Retail sector_ss

8/7/2019 Retail sector_ss

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Retail Sector Analysis

By Ishneh Singh Koch

FM


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The Indian Story (Organised Retail):

According to a McKinsey & Company report titled 'The Great Indian Bazaar: Organised Retail

omes of Age in India', organised retail in India is expected to increase from 5 per cent of the total

market in 2008 to 14 - 18 per cent of the total retail market and reach US$ 450 billion by 2015.

India's retail market is expected to be worth about US$ 410 billion, with 5 per cent of sales

hrough organised retail, meaning that the opportunity in India remains immense. Retail should

ontinue to grow rapidlyup to US$ 535 billion in 2013, with 10 per cent coming from organised

etail, reflecting a fast-growing middle class, demanding higher quality shopping environments and

tronger brands, according to the report Expanding Opportunities for Global Retailers, released b

Kearney.

Furthermore, according to a report titled 'India Organised Retail Market 2010', published bynight Frank India in May 2010 during 2010-12, around 55 million square feet (sq ft) of retail space

will be ready in Mumbai, national capital region (NCR), Bengaluru, Kolkata, Chennai, Hyderabad an

une. Besides, between 2010 and 2012, the organised retail real estate stock will grow from the

xisting 41 million sq ft to 95 million sq ft.

ollowing charts offer interesting insights into the growth of retail industry

both globally and domestically):


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he Following Chart Tells you the evolution of Retail in India :


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At present, the industry is experiencing heavy growth

ome News about the Sector

oreign direct investment (FDI) inflows between April 2000 and October 2010, in single-brand retaading, stood at US$ 197.04 million, according to the Department of Industrial Policy and Promotio

DIPP).

Carrefour, the worlds second-largest retailer, has opened its first cash-and-carry store in Indiin New Delhi. Germany-based wholesale company Metro Cash & Carry (MCC) opened itssecond wholesale centre at Uppal in Hyderabad, taking to its number to six in the country.

Electronic retail chain major, Next Retail India, plans to open 400 showrooms across thecountry during January-March 2011 increasing the total number of retail stores to 1,000 by thend of the fiscal year 2010-11.

Jewellery retail store chain Tanishq plans to open 15 new retail stores in various parts of thecountry in the 2011-12 fiscal.

V Mart Retail Ltd, a medium-sized hypermarket format retail chain, is set to open 40 outletsover the next three years, starting with 13 stores in 2011, in Tier-II and Tier-III cities.

Reliance Retail, the wholly owned subsidiary of Mukesh Ambani's Reliance Industries, is set open 150 stores by the end of March 2011 and double the number of stores across the countryall formats within five years.

Future Value Retail, a Future Group venture, will take its hypermarket chain Big Bazaar tosmaller cities of Andhra Pradesh, with an investment of around US$ 1.54 million to US$ 4.41million depending on the size and format.

RPG-owned Spencer's Retail plans to set up 15-20 new stores in the country in 2011-12. Spar Hypermarkets, the global food retailing chain of the Dubai-based Landmark Group,

expects to start funding its India expansion beyond 2013 out of its local cash flow in the


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country. So far, the Landmark Group has invested US$ 51.31 million in setting up fivehypermarkets and plans to pump in another US$ 51.31 million into the next phase of expansio

Leading watchmaker Titan Industries Limited plans to invest about US$ 21.83 million foropening 50 premium watch outlets Helios in next five years to attain a sales target of US$ 87.million.

British high street retailer, Marks and Spencer (M&S) plans to significantly increase its retailpresence in India, targetting 50 stores in the next three years.

Spain's Inditex, Europe's largest clothing retailer opened the first store of its flagship Zara bra

in India in June 2010. It further plans to open a total of five Zara outlets in India.

Bharti Retail, owner of Easy Day storesupermarkets and hypermartsplans to invest aboutUS$ 2.5 billion over the next five years to add about 10 million sq ft of retail space in thecountry by then, according to a company spokesperson.

Policy Initiatives

00 per cent FDI is permitted under the automatic route for trading companies for cash & carry tradwholesale trading/ wholesale trading.

DI up to 51 per cent under the Government route is allowed in retail trade of Single Brand productccording to the Consolidated FDI Policy document.

he Consumer Affairs Ministry has given the green signal to allow 49 per cent FDI in multi-brandetail. It has written a letter to this effect to the Commerce Ministry. "Multi-brand retail should beermitted with a cap of 49 per cent A significant chunk of investments should be spent on back-ennfrastructure, besides logistics and agro-processing," the Consumer Affairs Ministry had said inesponse to the discussion paper floated by the Department of Industrial Policy and Promotion in Jun010 on allowing 100 per cent FDI in multi-brand retail.

An Excerpt from the interview with Commerce and Industry Minister Anand Sharma :

India is losing agri products, fruit and vegetables to the tune of Rs 1 lakh crore annually. GOI said establishment ofold chains and back-end infrastructure could cut down these losses by more than half. The investment projected wasver Rs 64,000 crore.

he Securities and Exchange Board of India (SEBI) has notified the increase in the retail investmenmit to US$ 4,391.19 in initial public offers (IPOs). The new norms will be applicable to issues thatave yet not opened for subscription.


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Road Ahead

According to industry experts, the next phase of growth is expected to come from rural markets.

