Retail industry analysis

Industry Analysis On Indian Corporate Retailers

GROUP-5

1. JYOTI BAJPAI2. GAURAV SINGH3. VIGNESH.C4. VIDHYASRI5. NAVANEENTH RAHUL

TABLE OF CONTENTS

• INTRODUCTION• GLOBAL SCENARIO• INDIAN SCENARIO• STRUCTURE OF INDUSTRY• CONDUCT• PERFORMANCE ANALYSIS• FUTURE OUTLOOK• CONCLUSION

Introduction

• Sale of goods to the public for use or consumption rather than for sale.•Integrated supply chain system is used•Buy in bulk and sell it in small quantities to the end users.

Classification of retail:•Organised retail- trade by licensed retailers. Has higher growth potential.( hyper markets and supermarkets)

•Unorganised retail- low cost retailing.( kiraana stores and pavement shops)

Reasons for preferring retail:• Customer convenience• Availability of choice (price, product)• Space and design convenience• Long term relationship

Type of products in retail industry :

Retail is classified based on products type:• Food products: cold storage facility is required.• Durable goods : These goods do not get weared out quickly.

( electronic goods, furniture, sporting goods)• Soft goods: These goods consists of limited period of usage.

( clothing, apparel and other fabrics)

Types of retail:

• Market place: It is place were goods and services are exchanged.

• Market square: It is a place were the seller setup there stores and the buyer browse the stores.

• Retail chains: They are known as high street stores. Nowadays they grouped together in malls

Operational activities of retail :

Evolution of retail : ( INDIA)

Initiation (Pre 1990s) -- outlets were opened by manufacturer.

Conceptualisation (1990-05)-- Market potential was found by the retailer.

Expansion(2005-10)-- Corporate invested in the retail industry. Food and grocery was started.

Consolidation (2005)-- Expansion towards rural ands mall cities. International brands entered. Investment in infrastructure. FDI invested from 51%-100%. Retail players increased private label brands. Revenues were more then $700 million.

Global players in retail: (source: Deloitte Global Powers)

• Wal-Mart (US)• Carrefour(France)• Metro(Germany)• Tesco(United kingdom)• Lidl Stif tung&co (Germany)

Indian Players in retail:• Pantaloon Retail• K Raheja Group• Tata group• AV Birla group• Reliance

INTERNATIONAL LEARNING

Total retail contribution in World GDP is 27%.The GDP of the World measured in terms of GWP (gross world product): $71.83 trillion (2012).

Organized retail in US accounts for 22% of GDP. Total GDP of USA is 15.68 trillion USD (2012).

Share of organized retail in developing markets ranges between 20% to 55%.

Retail markets are organizing faster . In developed markets, dominant player (Wal-Mart in US,

Tesco in UK) has a significantly higher share; enjoying up to 8-13% market share

Departmental stores growth is declining while ‘All-under-one-roof’ & ‘neighborhood’ convenience is gaining strength.

RETAIL LANDSCAPE IN INDIA

• Indian Retail - dominated by unorganized sector

• Share of organized retail sector is only 8%

• FDI (51%) in the retail sector not permitted to protect local

retailers.

• Indian retail sector is one of the least concentrated in the

world.

• The top five companies hold a combined market share of less

than 2%

• India is third largest market in Asia , behind Japan and

China.

• The Indian retail industry has experienced growth of 10.6%

between 2010 and 2012 and is expected to increase to USD

750-850 billion by 2015.

SHARE OF ORGANIZED RETAIL IN INDIA

Company SizePantaloon Retail Ltd

(Future Group venture)

Over 2 million sq ft of retail space spread over 35 cities with 65

stores and 21 factory outlets

Shoppers Stop

(K Raheja Group venture)

Over 3.21 million sq ft of retail space spread over 23 cities with

51 stores

Spencer Retail

(part of RP-SG Group)

Retail footage of close to 1 million sq ft across 45 cities with

200 stores

Lifestyle Retail

(Landmark Group venture)Approximately 15 lifestyle and eight Home Centre stores

Bharti Retail

74 Easyday stores with plans to invest about 2.5 billion USD

over the next five years to add about 10 million sq ft of retail

space in the country

Reliance Retail 700 stores with a revenue of 7,600 crore INR

Aditya Birla ‘More’575 stores with approximate revenue of 2,000 crore INR.

