PROJECT REPORT ON

INDIAN APPAREL RETAIL INDUSTRY

NAME ROLL

DARPAN BERRY 11

MANISH MANNA 26

MOHIT MAKHIJANI 30

NIRAJ AGARWAL 34

Contents

1. Overview of retail industry

2. Competitors and Key Players

3. Company Profile

4. History & Achievements

5. Production house

6. Finance

7. Indian market environment

8. Marketing plan

9. Organisation strategy

10. What Biyani wants to be?

11. The Pressure points

12. The ‘own everything’ business model

13. Marketing research

14. SCM

15. Marketing mix –

Product

Price

Place

Promotion

INDIAN APPAREL RETAIL INDUSTRY

Pantaloons

INTRO TO INDUSTRY

A new focus on the apparel retail sector has attracted attention in recent days. With the changing lifestyles, organized retail is playing a key role in structuring the Indian domestic market. Retail sector in India is witnessing a huge revamping exercise as traditional markets make way for new formats such as departmental stores, hypermarkets, supermarkets and specialty stores. Leading domestic retailers are becoming more firmly entrenched, increasing their scale of operations and stabilizing their logistics and technology initiatives.

In its market research report, Indian Retail Sector - An Outlook [2005-2010] RNCOS estimated that the Indian apparel retail industry generated revenue of $2.0 billion in 2004 with a growth rate of 8.2% during 2000-04. As a result, this industry in India is second largest in the world after China. The Indian apparel retail industry varies within even short distances, as the designs of the outfits are based on the regions fashion trends.

COMPANY PROFILE

Pantaloon retail (india) limited, is india’s leading retailer that operates multiple retail formats in

both the value and lifestyle segment of the indian consumer market. Headquartered in mumbai

(bombay), the company operates over 12 million square feet of retail space, has over 1000 stores

across 71 cities in india and employs over 30,000 people.

The company’s leading formats include pantaloons, a chain of fashion outlets,  big bazaar, a

uniquely indian hypermarket chain, food bazaar, a supermarket chain, blends the look, touch

and feel of indian bazaars with aspects of modern retail like choice, convenience and quality

and central, a chain of seamless destination malls. Some of its other formats include brand

factory, blue sky, all, top 10 and star and sitara. The company also operates an online portal,

futurebazaar.com.

A subsidiary company, home solutions retail (india) limited, operates home town, a large-format

home solutions store, collection i, selling home furniture products and ezone focussed on

catering to the consumer electronics segment.

Pantaloon retail was recently awarded the international retailer of the year 2007 by the us-based

national retail federation (nrf) and the emerging market retailer of the year 2007 at the world

retail congress held in barcelona.

Pantaloon retail is the flagship company of future group, a business group catering to the entire

indian consumption space.

COMPETITORS and KEY PLAYERS

1. Launched in January 1998,

2. Globus is a part of the Rajan Raheja group.

3. The company opened its first store in 1999 at Indore followed by the launch of its

second store in Chennai (T-Nagar).

4. Soon to follow was another in Chennai located in Adyar. The flagship store in

Mumbai was opened on 1st November 2001 followed by a swanky new outlet in

New Delhi in South.

1. Established in 1998 as part of the Tata Group, Trent Ltd. operates Westside, one of

India's largest and fastest growing chains of retail stores

2. The company has already established 36 Westside departmental stores (measuring

15,000 - 30,000 square feet each) in Ahmadabad, Bangalore, Chennai, Delhi,

Gurgaon, Ghaziabad & Noida (to be considered as 1 city), Hyderabad, Indore,

Jaipur, Kolkata, Ludhiana, Lucknow, Mumbai, Mysore, Nagpur, Pune, Rajkot,

Surat, Vadodara and Jammu.