According to a market research report published in June 2008 by RNCOS titled, 'Booming Retailector in India', organised retail market in India is expected to reach US$ 50 billion by 2011. The kendings of the report are:

Number of shopping malls is expected to increase at a CAGR of more than 18.9 per cent from2007 to 2015

Rural market is projected to dominate the retail industry landscape in India by 2012 with totalmarket share of above 50 per cent

Driven by the expanding retail market, the third party logistics market is forecasted to reachUS$ 20 billion by 2011

Apparel, along with food and grocery, will lead organised retailing in Indiaurther, the luxury brand in the country is estimated to be worth about US$ 4.06 billion-US$ 4.51illion and is expanding rapidly driven by the growing aspirations of youth and income levels in the

ountry. Most people constantly scale up spends as aspirations grow.

hus, major international brands are in the process of expanding their retail presence. For instance,aul & Shark now has two stores with Hyderabad and will have few more by next year, Zegna,nother Italian brand, known for its formal wear and quality suits, is also expanding and Diesel willave seven stores in the country.

Meanwhile, European football clubs, including Manchester United, Chelsea and Liverpool, arencreasingly scouting for partnerships in India to sell their merchandise and also set up chain of coff

lubs and theme shops.

he stationery retailing market in India is also witnessing steady growth due to the arrival of organislayers in the business. It is estimated that the Indian office products industry is in the range of US$.22 billion with stationery comprising US$ 666.89 million-US$ 889.19 million and growing at 30 pent per annum.

uture Group and Reliance Retail are some of the players who are already tapping into the sector anave launched brands such as Staples and Office Depot.

ource: http://www.ibef.org/artdispview.aspx?art_id=27630&cat_id=376&in=63


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THE CASE OF BIG BAZAAAR:

he SWOT analysis ofBIG BAZAARis as follows:

trengths:

The strengths of Big Bazaar are it is leading and growing at the faster pace.

It has many outlets all over India. It has a good customer base.

They launched Big-Bazaar a hypermarket with over 1, 70,000 products as the first

ffering in value retailing segment. Products are cheaper than the market price by as

much as 5 to 60%.

Apparels are cheaper by 25 to 60% while the price difference on the other products

aries between 5 to 20%.

The Big-Bazaar has been positioned to the customer as a place where the customer

an shop for each & everything for which if goes to a market. Weakness:

Big Bazaar has not yet trapped the whole market.Facing problems due to political environment

Opportunities


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Huge untapped markethreats

Competition from organized retail players which are in market and emerginlike Reliance, shoppers stop, Wal-Mart

Competition from local retailers.


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COMPANY PROFILE

Big Bazaar comes under the Pantaloon Retail India Limited (PRIL). PRIL was early to realize

the potential of the huge middle-class population in India. We started the operations with a

trouser brand, Pantaloon. In the initial stages we had small format outlets branded Pantaloon

Shopee, which were franchise operations realizing the problems associated with franchisemodel, we decided to have our own retail outlets. They launched the own retail store,

Pantaloons. In 1997, they launched Big- Bazaar a hypermarket with over 1,70,000 products as

the first offering in value retailing segment. They have introduced the concept of seamless malls

in India through the new format Central. We have wide network of Pantaloons stores spread

across the country.

Hence, apart from retailing lifestyle products, it ventured into value retailing by launching the

hypermarket chain. Big Bazaar is a chain that stocks all home need products under one roof;

spread over 30,000 square feet of land, across different cities in India. It has been positioned as

Is se sasta aur acha kahin nahi, (Nothing cheaper and better anywhere) indicating the value of

stores. Big Bazaar stocks over 200,000 products that include apparel, food products, home

appliances and cosmetics. Products are cheaper than the market price by as much as 5 to 60%.

Apparels are cheaper by 25 to 60%while the price difference on the other products varies

between 5 to 20%.

On Oct. 12, 2001, we launched Big-Bazaar as offering in the value retailing segment. By

removing inefficiencies from the distribution chain we are able to unleash attractive savings,

which are passed on to the consumer. Big-Bazaar is Indias first hypermarket in the discount

store format. Big-Bazaar provides more than 2,00,000 items- food, grocery, utensils, kitchen

needs, home needs, bath needs, toys, stationary, electronics & white goods which are sold at adiscount to the maximum retail price. Price is the principal value proposition at these stores.

A big driver of the Big Bazaar is the product variety. This is achieved by selling wide range of

products & through the Shop-in-Shop format. As a result, a typical Big- Bazaar comprises

shops that stocks medicines, optical accessories, camera rolls, bakery products, dry fruits,

crockery, glassware, health & beauty products, ladies accessories, electronics infant necessities,

watches, clocks, computer accessories, food & beverages, stationary, readymade garments,

household appliances, home furnishings, baggage We believe this is a win-win situation as the

customer is assured of product availability, the shop owner can benefit of the in structure & we

enjoy assured income without needing to stock inventory. Also the shop-in-shop offering is ableto increase the customer traffic in to the stores. The Big-Bazaar has been positioned to the

customer as a place where the customer can shop for each & everything for which if goes to a

market. The number of Big-Bazaar stores has increased from 4 in 2002 to 21 Oct 24, 2005.

They have also launched private label initiative in Big-Bazaar. Understanding of the apparel

industrial, decades of experience& a vertically, integrated structure provides with more


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compelling reasons to expand the number of private labels. We have launched a full range of

accessories to supplement the apparel business including imitation jewelry, sunglasses, watches,

mobile phones etc...

Analysts attribute the success of PRIL to cheaper sourcing of products and lower distribution

cost. Pantaloons sourced its products through Consolidators. There was a consolidator for eachproduct category. These consolidators were responsible for procuring quality goods at the

cheapest possible price, and were paid commissions on their sale at the store. The consolidator

directly dealt with manufacturers, and as a result the distribution cost could be slashed as no

intermediates were involved. In addition to discounts on products through the year, Big Bazaar

also held events such as Kitchen Mela, Trouser Mela, etc. to attract customers.

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