Recently, purchased stake in Pantaloon Retail

Tata Trent59 Westside stores, 13 Starbazaar hypermarkets and 26

Landmark bookstoresApr 9, 2023 12

GAPS IN CURRENT ORGANIZED RETAIL

• Lack of right formats catering to needs especially “All Under One Roof” formats

• Absence of single trusted player with pan-India presence

• No investment in supply-chain infrastructure.

• Sole focus on front-end with minimal back-end linkages (DC, logistics, cold chain, vendor & farmer development, etc.)

• Inconsistent availability, quality & pricing

• Transactional approach, minimal focus on customer service over the life-cycle

STRUCTURE OF THE INDUSTRY

-MARKET STRUCTURE -HHI -PORTER’S 5 FORCE MODEL -PESTEL ANALYSIS

Source: Moneycontrol.com

Walmart 36%

Carrefour10%

Tesco8%Metro AG

8%

The Kroger Company

7%

Schwarz Un-ternehmens Treuhand KG

7%

Costco Wholesale7%

Home Depot6%

Target6%

Aldi GmbH & Company oHG 5%

Market share- Global

Source: Moneycontrol.com

Major Players- India

Source Moneycontrol.com

43%

20%

9%

8%

6%

6%

5%3%

Net Sales(Billion $)

Pantaloon Ret Shoppers Stop Spencer Lifestyle Bharti retail Reliance Aditya Birla “More” Tata Trent

HHI

Using the market shares squares of top 10 companies (global) the answer of Herfindahl-Hirschman Index

(HHI)  = 1728.

-moderately concentrated.

-highly competitive market.

Porter’s Five Forces

Threat of New Entrants Power of Suppliers

95% of the market is made up of small, uncomputerised family run stores.

The ability to establish favorable supply contracts, leases and be competitive is becoming virtually impossible.

The vertical structure and centralized buying gives chain stores a competitive advantage over independent retailers.

On the whole threat from new entrants in retail industry is high.

Historically, retailers have tried to exploit relationships with supplier.

In retail industry suppliers tend to have very little power.

Following examples explain the same.

Sears in 1970 set very high standards for quality; suppliers that did not meet these standards were dropped from the Sears line.

Wal-Mart places strict control on its suppliers.

Power of Buyers Availability of Substitutes

Customers have comparatively high bargaining power in unorganized sector than in organized sector.

As the customer will demand products from organized units he will be more focused towards quality aspect

The tendency in retail is not to specialize in one good or service, but to deal in wide range of products and services.

What one store offers is likely to be same as that offered by another store. The threat from substitutes is high.

Competitive Rivalry

Retailers always face stiff competition and must fight with each other for market share and also with unorganized sector.

They have tried to reduce cut throat pricing competition by offering frequent flier points, memberships and other special services to try and gain the customer‘s loyalty.

Thus retailers give each other stiff but healthy competition which is evident from their aggressive marketing strategies and segment policies.

PEST AnalysisPolitical analysis• 1995- General agreement by world trade organization’s on

services in the trade which include the both wholesale and retailing services.

• In 2011, FDI in single brand retail permitted to 100%• In 2012, September , FDI in multi brand retail permitted to

51%

Government argument :• Huge amount of investment will increase employment

opportunities.• Help farmers by eliminating middlemen.• Local players may learn the effective supply chain

efficiencies from foreign retail.

Economic analysis• Indian retail sector cover the 14-15% of the GDP.• Indian retail market stands in the top five retail market in

the world.

