Sie sind auf Seite 1von 20

Retailing

2016 CRISIL Ltd. All rights reserved.


Decoding the India retail story

May 2017
Decoding the India retail story

Growth prospects of overall retailing industry in India

Growth prospects of overall retailing industry in India

Growth prospects of organised retailing industry

2016 CRISIL Ltd. All rights reserved.


Vertical-wise growth and indicative financials

Assessment of various formats

Profitability
Key conclusions
Organised retail industry to grow at 21% (Rs 4.2 tn) in 2017-18
Aided by higher same store sales and new store roll outs
Growth for physical retailers will be steady at 19-21% CAGR while e-retail will be 34-36% CAGR
7th pay commission recommendation will add to the growth as disposable income will be on rise
Over long term (2016-17 to 2021-22), industry expected to grow at 23-25%

2016 CRISIL Ltd. All rights reserved.


Demonetisation impacted margins in 2016-17; to improve in 2017-18
OPM declined on account of demonetisation policy
Players adopted various strategies such as offering higher discounts to clear inventory as well as increase advertising
spends in order to boost demand
Multiple strategies like setting up an online presence (omni channel), cost optimisation, reconsidering store sizes, tying
up with leading e-commerce players, increasing share of private labels will improve operating margins in 2017-18

Organised retail penetration (ORP) to reach 10% by 2021-22


Food and grocery will be fastest growing segment; Book and music will grow slowest

Physical format retailers to face stiff competition from online players


Online format to grow at 34-36% CAGR during the period, competition to remain a concern
Players in the traditional space will focus significantly on omni-channel strategy to ensure brand visibility across
channels

3
Growth prospects of
overall retailing
industry in India

2016 CRISIL Ltd. All rights reserved.


Improving economy, relatively stable inflation to
drive retail industry
Growth in retailing industry vis--vis inflation growth

14.0% 25% Rs trillion


15% CAGR 14%
12.0% 120
20%
10.0% 97
14% 100
8.0% 15%
80
6.0% 10% 56

2016 CRISIL Ltd. All rights reserved.


60 49
4.0% 5.0% 35
5% 40 24
2.0%
20
0.0% 0%
-
2008-09

2009-10

2010-11

2011-12

2012-13

2013-14

2014-15

2015-16

2016-17

2017-18P

2011-12

2013-14

2016-17

2017-18P

2021-22P
Inflation Total retail growth (RHS)
P: Projected P: Projected
Source: CRISIL Research Source: CRISIL Research

Lower consumer spending (due to economic slowdown) dented overall retail growth in 2012-13 & 2013-14;
2014-15 witnessed slight growth momentum
In 2016-17, overall retail growth slowed down to 11% on-year from 13% on-year in 2015-16 due to
demonetisation policy
However, in 2017-18, the industry expected to recover, grow by 14% on-year on a lower base
Overall retailing to grow at 14-16% CAGR over next five years
Pent-up demand, along with better economic outlook, will boost consumer sentiment and drive up discretionary spends

5
Growth prospects of
organised retailing
industry

2016 CRISIL Ltd. All rights reserved.


Organised retail penetration to reach ~10% by 2021-22
Long-term story intact, yet growth to moderate in near term E-retailers to outpace physical stores; growth story to continue as
players eye market share
(Rs.bn) (Rs billion)
12,000 5 yr CAGR 23-25% 3,500 3,000-3,500
Growth impacted due to
slowdown in economy
10,000-10,500 3,000
10,000 during 2012-13 to
2014-15 2,500

8,000 Last 5 yrs CAGR 14% 2,000

15% 21% 23% 1,500

2016 CRISIL Ltd. All rights reserved.


6,000 5,156
1,000 724
4,201
4,000 3,483 500 153
3,037
-
1,816

2012-13

2013-14

2014-15

2015-16

2016-17

2017-18P

2018-19P

2019-20P

2020-21P

2021-22P
2,000

organised retail
Penetration in
-
2011-12 2015-16 2016-17 2017- 2018- 2021-
18P 19P 22P 5% 19% 26-28%

P Projected P Projected
Source: CRISIL Research Source: CRISIL Research

Growth to pick over 2016-17 to 2021-22 as consumer sentiments improve


Factors such as low inflation, store addition, 7th pay commission implementation, higher disposable income to
contribute for the growth story
Long-term growth to be healthy at 23-25% CAGR over 2016-17 to 2021-22
Online format to record 34-36% CAGR over the same period
Share of online format to reach 26-28% in organised retail industry by end of 2021-22

