Retail Sector in india
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The document provides an overview of India's retail sector, including key statistics and trends. It discusses the evolution of retail in India and highlights several growth opportunities in different retail sub-sectors such as food and beverage, consumer appliances and electronics, and e-commerce. Major players in the Indian retail space are profiled, along with an overview of government regulations and the impact of GST. Key takeaways note that India's retail sector is one of the fastest growing globally and is expected to reach USD 1.3 trillion by 2020. E-commerce in particular is experiencing strong growth and transforming the retail landscape in India.
Retail Sector in india
- 1. RETAIL SECTOR – INDIA
- 2. 2 © 2017 Ipsos. BUILD • COMPETE • GROW 03 Retail Sector Overview 07 F&B Service Industry 10 Consumer Appliances and Electronics 13 Growth of E-commerce 17 Major Players in India 19 Government Regulations 22 Impact of GST 25 Key Takeaways Table of Contents
- 3. 3 © 2017 Ipsos. BUILD • COMPETE • GROW33333333 RETAIL SECTOR OVERVIEW 3 © 2017 Ipsos.
- 4. 4 © 2017 Ipsos. BUILD • COMPETE • GROW Evolution of Retail in India 600 1000 2015 2020E Retail Sector Overview Ranked 1 in the Global Retail Development Index, India’s retail sector is one of the fastest growing globally with a CAGR of 12%. 2010-172005-10 2017 Onwards Substantial investments by Indian corporates Diversifying by entering in to food and general merchandise retailing category Growth of retail through its expansion in major cities across India Shift of focus to smaller cities and rural areas Emergence of e- commerce as one of the major segments FDI in single brand and multi brand retail is 100% and 51% respectively More than 50 international retailers are planning to enter in to India in the next six months New players will target smaller untapped markets E-commerce market is expected to reach USD 60-70 Billion by 2019 1 2 4 5 ~25% contribution to GDP ~4% is online retail ~8-10% organized retail penetration ~12-14 Million unorganized stores 3 5th largest retail market globally 6 #1 Global Retail Development Index rankings Revenues in Retail Sector: Market Size (USD B) Fundamentals of Indian Retail
- 5. 5 © 2017 Ipsos. BUILD • COMPETE • GROW Retail Sector Segments Food & beverage and apparel constitute about 80% of the retail in India. Favourable demographics and rising disposable income are the boosters of India’s retail sector. 69% Food & Beverage 11% Apparel 4% Consumer Durables 3% Home Furnishings 8% Personal Care 2% Footwear 3% Others Retail Sector Segment-Wise Split Organized Vs Unorganized Retail 8% 24% 92% 76% 2015 2020 Organized Retail Unorganized Retail Opportunities to Watch Out For Growth of E-Commerce Foreign Direct Investment Infrastructure Development Organized Retail Penetration 33% 20% 19% 6%
- 6. 6 © 2017 Ipsos. BUILD • COMPETE • GROW In the next three to five years, we are looking to add around 200 to 300 stores in India. Our current and future expansion is across metros and tier II and tier III towns. Marvin Bernstein, Managing Partner “Rurbanization” Contribution of Tier 2 Cities & Beyond (2016) Tier 2 & Beyond Total Retail Consumption Metros 80% 20% USD 660 B Organized Sector Unorganized Sector E-Commerce 71% 17% 12%94% 5% 1% Top 10 High Potential Markets Retailers on Entering Tier 2/3 Cities Retail: Fashion &Durables E-Commerce Jaipur Raipur Jamshedpur Trivandrum Kota Vadodara Mysore Vijayawada Nagpur Vizag Bhopal Lucknow Bhubaneswar Patna Indore Trivandrum Jalandhar Vijayawada Kanpur Vizag FMCG Chandigarh Kota Dehradun Kozhikode Jabalpur Trivandrum Jamshedpur Vijayawada Kolkata Vizag Tier 2 cities and beyond contribute 80% to the total retail sector in India. Considering the fact that retail business will grow rapidly in Tier III and Tier IV markets as these markets are largely unrepresented by organized players, it was decided to enter new markets through franchising instead of opening own stores. Rajeev Gopalakrishnan, President (SA) E-commerce solves the big problem of access and availability for people in non-metro areas. Over 70% of order volumes on Snapdeal, come from Tier II/III cities. Jayant Sood, Chief Customer Experience Officer Tier 2 &Beyond Metros
