Retail Formats

Presented b yHari Ram Pal,

+919837962636College of Agribusiness Management,

G.B Pant University of Agri. & Technology

Development of Retail Formats in India and Challenges ahead

Recent Trends

Retailing in India is witnessing a huge revamping exercise as can be seen in the graph

India is rated the fifth most attractive emerging retail market: a potential goldmine.

Estimated to be US$ 200 billion, of which organized retailing (i.e. modern trade) makes up 3 percent or US$ 6.4 billion

As per a report by KPMG the annual growth of department stores is estimated at 24%

Ranked second in a Global Retail Development Index of 30 developing countries drawn up by AT Kearney.

Retail Sales in India

Source: The Great Indian Market, Results from the NCAER’s Market Information Survey of Households, August 9, 2005

Consumer Trends

Source: The Great Indian Market, Results from the NCAER’s Market Information Survey of Households, August 9, 2005

Retail the largest private industry globally, is still in its nascent stages in India

Source: CII Mckinsey, HSBC

Fortune #1 “Wal-Mart” is a Retailer

#1

50

Over 50 of the Fortune

500 companies

are retailers

25

25 of the Asian Top 200

companies, are retailers

8

Global Retail industry is of size

USD 8 TrillionUnorganize

d RetailOrganized Retail < 3%

Over 12 Million Outlets in India

Organized Retail expected to be around Rs.110,000 Cr(USD 25 b) by 2010

Set to grow to 8-10% by 2010

Population in Crores 2008 -2025 (EST)

Proportion of the Total Retail Market (in %)

Metros of Mini Metros & Cities

6.7 13 15 13 25 20

6 6 7 10

Top Cities (Pop: > 1mn) 27 cities

3.7 7.2 2 3 3 4

Large Cities(Pop: 0.5-1 mn)32 Cities

2.4 4.5

Rest of 5500 Towns +6 lakh Villages

87.4 11.5 77 73 69 57

Total 100.2 140.0 2004 2010 2015 2025

Source: NCEAR, CSSO

Organized Retail Market in India

Country Share of Retail in Total Employment

India 6-7 %

China 6 %

Poland 12 %

Brazil 15 %

USA 11.7 %

Korea 18 %

UK 11 %

Malaysia 7 %

Source: FDI in Retail Sector in India, Arpita Mukherjee, Nitisha Patel, ICRIER Publication Pg. 31

Share of Retail Industry in Total Employment

Major Retailers

India’s top retailers are largely lifestyle, clothing and apparel stores

This is followed by grocery stores Following the past trends and business

models in the west retail giants such as Pantaloon, Shoppers’ Stop and Lifestyle are likely to target metros and small cities almost doubling their current number of stores

These Walmart wannabes have the economy of scale to be low –medium cost retailers pocketing narrow margin

Store Format By Location1. High Street FormatIt is Located in busy shopping area.Area is less than 2000 square feet.No parking facility Focused Merchandised CategoryExample: M. G. Road in Bangalore

2. Destination Format

Huge Parking spaceWide merchandise categoryThey are Independent retail store

with alluring proposition for the customer to

visit the store with the primary intention of

shopping there

3. Convenience StoreLocated in the catchment area of target

customersExtended hours of operationLess than 5000 square feet24X7 convenience stores situated close to

homes to generate high footprintssnacks, grocery type items & confectionary

Merchandise include: beverages, ready to eatThese store carry a limited stock of daily use

goods with a special focus on food products eg. In & Out petrol pump outlets.

Store format by ownership

Franchise Format Independent Store Format

Store format by Merchandise Category

Speciality storeSpecializing in a given type of

merchandise.Consortium of retailers that carry a

certain category of products. They are usually situated some distance from the city centre.

Consumers have to make a special visit to pick up the goods. eg, Gold, Wedding Souk.

Department store: Large retail store offering a variety of services and merchandise, organised in separate departments. Occupy prominent positions in the heart of town or as anchor stores in out-of-town malls eg. Shopper’s Stop.

• Supermarket: A store that sells a wide variety of goods including food, medicine and household products. Often part of a chain that owns or controls other supermarkets in the same or other towns; thus going for economies of scale. The chains are often supplied from the distribution centres of a larger business eg. FoodWorld.

Various other Retail Formats

• Hypermarket (from the French term hypermarche) : •A store that combines a supermarket and a department store. A gigantic retail facility that carries a big range of products under one roof, including fresh groceries and apparel. When planned, constructed and executed correctly, hypermart caters to all routine weekly shopping needs in one trip eg. Big Bazaar, Giant, Hyderabad•Size: 2000 Sq feet and above

• Category killers: •Large format stores that specialise in a narrow line of merchandise eg. Vivek, Vijay Sales, Mega Mart.•They use their buying power to negotiate low prices and excellent terms and assured supply when items are scarce.

Seamless malls: Consortium of retailers without walls separating the individual stores. One enormous shop, with hundreds of popular brands sharing space with each other. Eg. Pantaloon’s Central Mall.

Outlet mall: Shopping centre with national brand-name retailers selling discounted merchandise. Eg. Huma Mall.

Lifestyle centres: Shopping centres or malls whose array of retail outlets are designed to appeal to a particular segment of the population. Typically, lifestyle centres feature upscale specialty stores, services, and restaurants. Eg. Centrestage Mall.

DiscountersInternet Retailing

Anchor clients: The most important elements in a large format mall. An anchor is among the first clients to enter a mall, and occupies at least 25-30% floor space. Eg. Big Bazaar in Sahara Mall Gurgaon.

Draw tenant: A store that attracts a large number of potential customers to a shopping centre, often an anchor store.

Food court: Separate area of a shopping centre containing fast-food outlets and a common, seating area.

Gross leaseable area (GLA): Total floor space available for retail sales, usually in square feet.

Irregulars: Saleable merchandise with minor imperfections sold at discount.

Dollar store: US based My Dollar Store started operation

in Mumbai through franchise arrangement with Sankalp Retail Value.

Floor Space: 4000 Sq. Feet Merchandise: Cleaning, Health & Beauty,

Hardware, plastice ware, Kitchen ware &

confectionary etc.

Challenges AheadInfrastructureTechnologySupply ChainHuman ResourceForeign Direct Investment

Thanks