indian retail industry - group 7 sec d

8/4/2019 Indian Retail Industry - Group 7 Sec D

1/21

1

Industry Awareness

Indian Retail Industry

Group members:

Debika Subhalagna, (PGP2011614) Dhruv Shandil, (PGP2011622) Landge Suhas Gangadhar, (PGP2011704) Prahlad Kushwaha, (PGP2011786) Priya Zutshi, (PGP2011797) Sayan Gupta, (PGP2011859) Sundeep Suthar, (PGP2011909)

PGP-1

IIM Indore

Section D

Group 7


2/21

2

Contents Page No

1. Overview of the Indian retail industry 3-42. Growth of the Indian Retail Industry 5-73. Profile of major Domestic and International players in Retail Industry 7-104. Government regulation and policy in Retailing Industry 115. Impact of union budget 2011-12 for the sector 11-126. Key Trends in the Retail Industry 12-177. Product Life Cycle in Retail Industry 18-198. Exhibits and Reference 19-21


3/21

3

1. Overview of the Indian Retail Sector:

Retailing is the process of selling a product or service to the end consumer and is the last leg

in the product supply link. Retailing is a consumer driven market with developing cities and

increasing income levels becoming potential platforms for retailers to establish their

presence. Using the Porters Five Forces Model to determine the competitive intensity and

the magnetism of the market, we get:

High bargaining power of buyers Low barriers to entry Moderate, but increasing degree of competition Moderate threat of substitutes Moderate bargaining power of suppliers

All these factors show retailing has great prospects in the future, with many firms trying to

enter this sector and tapping the potential market.

The Indian retail market is the fifth largest retail destination globally, and the most attractive

emerging market for investment. The market is growing at 30% annually, with the organized

segment registering above average growth of 30% and continues to be one of the most

attractive countries for global retailers. The countrys retail sector is the second-largest

employer after agriculture, with retail trade employing 35.06 million and wholesale trade

generating additional employment for 5.48 million people. Indias retail market, valued at

US$ 353 billion in 2010, is projected to grow at a rate of 12 per cent per annum.

A rapid expansion is being experienced in the retail industry due to the entry of both the

Indian corporations as well as the global players. Further, the hike in the purchasing power,

evolving consumer needs, attitude, and lifestyle are making it a very promising field.

The different segments of the Indian retail sector are shown in Exhibit 1. Out of the US$ 1

million retail industry, the bulk is held by the food industry. Second in line is the apparel and

textile industry. Other sectors, such as fashion and accessories, leisure and entertainment and

home-based products, are also gaining in prominence. In the field of organized retailing the

time-segment and footwear segment are at the forefront.

The retail sector can be divided into two parts:

1. Unorganised Retail: Unorganised retailing refers to the traditional formats of low-cost retailing, for example, the local kirana shops, owner manned general

stores, paan/beedi shops, convenience stores, hand cart and pavement vendors, etc.


4/21

4

Most Indian shopping takes place in open markets and millions of independent

grocery shops called kirana. It constitutes 95-96% of the total retail space.

2. Organised Retail: India is at an early stage of evolution in the organised retail space,with the current penetration pegged at 4-5 %, which indicates a huge growth

potential. The share of organised retail in the total Indian retail trade pie is projected

to grow at 40% per annum. Organised retail formats are fast replacing traditional

retail formats such as kirana stores due to rising consumer expectations.

1.1Organised retail formats in India:The organized retail formats in India in vary from large sized Hypermarkets to low-sized

Convenience Stores as shown in Exhibit 2. These formats are either based on luxury retail or

franchising models.

Luxury retail market - With the rise in disposable incomes and increasing urbanisation, the

number of luxury goods consumers in India is increasing rapidly. Currently valued at US$ 3.5

billion, the Indian luxury retail market is expected to grow to US$ 30 billion by 2015, an

estimated growth rate of 25 per cent per annum, making India the twelfth-largest luxury retail

market in the world.

Franchising - The franchisee model has adapted well to Indian market conditions, providing

opportunities for a large number of entrepreneurs to work with the support of big brands.

Global players, such as Tommy Hilfiger, SPAR International, Costa Coffee, Hertz, Radisson,

Kentucky Fried Chicken (KFC), Dominos Pizza, T.G.I. Fridays, Ruby Tuesday, Subway,

Mothercare and McDonalds, have become forerunners in India through the franchisee route.