- 7. 7 © 2017 Ipsos. BUILD • COMPETE • GROW77777777 F&B SERVICE INDUSTRY IN INDIA © 2017 Ipsos.7
- 8. 8 © 2017 Ipsos. BUILD • COMPETE • GROW F&B Service Market Overview F&B service segment in India is expected to grow at a CAGR of 11.50%, with organized segment constituting 41% of the market in 2021. Unorganized OrganizedYEAR 2013 2016 2021E 70% 30% 67% 33% 59% 41% Food Service Market: Market Size (USD B) Organized Vs. Unorganized F&B Service Market Opportunities to Watch Out For in F&B Service in India Food Based Apps Foodtech market is expected to grow at a CAGR of 12% during 2016- 2020 Multi-Cuisine Restaurants Consumers want to experiment with different cuisines Malls are Preferred Locations Conversion of mall’s footfalls is high due to easy access to food Demand for International Cuisine Quick adoption of global cuisines has created lucrative opportunities for international F&B players “Foodtainment” Engaging customers by coupling entertainment with food Example: Sports bars, Karaoke, Book cafes, Video game consoles at bars and cafes 69.4 119.7 150.94 2011 2016 2021E
- 9. 9 © 2017 Ipsos. BUILD • COMPETE • GROW Opportunities to Watch Out For F&B Service Industry Segments Full service restaurants and quick service restaurants account for 73% of the F&B service segment in India. Full Service Restaurants Bars and Cafes Kiosks Full Service Restaurants 56.6% Quick Service Restaurants 16.3% Cafes & Bars Street Kiosks/Stalls 12.5% 2011 2016 2021E 39.1 67.5 83.9 Asian cuisine is the most popular Third party online ordering is popular 2011 2016 2021E 10.7 19.6 25.7 Latin American cuisine is gaining popularity Growing demand from tier 2 and tier 3 cities 2011 2016 2021E 10.0 18.0 22.6 Popular amongst all age groups Food trucks are becoming a popular concept 2011 2016 2021E 9.6 14.9 18.7 Millennials in metropolitan and tier 1 cities visit cafes/bars multiple times in a week Market Value (USD B) 14.6%
- 10. 10 © 2017 Ipsos. BUILD • COMPETE • GROW1010101010101010 CONSUMER APPLIANCES & ELECTRONICS INDUSTRY IN INDIA © 2017 Ipsos.10
- 11. 11 © 2017 Ipsos. BUILD • COMPETE • GROW 9.9% 8.9% 8.4% 6.6% 5.3% 4.4% 56.5% Bajaj Electricals Crompton Greaves Philips Usha International LG Electronics Samsung Others Consumer Appliances By 2025, India is expected to become the 5th largest consumer appliances market in the world. 12.5 20.6 2016 2021E Market Size (USD B) Market Penetration: India Vs Global Global 70% India 8.8% Global 60% India 3% Global 85% India 21% Washing Machine Air Conditioner Refrigerator Opportunities to Watch Out For in Consumer Appliances in India Electronic Hardware Technology Park Scheme Companies that replace imports with local manufacturing are given benefits like duty waivers and tax incentives National Electronics Policy 2012 The aim of this policy is to make India a global hub for Electronic System Design and Manufacturing by attracting investments of over USD 100 Billion by 2020 Market Share (2017) Electronics Development Fund A fund of USD 2 Billion has been set up to promote innovation, IP creation, product commercialization, etc Foreign Direct Investment The government has eased the FDI policies on electronics hardware manufacturing and now allows 100% FDI under the automatic route
