retail industry in future

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RETAIL INDUSTRY INFUTUREPresented ToProf. Priyanka Batra

Presented BySavan Bhatt

2012

MBA (Retail Management)Center for Management Studies, Ganpat University


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Retail industry

in Future


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Organized retail is a new phenomenon in India and

despite the downturns, the market is growing

exponentially, as economic growth brings more of

Indias people into the consuming classes and organized

retail lures more and more existing shoppers into itsopen doors. By 2015, more than 300 million shoppers

are likely to patronize organized retail chains.

The growing middle class is an important factor

contributing to the growth of retail in India. By 2030, itis estimated that 91 million households will be middle

class, up from 21 million today. Also by 2030, 570

million people are expected to live in cities.

Consumer markets in emerging market economies likeIndia are growing rapidly owing to robust economic

growth. India's modern consumption level is set to

double within five years to US$ 1.5 trillion from the

present level of US$ 750 billion.

TheFuture


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Thus, with tremendous potential and huge population,

India is set for high growth in consumer expenditure.

With India's large young population and high domesticconsumption, the macro trends for the sector look

favorable.

Online retail business is another format which has high

potential for growth in the near future. The online retailsegment in India is growing at an annual rate of 35 per

cent, which would take its value from Rs 2,000 crore (US$

429.5 million) in 2011 to Rs 7,000 crore (US$ 1.5 billion)

by 2015.

TheFuture


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According to McKinseys report: Indias retail sector will be a $ 450 billion

industry by 2015, one among top 10 retail markets in the world.

Organized retail will create 1.6 million jobs in the next 5 years.

Organized retail now accounts for only 5% of Indias retail business with an

estimated 12 million mom-and-pop stores garnering the bulk of the trade.

By 2015, organized retail is expected to have a share of 14-18 percent of thebusiness.

The huge Indian middle class consumer are now the blue eyed segment for

biggies like Bharti, Wal-Mart, Reliance and loads of others, in race to capture

their pie in Indian Retail Market.


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The modern retail Industry in BRICs is seen as having the maximum potential

on growth world wide. It grew by almost 30% in India and 13% in China and

Russia last year.

According to A.T. Kearney, in their report, Growth Opportunities For Global

Retailers have ranked India at No.1 position consecutively for the second

year.

The report sees Indian retail Industry to grow exponentially over next fewyears. The ranking has been done for30 upcoming global economies.


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Investment in

Indian Retail

sector


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Bharti-Wal-Mart will invest approx. US$2.5 billion by 2015.

Reliance Industries Limited is planning to invest US$ 6 billion in the

organized retail sector in India by opening 1500 supermarkets and

1000 hypermarkets by 2012-2013. Metro AG is investing US$400 million over the next three years.

Pantaloons is planning to invest US$ 1 billion in order to increase its

retail space to 30 million square feet

New Delhi-based round-the-clock convenience chain Twenty Four

Seven Retail Stores Pvt. Ltd plans to invest US$200 million in the next

five years and targeting an emerging segment of night shoppers.

Major Investment in Indian Retail

Industries


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Convenience store chain operator Lawson Inc. is set to

become the first major Japanese retailer to foray into India

through a proposed JV with top Indian retailer Future Group

Pantaloon Retail India Ltd has earmarked US$195.59 mn

expenditure over the next three years for expansion.

Havells India has announced its entry into the domesticappliances market with an aim to garner sales of US$ 112

mn in the next four years.

Sahara India has announced an expansion plan to launch a

range of food and non-food items at over 10,000 retail outletsacross 285 cities.

Yum! Brands Inc, the US owner of the KFC and Pizza Hut

restaurants, expects its Indian operations to be around US$ 1

bn by 2015.


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The Government is considering a

proposal to raise the foreigndirect investment in single-

brand retail from 51 per cent.

Online retail is expected to

touch approximately US$1,420 mn by 2015

INDIAN RETAIL

SECTOR THE FUTURE

Consumer expenditure on food,

beverages and tobacco is forecast

to rise in absolute terms to US$

507.2 bn in 2015, from an

estimated US$ 325.8 bn in 2010.

Retail Sales are forecast to

grow by an annual average of

5.2% during 2011-2015


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FOREIGN DIRECTINVESTMENT IN

INDIAN RETAIL

SECTOR


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According to the Indian retailing laws, Foreign Direct Investment in multi-brand

retail market was prohibited. But government is thinking to open the FDI in

retail in India which implies that foreign investment in retailing is possible up

to 51%.

Now the announcement of retail FDI in India has triggered a series of debates

on both positive and negative notes and become Political Issue. So lets discuss

these things, what all this means to you through advantages and

disadvantages:

FDI


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1. Cheaper production facilities:

FDI will ensure better operations in production cycle and distribution. Due toeconomies of operation, production facilities will be available at a cheaper ratethereby resulting in availability of variety products to the ultimate consumers at areasonable and lesser price.

2. Availability of new technology:

FDI enables transfer of skills and technology from overseas and develops theinfrastructure of the domestic country. Greater managerial talent inflow from othercountries is made possible. Domestic consumers will benefit getting great varietyand quality products at all price points.

3. Benefits to farmers:

In most cases, in the retailing business, the intermediaries have dominated theinterface between the manufacturers or producers and the consumers. Hence thefarmers and manufacturers lose their actual share of profit margin as the lionsshare is eaten up by the middle men. This issue can be resolved by FDI, as farmers

might get contract farming where they will supply to a retailer based upon demandand will get good cash for that, they need not to search for buyers.

Advantage of FDI


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4. Growth in economy:

Due to coming of foreign companies new infrastructure will be build, thus

real estate sector will grow consequently banking sector, as money need to be

required to build infrastructure would be provided by banks.

5. FDI opens new doors for Franchising:

Restrictions on FDI are considered as trade barriers as they deny direct market

access to foreign firms. Retail giants who are at their wings, seeking entry into

foreign market look for other available alternatives. These restrictions on theglobal retailers regarding the inflow of Foreign Direct Investment, leads them

towards acquiring the market entry through franchises. Thus, countries which

offer promising market potentialities for retail growth offers substantial

growth in the franchising sector as well.

Advantage of FDI


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Will affect 50 million merchants in India

Profit distribution, investment ratios are not fixed

Retailer faces loss in business

Workers safety and policies are not mentioned clearly

Inflation may be increased

Again India become slaves because of FDI in retail sector

Disadvantage of FDI


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According to the non-government cult, FDI will drain out the countrys

share of revenue to foreign countries which may cause negative impact on

Indias overall economy.

The domestic organized retail sector might not be competitive enough to

tackle international players and might loose its market share.

Many of the small business owners and workers from other functional

areas may lose theirjobs, as lot of people are into unorganized retailbusiness such as small shops.

Disadvantage of FDI


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retail industry in future

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