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Real estate sector growing at 30% per annum and one of the largest
employer – a key contributor to GDP
Office space demand of 66 million sq.ft. for IT industry over next 5 years
Real Estate in India projected to be USD 50 billion in 2008
Organized retail space demand of 40 million sq.ft. over next 3-4 years
India is ranked the 5th largest retail destination across the globe
Consumerism – the order of the day, which is fueling the growth in both
the commercial as well as the retail sector
India is amongst the least saturated of all major global markets in terms of
penetration of modern retailing formats
Many strong regional and national players emerging across formats and
product categories
Most of these players are now gearing up to expand rapidly after having gone
through their respective learning curves
Real Estate Developers are also moving fast through the learning curve to
provide qualitative environment for the consumers
Improved Infrastructure
Conclusion
Lakshmi Narayanaswamy
(203/43)
Mudit Sharma (222/43)
Industry Evolution
Unorganized
Unorganized :: VastVast majority
majority of of the
the twelve
twelve million
million stores
stores are
are Experimentation
Experimentation with with formats:
formats: Retailing
Retailing in in India
India isis still
still evolving
evolving
small
small "father
"father and
and son"
son" outlets
outlets and
and the
the sector
sector isis witnessing
witnessing aa series
series ofof experiments
experiments across across the the
Fragmented country
country with
with new
new formats
formats being
being tested
tested out.
out. Ex.
Ex. Quasi-mall,
Quasi-mall, sub- sub-
Fragmented :: Mostly
Mostly small
small individually
individually ownedowned businesses,
businesses, urban
urban discount
discount stores,
stores, Cash
Cash andand carry
carry etc.
etc.
average
average size
size of
of outlet
outlet equals
equals 50 50 s.q.
s.q. ft.
ft. Though
Though IndiaIndia has
has the
the
highest
highest number
number of of retail
retail outlets
outlets perper capita
capita in in the
the world,
world, the
the retail
retail Store
Store design
design :: Biggest
Biggest challenge
challenge forfor organised
organised retailing
retailing to to
space
space per
per capita
capita at
at 22 s.q.
s.q. ftft per
per person
person is is amongst
amongst the the lowest.
lowest. create
create aa “customer-pull”
“customer-pull” environment
environment thatthat increases
increases the the amount
amount
Rural of
of impulse
impulse shopping.
shopping. Research
Research shows
shows that
that the
the chances
chances of of
Rural bias:
bias: Nearly
Nearly twotwo thirds
thirds ofof the
the stores
stores areare located
located inin rural
rural senses
senses dictating
dictating sales
sales are
are upto
upto 10-15%.
10-15%. Retail
Retail chains
chains likelike
areas.
areas. Rural
Rural retail
retail industry
industry hashas typically
typically two two forms:
forms: "Haats"
"Haats" andand MusicWorld,
“Melas".
“Melas". Haats
Haats are
are the
the weekly
weekly markets
markets :: serveserve groups
groups of of 10-50
10-50 MusicWorld, Baristas,
Baristas, Piramyd
Piramyd andand Globus
Globus are are laying
laying major
major
villages emphasis
emphasis & & investing
investing heavily
heavily inin store
store design.
design.
villages and
and sell
sell day-to-day
day-to-day necessities.
necessities. Melas Melas areare larger
larger in
in size
size
and
and more
more sophisticated
sophisticated in in terms
terms of of the
the goods
goods sold
sold (like
(like TVs)
TVs) Emergence
Emergence of of discount
discount stores:
stores: They
They are
are expected
expected to to
spearhead
spearhead thethe organised
organised retailing
retailing revolution.
revolution. Stores
Stores trying
trying to to
emulate
emulate the
the model
model of of Wal-Mart.
Wal-Mart. Ex. Ex. Big
Big Bazaar,
Bazaar, Bombay
Bombay
Bazaar,
Bazaar, RPGs.
RPGs.
Unorganized
Unorganized retailing
retailing is is getting
getting organized:
organized: To To meet
meet the the
challenges
challenges ofof organized
organized retailing
retailing such
such asas large
large cineplexes,
cineplexes, and and
malls,
malls, which
which are
are backed
backed by by the
the corporate
corporate house
house such such asas 'Ansals'
'Ansals'
and
and 'PVR‘
'PVR‘ the
the unorganized
unorganized sector sector is
is getting
getting organized.
organized. 25 25 stores
stores
in
in Delhi
Delhi under
under the
the banner
banner of of Provision
Provision mart
mart areare joining
joining hands
hands to to
combine
combine monthly
monthly buying.
buying. Bombay
Bombay Bazaar
Bazaar and and Efoodmart
Efoodmart formed formed
which
which are
are aggregations
aggregations of of Kiranas.