- 12. 12 © 2017 Ipsos. BUILD • COMPETE • GROW 28.1% 14.2% 10.5% 9.5% 9.3% 28.3% Samsung Xiaomi Vivo Lenovo Oppo Others 100 400 2016 2021E Consumer Electronics Increasing mobile penetration and internet subscriptions are the primary trends driving the consumer electronics segment in India. Electronics Market Size (USD B) CAGR (2016-21) 23.2%23% Opportunities to Watch Out For in Consumer Electronics Mobile Phone Penetration Mobile phone penetration is expected to reach 66% by 2022, due to the rise of demand from tier 2 and 3 cities and availability of affordable phones 15% Online Sales Online sales of consumer electronics posted strong growths in this segment due to its accessibility and multiple promotions that are run online Smart Phones Wireless Audio Devices Gaming Devices Market Share- Mobile Phones (2017) 87 400 35 104 2013 2020E Demand Local Production Electronics: Demand & Supply (USD B) The significant gap between the demand and the local production can only be met by imports or by setting up more manufacturing plants in India
- 13. 13 © 2017 Ipsos. BUILD • COMPETE • GROW1313131313131313 GROWTH OF E-COMMERCE © 2017 Ipsos.13
- 14. 14 © 2017 Ipsos. BUILD • COMPETE • GROW 22.3 79.1 E-Commerce in India The biggest disruption in the Indian retail market is E-Commerce, which is expected to grow at a CAGR of 28.8%. It accounts for ~4% of total retail. E-Commerce Market Size (USD B) 2021 E 2016 E-Commerce Split 43% Electronics & Accessories Apparel & Lifestyle Home & Living Food & Grocery Others 27% 6% 3% 21% Opportunities to Watch Out For in E-Commerce in India Fastest Growing Segments in Online Retailing: CAGR(2016-2022) Home Improvements 42.9% Food & Drink 28% Video Game Hardware 21.3% Demand from Tier 2 and Beyond In 2016, 60% of the sales for Snapdeal came from Tier 2 and Tier 3 cities M-Commerce In 2016, 82% of Snapdeal’s and 80% of Flipkart’s traffic came from mobile apps or m-site CAGR: 28.8%
- 15. 15 © 2017 Ipsos. BUILD • COMPETE • GROW Major E-Commerce Players & Investments Indian E-Commerce players have been able to attract substantial foreign investments from investors like SoftBank, Tiger Global Management and Alibaba. Top 3 E-Commerce Players in India: Market Share (2016) #1 #2 #3 39.5% 30.2% 12.1% SoftBank invested USD 2.5 Billion in Flipkart in 2017. It has previously raised USD 1.4 Billion from Tencent, Microsoft and eBay SoftBank, Nexus Capital and Ratan Tata are some of the investors of Snapdeal Amazon has committed to invest USD 5 Billion in the coming years Highlights of 2015-17: Investments & Deals Top International Investors in Indian E-Commerce Invested USD 177 Million USD 500 Million FDI Acquired 5% Stake for USD 27.7 Million Retailing of Food Products in India
- 16. 16 © 2017 Ipsos. BUILD • COMPETE • GROW Transition To Omnichannel Retailers are shifting from single channel to omnichannel retail to monetise on the changing retail climate in India. Online Mobile Retail Stores Try at Home Retail Stores Online In-Store Experiences OnlineRetail Stores Mobile Online Retail StoresMobileOnline Retail StoresMobile Omnichannel Retailers To Go Online in 2018Retail Stores
- 17. 17 © 2017 Ipsos. BUILD • COMPETE • GROW1717171717171717 MAJOR PLAYERS IN INDIA © 2017 Ipsos.17
- 18. 18 © 2017 Ipsos. BUILD • COMPETE • GROW Retailers in India Metros 35 Tier 2/3 22 Metros 46 Tier 2/3 35 Metros 50% Tier 2/3 50% Metros 30% Tier 2/3 70% Metros 17 Tier 2/3 4 Metros 11 Tier 2/3 Planned Metros 103 Tier 2/3 Planned Number of Stores Across Metros and Tier 2 Cities & Beyond Global Retailers Set to Enter India 5o global retailers across segments are set to enter India in the next six months, with 18 in the F&B service space. These entrants are expected to invest USD 300-500 Million cumulatively. Metros 1 Tier 2/3 20
- 19. 19 © 2017 Ipsos. BUILD • COMPETE • GROW1919191919191919 GOVERNMENT REGULATIONS 19© 2017 Ipsos.