Lifestyle International (P) Ltd is part of the Landmark Group, a Dubai – based

retail chain. With over 30 years’ experience in retailing, the Group has become one

of the foremost retailers in the Gulf

1. India’s leading retailer operating in value and

2. Lifestyle segment of the Indian consumer

3. Market

4. Headquartered at Mumbai

5. Company operates over 7 million square feet

6. Of retail space,1000 stores across 51 cities in

7. India and employees over 25000 people

8. A flag ship company of future group

FUTURE GROUP:-

VISION: “To deliver everything, everywhere, every time to every Indian consumer

in the most profitable manner”

MISSION: “Indianess as a core value”

CORPORATE CREDO: “Rewrite rules, retain value”

As retail is a growing sector there are many market players in the field. To name a few:

Shopper stop, Vishal Mega mart, Westside, Wills Lifestyle an ITC brand, etc.

HISTORY AND ACHIVEMENTS

1987 Company incorporated as manz wear private limited. Launch of pantaloons trouser,

india’s first formal trouser brand.

1991 Launch of bare, the indian jeans brand.

1992 Initial public offer (ipo) was made in the month of may.

1994 The pantaloon shoppe – exclusive menswear store in franchisee format launched

across the nation. The company starts the distribution of branded garments through

multi-brand retail outlets across the nation.

1995 John miller – formal shirt brand launched.

1997 Company enters modern retail with the launch of the first 8000 square feet store,

pantaloons in kolkata.

2001 Three big bazaar stores launched within a span of 22 days in kolkata, bangalore and

hyderabad.

2002 Food bazaar, the supermarket chain is launched.

2004 Central - india’s fiRs.t seamless mall is launched in bangalore.

2005 Group moves beyond retail, acquires stakes in galaxy entertainment, indus league

clothing and planet retail.

Sets up india’s first real estate investment fund kshitij to build a chain of shopping

malls.

2006 Future capital holdings, the company’s financial is formed to manage over $1.5

billion in real estate, private equity and retail infrastructure funds. Plans forays into

retailing of consumer finance products.

Home town, a home building and improvement products retail chain is launched

along with consumer durables format, ezone and furniture chain, furniture bazaar.

Future group enters into joint venture agreements to launch insurance products with

italian insurance major, generali.

Forms joint ventures with us office stationery retailer, staples.

2007 Future group crosses $1 billion turnover mark.

Specialised companies in retail media, logistics, ipr and brand development and retail-

led technology services become operational.

Pantaloon retail wins the international retailer of the year at us-based national retail

federation convention in new york and emerging retailer of the year award at the

world retail congress held in barcelona.

Futurebazaar.com becomes india’s most popular shopping portal.

2008 Future capital holdings becomes the second group company to make a successful

initial public offering in the indian capital markets.

Big bazaar crosses the 100-store mark, marking one of the fastest ever expansion of a

hypermarket format anywhere in the world.

Total operational retail space crosses 10 million square feet mark.

Future group acquires rural retail chain, aadhar present in 65 rural locations

PANTALOON PRODUCTION HOUSE

Jogeshwari east, mumbai 400060, maharashtra

P: 2256442463

Website:- www.pantaloon.com

FINANCIAL REPORT

Pantaloon retail net up 52%

Pantaloon retail posted 52.10 % increase in net profit for the quarter ended march 2006 to

Rs..16.23 crore as compared with Rs..10.67 crore for the corresponding quarter last year.

 

Net sales for the quarter stood at Rs..455.39 crore as compared with Rs..274.95 crore for the last

corresponding quarter, higher by 61.17 %.

INDIAN MARKET ENVIRONMENT

Currently in india, the national economy and market place are undergoing rapid changes and

transformation. A large number of reason could be attributed to these changes. One of the reason

in these changes in the indian market scenario is globalization, and the subsequent and resulting

explosive growth of global trades and the international competition. Here is the small overview

of thw indian market environment.

Indian marketing environment

Analysing marketing environment:-

Relationship b/w

Organisation external partners consumers

Tools

Marketing intelligence market research

Marketing environment:-

Micro macro

Company demographics

Suppliers economic

Marketing intermediaries natural

Customers technological

Competitors political

Public cultural

On the basis of all the micro and marco environment features, Pantaloons has been keeping in

mind all these and plans the organization & marketing strategies and research plannings.