The franchising revolution is, however, not limited to global brands. Many Indian brands,

such as Park Avenue, Color Plus, Provogue, Nirulas, SagarRatna, Woodlands and Liberty,

have also increased their market presence via this route.

1.2Market analysisRobust consumption in the rural economy is one of the key factors that has contributed to

Indias consistent growth, even during the 200809 global economic slowdown. This can be

attributed to the fact that rural India accounts for more than 70 % of all Indian households

and close to two-fifths of the countrys total consumption pie. According to industry

estimates, Indias rural economy constitutes 45 % of its GDP. A large number of

organisations derive a significant proportion of their overall sales from small cities, which

reflects the growing economic importance of India's rural consumer. Retail and fast-moving

consumer goods (FMCG) players have begun devising exclusive marketing strategies to tap

the rural consumer base.


5/21

5

2. Growth of the Indian Retail Industry:The Indian Retail Industry is at a very crucial stage of its growth. It has been a constant

topper in the Global Retail Development Index, and has been pegged at the 3rd position in the

year 2010. The Organized sector is growing at a rate of 13%, while the unorganized sector

continues to show its upward trend at 10% per annum. However, these growth rates are only

moderate, as reports suggest that the organized sector is expected to treble itself in the next 5

years. There are several factors contributing to this phenomenal growth of the retail industry

in India. The following are some of the major ones:

1.Increase in Consumer Class: Indias consumer class is estimated to grow nearlytwelve-fold (from 50 million at present)to 583 million by 2025, with more than 23

million people likely to be listed among the worlds wealthiest citizens. The increase in

per capita income of the different sections of the society has infused an enormous

purchasing power into the hands of the people. This has been one of the major

contributors to the growth of the retail industry in India.

2.Easy Consumer Credit: With the emergence of concepts such as quick and easy loans,easy monthly instalments (EMI), loan through credit cards and loan over phone, it has

become easy for Indian consumers to afford expensive products. Unlike a decade ago,

credit cards and short-term loans have become easily accessible and have contributed to

the emergence of a consumer culture in India. With loans for everything from a home to

an automobile freely available, the Indian consumer has started spending on big-ticket

items that were traditionally within his reach only after years of savings.

3.Change in patterns of consumption: The growth of the organized retail sector in Indiacan be attributed to a shift in the demographics and preferences of the consumer base

leading to a major upheaval in the retail sector. The mindset of the Indian consumer is

changing dramatically, with their focus shifting from low price to convenience, high

value and a superior shopping experience.

4.Improvements in infrastructure and enhanced availability of retail space: The lastdecade has seen a major investment in the infrastructure sector from major players like

Reliance, GMR etc. which has fuelled the growth of the new shopping experience. For

proper sourcing and distribution, a good road network is necessary. The fact that many

big players have entered this market and invested heavily on retail infrastructure has

proved beneficial to the growth of organized retail.


6/21

6

5.Technological Advancements and Innovation: Technology, especially IT has made astupendous impact on the course of businesses in India. The following enumerates the

several ways in which it has been able to transform retailing in India.

a. Inventory Management: Retailing is a `technology-intensive' industry. Successfulretailers today work closely with their vendors to predict consumer demand, shorten

lead times, reduce inventory holding and thereby, save cost.

b.Concept of e-retailing: The Internet has several advantages over a visit to a retail outlet.Because of the elimination of some layers of middlemen the cost of the product in an

Internet transaction comes down as compared with a traditional retail transaction.

Inventory holding costs reduce as they can be sourced as per orders received over the

Internet with a base amount stocked initially to take advantage of the economies of

scale. This also reduces the need for large storage areas, thus reducing the real estate

costs.

c. Innovations in Transportation Logistics: The logistics service providers have beeninnovating several interesting formats and models for the retail sector. As of now,

organized retail chains in India do not, by far, outsource logistical requirements, they

develop their own network.

d.Convenience to Consumers: Technologies like RFID, Mobile Voice communicationsetc. have made it more convenient for both the customers and retail outlets to receive

and provide better service respectively.

6. Low profitability of the unorganised sector: Retail in India is pre-dominantlyunorganized. The following are a few causes of Low Productivity in Unorganized

Retail, and contributors to the rapid growth of the organized retail sector:

a.Labour intensity: Counter-stores in India have a very low output to labour consumption

ratio. Low labour costs, failure to employ part-time labour and the absence of

multitasking are the mainly responsible for the unusually high consumption of labour.

