Organised Retail

Emerging Trends and Way Forward January 2015

Watchouts
Stronger

• inflation due to market inefficiencies and supply bottlenecks

• Below-average monsoon rains

India retail
landscape and
evolution
 India Retail Sector – Scaling New Heights

Total Retail Market Organized Retail Penetration

1000 950
900
800
700
USD Billion

600 520
500
400
300 7.5% CAGR
20%
10%
200 Organized retail Organized retail penetration
penetration
100
2013 2018
0
2013 2018 Total Retail Market Size: Total Retail Market Size:
USD 520 USD 950

Indian Retail sector is scaling new heights with a gradual shift towards Organized retailing.
In 2013, the India retail sector was estimated at USD 520 Billion with organized retail penetration of 7.5% which is expected to reach
USD 950 Billion by 2018

Source: Pulse of Indian Retail Market; EY RAI Report

 India Retail Sector – Scaling New Heights

Organized Retail Unorganized Retail

Food and Grocery
6 1 31 Apparel
8 24 14
5 Consumer Durables, Mobiles
2 4 and IT
10 6 Home Décor and Furnishings
93%
4 Unorganized Beauty, Personal and
12 Healthcare
Retail
Pharmacy
70
20 35 Jewellery, Watches and Eye
Care
Footwear
7%
Books and Music

Organized Retail (2011-12) Unorganized Retail (2011-12)

Unorganized retail sector is largely concentrated around the food and grocery segment, while the organized sector has harped
on apparels, accessories and lifestyle goods.

Source: JLL Research-India’s retail Luxury Quotient-Exploring the Luxury clusters of India
 India Retail Sector – Growth Triggers

Rising Working and Younger

Growing Urbanization Easy availability of credit
Population

200 million
Liberalization of FDI Policy Indians would be reaching working
age over the next two decades

27
Median age of India’s Population
Rising Income Levels

Driven by favorable demographics and rising income level, there has been transformation in Indian retail sector to match the
varying needs of the consumers
Source: For Median age- Central Intelligence Agency
Retail and Retail
Real Estate: Key
Trends
India Retail Sector – Key Trends

1 2 3 4 5
Entry of Penetration in Right Strategy
Newer
Global Tier 2,3 cities driving E- retailing
Formats
Retailers and beyond exceptional
sales
 Trend 1-Entry of Global Retailers in India
Timeline of entry

USD 259
Million

FDI in Single Brand Retail

since April 2010

Pre 2010 2010 onwards Brands planning to enter

• Liberalization of FDI in multi brand retail is further paving the way for entry of global retailers in India

• International retailers are introducing global best practices and formats to Indian outlets including design, layouts and fit-outs
 Trend 2-Newer Formats
Smaller/ Multiple Formats to Capture Larger Footfalls

CROMA ZIP – STORE AT AIRPORT MULTI – CHANNEL RETAILING RELAINCE DX

Leveraging the opportunity in high footfall areas through smaller formats

In order to ensure wider spread and reach, Croma introduced Zip stores and portable kiosks apart from the standardized mega store
formats
Reliance Digital – brought a similar smaller format – Reliance DX
Trend 2-Newer Formats
Offering the Experience
VODAFONE

Vodafone

Vodafone-Stepping ahead through futuristic one stop shop experience platform for customers
Launched “Innovative Design” retail concept Based on a Concept in international markets.
offers live and engaging retail experience
 Trend 2-Newer Formats
Global + Local Approach

“DUNKIN’ DONUTS” VS “DUNKIN’ DONUTS & MORE”

F&B QSR Chains – Dunkin Donuts, Mc Donalds, KFC – customized their retail offering to better suit the Indian Consumers
Trend 2-Newer Formats
Global + Local Approach-Opposite end of the spectrum

Fabindia is reinventing itself with western wear line -

Fable

“It's a part re-invention. The market for ethnic

clothing is for occasions or when people feel
patriotic but ethnic as everyday wearing is not
prevalent anymore.”
- William Bissell, Fabindia
Trend 3-Penetration in Tier II, Tier III and beyond
INOX Cinemas – second largest cinema chain in the
country has multiplex located in following cities
• Anand
• Aurangabad
• Bangalore
• Belgaum
• Bharuch
• Bhopal
• Bhubaneswar
• Burdwan
• Chandigarh
• Chennai
• Darjeeling
• Dhanbad
• Durgapur
• Goa
• Hyderabad
• Indore
• Jaipur
• Kanpur
• Kolkata

The opportunity landscape in India spans beyond the major metros

Cinema chains footprint highlight the vastness and scale of this opportunity
Trend 4-Right Strategy driving Exceptional Sales
Right Product , Right Offering and Right Real Estate Strategy

Reasons for remarkable

Growth:

• Right Merchandise

• Brands Pricing and

Inventory Rotation

• Keeping Real Estate

cost in control

Fast fashion brand Zara, which opened its shop in India in 2010 have crossed USD 83.3 Million (INR 500-crore) sales mark
It clocked 43 % annual growth in its sales for the year ended March 2014
Trend 5-Growing Prominence of E-tailing

USD 2.3 Billion USD 19 Billion-

USD 38 Billion
Market Size of E-tailing
Market Size by end
in India
of this decade
2014

Online shoppers to rise from

25 Mn to 40 Mn by 2016

Source: Times of India, Business Standard, Business Today

Retail Real Estate
Overview in India

Retail Real Estate Overview in India

Retail Real Estate: Stock and Supply

120
Historically low supply 104.1
100 97.9 6.55
in last many years
87.3
Built-up Area (Million Sft)

10.27
77.3
80 76 10.01
70.8 1.30
66.5 5.23
4.30
60 53.3 13.20
7.97 97.62
87.35
40 76.0 77.3
66.5 70.8
53.3
20 45.3

0
2010 2011 2012 2013 2014 2015 2016 2017
Stock Net Addition

2014 witnessed historically low supply in many years with very few malls getting operational

Note: Figures represent the top seven cities of India – Mumbai, NCR-Delhi, Bangalore, Chennai, Pune, Hyderabad and Kolkata.
Retail Real Estate: Key Trends

Increasing focus on developing quality international standard malls with right planning and mall
1 management

India has positioned itself firmly on the radar of international brands thus generating the opportunities
2 for development of next gen retail real estate development

Retail real estate developments are being upgraded to meet the global standards of international
3 retailers requirements

4 Rising Opportunities in emerging cities and newer locations: as retailers gear up to explore the new
opportunities beyond the Tier 1 cities

5 Coming up of various newer retail formats through collaboration of multiple stakeholders

Retail Real Estate: Key Challenges

1 Poor infrastructure limits growth and Profitability. E -tailing

would further act as a competition to physical stores

2 Regulatory hurdles are high, especially in obtaining licenses

and permits

Real Estate cost especially in larger cities act as a deterrent to

3 growth

4 Quality Space Availability: Difficulty in finding suitable and

quality retail properties in bigger cities

High operational cost and deep discounting to improve

5 sales have affected profits of retailers
Retail Real Estate: The way forward

Key to Success
• Indian retail and real estate market is quite dynamic with fast paced evolution. The brand expansion
strategy should be flexible that can change according to market conditions.

• Indian retail real estate is an opportunistic market and therefore the expansion plan should be managed/
executed strategically.

• Churning in newer and innovative ideas in order to cater the discerning consumers

• Rising opportunity in Tier I and II cities but due to lack of quality space the expansion in these cities needs
to planned taking into account the consumer profile and the supply of mall developments
Thank you

COPYRIGHT © JONES LANG LASALLE 2014