MARKETING PLANS OF PANTALOONS – KISHORE BIYANI

Pantaloon

Double or quits

 Kishore Biyani is india’s most successful retailer to date. And he wants to stay that way.

Even if it means wagering everything he has built so far.

is Kishore Biyani a retailer or a fund manager? That

question might well be asked of him in the not too distant

future.

Over the last few months, future capital holdings (fch),

led by ceo sameer sain, has stitched together a fully

integrated financial services business model. Fch has

already become the fastest growing start-up in the alternative asset management business in

india with almost $830 million in assets. Now, it has big plans in insurance, retail lending and

forex services.

“whether we have a consumer who wants to leverage future income to realise his aspirations

today, or wants to save and invest, or buy protection for his family, we want to be a part of it,”

says sain. He believes that in 5-7 years, fch’s bottom line will be bigger than the retail business!

In the insurance business, the future group has managed to wrest a 74 per cent stake in a joint

venture by investing just Rs. 100 crore (its jv partner invested the same amount for a 26 per cent

stake). “italian assicurazioni generali, ranked 21 on the fortune 500 list, is a good fit for us

because they derive almost 17 per cent of their sales from mall assurance. They have also

partnered another retailer in the philippines,” says sain. Biyani estimates that with just a 1 per

cent footfall conveRs.ion rate, the insurance business would have over 2 million customers.

That would earn him huge fees on distribution and catapult the company to amongst the largest

private insurance players by way of number of policies sold.

Fch has promoted an integrated retail financial services distribution company christened money

bazaar that will be housed within all future group stores and malls. It will market credit cards,

personal loans, mortgages and consumer durable loans. Raman mangalorkar, head (consumer

and retail practice), at kearney, says that a study in the americas found that the cards business

contributed most of the value of the retail business of large american and canadian retailers as

the core business was characterised by cut-throat margins. Perhaps Biyani is motivated by

similar expectations.

Fch will also distribute forex products and mutual funds. For its sub-prime financing business, it

is in talks with potential partners who will hold a minority stake while pumping in money and

contributing expertise.

Also on the anvil is a $200 million-250 million hospitality fund. This will set up a chain of 30-

40, three and four star hotels pan india. Fch will also launch hedge funds in addition to kshitij 2,

a domestic real estate venture fund, estimated to be around $80 million in size.

It will also undertake corporate finance and advisory work and has set up future capital special

situations (investment) to do proprietary investments. The first such proprietary investment is a

47,000-sq. Ft building in peninsular corporate park at lower parel in central mumbai, part of

which will be self occupied.

We are putting investors on notice.” That’s a surprising statement from a man who is about to

raise funds for a high-risk Rs. 4,000-crore expansion. Kishore Biyani, 44, who controls the

country’s biggest retail group, should be talking up his share price, not spooking it. But as he

steers the Rs. 1,993-crore pantaloon retail (india), or pril, into its next phase, Biyani, more than

anyone else, knows there is no point trying to camouflage the scale of his wager.

He is buying up more retail real estate than many asian

biggies. He is attempting a quick fire launch of 18

formats and over 3,340 new stores by 2010. (he has

four formats and 140 stores now.) He is getting into

risky and capital-intensive businesses, which include

lending to his customers and selling insurance. And he

is planning an advertising blitzkrieg that he claims will

make him one of the top three advertisers in the

country.

And Biyani is planning his biggest and most audacious

moves at a time when pril is starved of resources — it

has a Rs. 395-crore negative cash flow from operations

and investment, and a cash crunch is looming large.

Last year, the stock underperformed the sensex by a

wide margin. This has cast a shadow over Biyani’s

fund-raising ability. Besides, if he manages to expand

as much as he is planning to, he will need hordes of

trained managers at every level. Industrywide, there is a

shortage of talent and Biyani has no clue where he will

find people. Meanwhile, profit margins, already a wafer

thin 6-7 per cent, are coming under more pressure.

of course, Biyani had taken huge gambles even earlier.

And he had shown a remarkable ability to come roaring

back each time he was written off. The difference this

time is that he is taking a make-or-break gamble when he actually has lots to lose. He has built

his group to a respectable size. But now, he is putting all that at stake. Why does he need to do

this?