Benefits to farmers-• 7-10% higher price as compare to Mandi• 3-4% incentive if they produced good quality goods.• Increase the standard of living.

Social analysis• Provide employment on large basis from lower level to

top management.• Prices of good will be much affordable.• Better quality products.• Better service.• Companies should purchase most of its good from local

markets rather than outsourcing. • Increase in Infrastructure• Fulfilment of unemployment gap

Technological analysis

•Foreign companies will bring best technologies to increase their productivity and profit.

•They have a direct touch with farmers and trained them for new technologies

•Farmers are getting trained freely with new technologies

CONDUCT

Elements of retail price: • Cost of goods is the Cost of Merchandise Expenses

incurred towards transportation, taxes, duties, etc• In the business process Expenses Incurred can be of two

types a following:

i)Fixed Expenses eg. Shop rent, Head Office costs etc

ii)Variable expenses eg. Merchandise margins, product mix costs their Management either enhances or destroy Profitability

RETAIL PRICING

Fixing The Retail Price:• The concept of fixing retail price depends upon the

Profit to be earned which consist of following factors like.

• Profit from Merchandise planed before price fixation• Profit to be arrived at is expressed as a mark up

percentage

Retail Price = Cost + Mark Up

Or Cost = Retail Price - Mark Up

Or Mark Up = Retail Price - Cost • Components of the formula can be expressed inrupee

Term or as a percentage

Developing A Pricing Strategy:

• Cost Oriented Pricing• Demand Oriented Pricing• Competition – Oriented Pricing

RETAIL PRICING

PRODUCT LAUNCHS• Dealer meets• Guerilla marketing• Press launch• Out-of-home

DESIGN/CREATIVES• Mall marketing• Canters/bus• Display• Exhibition

BRAND ACTIVATION• Consumer promos• Mall activity• School & college promos• Road show• Rwa ( resident welfare asscoiation) activity• Flash mobs

RETAIL PROMOTION

Various Approach To Pricing Strategy

• Market Skimming• Market Penetration• Leader Pricing• Price Bundling• Discount Pricing• Every Day Low Pricing• Odd Pricing

• Align product mix. The right location analytics helps retailers identify where customers spend the greatest amount of time within the store and, ultimately, which products carry the greatest appeal for their customers.

• Identify most appealing offers. Historical traffic data will measure the impact of special product offers made through external marketing and in-store campaigns.

• Ensure staff availability and expertise. Traffic analyses will uncover peak shopping times or "power hours" when sales opportunities are at their greatest.

TECHONOLOGY

• Create comfortable environments where customers want to be. When retailers understand in-store traffic patterns, they are able to eliminate areas of decreased flow, bottlenecks and other factors that can cause shopper frustration and impede the purchase process.

• Provide access to mobile location tools. Retailers with locations enabled, branded store apps can further improve the holiday shopping experience for their customers.

Performance analysis

Profitability Ratio

Pantaloons Retail Shoppers Stop Trent

-6

-4

-2

0

2

4

6

8

Mar-11Mar-12Mar-13

Industry profitability analysis

Sales growth

Source: moneycontrol.com

Future outlook Existing players expanding to smaller towns in India

Number of existing players like Big Bazaar, Shopper’s Stop, are planning expansion in smaller cities

Indian business houses in retail Many business houses are planning retail entry / expansion

either on their own or through partnerships

Global Players planning entry in India Some of world’s largest retailers - evaluating entry in India

including Wal-Mart, Carrefour,Tesco, IKEA, Best Buy, Lowe's, Kingfisher Group, Auchan, Woolworth, NTUC etc.

Shop Rite, Metro, Marks & Spencers, & Spar are already here Some have setup Sourcing / Back-office centers e.g. Tesco,

Wal-Mart, etc.

Rural opportunity - becoming interesting for organized retailers

CONCLUSION

• The Indian retail industry encompasses a plethora of opportunities.

• Consumer purchasing power is also increasing every year which shows that a there are large opportunities.