This has driven down the productivity in the sector.

b. Inventory and Supply Chain Management: Unorganized retailers in India rarely track

consumer behavior and sales data to improve their inventory management practices.

Counter stores and street vendors do not have the infrastructure, exposure or credibility

to form lasting relationships with suppliers. As a result retailers usually use different

suppliers every time they purchase inventory. This leaves them largely incapable of

strategically managing their business.


7/21

7

c. Low entry barriers: With 700 million agricultural labourers looking to move into retail,

low barriers to entry and the absence of regulation in this sector have made it a largely

over-supplied sector. The excess supply of counter-stores and street vendors represents

a tremendous decrease in the productivity of this sector.

d. Absence of competition: Almost all retailers find a way to make ends meet or change

their merchandise till they make ends meet-is also responsible for a form of status quo

in the sector where little to no improvements in efficiency, management and by

extension productivity are seen. In fact, this sector is so stagnant with respect to

operational changes that no improvement in productivity is expected in the near future.

3. Profile of major Domestic and International players in retail:

3.1Domestic:1. K. Raheja group: Brief profile: Shoppers Stop is an Indian department store chain promoted by the

K.Raheja Corp. Group (Chandru L Raheja Group), started in the year 1991 with its

first store in Andheri, Mumbai. With the launch of the Navi Mumbai departmental

store, Shoppers Stop has 34 stores in 15 cities in India.

Key persons: Developer K. Raheja, Management, B.S. Nagesh (Customer CareAssociate & Vice Chairman), Govind Shrikhande (Customer Care Associate,

President & CEO)

Main associated brands: Shoppers Stop (clothing, accessories, fragrances,cosmetics, footwear and home furnishing store), Crossword (book store),

InorbitMall (fashion, lifestyle, food and entertainment) and Hyper City

(hypermarket)

Financial position: 2009-10 Net profit stood at Rs. 50.2cr and Operating Income at1568.4cr

2. Tata group: Brief Profile: Trent, a part of TATA group commenced its retail operations by

acquiring the UK based littlewoods department store in Bangalore in 1998. The

company operates department stores under the name Westside. It is also present in

the food and grocery vertical and the speciality verticals (apparel, books and

music)

Key persons: Ratan Tata - Chairman Tata sons, Himanshu Chakrawarti GM ,Trents


8/21

8

Main associated brands: Landmark (books and music), Croma (multi-brandelectronics), World of Titan (watches), Tanishq (jewellery), Titan Eye+ (eye wear),

Westside (lifestyle retail store), Star Bazaar (hypermarket chain), Fashion

Yatra(family fashion store)

Financial position: Net profit was Rs. 40.2cr and Operating Income was Rs.579.3crored in 2009-10 fiscal

3. Future Group: Brief Profile: Future Group, incorporated in 1987 as Menz wear pvt ltd. Its

Pantaloon retail India ltd (PRIL) has evolved from being a mens apparel retailer to

a full-fledged retail co. catering to the lifestyle and value segments through its

various format stores. The co transferred formats under the value retail business to

a wholly owned subsidiary, future vale retail limited (FVRL) in Jan 2010. PRIL

also operates subsidiaries such as future media, future logistics, future brands etc.

which provide back end support to its retail venture.

Key persons: Founder, MD and CEO- Mr Kishore Biyani Main associated brands: Central (shopping mall), Big Bazaar(hypermarket),

Pantaloons (fashion outlet), Blue Sky (sunglasses), Brand Factory (multi-brand

readymade garments), KB's Fair Price (essential products), Navaras(jewellery),

Planet Store (multi-brand sports and lifestyle speciality retail), aLL(fashion

garments), Ethnicity (Indian ethnic wear), Home Town (home needs),

eZone(electronics), Furniture Bazaar(home furniture), Electronics Bazaar(under

Big Bazaar, electronics stores), Home Bazaar(satellite version of Home Town),

Collection I (lifestyle furniture), Gen M & One Mobile (mobile phones), M-Port

(electronics), Shoe Factory (footwear) andDepot(books and music)

Financial position: Net profit stood at Rs. 60.9cr and operating income at Rs.9821.1cr in 2009-2010

4. Reliance retail: Brief profile: Reliance retail ltd. (RRL) the wholly owned subsidiary of reliance

industries entered retailing with the acquisition of Mumbai based sahakaribhandar

in mid-2006 and currently operates stores across verticals such as apparels,

consumer durables, footwear and jewellery.