Deep inside, Biyani had known that one day it could come to this. He had tried his best to thwart

such a scenario.

A few months ago, he explored the possibility of collaborating with reliance retail by engaging

with Mukesh Ambani.

But the talks failed. A top reliance executive, who spoke on condition of anonymity, is brutal in

his assessment: “with our entry, the retail sector will see a bloodbath.” Biyani, as the biggest

retailer and, perhaps, the only independent one, is vulnerable.

That was probably the real trigger for this ‘high-growth, high-risk’ game plan. Today, he is

caught in the middle of one of the fiercest corporate battlegrounds of the decade. Besides

reliance, several players like the aditya birla group and bharti are eyeing this sector. Trent, the

retail arm of the $17.8-billion tata group, has expanded into hypermarkets. Shoppers’ stop is

expanding. South africa’s shoprite is already here via the franchisee route. Uk’s giant retailer

tesco, according to consultant at kearney, is in talks with homecare retail marts, owners of the

upcoming magnet hypermarket chain. And wal-mart is straining at the leash, waiting for fdi to

be allowed. “what happened in 25 years in the us will happen in five years here,” says b.s.

nagesh, managing director, shoppers’ stop and vice-chairman, hypercity hypermarket.

Suddenly, despite all that he has built so far, Biyani will get marginalised in the retail game

unless he grows to many times his current size in the next couple of years. He wants to remain a

significant player or, as some say, at least an attractive target for an acquisition. His plan is to

turn pril into a $7-billion integrated retailer with over $1 billion in profits by the year 2010 (see

‘what Biyani wants to be in 2010…’).

To do that, Biyani’s empire — recently renamed the future group — has to be ‘everything,

everywhere for everyone’. “we should be able to provide everything from a mochi’s (cobbler’s)

services to that of a chaviwala (key maker), to a money changer,” says Biyani. “we will do in

the next one year what we have achieved in the last seven,” adds sanjay jog, head (hr).

Nothing illustrates his new risk appetite more than his real estate plans. Till march 2006, he had

occupied 2.7 million sq. Ft of retail space. But over the last two-and-a-half years, he has booked

16 million sq. Ft of realty at an average Rs. 45 per sq. Ft. By 2010, pril’s stores will be

occupying a total of 30 million sq. Ft. That apart, Biyani aims to have 40 million sq. Ft more

under pantaloon’s real estate funds business by 2010. That’s a total of 70 million sq. Ft. And it

dwarfs capitaland, one of asia’s largest mall management and listed property companies.

Capitaland currently oveRs.ees around 20 million sq. Ft of space.

“Biyani has moved fast and become the largest holder of retail real estate in the country. This

will give him at least a two-year head start,” says akshaya kumar, chairman, colliers

international. At the moment, some retailers are struggling to find suitable properties.

“availability of large ground floor space like that suitable for our spencer’s hypermarket is

limited,” concedes harsh goenka, chairman, rpg enterprises.

Could this be a source of competitive advantage? Perhaps, but only in the short term as there is

plenty of mall supply coming up. In any case, pril has now taken on a huge realty risk.

It is obvious that Biyani is trying to match Ambani in ambition, even though it calls for more

capital and involves more risks. But the big question is: can Biyani match Ambani with hard

cash? Reliance industries will spend more than Rs. 25,000 crore ($5.6 billion) on retail. This is

where Biyani’s cookie begins to crumble. By his own estimates, the group plans to invest Rs.

4,000 crore over the next four years. But even this may be quite a stretch. Put that figure in

perspective — pril’s current market capitalisation is only Rs. 4,109 crore.

Cash crunch: - To achieve $7 billion in sales, pantaloon needs money to launch new formats

and expand existing ones into new locations. “if we had restricted ourselves to only food and

fashion retailing, our sales would expand only at 30-40 per cent. But we want to grow at 80-90

per cent, which categories like home and communication and durables will allow us to do,” says

Prashant Desai, head (knowledge office), pril.

