increase its presence in the fast-growing domestic premium-to-luxury fashion retail market Australian bakery cafe chain Muffin Break is planning to enter into India in next two or three months and plans to open up to 40 outlets in the next two years

Road Ahead

With increasing disposable incomes, expansion of stores and supporting economic factors, India's retail sector is expected to grow to about US$ 900 billion by 2014, according to a report by global consultancy and research firm PricewaterhouseCoopers (PwC). Exchange rate used: 1 INR = US$0.02003, as on March 12, 2012

Different products involved in Retailing


o o o o o o o o

Food Books & Magazines Fashion & Clothing Personal Care Optical Consumer Electronics Sport & Leisure Home Ware Footwear & Leather

Toys & Games o Jewellery & Watches oFurniture o Petrol


o

Retail Sector in India

Retail Sector contribution to GDP sector is 8%-10%.

Key Players in the Indian Retail Sector

International Retail: At a Glance

Comparison of Indian retail sector

SWOT analysis

Strength
Increasing demand driven by the countrys young

working population Increase in per capita income which in turn increases the household consumption Create win-win situation for all links in value chain ( suppliers, producers, retailers and customers). Improvement in the standard of living. Technology intensive industry

Weakness

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.

Opportunities

Change in consumer behavior pattern and increase in disposable income. It is estimated that 15 million people would be engaged 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.

Threats

Indian taxation system favors small retail business. Competition from unorganized Sector to the organized Sector. Middle class Psychology. Increasing Real Estate prices

Factors which the new entrant into retail sector failed to verify

For FMCG giants the proposition of their sales through organized retail remains small Failed to learn from the failures in organized retailing like TVS groups Stop & Shop. Growth rate of small retailers. Trading Inefficiencies which forces the manufactures to increase the price Small retailers can compensate this by personalized services like credit and free home delivery. Unsupportive nature of few manufactures like not printing the bar codes, despite this being so important for retail logistics.

International retailers in India: Strategies


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How they are present

Franchise l International company gives name and technology to local partner. Gets royalty in return l In case master franchise is appointed for region or country, he has right to appoint local franchisees l Nike, Pizza Hut, Tommy Hilfiger, Marks and Spencer, Mango Manufacturing l Company sets up Indian arm for production l Bata India. It also has right to

How they are present


l

Distribution l International company sets up local distribution office l Supply products to Indian retailers to sell l Also set up franchised outlets for brand l Swarovski, Hugo Boss Wholesale trading l Cash and Carry operations l 100% FDI permitted l Metro Cash n Carry

Conclusion

Huge Scope for Development Competitive Market Organized retail is fast growing at a rate of 30% YOY Greater opportunity for employment