3. Retail in India - Overview

Overview of Retail Overview of Retail in Indiain India

KRITHIKA G.KKRITHIKA G.KAsst. Professor Asst. Professor FMSFMS

1

Evolution of Retail in IndiaEvolution of Retail in India

• Barter System

• Unique needs, due to size & complexity

• Special feature - Haats, Melas & Mandis

2

HaatsHaats• Periodic markets (fixed times & locations)

• Public gathering of buyers & sellers

• Avg.sale per day: Rs.2.25 lakhs

• 300+ sale outlets per haat

• 4500+ visitors per haat

• Rs.900 avg. sale per outlet

• Approx. 20-50 villages

Source: BW Marketing Whitebook, pp.99-101) 3

MelasMelas• Fairs (commodity / religious)

• 25000 annual melas across India

• Avg. outlets – 800

• Avg sale per mela – Rs 143 lakh

Source: BW Marketing Whitebook, pp.99-101) 4

MandisMandis• Markets set up by State Govt.

• Direct sale of agricultural produce from farmers

• Avg. 600 mandis

• Population catered to 1.36 lakhs

Source: BW Marketing Whitebook, pp.99-101) 5

India’s Largest Retail India’s Largest Retail ChainsChains

PDS(Rationing System – British –

WW )II

463,000

Post Offices 160,000

KVIC (1957) 7,000

CSD Stores(Canteen Stored Dept.)

3400

Source: Business World, Marketing Whitebook, 2005, pp.238) 6

Emerging Formats

•Exclusive Retail Stores•Hyper Markets•Internal Retail•Malls/Speciality malls•Multiplexes•Rural Oriented Formats•Fast Food Outlets•Service Galleries•Etc.

Established Formats

•Kirana Shops•Convenience / Departmental Stores•Company / Multi-brand Showrooms•PDS/Fair Price Shops•Co-operative Stores•Pan/Beedi Shops

Traditional Formats

•Itinerant Salesman•Haats•Melas•Mandis, etc.

Source: Retailing Management, Swapna Pradhan, Retail in India. Pp.23 7

Indian Retail Industry Indian Retail Industry Overview….Overview….

8

• Changing customer profile

• Changing Income Profiles

• Diminishing difference b/w Urban & Rural

• Change in Consumption Patterns

• Average consumer today is richer, younger and more aspirational in his / her needs

• Explosion of organized retail formats

• Investment in retail more than 12 times that was invested during the last one decade.

(999Source: KPMG India analysis & http://nitine.blogspot.com/2008/03/retailing-rural-marketing-india-v.html)

9

• Retailing in India is was estimated to be a US$ 200billion industry, of which organized retailing made up 3 percent or US$ 6.4 billion.

• By 2010, organized retail is projected to reach US$ 231 billion.

10

Retail landscape in IndiaRetail landscape in India

• Indian retail market is US$ 332.8 billion (Rs 1330,000 crore)

• Growing at 10.8 % p.a.

• Expected to grow to US$ 590 billion in 2011-12 @ 13%p.a. (Source:http://www.indianrealtynews.com/retail-market/indias-retail-business-estimated-to-touch-590-billion-in-2-years.html – 13/07/09)

• Organised retail – 5.9% (US$19.6 billion) - expected to touch US$ 57.5 billion in 2010 i.e 13% of the total retail market.

Source: Images F&R Research Estimates; Images Retail; May 2008 11

Investment ClimateInvestment Climate• Economic Growth of 9% p.a

• Can exceed China by 2015; Britan by 2022; Japan’s by 2032

• Can become third largest economy after US & China

• Second largest economy after China by 2050

Source: Images F&R Research Estimates; Images Retail; May 2008 12

Contd……Contd……• FDI inflow in 2007 – US$ 19.16 billion

• 72% increase from US$ 11.12 billion in 2006

• US$ 5 billion into retailing Industry (infrastructure, systems & shop-fit)

• Largest English speaking population than whole of Europe

Source: Images F&R Research Estimates; Images Retail; May 2008 13

Cont’d…Cont’d…• 300 million odd – middle class

• According to estimates 70 million Indians earn a salary of over USD 19,500 p.a.

• Middle class predicted to rise to 140 million by 2011

• Expected consumers to swell to 600 million

• Will establish India as one of the largest consumer markets of the world.

Source: Images F&R Research Estimates; Images Retail; May 2008 14

During the current financial During the current financial crisis….crisis….

• Dip in growth rate of GDP from an avg. of over 9% in the last three fiscal yrs. To 6.7%

• Sharp rise in wholesale price index to nearly 13% in Aug 2008 & sharp fall to close at)0% in March 2008

• Gross capital flows peaked at 9% in 2007-08 before the global financial crisis

Source: Images Retail; May 2009 15

• India’s Retail Trade Not To Be Opened Any Further: Govt. (http://www.indianrealtynews.com/retail-market/indias-retail-trade-not-to-be-opened-any-further-govt.html - 18/07/09)

16

The Retail RevolutionThe Retail Revolution• 15 million retailers & a rapidly evolving

retail market

• 280 hypermarkets, 3200 supermarkets, 400 departmental stores and 1200 mega speciality stores & 20000 exclusive brand outlets across various retail categories by 2011

• 200 million sq ft. of gross leasable quality retail space (GLA) in Malls by 2011

Source: Images F&R Research Estimates; Images Retail; May 2008 17

……....• Most of retail growth may come from more

than 1000 tier II towns of India.