Of the Rs. 4,000 crore needed, about Rs. 2,100 crore will be used for capital expenditure and Rs.

1,900 crore for working capital. Where could this money come from?

“we expect internal accruals of Rs. 1,800 crore and can raise debt for 75 per cent of our working

capital needs,” says Biyani. This would leave a net deficit of around Rs. 775 crore, to be funded

largely by equity. There are two problems here.

First, pril’s negative cash flow from operations and investment, a result of its breakneck pace of

expansion, is unlikely to change soon. The sales cycle in the fashion part of the business is

almost double the credit period received. The only way to change this is to increase the share of

food sales. “but that would depress our ebitda (earnings before interest, tax, depreciation and

amortisation) margins, which we want to maintain at 7-8% levels,” admits desai.

Biyani is also counting on the group’s financial services business to generate significant cash

flow for him (see ‘Kishore Biyani, fund manager’). It currently manages a little under a billion

$’s. in assets and could earn annual asset management fees of around $20 million. And if the

funds achieve the targeted 30% internal rates of return, it could earn another $60 million in

profits.

Meanwhile, raising the Rs. 775-crore equity (or more if the expected accruals don’t kick in)

isn’t going to be easy. Unlike Ambani, who will put in $2.24 billion in equity, Biyani will

depend on the market for funds. But he isn’t getting much support there. “runaway growth is not

a good idea. There are inherent risks. Biyani is a firs.t generation entrepreneur. He does not have

a proven blue-chip management,” says Abhay Aima, country head (equities and private

banking), HDFC bank. “currently, investors are sceptical about funding this sector because they

want to see what happens when reliance launches fully,” adds ullal ravindra bhat, managing

director, dalton capital advisors. india.

Moreover, Biyani may not issue fresh shares if he does not get a premium high enough to

protect his family’s shareholding from falling too much below the current 44.24 per cent,

especially when he personally holds only 3.13 per cent.

Finally, foreign institutional investors.’ (fii’s) holding in retail companies has been limited to 24

per cent of equity. In pril, fiis held 28.25 per cent stake as of end march 2006, creating a supply

overhang. Effectively it also rules out fresh issue of shares via gdrs. (global depositary receipts),

adrs. (american depositary receipts) or fccbs (foreign currency convertible bonds), all of which

hold the possibility of issuing equity at a premium to current market price.

But Biyani thinks he has come up with a solution. He plans to split his businesses and raise

money separately for each.

All the new businesses are being carried out under separate legal entities. Pril will seed the

business with equity capital. Later, it will hawk stakes in these companies, hopefully at fat

premia, realising both value and much needed hard cash. “i have lots of pieces to sell and we

may not need to raise any fresh equity from the market,” says Biyani. For example, he is in talks

to sell a little under 20 per cent stake for around Rs. 180 crore in home solutions retail india, the

company that will launch home town stores, a large format one-stop shop stocking everything

from plumbing and cement to consumer durables and furnishings. Similar plans are also afoot at

future media and future logistics. In fact, two of Biyani’s biggest formats could be hived off as

separate companies. “central, which aims to provide a premium shopping destination built

around big brands, is being made into a separate company; big bazaar could follow too,” he

says.

THE PRESSURE POINTS

For all his bravado, there is no doubt that Biyani is under extreme pressure. Occasionally,

though, he lets his guard down. “we don’t say that we will be the no. 1 retailer in india, but we

will be dominant,” says Biyani.

Perhaps he realised his own frailty when he lost raghu pillai, who was to head home solutions

retail, to reliance. Pillai was the architect of the rpg group’s retail business. He had built many

successful formats like foodworld, spencer’s hypermarket, etc. Biyani had lured him with much

fanfare. But in only a few months, pillai moved over to the Mukesh Ambani camp foregoing

employee stock options for a significantly higher fixed salary.

The scale and scope of Biyani’s plans will also require a lot of senior managers. “management

bandwidth is a problem,” says dalton’s bhat. And good talent is hard to come by in the retail

sector.

