2012

RETAIL INDUSTRY IN FUTURE

Presented To
Prof. Priyanka Batra

Presented By
Savan Bhatt
MBA (Retail Management) Center for Management Studies, Ganpat University

Retail industry in Future

 Organized retail is a new phenomenon in India and despite the downturns, the market is growing exponentially, as economic growth brings more of Indias people into the consuming classes and organized retail lures more and more existing shoppers into its open doors. By 2015, more than 300 million shoppers are likely to patronize organized retail chains. The growing middle class is an important factor contributing to the growth of retail in India. By 2030, it is estimated that 91 million households will be middle class, up from 21 million today. Also by 2030, 570 million people are expected to live in cities. Consumer markets in emerging market economies like India are growing rapidly owing to robust economic growth. India's modern consumption level is set to double within five years to US$ 1.5 trillion from the present level of US$ 750 billion.

The Future

 Thus, with tremendous potential and huge population, India is set for high growth in consumer expenditure. With India's large young population and high domestic consumption, the macro trends for the sector look favorable. Online retail business is another format which has high potential for growth in the near future. The online retail segment in India is growing at an annual rate of 35 per cent, which would take its value from Rs 2,000 crore (US$ 429.5 million) in 2011 to Rs 7,000 crore (US$ 1.5 billion) by 2015.

The Future

 According to McKinseys report: Indias retail sector will be a $ 450 billion industry by 2015, one among top 10 retail markets in the world. Organized retail will create 1.6 million jobs in the next 5 years.

Organized retail now accounts for only 5% of Indias retail business with an estimated 12 million mom-and-pop stores garnering the bulk of the trade.
By 2015, organized retail is expected to have a share of 14-18 percent of the business. The huge Indian middle class consumer are now the blue eyed segment for biggies like Bharti, Wal-Mart, Reliance and loads of others, in race to capture their pie in Indian Retail Market.

 The modern retail Industry in BRICs is seen as having the maximum potential on growth world wide. It grew by almost 30% in India and 13% in China and Russia last year. According to A.T. Kearney, in their report, Growth Opportunities For Global Retailers have ranked India at No.1 position consecutively for the second year. The report sees Indian retail Industry to grow exponentially over next few years. The ranking has been done for30 upcoming global economies.

Investment in Indian Retail sector

Major Investment in Indian Retail Industries

Bharti-Wal-Mart will invest approx. US$2.5 billion by 2015. Reliance Industries Limited is planning to invest US$ 6 billion in the organized retail sector in India by opening 1500 supermarkets and 1000 hypermarkets by 2012-2013. Metro AG is investing US$400 million over the next three years. Pantaloons is planning to invest US$ 1 billion in order to increase its retail space to 30 million square feet New Delhi-based round-the-clock convenience chain Twenty Four Seven Retail Stores Pvt. Ltd plans to invest US$200 million in the next five years and targeting an emerging segment of night shoppers.

Convenience store chain operator Lawson Inc. is set to become the first major Japanese retailer to foray into India through a proposed JV with top Indian retailer Future Group

Pantaloon Retail India Ltd has earmarked US$195.59 mn expenditure over the next three years for expansion.

Havells India has announced its entry into the domestic appliances market with an aim to garner sales of US$ 112 mn in the next four years.

Sahara India has announced an expansion plan to launch a range of food and non-food items at over 10,000 retail outlets across 285 cities. Yum! Brands Inc, the US owner of the KFC and Pizza Hut restaurants, expects its Indian operations to be around US$ 1 bn by 2015.

The Government is considering a proposal to raise the foreign direct investment in singlebrand retail from 51 per cent.

Online retail is expected to touch approximately US$ 1,420 mn by 2015

INDIAN RETAIL SECTOR THE FUTURE

Consumer expenditure on food, beverages and tobacco is forecast to rise in absolute terms to US$ 507.2 bn in 2015, from an estimated US$ 325.8 bn in 2010.

Retail Sales are forecast to grow by an annual average of 5.2% during 2011-2015

FOREIGN DIRECT INVESTMENT IN INDIAN RETAIL SECTOR

FDI
According to the Indian retailing laws, Foreign Direct Investment in multi-brand retail market was prohibited. But government is thinking to open the FDI in retail in India which implies that foreign investment in retailing is possible up to 51%. Now the announcement of retail FDI in India has triggered a series of debates on both positive and negative notes and become Political Issue. So lets discuss these things, what all this means to you through advantages and disadvantages:

Advantage of FDI
1. Cheaper production facilities: FDI will ensure better operations in production cycle and distribution. Due to economies of operation, production facilities will be available at a cheaper rate thereby resulting in availability of variety products to the ultimate consumers at a reasonable and lesser price. 2. Availability of new technology: FDI enables transfer of skills and technology from overseas and develops the infrastructure of the domestic country. Greater managerial talent inflow from other countries is made possible. Domestic consumers will benefit getting great variety and quality products at all price points.

3. Benefits to farmers: In most cases, in the retailing business, the intermediaries have dominated the interface between the manufacturers or producers and the consumers. Hence the farmers and manufacturers lose their actual share of profit margin as the lions share is eaten up by the middle men. This issue can be resolved by FDI, as farmers might get contract farming where they will supply to a retailer based upon demand and will get good cash for that, they need not to search for buyers.

Advantage of FDI
4. Growth in economy: Due to coming of foreign companies new infrastructure will be build, thus real estate sector will grow consequently banking sector, as money need to be required to build infrastructure would be provided by banks. 5. FDI opens new doors for Franchising: Restrictions on FDI are considered as trade barriers as they deny direct market access to foreign firms. Retail giants who are at their wings, seeking entry into foreign market look for other available alternatives. These restrictions on the global retailers regarding the inflow of Foreign Direct Investment, leads them towards acquiring the market entry through franchises. Thus, countries which offer promising market potentialities for retail growth offers substantial growth in the franchising sector as well.

Disadvantage of FDI
Will affect 50 million merchants in India Profit distribution, investment ratios are not fixed Retailer faces loss in business Workers safety and policies are not mentioned clearly Inflation may be increased Again India become slaves because of FDI in retail sector

Disadvantage of FDI
According to the non-government cult, FDI will drain out the countrys share of revenue to foreign countries which may cause negative impact on Indias overall economy.
The domestic organized retail sector might not be competitive enough to tackle international players and might loose its market share. Many of the small business owners and workers from other functional areas may lose their jobs, as lot of people are into unorganized retail business such as small shops.