Key persons: Gwyn Sundhagul is the chief executive of the value-format division. Main associated brands: Reliance Fresh (neighbourhood store), Reliance Mart

(supermarket), Reliance Super(mini-mart), Reliance Digital (consumer durables


9/21

9

and information technology), Reliance Trends (apparel and accessories), Reliance

Wellness (health, wellness and beauty),iStore(Apple products),Reliance Footprint

(footwear), Reliance Jewels (jewellery), Reliance Time Out(books, music and

entertainment), Reliance AutoZone (automotive products and services) and

Reliance Living (home ware, furniture, modular kitchens and furnishings)

Financial position: RRL posted a net loss of Rs 20.24 crore in FY09.3.2International:1. Wal-Mart:

Brief profile: Wal-Mart Stores, Inc, branded as Walmart since 2008 and Wal-Martbefore then, is an American public multinational corporation that runs chains of

large discount department stores and warehouse stores. The company is the world's

18th largest public corporation, according to the Forbes Global 2000 list, and the

largest public corporation when ranked by revenue. It is also the biggest private

employer in the world with over 2 million employees. The company was founded

by Sam Walton in 1962, incorporated on October 31, 1969. Walmart has 8,500

stores in 15 countries.

Key persons: Mike Duke (CEO),H. Lee Scott (Chairman of the ExecutiveCommittee of the Board),S. Robson Walton (Chairman)

Main associated brands: Sam's Choice, Great Value, Equate, Mainstays, Ol' Roy,Parent's Choice, White Stag, Georges

Financial position: Its profit margin was 3.6% and revenue stood at US$ 421.849billion (2011). Net Income was US$ 15.355 billion (2011)

2. Carrefour S.A. Brief profile: Carrefour S.A. is an international hypermarket chain headquartered

in Levallois-Perret, France. It is one of the largest hypermarket chains in the world

(1395 hypermarkets at the end of 2009), Carrefour operates mainly in Europe,

Argentina, Brazil, China, Taiwan, Colombia, Dominican Republic, and in Saudi

Arabia, but also has shops in North Africa and other parts of Asia, with most

stores being of smaller size than hypermarket or even supermarket. Carrefour

means "crossroads" in French.

Key persons: Lars Olofsson (Chairman and CEO) Main associated brands: Hypermarkets, Carrefour, Atacado, Hyperstar.,

Supermarkets, Carrefour Bairro, Carrefour Express, Carrefour Market(Formerly

Champion as of 2008), Champion Mapinomovaoe, Globi, GB, GS, Carrefour


10/21

10

mini, Gima., Hard discount stores, Dia, Ed, Minipreo., Convenience stores,

Carrefour City, 5 minutes, 8 Huit, Marche Plus, Proxi (supermarket), Sherpa,

Dperd, Smile Market, Ok!, Express, Shopi(supermarket). Cash & Carry Carre,

four Contact, Promocash, Docks Market, Gross IPer.

Financial position: It had a margin of 0.5%. revenue stood at $119,887 million(2009)

3. Metro AG Brief profile: Metro AG is a diversified retail and wholesale/cash and carry group

based in Dsseldorf, Germany. It has the largest market share in its home market,

and is one of the most globalised retail and wholesale corporations. It is the

fourth-largest retailer in the world measured by revenues (after Wal-Mart,

Carrefour and Tesco). In English it often refers to itself as Metro Group. It was

established in 1964 by Otto Beisheim.

Key persons: EckhardCordes (CEO and Chairman of the executive board), JrgenKluge (Chairman of the supervisory board), Olaf Koch (CFO)

Main associated brands: Metro/Makro Cash & Carry , Real , Media Markt ,Saturn, Galeria Kaufhof

Financial position: Profit margin was at 0.8%, its revenue stood at $90,850m in2009.

Entry of foreign playersDue to restrictions from government policies foreign players are debarred from entering into

the multi-brand retailing industry in India. In last two years there has been a lot of

development regarding Free Trade Agreements (FTAs) with European Union for retail

industry, but it is yet to be finalized.

The investment opportunities are numerous in the food, interiors, apparels, fast food, and

consumer durables industries. In fact, many foreign companies are making ties with Indian

firms to market their products here. Some examples of these collaborations are the Bharati

group tying up with Wal-Mart. Or the many franchisees of fast food joints, such asMcDonald's, Domino's, or Pizza Hut in the food section. In the apparel and sports section,

Adidas, Reebok, Nike, Sony, and Levis are making their presence felt.