7
Vertical-wise growth
and indicative
financials

2016 CRISIL Ltd. All rights reserved.


8
Apparel, lifestyle accessories and consumer durables -
growth drivers

2016 CRISIL Ltd. All rights reserved.


P: Projected, ORP: Organised retail penetration
Source : CRISIL Research

Apparel, consumer durables to register faster growth among verticals


Books and music to see demand decline further due to stiff competition from digital media
ORP for food and grocery (which has a lions share in overall retail), to remain lower than other segments
as players will face stiff competition from the unorganised kirana stores

9
Furnishings, Apparels, footwear earn highest gross
margins
Food and grocery Other categories

Category Gross margins (%) Category Gross margins (%)

Fresh 8-10 Apparels 30-35

Staples 10-12 Footwear 30-35

2016 CRISIL Ltd. All rights reserved.


FMCG-Food 10-12 Electronics 12-14

FMCG-Others 10-12 General merchandise 12-14

Furnishings 35-40

Source: CRISIL Research

Food and grocery high-volume, low-margin business


Apparel right product mix (brands and private labels) can boost returns
Furnishing unbranded and regional products offer higher margins due to high realisation
Consumer durables a challenging business as it is brand-driven (low gross margins) and
high operating overheads
Inventory days vary across segments, formats and business models

10
Food and Grocery (F&G) high-volume low-margin
business
Huge opportunity but fiercely competitive
Wet markets, cart vendors etc
Mom-and-pop stores

Business dynamics challenging


Catchment area small (2-3 km radius)

2016 CRISIL Ltd. All rights reserved.


Fruits and vegetables - primary footfall driver
Huge wastages due to an underdeveloped supply chain

F&G - a low-margin business


Gross margins typically in the 8-12% range
To improve margins, retailers need
Private labels in processed food, FMCG, and general
merchandise
Expansion of scale critical to improve bargaining power with
suppliers

11
Clothing right product mix can generate high returns

Appropriate brands - key to attracting footfalls


Brands can attract high-end customer segments
Indian consumers not averse to private labels
Private labels attract low-mid-segment customers

2016 CRISIL Ltd. All rights reserved.


Ability to generate higher gross margins
Private labels offer gross margins of 40-45%
Even branded apparel offer gross margins of 30-35%

12
Consumer durables A challenging business

High brand awareness amongst consumers


Buyers prefer national/well-known brands
After-sales services - a core part of the offering
Gross margins on branded products at 12-14%

Private labels - a risky proposition

2016 CRISIL Ltd. All rights reserved.


Technology obsolescence can lead to high inventory

Operating overheads on the higher side


Trained manpower needed for guiding purchases

13
Assessment of
various formats

14

2016 CRISIL Ltd. All rights reserved.


Various formats of stores
Supermarket Departmental Hypermarket Cash and carry
Store
Store size (sq ft) 2,000-10,000 50,000-55,000 75,000-1,00,000 1,50,000-1,80,000

Location Near cluster of In the main city/ Close to the main Beyond prime locations of the city
residential property town city/ towns

Model Majority is Majority is Majority is displayed ~30 % is displayed, balanced is

2016 CRISIL Ltd. All rights reserved.


displayed displayed stored

Products Mainly food and Apparels, footwear, Food and grocery Food and grocery along with
grocery electronics. But not along with apparels, apparels, footwear, electronics etc.
food and grocery footwear, electronics
etc. Share of food and grocery is much
larger than Hypermarket

Price points Retail prices Retail prices Retail prices Similar to distributor/ wholesaler

Entry Any Any Any Only with business license

Customers Retail consumers Retail consumers Retail consumers Hotels, Corporate, Caterers, local
shops

15
Comparison across verticals and formats
Verticals Format

Food and Consumer Departmental Cash and


Key metrics Apparels Hypermarket
Grocery Durables Store Carry
~75,000- 1,50,000-
Store size (sq ft) 8,000 2,000-3,000 8,000 ~50,000-55,000
1,00,000 1,80,000
Gross margins (%) 30-35 8-12 12-14 25-30 20-22 10-12

2016 CRISIL Ltd. All rights reserved.


Operating margins *(%) 11-12 2-3 3-4 10-11 6-7 2-4

Cash breakeven (years) ~4 ~7 ~8 ~4 ~5 7-8

Equity IRR (%) 16-17 11-12 12-13 17-18 ~15 13-15

Note: 1) Above assumptions are for a stores located in a metro city


2)* indicates a 20 year average
Source: CRISIL Research

Department stores more profitable than hypermarkets, but hypermarkets more


scalable
Compact hypermarkets are in vogue

16
Profitability

17

2016 CRISIL Ltd. All rights reserved.


Operating margins estimated to have plunged in 2016-17
Typical cost structure Single brand retailers - Better demand to improve EBITDA margin in
2017-18

