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Industry Evolution
India tops the AT Kearney's annual Global Retail Development Index (GRDI)
for the third consecutive year, maintaining its position as the most
attractive market for retail investment. Furthermore a report by
PricewaterhouseCoopers foresees India and China to continue as the top
sourcing hubs in retail and consumer sector in the coming years.
The Indian retail market, which is the fifth largest retail destination
globally, according to industry estimates is estimated to US$ 427 billion by
2010 and US$ 637 billion by 2015. Simultaneously, modern retail is likely to
increase its share in the total retail market to 22 per cent by 2010.
India has one of the largest number of retail outlets in the world. Of the 14
million retail outlets present in the country, nearly 5 million sell food and
related products. Thought the market has been dominated by unorganised
players, the entry of domestic and international organised players is set to
change the scenario.
Organised retail segment has been growing at a blistering pace, exceeding all
previous estimates. According to a study by ASSCHAM organized retail
segment will reach US$22 bn by 2010. The fastest growing segments have
been the wholesale cash and carry stores (150 per cent) followed by
supermarkets (100 per cent) and hypermarkets (75-80 per cent). Further, it
estimates the organised segment to account for 25 per cent of the total
sales by 2011.
Growth:
In growth stage, the market is developing quickly and also ready for
modern retailing. Countries, which are in Peaking stage such as India.
Retailers entering this stage have the best chance for long-term success.
Retailers at this stage should enter through local representations,
sourcing offices and new stores.
Strategy suggested: The strategy of adopting quality and styled products
with new models and shift of advertising from product awareness to
product preference .The idea behind adopting this strategy is to
strengthen against competitors.
Unorganized : Vast majority of the 14 million stores are small "father and
son" outlets
Fragmented : Mostly small individually owned businesses, average size of
outlet equals 50 s.q. ft. Though India has the highest number of retail
outlets per capita in the world, the retail space per capita at 2 s.q. ft per
person is amongst the lowest.
Rural bias: Nearly two thirds of the stores are located in rural areas. Rural
retail industry has typically two forms: "Haats" and “Melas". Haats are the
weekly markets : serve groups of 10-50 villages and sell day-to-day
necessities. Melas are larger in size and more sophisticated in terms of the
goods sold (like TVs)
Leading Retailers
Developments
• The share of modern retail is likely to grow from its current 2 per
cent to 15-20 percent over the next decade
• Over next two years India will see several Indian retail businesses
attaining a critical mass as growth in the industry picks up momentum
driven by two key factors:
• Availability of quality real estate and mall management practices
• Consumer preference for shopping in new environments
• Wal-Mart : huge plans for India. Moving a senior official from its
headquarters in Bentonville, Arkansas, to head its market research
and business development functions pertaining to its retail plans in
India.
• New York-based high-end fashion retailer Saks Fifth Avenue has tied
up with realty major DLF Properties to set up shop in a mall in New
Delhi.
• Tommy Hilfiger, retailer of apparels, expects to open one store each
in Delhi, Ahmedabad, Lucknow and Bangalore in the next four months.
Retail Reform
The Government allows 100 per cent foreign direct investment (FDI) in
cash and carry through the automatic route and 51 per cent in single
brand. Besides, the franchise route is available for big operators. To
further attract global retailers, the economic survey 2007-08 has
suggested a share for foreign equity in all retail trade and 100 per cent
in respect of luxury brands and other specialised retail chains.
• Customers are becoming more demanding – the Web 2.0 revolution has
provided a forum for sharing opinions to the point where consumers
really do call the shots. They expect choice and convenience or will go
elsewhere.
• Premium products and services still sell well and Green is becoming
iconic – many of the less price sensitive consumers are still highly
style and status conscious, and consumers are going to increasingly
great lengths to boycott
Ok, so that’s 3 consumer trends. How about the Retail Industry in general?
• The leaders are merging channels – and providing seamless brand and
customer experiences across them all. Consumers in return are
becoming rapidly less tolerant of pricing, availability or service
differentials online and offline.
Threats
2009 Retail Industry Predictions: Closing Stores, Going
Out of Business, and Getting Back to Basics
• In 2009 large and small retailers will be hosting going out of business
sales before closing their stores. This is predicted to happen as many
as 200,000 times by some retail industry analysts. While the numbers
are as difficult to predict as the economy itself, it is certain that
there will be substantial retail casualties in 2009.
• There are many retail chains that will be forced out of business in
2009 by their own debt structure and the global credit crunch. There
are also many retail stores that will close storefronts in 2009 because
a recessed economy demands a recessed retail industry. That’s just
the way the economy ebbs and flows.
• The retail industry crisis will bring out the best that some
retailers have to offer, they survive.
• The big winner in 2009 and beyond will be American consumers. A
forced discrimination will create conscious consuming habits that will
not only redefine the retail industry, but also reprioritize daily
existence. Unfortunately, elevated consciousness never comes at a
discounted price.
Conclusion:
Many agencies have estimated differently about the size of organized retail
market in 2010. The one thing that is common amongst these estimates is
that Indian organized retail market will be very big in 2010. The status of
the retail industry will depend mostly on external factors like Government
regulations and policies and real estate prices, besides the activities of
retailers and demands of the customers also show impact on retail industry.
As the retail market place changes shape and competition increases, the
potential for improving retail productivity and cutting costs is likely to
decrease. Therefore it is important for retailers to secure a distinctive
position in the market place based on values relationships or experience.
Finally it is important to note that these strategies are not strictly
independent of each other; value is function of not just price quality and
service but can also be enhanced by personalization and offering a
memorable experience.