The government as of now allows 51% FDI for single-brand companies. Other than that,

franchisees are available for foreign outlets to tap the Indian retail Industry.


11/21

11

Also, this field provides many employment opportunities that help raise the economy and in

turn the standard of living. This thereby increases the customer base for the products

themselves. Thus, by all means and ways, the Indian retail industry is paving a way for itself.

4. Government regulation and policy in Retailing IndustryCurrent FDI policy in retail

Indias current policy doesnt allow FDI in retail trade except for single branded retailProducts sold should be of a 'Single Brand' onlyProducts should be sold under the same brand internationally'Single Brand' product would cover only products, which are branded during

manufacturing

FDI up to 51% is allowed in Single Branded retail with prior government approval 100% FDI is allowed in whole sale cash and carry format Franchise arrangements are allowed in retail formatCurrent Retail entry options

Strategic License agreements - Foreign Company can enter into a licensing agreementwith a domestic retailer or partnering with Indian promoter owned companies.

Cash and Carry Wholesale Retailing - 100 % FDI allowed in wholesale trading whichinvolves building a large distribution network. Example Wal-Mart, Metro, Shoprite

Distribution - An international company can set up a distribution office in India andsupply products to the local retailers. Franchise outlets can also be set up in this route.

Example Mango, Boss

Franchisee Route - The entry route which includes the master franchisee route iswidely used, with a number of international brands to set up presence in India.

Example Nike, Mark and Spencer, Dominos Pizza, Pizza Hut, Subway

Manufacturing - A company can setup manufacturing units in India along withstandalone retailing outlets. Example Bata, United Colors of Benetton

Joint Venture - International firms can enter into agreements with domestic players andset-up base in India. Share of MNCs is restricted to 49% in this route.

5. Impact of union budget 2011-12 for the sector Goods and Service Tax (GST) -GST, which is expected to be introduced in India with

effect from April 1, 2011, aims to establish an economically efficient tax system that is


12/21

12

neutral in its application, attractive in terms of distribution and removes the tax

cascading that is prevalent in the existing system.

Among other things, the implementation of GST is expected to simplify the supplychain for consumer goods, make cash flow improvements by removing the excise duty

on goods manufacturing, lower business input costs and enable enhanced profitability

due to the elimination of tax cascading

GST Production and distribution structure- The abolition of Central Sales Tax(CST) is likely to warrant a re-evaluation of procurement and distribution arrangements.

Removal of excise duty on products may result in cash flow improvements, since GST

will be paid on sale/supply rather than on the product.

Pricing and profitability - The elimination of tax cascading is expected to lowerbusiness input costs and improve profitability. The application of tax at all points of the

supply chain is likely to require adjustments to profit margins, especially for distributors

and retailers.

Cash flow - Tax refunds on goods purchased for resale implies a significant reductionin the inventory cost of distribution. Distributors are also expected to enjoy cash flow

from collection of GST in their sales, before remitting it to the government at the end of

the tax-filing period.

System changes and transition management - Changes need to be made toaccounting and IT systems to record transactions in line with GST requirements.

Appropriate measures need to be taken to ensure smooth transition to the GST regime,

for example, through employee training, compliance under GST, customer education

and inventory credit tracking.

6. Key Trends in the Retail Industry

Emergence of multiple franchisee models This model is largely adopted bycompanies offering products in the value and semi-premium branded segments in order to

enable greater scale, limit dependence on a few players and leverage local hands-on

knowledge of the market. Jumbo King, the Mumbai-based snack major, and PepsiCo

India are following this model.

Rural retailing Rural India accounts for more than 70 per cent of all Indianhouseholds and close to two-fifths of the total retail consumption pie. Retail companies


13/21

13

have realised the importance of tapping the rural consumer base. Examples include DCM

Shriram'sHariyali Kisaan Bazaarand ITC's Chaupal Sagar.

Collaborative model for international products Joint ventures (JVs) are emerging asthe preferred model for new entrants, wherein foreign players leverage the knowledge of

the local player and focus on key issues such as quality, pricing, promotions and brand

management. Key examples include the Bharti Groups JV with Wal-Mart for retail and

wholesale retail and StaplesJV with Pantaloon Retail Ltd to launch Staples products in

the Indian market.

Vertical integration Retail companies are looking at integrating their business modelsvertically to explore additional sources of revenues. For example, Dabur India Ltds retail

foray into the health and beauty retail business through a retail chain known asNewU,

and Nokias launch of concept stores.