Biyani has already taken on board this criticism. He has now hired a second line of management

to run the company while he and the rest of his family like cousin rakesh (oveRs.ees it strategy

and new retail formats like central and fashion station), and uncle gopikishan (participates in

overall strategy) focus on ‘strategy and relationships’. “we have been working with mckinsey

over the past six months to ensure that we are ready for 2010. We have identified 10 members

of the top management and will shortly be announcing a management board and a management

council to lead the organisation,” he says.

But competition is intensifying. Big bazaar, pantaloon’s most successful format, was built on a

price platform. Its core proposition is ‘is se sasta aur achha kahin nahi’ (nowhere is it cheaper

and better than here). That brought in huge volumes, but it also meant low margins. And some

rivals may be in the process of discovering a more profitable model. Hypercity, launched by the

rahejas, is perhaps one example. Hypercity in mumbai buzzes with activity as consumers prefer

its layout and merchandising and do not seem to mind its slightly higher prices. It has already

crossed the millionth customer mark in the first quarter of its opening.

But big bazaar will continue to fight on price. So will reliance. That could result in profit

margins dropping to 5-6 per cent. In preparation, pantaloon is squeezing suppliers. wal-mart

style to get better deals. “we have obtained 5 per cent lower prices this year on food and fmcg

products. We believe there is more scope to extract lower prices,” says Biyani. The company is

also establishing bases in the middle east, hong kong and china to source globally as compared

to its current model where over 80 per cent of sourcing is local. Such pressures have forced

Biyani to rethink his business model.

THE ‘OWN EVERYTHING’ BUSINESS MODEL

During his early years, Biyani preferred an asset-light, capital-light business model. He didn’t

control real estate. Rarely did he lock up more than what was necessary. He did not even control

all the merchandise in his stores.

But now, he wants to control everything. He wants to control the real estate, so he has set up

realty funds. He wants to control his vendors, so he has set up a private equity fund to invest in

them. He wants to control his merchandise, so he is creating his portfolio of branded products.

He wants to control the consumer, or at least how much she spends, so he is setting up a lending

arm. He wants to control his supply chain, so he is building 2 million sq. Ft of warehousing

space and is setting up a logistics business. He is even setting up his own advertising company

to monetise footfalls by exposing them to in-store advertising. “whatever is required in our

malls or in our stores should be directly or indirectly controlled by us,” says Biyani. That is the

mandate of the new future group.

Realty is the first building block in the new model. “if the malls you need aren’t ready on time,

then you simply cannot expand,” says ved prakash arya, coo, pril. That’s why the group has also

set up a real estate funds business.

These days, it is not uncommon for Biyani to lease out entire malls. (the new mall being built in

place of the once popular milan cinema in suburban mumbai is one example.) He will use part

of it. The rest he will lease out to others, at a profit. This way, he also locks out competitors.

Second, future capital will provide ge money-like counters insider pantaloon formats to help

fund purchases through loans, credit card offerings, etc. “financing can help expand retail into

segments that wouldn’t otherwise buy, despite aspiring to consume,” says roopa

purushothaman, chief economist and strategist, future group.

DISTRIBUTION NETWORK OF PANTALOON

MARKETING-MIX

Marketing mix basically means the 4p’s of Marketing

Product Pricing Place Promotion

Product

Pantaloon today is a well known apparel brand which targets middle class buyers and not niche market. The styling of the apparels is very fresh and new and is very popular among the youth. The quality of a pantaloon product is always reliable and can be used in a long run at moderate pricing.

Pricing

The Pricing strategy of the Pantaloon product is planned by keeping their targeted customers in mind who are middle class buyers. The price range of pantaloons apparels starts from around Rs. 400 and then figures goes in thousands. There are discount offers introduced from time to time by the company.

Place

The distribution channels of Pantaloons are very widely and extensively distributed across the country. There are more than 150 Pantaloon stores across the country and more than 5 outlets in Mumabi itself.

Promotions

Mr. Kishore Biyani has been a very successful entrepreneur in promoting his company Pantaloons. Pantaloons has advertised his product through various channels like TV advertisements and various hoardings with Ms. Lara Dutta as their brand ambassadors and has very well and maintained their public relations.