Kiranas.
Recent Trends contd.
Multiple drivers leading to a consumption boom:
Favorable demographics
Growth in income
Increasing population of women
Raising aspirations : Value added goods sales
Food and apparel retailing key drivers of growth
Organized retailing in India has been largely an urban phenomenon with affluent classes and growing number of double-
income households.
More successful in cities in the south and west of India. Reasons range from differences in consumer buying behavior to cost
of real estate and taxation laws.
Rural markets emerging as a huge opportunity for retailers reflected in the share of the rural market across most categories of
consumption
ITC is experimenting with retailing through its e-Choupal and Choupal Sagar – rural hypermarkets.
HLL is using its Project Shakti initiative – leveraging women self-help groups – to explore the rural market.
Mahamaza is leveraging technology and network marketing concepts to act as an aggregator and serve the rural markets.
IT is a tool that has been used by retailers ranging from Amazon.com to eBay to radically change buying behavior across the
globe.
‘e-tailing’ slowly making its presence felt.
Companies using their own web portal or tie-sups with horizontal players like Rediff.com and Indiatimes.com to offer products
on the web.
Major Retailers
Indian retail is fragmented with over 12 million outlets operating in the country. This is in comparison to 0.9
million outlets in USA, catering to more than 13 times of the total retail market size as compared to India
India has the highest number of outlets per capita in the world - widely spread retail network but with the lowest
per capita retail space (@ 2 sq. ft. per person)
Annual turnover of Wal-Mart (Sales in 2001 were $219 billion) is higher than the size of Indian retail industry.
Almost 100 times more than the turnover of HLL (India's largest FMCG company).
Wal-Mart - over 4,800 stores (over 47 million square meters) where as none of India's large format store
(Shoppers' Stop, Westside, Lifestyle) can compare.
The sales per hour of $22 million are incomparable to any retailer in the world. Number of employees in Wal-
Mart are about 1.3 million where as the entire Indian retail industry employs about three million people.
One-day sales record at Wal-Mart (11/23/01) $1.25 billion - roughly two third of HLL's annual turnover.
Developed economies like the U.S. employ between 10 and 11 percent of their workforce in retailing (against 7
percent employed in India today).
60% of retailers in India feel that the multiple format approach will be successful here whereas in US 34 of the
fastest-growing 50 retailers have just one format
Inventory turns ratio: measures efficiency of operations. The U.S. retail sector has an average inventory turns
ratio of about 18. Many Indian retailers KPMG surveyed have inventory turns levels between 4 and 10.
Global best-practice retailers can achieve more than 95 percent availability of all SKUs on the retail shelves
(translating into a stock-out level of less than 5 %).The stock-out levels among Indian retailers surveyed ranged
from 5 to 15 percent.
Future direction: Positives
AT Kearney has estimated India’s total retail market at US$ 202.6 billion which is
expected to grow at a compounded 30 per cent over the next five years.
With the organised retail segment growing at the rate of 25-30 per cent per annum,
revenues from the sector are expected to triple from the current US$ 7.7 billion to
US$ 24 billion by 2010.
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.
Future direction: Concerns
68 million square feet of mall space is expected to be available by end of 2007, which might lead to
over-capacity of malls
Lack of differentiation among the malls that are coming up. One option may be to look at specialization.
Poor inventory turns and stock availability measures - retailers clearly need to augment their
operations.
Operations of retailers and suppliers are not integrated. Efficient replenishment practices practiced in
the Indian auto and auto-component industry can be leveraged to implement efficient supply chain
management techniques.
Supplier maturity, in terms of adherence to delivery schedules and delivering the quantity ordered, is
an issue
Sales tax laws - lead to retailers having state-level procurement and storage leads to Indian retailers
having higher inventories. VAT has helped alleviate this a bit.
Increased adoption of IT and shrinkage management will be a critical area.
Supply chain and customer relations followed by merchandising, facilities management and vendor
development are areas which have significant gaps and proactive training is a key imperative for
overcoming these.
Sources
AT Kearny
Forrester Research 2006
KPMG-FICCI Report
http://www.indiainbusiness.nic.in/