Collaboration for back-end resource sharing Another interesting trend in the Indianretail market is the collaboration of back-end resources, where retailers align their

sourcing operations and share private label, logistics, warehouses and hiring details on a

transactional payment model. For example, the Future Group, the Aditya Birla Group, the

RPG Group and the Reliance Group have come together to reduce their operational costs

and improve margins.

Increasing market reach Retail companies are looking to increase their footprint inTier II, III and IV cities and towns to capture domestic demand. For example, the

Raymond Group plans to open more than 200 stores across India by mid-2011, and the

Tata Group's retail venture, Westside, is planning to expand its franchisee base in Tier II

and Tier III cities.

Innovation in new retail formats Retailers are not only investing in their operations,but are also exploring the possibility of adopting new business models or formats. For

instance, Reliance Retail has devised a new business model under which it will open

small employee-friendly retail outlets at the premises of large corporate organisations.

The Network18 group has ventured into online and on-air retail marketing and

distribution through HomeShop18.

Direct sourcing arrangements Retailers are directly procuring produce from farmersin order to offer quality products at prices that are lower than the market price and also to

secure a larger number of clients. Wal-Mart sources around 35 to 40 per cent of its

produce directly from approximately 130 small and marginal farmers. It is also educating


14/21

farmers about transplanting,

obtain better and higher yield

Focus on private labels such as private labels, and

revenue. On average, in Ind

total retail industry revenu

contribution from 15 per cen

InvestmentThe organised retail industr

considerable activity in term

Model 1-Investment/Exp Model 2-Mergers and Ac Model 3-Strategic allianc

Model 1 - Investment/Expansi

Company

RelianceRetail

Plans to invest US$ 1and tier III cities in In

GitanjaliGemsLtd

Plans to open aroundpresence in China and

ShoppersStop Ltd

Currently operates moacross 10 store formatand achieve 3.89 milli

Pantaloon Retail

India Ltd

Plans to invest nearlyretail formats

Spencer's Retail

Ltd

Plans to launch 1targeting to have

BhartiRetail

Plans to invest upft. of retail space i

14

nutrient management and the use of low cost i

s.

etailers are increasing their focus on high-ma

are looking to increase private labels contrib

ia, private label contributes between 10 and 2

. Spencers Retail Ltd plans to increase its

currently to 30 per cent over a period of 18 mo

y is at a nascent stage of development and

of investments and expansions.

ansion plans

quisitions (M&A)

es/JVs for market entry

n plans

Plans

5 million (INR 6 billion) to open 200 Reliance Footia by 2013; Reliance Lifestyle plans to open 3,000

00 stores by the end of March 2011 in India; also aithe Middle East

re than 99 stores in 14 Indian cities, with 2.24 millios; plans to aggressively expand retail outlets acrosson sq ft. of trading space by 201314

S$ 437.5 million (INR 21 billion) during 201114

0 Beverly Hills Polo Clubs (BHPC) stores bya presence in all major cities; BHPC currentl

to US$ 2.5 billion (INR 120 billion) and addn five years.

nnovations to

gin verticals,

ution to total

0 per cent of

private label

nths

is witnessing

print stores in tier IIew stores by 2015

ms to increase its

n sq ft. of trading spaceormats in new cities

to expand its various

2011 and isy has 14 stores

about 10 million sq


15/21

Model 2-Mergers and Acquisiti

Acquirer Name

Shoppers Stop Ltd

(department store)

TPG Capital, Bain Capital

Gitanjali Gems Ltd (retail

jewellery)

TVS Shriram Growth Fund

India Hospitality Corp,

USA (hospitality)

Marksand

Spencer

Targeting 50 new stomarket.

Planet M

Retail Ltd

Opened three new o

LifestyleInternatio

nal PvtLtd

Plans to open 50 morstores selling apparel,that will sell home fur

Timexgroup, US

A

Plans to nearly doubloutlets, at an estimat

RaymondLtd

Opened 100 stores b200 or more stores by

GucciGroup

NV, Netherlands

Acquired a 51 per ceninvestment of US$ 21

15

ons (M&A)

Target Name Year

HyperCity Retail India Pvt

Ltd (hypermarket)

Jun-10

Lilliput Kidswear Ltd

(branded kidswear retail)

Apr-10

Morellato India Private Ltd

(watch and jewellery retail)

Jan-10

Landmark (department

store)

Nov-09

Treasure Food and

Beverage (retail restaurants)