• Striking features of Indian Retail:

• At Subhiksha, 40 per cent of revenues and space come from cities that are not state capitals.

• At Vishal Megamart, 80 per cent of revenues come from tier II and III cities

• Around 70-75 per cent of visitors end up buying from retail outlets in smaller places, whereas, in large cities, it is around 50-55 per cent

• Retail Operations in smaller cities result in extra 3 – 4 percent margin

(Source:http://nitine.blogspot.com/2008/03/retailing-rural-marketing-india-v.html; Nitin Srivastava) 18

Rural RetailingRural Retailing• Corporate retailers (ITC, Godrej, Reliance,

AV Birla, Pepsico) – Farm Linkages

• Loan wavier from Indian govt. of Rs.60,000 to farmers to lighten their debt.

• Consumer spending – urban : rural = 9 :11 i.e Rural India accounts for 55% of pvt. Retail consumption.

• Half of growing retail market in Rural India

Source: Images F&R Research Estimates; Images Retail; May 2008 19

• New Assocham study “The Rise of Rural India” – rural retail mkt. = 40% of total size of retail market in India

• Growing at 10% of India’s GDP

• Currently 10,000 of the 6 lakh+ villages have access to organised retail

Source: Images Retail; May 2009 20

Rural MarketingRural MarketingAccording to National Council of Applied Economic Research (NCAER) Reports –

• There are 720 million consumers in 627,000 villages.

• 17% of these villages account for 50% of rural population & 60% of rural wealth!

• Leading to ‘bottom of the pyramid’ marketing

• Egs. DCM Hariyali Kisaan Bazaar, ITC Chaupal Sagar, Godrej Aadhar, Tata Kisan Sansar, Reliance Fresh, Naya Yug Bazar etc.

Source: Images F&R Research Estimates; Images Retail; May 2008 21

Indian Retail Market Indian Retail Market SizeSize

22

Overall Retail MarketOverall Retail Market

• Overall Retail market size – US$ 332.8b (Rs.1330,000cr)

1. Food & Grocery – 59.5% (Rs.792,000cr)2. Clothing & Accessories – 9.9% (Rs. 131,300cr)3. Catering Services – 5.4% (Rs. 71,300cr)4. Jewelry (Rs. 69,400cr)5. Consumer Durables – (Rs.57,500cr)6. Health & Pharma – (Rs 48,800cr)7. Entertainment – (Rs. 45,600)8. Furniture, furnishings & kitchenware – (Rs.45,500cr)9. Mobiles & Accessories - (Rs.27,200cr)10.Leisure Retail - (Rs.16,400cr)11.Footwear - (Rs.16,000cr)12.Health & Beauty Care Services - (Rs.4,600cr)13.Watches & Eyewear - (Rs.4,400cr)

Source: Images F&R Research Estimates; Images Retail; May 2008 23

Overall Retail MarketOverall Retail Market• Fastest Retail Growth (2007) over

the previous year in the following categories …

1. Mobile & Accessories – 25.6%

2. Out-of-home Food (Catering Services) – 25.1%

3. Books, Music & Gifts – 23.3%

Source: Images F&R Research Estimates; Images Retail; May 2008 24

Organized Retail SegmentOrganized Retail Segment

• Organized Retail Size – US$ 19.6b (Rs. 78,300cr)

1. Clothing & Fashion Accessories – 38.1% (Rs.29,800)

2. Food & Grocery – 11.5% (Rs.9,000cr)3. Footwear – 9.9% (Rs. 7,750cr)4. Consumer Durables – 9.1% (Rs. 7,100cr)5. Out-of-Home Food (Catering Services )6. Services & Furniture7. Furnishings & Kitchenware …

Source: Images F&R Research Estimates; Images Retail; May 2008 25

Organized Retail SegmentOrganized Retail Segment• Fastest Growth in 2007 over previous

yr. recorded in…

1. Tiny Health & Beauty Care Services – 65% (Rs. 660cr)

2. Entertainment – 53.8%

3. Mobile & Accessories – 55.2%

4. Food & Grocery – 55.2%

Source: Images F&R Research Estimates; Images Retail; May 2008 26

Other Emerging Sectors……Other Emerging Sectors……

• Jewelry Retail (Branded)

• Footwear Retail

• Time Wear

• Eye Wear

• Fuel / Petrol Retail27

Comparative Growth in Both Comparative Growth in Both CategoriesCategories

Overall Retail Market

Organized Retail

Segment

2006 26.1% 41.7%

2007 25% 37%

Source: Images F&R Research Estimates; Images Retail; May 2008 28

“ India is an important growth market with tremendous long-term potential for our company……”

Richard H. LennyPresident & CEO The Hershey

Company

29