Retailing Formats

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Retail Formats : Indian Trend

S O U R A V S I N H A



Where We Stand

y Indian retail is fragmented with over 12 million outlets where as 0.9 millionoutlets in USA, caters to more than 13 times of the total Indian retail market size

y India has the highest number of outlets per capita in the world - but with thelowest per capita retail space (@ 2 sq. ft. per person)

y Annual turnover of Wal-Mart (Sales in 2001 were $219 billion) is higher than the

size of Indian retail industry. [Almost 100 times more than the turnover of HLL,India's largest FMCG company]y Number of employees in Wal-Mart are about 1.3 million where as the entire

Indian retail industry employs about three million people.y Developed economies like the U.S. employ between 10 and 11 percent of their

workforce in retailing (against 7 percent employed in India today).y 60% of retailers in India feel that the multiple format approach will be successful

here whereas in US 34 of the fastest-growing 50 retailers have just one formaty The U.S. retail sector has an average inventory turns ratio of about 18. Many

Indian retailers KPMG surveyed have inventory turns levels between 4 and 10.y Global best-practice retailers can achieve more than 95 percent availability of all

SKUs on the retail shelves (i.e. a stock-out level of less than 5%).The stock-out levels among Indian retailers surveyed ranged from 5-15%



T he Beginning

y Traditionally retailing in India can be traced to

The emergence of the neighborhood µKirana¶ stores catering to theconvenience of the consumers

Era of government support for rural retail: Indigenous franchise model of

store chains run by Khadi & Village Industries Commission

y 1980s experienced slow change as India began to open up economy.

y Textiles sector with companies like Bombay Dyeing, Raymond's, S Kumar'sand Grasim first saw the emergence of retail chains

y Later Titan successfully created an organized retailing concept andestablished a series of showrooms for its premium watches



T he Beginning (contd.)

y The later half of the 1990s saw a fresh wave of entrants with a shift fromManufactures to Pure Retailers.

For e.g. Food World, Subhiksha and Nilgiris in food and FMCG; Planet M andMusic World in music; Crossword and Fountainhead in books.

y Post 1995 onwards saw an emergence of shopping centers,

mainly in urban areas, with facilities like car parking

targeted to provide a complete destination experience for all segments of society

y Emergence of hyper and super markets trying to provide customer with 3 V¶s -Value, Variety and Volume

y Expanding target consumer segment: The Sachet revolution - example of reaching to the bottom of the pyramid.



Unorganized : Vast majority of the twelvemillion stores are small "father and son"outlets

Fragmented : Mostly small individuallyowned businesses, average size of outletequals 50 s.q. ft.Though India has the highest number of retail outlets per capita in the world, theretail space per capita at 2 s.q. ft per person is amongst the lowest.

Rural bias: Nearly two thirds of the storesare located in rural areas.

Unorganized : Vast majority of the twelvemillion stores are small "father and son"outlets

Fragmented : Mostly small individuallyowned businesses, average size of outletequals 50 s.q. ft.Though India has the highest number of retail outlets per capita in the world, theretail space per capita at 2 s.q. ft per person is amongst the lowest.

Rural bias: Nearly two thirds of the storesare located in rural areas.

Traditionally three factors have plaguedthe retail industry:

Traditionally three factors have plaguedthe retail industry:

Experimentation with formats:

The sector is witnessing a series of experimentsacross the country with new formats being testedout.Ex. Quasi-mall, sub-urban discount stores.

Store design :

Biggest challenge for organized retailing is tocreate a ³customer-pull´ environment to increaseimpulse shopping.

Emergence of Supermarts:Stores like Big Bazaar, Bombay Bazaar are tryingto emulate the model of Wal-Mart.

Unorganized retailing is getting organized:

25 stores in Delhi under the banner of Provisionmart are joining hands to combine monthlybuying.

Experimentation with formats:

The sector is witnessing a series of experimentsacross the country with new formats being testedout.Ex. Quasi-mall, sub-urban discount stores.

Store design :

Biggest challenge for organized retailing is tocreate a ³customer-pull´ environment to increaseimpulse shopping.

Emergence of Supermarts:Stores like Big Bazaar, Bombay Bazaar are tryingto emulate the model of Wal-Mart.

Unorganized retailing is getting organized:

25 stores in Delhi under the banner of Provisionmart are joining hands to combine monthlybuying.