Nov-09

es during 201114 to double its presence in the In

tlets in superstore format in 2010

e stores across India by 201213, which will includecosmetics and footwear, as well as about 15 Homenishing goods, among others

its retail stores by mid-2011 to around 120 from itd investment of US$ 1.25 million (INR 60 million)

tween October 2009 and January 2010, and plans tJune 2011

t stake in its Indian franchisee, Luxury Goods Retail,000 (INR 10.42 million) in order to open single-br

Format

Acquisition

Private Equity

Divestiture

Divestiture

Acquisition

ian

35 lifestyle retailCentres stores

s existing 68

o open another

Private Ltd, at annd stores


16/21

16


jewellery)

Spectrum Jewellery Pvt Ltd,

Thailand (diamonds and

other precious stones)

Oct-09 Acquisition


jewellery)

Alliance Jewelleries Pvt

Ltd, Lebanon (designer of

gold and diamond studded

jewellery)

Oct-09 Acquisition

Gitanjali USA Inc, a wholly

owned subsidiary of


jewellery)

Diamlink Inc, USA

(diamonds and diamond-

studded jewellery)

Jul-09 Acquisition

Gruppo Coin, Italy (fashion

retail)

Brandhouse Retails Ltd

(fashion retail)

Feb-09 JV

Inditex, Spain Trent Ltd (retail) Feb-09 JV

Model 3 - Strategic alliances/JVs for market entry

Company Partnership arrangements

Reliance Group

(Reliance Industries Ltd)Marks & Spencer to open 50 stores to sell women's, men's and children'sclothing and homewareduring 201114

Pearle Europe to launch a chain of optical stores

VornadoRealty Trust to collectively invest US$ 500 million (INR 24 billion)to acquire, develop and operate retail shopping centres in key cities

Office Depot Inc to launch 250 standalone stationery stores by 2010

Hamleys, UK exclusive pan-India franchise arrangement to open 20Hamleystoy outlets by 2015, at an investment of US$ 26 million (INR 1,248million)

Future Group

The Future Group owns a retail licence from Staples Inc USA to sell more than700 products and carry the latters entire range of technology and stationeryproductsAxiom Telecom LLC, UAE to distribute and service telecom products

CelioSA to open Celio'sretail garment branded stores in India

Clarks International, UK to sell its premium international footwear label

Fashion Box Group, Italy to sell its luxury denim brandReplay

Carrefour SA to open Carrefour-branded franchise stores in the country


17/21

17

RPG Group

Cellucom Group, Dubai to offer mobility solutions and offer a bettershopping experience by sharing its knowledge of mobile technology in aconsumer-friendly atmosphere

Au Bon Pain, USA to set up 100 standalone dining and bakery caf outlets

Chad Valley, UK (owned by Woolworths plc.) to offer its range of toysthrough standalone exclusive stores and shop-in-shop formats within the samelayout

K Raheja Group

Mothercareplc, UK to sell its brand of maternity and baby/childrens clothes

Argos, UK to open its unique format of catalogue stores

DLF Group

Mothercareplc, UK entered a new joint venture in India with DLF BrandsLtd to complement its India business footprint in segments such as maternityclothing, baby clothes and nursery items

Tata Group

Tesco entered a deal with the retail arm of the Tata Group, to supplyproducts, services and expertise to the latters hypermarket business, StarBazaar

Foreign investment in India is governed by the FDI policy of the Indian Government and the

Foreign Exchange Management Act of 1999.

FDI policy in retail trade

India will announce new rules for foreign investment in retail by April 2012, paving the way for

companies such as Wal-Mart Stores and Carrefour to open stores, according to Junior Trade

Minister Jyotiraditya Scindia. A government panel has issued a report that recommends easing a

law that prohibits non-Indian companies from operating multi-brand outlets. Allowing foreign

investment in multi-brand retail may help moderate food prices, said Kaushik Basu, chief

economic adviser in the finance ministry, who sits on the panel.

In a landmark decision, the government has eased norms for investments by foreign companies that

are present in India through a joint venture (JV) or a technical collaboration. Now, the foreign

company will not have to seek a no-objection certificate (NOC) from the Indian partner for

investing in the sector where the joint venture operates. The government has also relaxed norms for

downstream investments and convertible instruments, giving foreign companies more powers. The

changes are part of the third revision of the Consolidated FDI Policy.


