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Indian Retail S Analysis

- Retail in India accounts for 14-15% of GDP and employs over 40 million people, though 97% of the sector is still unorganized. - Organized retail is growing at 35% annually but still only comprises 3% of the overall market. Common retail formats in India include convenience stores, supermarkets, hypermarkets, and e-retailing. - Growth in the retail sector is being driven by rising urbanization, incomes, and consumerism as well as developments in infrastructure and real estate. The government is allowing more FDI in retail which brings global competition and opportunities.

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87 views18 pages

Indian Retail S Analysis

- Retail in India accounts for 14-15% of GDP and employs over 40 million people, though 97% of the sector is still unorganized. - Organized retail is growing at 35% annually but still only comprises 3% of the overall market. Common retail formats in India include convenience stores, supermarkets, hypermarkets, and e-retailing. - Growth in the retail sector is being driven by rising urbanization, incomes, and consumerism as well as developments in infrastructure and real estate. The government is allowing more FDI in retail which brings global competition and opportunities.

Uploaded by

smarty_hemant
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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AN ANALYSIS OF INDIAN RETAIL SECTOR

Indian Retail Scenario


Retailing in India is one of the pillars of its economy & accounting 14% to 15% of GDP. Employs 40 million Indians (3.3%). The retail sector in developing markets has experienced explosive growth over the past 10 years. As the population has increased by 11%, retail space expanded by 225 % Retail sales per capita increased almost 100 %, Internet access grew more than 400 %. Developing countries now represent 42 % of global retail sales.

Structural changes

Division of Retail Industry


Organized retailing licensed retailers, who are registered for sales tax, income tax, etc constitute 3% of retail sector. retail industry 3% Growing 35% annually.
organised retail unorganised retail

Unorganized retailing

97%

traditional formats of low-cost retailing, example, kirana shops, owner manned general stores, paan/ beedi shops, convenience stores, hand cart and pavement vendors, Constitute 97% of retail sector. Growth is pegged by 6% annually.

RETAIL FORMATS
Convenience Stores Discount Stores Factory / company outlets Supermarkets Department Stores Hypermarkets Rural Retailing Airport Retailing E-Retailing

INDUSTRY CHARACTERISTICS
Highly unorganized (97%) & fragmented industry. Small to huge store (serves consumers through a small
grocery store to a huge departmental store)

Long supply chain. Working Capital intensive. Hierarchy in retail. (Town Centers-District Centers- Neighborhood
Centers- Corner Stores.)

Linkages with the economic growth. The rural-urban divide.

INDUSTRY GROWTH DRIVERS


Demand factors
Rising Urbanization Growing per capita expenditures Growing spread of plastic money' Changing face of Indian consumerism - from necessities to luxuries Rising number of nuclear families Growing female working population

Supply-side factors
Developments in the real estate scenario Retail growth through VC/PE route

Government policies
FDI up to 100% for cash and carry wholesale trading and export trading allowed under the automatic route. 100% FDI in integrated cold-storage chain & other infrastructure. FDI up to 51 % with prior Government approval (i.e. Foreign Investment Promotion Board (FIPB) approval ) for retail trade of Single Brand products (now 100% allowed by jan 10/2012) 50% jobs go to rural areas & 30% of inputs sourced from SMEs. India will allow 51% FDI in the multi-brand retail sector.

Global development analysis


China ranks as the most attractive emerging market for apparel retailers according to a study by global management consulting firm A.T. Kearney. Brazil Jumps to First Place in Ranking of Top Developing Economies for Global Retail Expansion Brazil, Uruguay and Chile top China and India for new expansion opportunities. A.T. Kearney Global Retail Development Index, 2011
Country Brazil 2011 Rank 1 2010 Rank 5 Change +4 Uruguay 2 8 +6

Chile

+3

India

-1

Kuwait

-3

China

-5

Saudi Arabia

-3

Peru

+1

U.A.E.

-2

Turkey

10

18

+8

Qualitative Aspects
Threat of new entrant
Intensive Capital requirement. Govt. policy on FDI. Inability to build economies of scale.

Bargaining power of buyers


High due wide variety of choices, FDI liberalization

Rivalry between existing competitors


Highly competiveness due allowance of FDI. Global competition increased.

Threat of Substitute
Moderate to low due to unorganized retailing sector.

Bargaining power of suppliers


Low as large number of potential suppliers. Unorganized sector dominates the market.

Industrial life cycle


The graphically representatio n of growth of retail industry through years.

Business analysis
Growth analysis
The growth in sales raised by 8.85% and earning by 6.19%.(Last updated in January 2012)

Defensive industry
Retail sector considering food stores is less affected by recession whereas luxury stores had an impact.

Cyclical industry
Consumer durables are most volatile.

Impact of recession on retail sector


Earliest players -Subhiksha's -liquidity injection. Vishal Retail -debt restructuring (CDR) plan from its lenders Reliance Retail run by Mukesh Ambani and Pantaloon led Kishore Biyani by went slow on expansion plans and even scaled down operations. organized segment suffered a set-back in the form of declining revenues and halt in their capex plans. Inventory being stacked up resulting in a low inventory turnaround ratio

Challenges in India
Barriers to FDI
FDI not permitted in pure retailing Franchisee arrangement allowed.

High Cost of Real Estate Complex Taxation System


Differential sales tax rates across states - Multi-point octroi Sales tax avoidance by smaller stores.

Customer Preferences Unavailability of Talent Intermediaries dominate the value chain. Infrastructure. Absence of a farm-to-fork (PDS) No Global Reach

Indian retail will double in economic value, expanding by $400 billion by 2020. 25% market share an expected growth by 2021. Huge Scope for Development Competitive Market Organized retail is fast growing at a rate of 30% YOY Greater opportunity for employment. The industry is expected to grow at a rate of 12% per annum for the next 5 years. The Indian luxury market is expected to grow by 25% per annum making India the 12th largest in the world.

Conclusion
Many investors like retail, because they are personally familiar with itafter all, everybody shops. retail is overvalued due to many 1031 investors searching for a safe investment.

Any Question

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