Recent changes:

Recent changes:

T he T ransition



T he Evolution T he Evolution



Retailing Formats in India

y Malls:The largest form of organized retailing today. Locatedmainly in metro cities, in proximity to urban outskirts.Ranges from 60,000 sq ft to 7,00,000 sq ft and above. Theylend an ideal shopping experience with an amalgamation of product, service and entertainment, all under a commonroof.Examples include Piramyd, City Centre

Discount Stores:

Discount stores or factory outlets, offer discounts on the MRPthrough selling in bulk reaching economies of scale or excessstock left over at the season. The product category can rangefrom a variety of perishable/ non perishable goods

MBO¶s :

Multi Brand outlets, also known as Category Killers, offer several brands across a single product category.These usually do well in Metros.

Specialty Stores:Chains such as the Mumbai books retailer Crossword, RPG'sMusic World and the Times Group's music chain Planet M, arefocusing on specific market segments and have establishedthemselves strongly in their sectors.



Retailing Formats in India

Department Stores:

Large stores ranging from 20000-50000 sq. ft, catering toa variety of consumer needs. Further classified intolocalized departments such as clothing, toys, home,groceries, etc.E.g. Shoppers Stop, Pantaloon, Westside

Convenience Stores:

These are relatively small stores 400-2,000 sq. feet locatednear residential areas. They stock a limited range of high-turnover convenience products and are usually open for extended periods during the day, seven days a week.Prices are slightly higher due to the convenience premium.

Hypermarts/Supermarkets:

Large self service outlets, catering to varied shopper needs aretermed as Supermarkets.These stores today contribute to 30% of all food & groceryorganized retail sales.Super Markets can further be classified in to- mini supermarkets typically 1,000 sq ft to 2,000 sq ft and-large supermarkets ranging from of 3,500 sq ft to 5,000 sq ft.



M arket T rends M arket T rends



Retailer Current Format New Formats. (Experimenting With )

Shoppers' Stop Department Store Quasi-mall

Ebony Department Store Quasi-mall, smaller outlets, adding food retail

Crossword Large bookstore Corner shops

Piramyd Department Store Quasi-mall, food retail

Pantaloon Own brand store Hypermarket

Subhiksha Supermarket Considering moving to self service

Vitan Supermarket Suburban discount store

Foodworld Food supermarket Hypermarket, Foodworld express

Globus Department Store Small fashion stores

Bombay Bazaar Aggregation of Kiranas

Efoodmart Aggregation of Kiranas

Metro Cash and carry

S Kumar's Discount store

Strategic T rends New Format



Strategic T rends M& A

Acquired/ JVCompany/ Target

Acquirer Nature of Business

Stake Consideration(US$ million)

Liberty Shoes Future group Retail(Footwear)

51% 3

Indus - League

Clothing

Future group Retail clothing 68% 5

Odyssey India Deccan ChronicleHoldings

Leisure retailchain (books,music, toys)

100% 14

Landmark Tata Trent Books, music,accessories

74% 24

Bistro Hospitality TGI Friday's (asubsidiary of Carlson RestaurantWorld-wide)

Restaurant(Food retail)

25% N/A

Indus League clothing(Future groupcompany)

Etam group, France Lingerie andwomen's wearretailing

50%(JV)

8



Strategic T rends New BusinessModel



Strategic T rends Rural Penetration

ITC spent 3 years and Rs. 80 crore on r&d to come up with the concept of E-choupal and Choupal Sagar-rural hypermarkets.

HLL came up with Project Shakti in late 2000 to sell its products through womenself-help groups Another step to tap the rural market was `Operation Bharat' wherein low-pricedsample packets of toothpastes, fairness creams and shampoos reach to 20mnhouseholds.



T he Road Ahead



Sources

1. Ernst & Young, The Great Indian Retail Story, 2006.2. FICCI - ICICI Property Services Study.3. Let gradualism guide FDI in retail, Economist, 2006.4. AT Kearney, GRDI 2006.5. Retail scenario most developed in Bangalore, DH News service, According to Bijou Kurien,6. President & Chief Executive - Life Style, Reliance Retail.7. CII, Logistics and Freight News, March 2006.

8. KPMG analysis, Consumer markets in India - the next big thing, September 2005.9. India's changing household, Deutche Bank, November 2004.10. CII, Manufacturing Bulletin, June 2006.11. Pharma's retail push, Business Line, 2006.12. Northbridge Journal, Industry Outlook - Retail, 2006.13. Express Press release, Consumer durables sector sees pick-up sales in India, 2006.14. Price Water Coppers, Asia-Pacific M&A bulletin, Mid year 2006.15. KSA Technopak, June 2006.16.Forrester Research 2006

17.KPMG-FICCI Report18.http://www.indiainbusiness.nic.in/



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