18/21

18

7. Industry product life cycle analysisOne of the most influential growth factors for retailers is product cycles. In many cases, newly

innovated products (such as new flat-panel TVs or an updated line of iPods are released with high

prices to maximize profits early on. Competition between consumer retailers and increased supply

from manufacturers drive down prices over time until each retailer makes little profit by the end of

a product's life cycle. How quickly product cycles mature drives the profit a retailer makes. There

are many product cycles co-occurring at any given point in time, and these product cycles vary

between retail industry sub-sectors; for example, an important product cycle in consumer

electronics retail currently is flat panel HDTVs).

There are usually five stages in the industry lifecycle. These are defined as:

1. Early Stage Phase: The inception of the retail industry dates back to times where retailstores were found in the village fairs, Melas or in the weekly markets. These stores were

highly unorganized. Specialty stores were developed only in those areas that had a population

of above 5,000.

2. Innovation Phase: In this phase product innovation starts declining and process innovationstarts beginning and also a dominant design arrives in the industry. Supermarkets flourished

in the India with the growth of suburbs after liberalization.

3. Cost or Shakeout Phase: In this phase barriers to entry are very high and large-scaleconsolidation occurs. The retail industry in India gathered a new dimension with the setting

up of the different International Brand Outlets, Hyper or Super markets, shopping malls anddepartmental stores.

4. Maturity: With the government intervention the retail industry in India took a new shape.Outlets for Public Distribution System, Cooperative stores and Khadi stores were set up.

These retail Stores demanded low investments for its establishment. The untapped scope of

retailing has attracted superstores like Wal-Mart into India, leaving behind the kiranas that

served us for years. Such companies are basically IT based. The other important participants

in the Indian Retail sector are Bata, Big Bazaar, Pantaloons, Archies, Cafe Coffee Day,

landmark, Khadims, Crossword, to name a few.5. Decline: In this phase revenues start declining and the industry as a whole may be supplanted

by a new one. To compete in this sector one needs to have up-to-date market information for

planning and decision making. The second most important requirement is to manage costs

widely in order to earn at least normal profits in face of stiff competition.


19/21

19

Source: The 2010 AT Kearney Global Retail Development Index

Exhibits:

Exhibit 1 Sales proportions of various retail segments in India in 2010.

62%10%

8%

6%

4%

4% 3%

2%

1%

Sales

Food

Fashion

Leisure & entertainment

Fashion & Accessories

Consumer Durables

Health, beauty & Pharma

Furniture

Telecom

Books & Music


20/21

20

Exhibit 2 Organized retail formats in India

Format Description Example

Hypermarkets Offers a large basket ofproducts, ranging fromgrocery, fresh and processed

food, beauty and householdproducts, to clothing andappliances.

Big Bazaar, Spencers, Spar,Star bazaar, Pantaloons,Hyper City

Cash and Carry Offers several thousandstock-keeping units (SKUs)and generally has bulkbuying requirements.

Bharti-Wal-Mart, Metro

Department Stores Offers a large layout with awide merchandise mix,usually in cohesivecategories, including fashionaccessories, gifts and

products for the home.

Shoppers Stop, Lifestyle

Supermarkets Offers not only householdproducts but also food as anintegral part of their services.

Apna Bazaar, food Bazaar

Shop-in-shop Shops located within thepremises of large shoppingmalls in major cities.

Infinity ( Magna Group)

Speciality Stores Focus on individuals andgroup clusters of the sameclass, with high productloyalty.

Brand Bazaar, Food Bazaar

Category Killers Large specialty retailersfocusing on a particularsegment. These retailers areable to provide a wide rangeof choice to consumers,usually at affordable prices,due to scale economies.

The Loft, Central Mall

Discount Stores Offers a wide range ofproducts, mostly branded, atdiscounted prices.

Subhiksha, Factorys Outletslike Levis, Lee, BrandFactory

Convenience Stores Relatively small retail storeslocated near residential areas.

Safal


21/21

21

References:

1. Retail, Nov.2010, IBEF, Published by Ernst and Young2. The 2010 AT Kearney Global Retail Development Index, AT Kearney3. Retailing Industry Analysis 2010, CRISIL Research Reports4. Quarterly Performance Analysis of Companies (July - September 2010) Indian

Retail Industry, October 2010, Cygnus Business Consulting and Research Pvt. Ltd.

5. ICRA Sector Research on Indian Retail Industry, October 20016. Indian Food Retail Sector In The Global Scenario-Vijay Anand& Vikram Nambiar7. Indian Brand Equity Foundation

indian retail industry - group 7 sec d

Documents