Indian Retail

Tomorrow’s “Promised Land”

Sushant Das
 India
2nd largest
growing
ecomony
3rd largest
economy in
terms of GDP
in the next 5
years
4th largest
economy in PPP
terms
India’s economy growth – 8%
Growth rate to exceed China by
2015
To grow larger than Britain’s
economy by 2022
To cross Japan’s economy by 2032

Be the 3rd largest economy after US

and China
BRIC Report 2004 – Goldman Sachs
 Indian Retail Scenario
Over 60% of the 700 shopping centers
which is being developed has been
sold or leased out already.
 Indian Retail Scenario
In 2005, the top 6 Indian cities accounted
for 66% of the total organized retailing
In 2009, the top 6 Indian cities account for
47% of the total organised retailing

Retail activities are picking up in the Tier 2

cities ( Surat, Lucknow, Bhopal, Indore, Vadodara,
Coimbatore, Nasik, Bhubaneshwar, Varanasi, Chandigarh,
Ludhiana, Amritsar,etc )
The contribution of these Tier 2 cities to
grow by 20 – 25 per cent
Indian Retail Scenario ( 2011-12)
700 shopping centers & multiplexes
consisting of :

200 Hypermarkets
500 Departmental stores
2000 Supermarkets
Over 15000 Vanilla stores
Indian Retail Scenario ( 2011-12)
Tier 2 cities retail space explosion

Huge technological advancements

More Knowledgeable and empowered customer

New avenues of consumer expenditure evolving

1984 : 7% categories consisted of 80% of total
consumer expenditure
2004 : 17% categories consists of 80% of the total
expenditure
( Outsourcing domestic help, Gifting, Holidaying, Education
gaining prominence )
Organised Retail : INR 350 Billion
Currently 5.1% of Total Retail Sales & Growth rate @ 15-20%

2012 Projection : Organised Retail will cross INR 1000 Billion

 Let’s analyse a bit…..
Why such a fuss over India ?
What factors has made it possible
for the world to take notice of us ?
How did it all happen ?

Also, let’s debate on…..

The deterrent factors
Factors driving the Retail Explosion
Favourable demographic & psychographic changes
of consumers

International Exposure

Availability of quality retail space

Wider availability of products

Brand Communication

Development of India as a global sourcing hub

 Indian Consumer Base
890 million below 45 years – Largest young population in the world

More English speaking people than the whole of Europe

300 million middle class (Real consumers) to grow to 600 million by

2011

550 million people would be below the age of 20 by the year 2015

70 million earning over Rs 8 lakh annually which will grow to 140

million by 2011
 AC Nielsen Global Survey 2005
3 Parameters

Job Prospects
Survey across major cities Personal Finances
in the world Spending Desires

India is at the top of the Index

 Indian Consumer Base
Emerging Consumer Segments :
Group Age Population
Technology Babies 8 – 19 32 M
Impatient Aspirers 20 – 25 16 M
Balance Seekers 26 – 50 41 M
Breaking free 51 – 60 9M

Projected Demographic Shifts by 2011

– 510 Million people aged between 20 to 49

– 65% of Total population will be below the age 35

A young consumer base is growing up free from the

self-denial of earlier generations.
Consumer Evolution - Trends
Easier and uninhibited acceptance of luxury

Willingness to experiment

Increased effort to look and feel good

Double Income couples – Increased propensity

towards disposability

Kids becoming aware of ext. environment & more

demanding
Consumer Evolution - Trends
Emphasis on experience and enjoyment

Expectations of return on money spend

significantly higher

Design & quality acquiring significance

 International Exposure
33% Indians have an intent of using their
disposal income to embark on a vacation -
AC Neilsen survey

Proliferation of Cable channels, Internet has

led to a high level of awareness and
expectation
 International Exposure
The previous generation heard what the
world has to offer

The current generation saw what the world

has to offer

The next generation wants what the world

has to offer
 Retail Space
2005-06 95 malls are operational with 22
mn sq. ft retail space

2011-12
500 malls would be operational
with approx 125 mn sq. ft
retail space
In addition
Kshitij planning 50 malls with 40 mn sq.ft
Defunct mills in Mumbai allowed for Retail Development
Reliance mulling over building malls on major highways
Provogue has floated a company for realty development

Estimation of Retail space is very speculative in nature at

the moment.
Availability of products / services
Guess Trussardi Giordano Chanel
Espirit Breguet Swatch Lotto
Mothercare Versace Hugo Boss
Rado Marks & Spencer Tag Heuer
Next Debenhams Nautica

About to enter
FCUK Zara Cerruti
Roche Fendi DKNY Ikea Clark
Build-a-bear
 India as a sourcing hub
Wal- Mart GAP Tesco JC Penny
H&M Karstadt-Quelle Sears(K Mart )

3 – 4 yrs INR 100-150 Billion / year

INR 10-20 Billion / year

Bottlenecks
 Bottlenecks
Regulatory Barriers
Lack of skilled manpower
Differential Taxation system
Labour legislation
Lack of Industry status
Absence of developed supply chain and IT
management
Structural Impediments
High cost of real estate
Varied customer preferences across regions
 Regulatory Barriers
Complex Taxation system – Differential sales tax
rates adds cost and complexity of distribution