(%) Selling (%)


Expenses 12.0 11.0
Other 10.8 10.8 10.7
5-10 10.1
Expenses 11.0 9.8
10-15 Employee 10.0
8.5 8.5-8.7
Costs 9.0 8.1-8.3
5-10 8.0 6.8
7.0 5.9 6.2 5.9
Power and

2016 CRISIL Ltd. All rights reserved.


Fuel Material cost 6.0 4.9 4.7 4.7
1-2 70-75 5.0
4.0
2009-10 2011-12 2013-14 2015-16 2017-18P

Operating margins Net margins


Source: CRISIL Research Source: CRISIL Research

Multi-brand retailers- cost rationalisation to help improve margin


in 2017-18
(%) Margins to have come under pressure in 2016-17 due
10.0 to demonetisation
8.1 8.1
7.2 7.6
8.0 6.8 7.2 6.9 7.0-7.2 7.7-7.9 Players adopted various strategies such as offering higher
discounts to clear inventory as well as increase advertising
6.0
spends in order to boost demand
4.0

2.0 3.6 0.7


Continued efforts to trim costs to help operating
2.8 3.1 margin improve in 2017-18
0.0 1.5 1.6
1.0
2009-10 2011-12 2013-14 2015-16 2017-18P Players could see their margin improve if they continue
Operating margins Net margins with measures such as closing unprofitable outlets, right
sizing stores and increasing share of private labels

18
About us
CRISIL Limited
CRISIL is a global analytical company providing ratings, research, and risk and policy advisory services. We are India's leading ratings agency. We are also the
foremost provider of high-end research to the world's largest banks and leading corporations.
CRISIL is majority owned by S&P Global Inc., a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity
markets worldwide.

CRISIL Research
CRISIL Research is India's largest independent integrated research house. We provide insights, opinion and analysis on the Indian economy, industry, capital markets
and companies. We also conduct training programs to financial sector professionals on a wide array of technical issues. We are India's most credible provider of

2016 CRISIL Ltd. All rights reserved.


economy and industry research. Our industry research covers 86 sectors and is known for its rich insights and perspectives. Our analysis is supported by inputs from
our network of more than 5,000 primary sources, including industry experts, industry associations and trade channels. We play a key role in India's fixed income
markets. We are the largest provider of valuation of fixed income securities to the mutual fund, insurance and banking industries in the country. We are also the sole
provider of debt and hybrid indices to India's mutual fund and life insurance industries. We pioneered independent equity research in India, and are today the country's
largest independent equity research house. Our defining trait is the ability to convert information and data into expert judgements and forecasts with complete
objectivity. We leverage our deep understanding of the macro-economy and our extensive sector coverage to provide unique insights on micro-macro and cross-
sectoral linkages. Our talent pool comprises economists, sector experts, company analysts and information management specialists.

CRISIL Privacy Notice


CRISIL respects your privacy. We use your contact information, such as your name, address, and email id, to fulfil your request and service your account and to
provide you with additional information from CRISIL and other parts of S&P Global Inc. and its subsidiaries (collectively, the Company) you may find of interest.
For further information, or to let us know your preferences with respect to receiving marketing materials, please visit http://www.crisil.com/privacy. You can view the
Companys Customer Privacy at https://www.spglobal.com/privacy.
Last updated: April 2016

Disclaimer
CRISIL Research, a division of CRISIL Limited (CRISIL) has taken due care and caution in preparing this Report based on the information obtained by CRISIL from
sources which it considers reliable (Data). However, CRISIL does not guarantee the accuracy, adequacy or completeness of the Data / Report and is not responsible
for any errors or omissions or for the results obtained from the use of Data / Report. This Report is not a recommendation to invest / disinvest in any company covered
in the Report. CRISIL especially states that it has no financial liability whatsoever to the subscribers/ users/ transmitters/ distributors of this Report. CRISIL Research
operates independently of, and does not have access to information obtained by CRISILs Ratings Division / CRISIL Risk and Infrastructure Solutions Limited (CRIS),
which may, in their regular operations, obtain information of a confidential nature. The views expressed in this Report are that of CRISIL Research and not of CRISILs
Ratings Division / CRIS. No part of this Report may be published / reproduced in any form without CRISILs prior written approval.

19
Thank you

2016 CRISIL Ltd. All rights reserved.

Das könnte Ihnen auch gefallen