- 20. 20 © 2017 Ipsos. BUILD • COMPETE • GROW Catalyst for growth • Liberal policies to encourage businesses • Start-up centres, incubators and policy support Regulations in India Investor confidence in India has grown exponentially in the past two years, which is evident from the FDI Confidence Index, where India is currently ranked 8th. Manufacturing hub • Initiatives to promote local production – government policies and incentives Trillion dollar opportunity • Digital drive, cashless economy leading to higher adoption of online retail • Increasing the rural e-commerce footprint through over 140,000 post offices of India Post in rural India providing the last mile reach Influence of the young generation • Government initiatives focusing on generation of adequately skilled workforce which is industry-ready and employable Make in India Digital India Skill India Start-up India 01 02 03 04 Single-Brand Store Multi-Brand Store FDI of 100% is allowed. Automatic route up to 49% and Government route beyond 49% FDI of 51% is allowed with minimum investment of USD 100 Million through Government route If the FDI exceeds 51%, the retailer is required to source 30% of the products from Indian vendors At least 30% of the products should be sourced from Indian vendors 50% of the investment should be invested in back- office infrastructure within 3 years FDI Regulations Other Regulations and Reforms
- 21. 21 © 2017 Ipsos. BUILD • COMPETE • GROW FDI Process The timeline for processing the FDI proposal takes approximately 10 weeks from the day of filing of the application. Favorable Mode of Entry Standard Operating Procedure for FDI Step 1 Filing of the investment proposal on Foreign Investment Facilitation Portal Step 2 Application forwarded to “Competent Authorities” and Reserved Bank of India for approval of foreign investment Step 3 Initial scrutiny of the investment proposal and seeking relevant information from applicant Step 4 Respond to queries raised by “Competent Authorities” Step 5 Submission of comments by consulted ministry, RBI or any other stakeholder Wholly Owned Subsidiary 1 Joint Venture with an Indian Company 2 Brand Licensing 3 Franchising Model 4 Step 6 Grant of approval by the “Competent Authority” 1 Week 1 Week 1 Week 4 Week 2 WeekTime Frame
- 22. 22 © 2017 Ipsos. BUILD • COMPETE • GROW2222222222222222 IMPACT OF GST 22© 2017 Ipsos.
- 23. 23 © 2017 Ipsos. BUILD • COMPETE • GROW 18% Goods & Services Tax GST came in to effect on 1st July, 2017, replacing multiple cascading taxes levied by the central and state governments. Implementation of GST has helped pump foreign investments in the Indian economy. GST Rates Across Segments Mobile Phones Footwear (Below USD 8) 5% 12% 28% Apparel Medicine Processed Food Hotel Stay (Tarif: USD 15-40) Television Footwear (Below USD 8) Wristwatch F&B Service Consumer Durables Jam, Cornflakes, etc. Reduced Tax Burden Increased Tax Burden Hotel Stay (Tarif: USD 15-120) Hotel Stay (Tarif: > USD 120) Impact of GST on Retail Reduces Tax Burden on Retailers Increased Efficiency in Supply Chain Tax on Promotional Items and Gifts Easy Expansion of Retail to Other States Growth of Organized Retail
- 24. 25 © 2017 Ipsos. BUILD • COMPETE • GROW2525252525252525 KEY TAKEAWAYS © 2017 Ipsos.25
- 25. 26 © 2017 Ipsos. BUILD • COMPETE • GROW Key Takeaways GROWTH RATE Retail in India is growing at a CAGR of 12%. Organized retail is expected to grow to 24% by 2020. OPPORTUNITIES IN RETAIL Favorable demographics has given a boost to India’s retail sector. Government initiatives like “Make in India” has made India a conducive manufacturing hub. RISE OF E-COMMERCE E-commerce is one of the fastest growing retail segments, which is expected to grow at a CAGR of 28.8%. NEW RETAIL DESTINATIONS Retailers are leveraging on Tier II cities and beyond due to increasing demand from these areas and infrastructure connectivity. FOREIGN DIRECT INVETSMENT 100% FDI for single brand retailers and 51% FDI for multi brand retailers is permitted. GOODS AND SERVICES TAX A game changer for the Indian economy, GST will benefit all big and small retailers by creating a unilateral platform for goods and services.
- 26. 27 © 2017 Ipsos. BUILD • COMPETE • GROW2727272727272727 THANK YOU 27© 2017 Ipsos.