Cost advantage for smaller stores through tax

evasion

Mutliple legislations limits flexibility in

operations

Irritant value in establishing chain operations; adds

to overall costs
 Skilled manpower shortage
Lack of trained personnel

Higher trial and error in managing retail operations

Increase in personnel costs

 Labour Legislation
Stringent labour laws governing hours of work /
minimum wage payments

Multiple licenses / clearances required

 Industry status
Restricted availability of finance

Restricts growth and scaling up

 Integrated Supply chain / IT
Limited product range ( segments in food / apparel
reserved for SSIs )

Makes scaling up difficult

High cost and complexity of sourcing & planning

Lack of value addition and increase in costs by

almost 15%
 Structural Impediments
Lack of urbanization

Poor transportation infrastructure – Wastage of

almost 45% of farm produce

Consumer habit of buying fresh foods

 High Real estate rates
Difficult to find good real estate in terms of location
and size

High land cost owing to constrained supply

Disorganized nature of transactions

 Varied Customer Preferences
Local consumption habits

Need for variety leads to stocking larger no of SKUs

at a store level

Increases complexity in sourcing and planning

Increases the cost of store management

MAJOR PLAYERS IN THE INDUSTRY
 Prominent Retailers in India
RPG Retail
Pantaloon Retail
The Tata Group
Raheja Group
Lifestyle India
Aditya Birla Retail Limited
Reliance Retail India
Nilgiris’
Subhiksha
Trinethra
Vishal Group
Adani
Presence of Foreign Players
 Presence of Foreign Players
German giant Metro AG & South African Shoprite Holdings has
set up wholesale operations

Carrefour has deputed Gerard Freiszmuth as CEO to explore

opportunities and oversee work

Wal Mart has tied up with Bharti to co launch retail operations

in India

Australian retailer Woolworths has announced its market entry

into India. It is entering into a joint venture with the Tata
Group for durable retailing

French retailer Geant is expected to start operations

India is ready to leapfrog into the next stage of
evolution where a large number of Indian and
international retailers would build scalable
models with a pan India appeal.
 Summarising>>>
INDIA - A Vibrant Economy & Resplendent
Market
• 4 Largest economy in PPP terms after USA, China
& Japan

• To be the 3 largest economy in GDP terms in

next 5 years.

• 2 fastest growing economy in the world

.
• A US $580 billion economy grew 8.2 percent in
the year 03-04

• Among top 10 FDI destinations

• Stable Government with 2 stage reforms in place

• Growing Corporate Ethics (Labour laws, Child
Labour regulations, environmental protection
lobby, intellectual/property rights, social
responsibility).
Summarising>>>
• Major tax reforms including implementation of
VAT.

• US $ 130 billion investment plans in infrastructure

in next 5 years

• 2 Second most attractive developing market

• 5th among the 30 emerging markets for retailers

A country with the largest young population in the

world - over 867 million people below 45 years of
age!

More English speaking Indians than Europeans

300 million odd middle class - the Real consumers -
is catching the attention of the world

With over 600 million effective consumers by 2011.

India to emerge as a major consumer market of the
world by 2011.
Summarising>>>
Retailing in India
Total Consumer Spend in the Year 03-04 INR
930,000 crores (USD 375 billion) growing over 5%
annually

Retail sales 55% at Rs. 28,000 crore (USD 205

billion)

Organised Retail Only 3% but growing at 30%

Organised retail to cross Rs. 1000 billion mark by

2012

Rs. 200 billion investment in the pipeline

Top 6 cities account for 47% of total organized

retailing.

Overwhelming acceptance of modern retail formats.

Fashion drives organized retail.

Summarising>>> Malls in India
• A decade ago not a single mall

• A year ago less than half a dozen

• Today 365 malls

• 4 years from now 700 malls

India Retail By 2011-12

125 million sq ft of quality space under development

7 major cities to account for 41 million sq ft

development

700 malls, shopping centres and multiplexes under

construction

To open 200 hypermarkets, 500 large department

stores, 2000 supermarkets and over 15,000 new
outlets

To add US $ 10 billion of business to organised retail.

Summarising>>>
Retail Prospects

• Clothing
• Footwear
• Jewellery & watches
• Health & Beauty (including services)
• Food & Grocery
• Catering Services
• Consumer Electronics + mobile sets/
Peripherals
• Books, Music & Gifts
• Home
• Entertainment
• Petrol Stations
• Rural Retailing
 Summarising>>>
Indian Retail Where it stands
Five Reasons why Indian Organized Retail is at
the brink of Revolution :
• Scalable and Profitable Retail Models are well
established for most of the categories

• Rapid Evolution of New-age Young Indian

Consumers

• Retail Space is no more a constraint for growth

• Partnering among Brands, retailers, franchisees,

investors and malls

• India is on the radar of Global Retailers Suppliers

 Indian Retail
Tomorrow’s “Promised Land”