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8/13/2019 Retail Industry in 2015_2
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RETAIL INDUSTRY IN
2015
Submitted ToProf. Atul Mehta
Submitted BySavan Bhatt
2012
MBA (Retail Management)Center for Management Studies,
Ganpat University
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Retail at India Level
India is one of the largest emerging markets, with a population of over one billion. It is one
of the largest economies in the world in terms of purchasing power. Retailing in India is at a
nascent stage of its evolution, but within a small period of time certain trends are clearly
emerging which are in line with the global experiences. Organized retailing has become
more popular in big cities in India and most of the metropolitan cities and other big cities
are flooded by modern organized retail stores. Many semirural areas have also witnessed
entry of such organized retail outlets. India's retail sector is estimated to touch US$ 833
billion by 2013 and US$ 1.3 trillion by 2018, with a compound annual growth rate (CAGR) of10%, which is quite lucrative. Retailing as a whole contributes almost 10% of Indias GDP,
and employs almost 8% of Indias employable population. The organized sector accounts for
a 5 per cent indicating a huge potential market opportunity that is lying in the waiting for
the consumer-savvy organized retailer. Purchasing power of Indian urban consumer is
growing and branded merchandise in categories like Apparels, Cosmetics, Shoes, Watches,
Beverages, Food and even Jewellery are slowly becoming lifestyle products that are widely
accepted by the urban Indian consumer.
Organized retailing is witnessing a wave of players entering the industry. These players are
experimenting with various retail formats. A number of large corporate houses like Aditya ,
Bharti, Reliance, Pantaloon, Vishal, Tata's, RPG, Raheja's and Piramals's have already made
their foray into this arena, with beauty and health stores, supermarkets, self-service music
stores, new age book stores, everyday low price stores, computers and peripherals stores,
office equipment stores and home/building construction stores. Today organized playershave attacked every retail category.
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Growth after 2011
Before 2011, India had prevented innovation and organized competition in its consumer
retail industry. Several studies claim that the lack of infrastructure and competitive retail
industry is a key cause of India's persistently high inflation. Furthermore, because of
unorganized retail, in a nation where malnutrition remains a serious problem, food waste is
rife. Well over 30% of food staples and perishable goods produced in India spoils because
poor infrastructure and small retail outlets prevent hygienic storage and movement of the
goods from the farmer to the consumer.
One report estimates the 2011 Indian retail market as generating sales of about $470 billion
a year, of which a miniscule $27 billion comes from organized retail such as supermarkets,
chain stores with centralized operations and shops in malls. The opening of retail industry to
free market competition, some claim will enable rapid growth in retail sector of Indian
economy. Others believe the growth of Indian retail industry will take time, with organized
retail possibly needing a decade to grow to a 25% share. A 25% market share, given the
expected growth of Indian retail industry through 2021, is estimated to be over $250 billion
a year: revenue equal to the 2009 revenue share from Japan for the world's 250 largest
retailers.
The Economist forecasts that Indian retail will nearly double in economic value, expanding
by about $400 billion by 2020. The projected increase alone is equivalent to the current
retail market size of France.
In 2011, food accounted for 70% of Indian retail, but was under-represented by organized
retail. A.T. Kearney(global management consulting firm) estimates India's organized retail
had a 31% share in clothing and apparel, while the home supplies retail was growing
between 20% to 30% per year. These data correspond to retail prospects prior to November
announcement of the retail reform. The Indian market offers endless possibilities for
investors.
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Retail industry in 2015
Retail Revolution in India
McKinseys report: Indias retail sector will be a $ 450 billion industry by 2015, oneamong 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.
There will be a huge growth in the number of people with increasing disposableincomes.
The huge Indian middle class consumer are now the blue eyed segment for biggieslike Bharti, Wal-Mart, Reliance and loads of others, in race to capture their pie in
Indian Retail Market.
The modern retail Industry in BRICs (Brazil, Russia, India and China)is seen as havingthe maximum potential on growth world wide. It grew by almost 30% in India and
13% in China and Russia last year.
A.T. Kearney, in their report, Growth Opportunities for Global Retailers haveranked India at No.1 position consecutively for the second year.
The report sees Indian retail Industry to grow exponentially over next few years. Theranking has been done for30 upcoming global economies.
It is based on 4 broad categories namely -Country Risk, Market Attractiveness,Market Saturation and Time pressure for a new entrant to start retail business.
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Investment in Indian retail sector in Future
Convenience store chain operator Lawson Inc. is set to
become the first major Japanese retailer to foray into Indiathrough a proposed JV with top Indian retailer Future Group
Pantaloon Retail India Ltd has earmarked US$195.59 mn
expenditure over the next three years for expansion.
Havells India has announced its entry into the domestic
appliances market with an aim to garner sales of US$ 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 outlets across
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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Opportunities for The Organized Retail Sector In India
1. Indias booming economy is a major source of opportunity. It is the third largest in the
world in terms of purchasing power. India is the second fastest growing major economy in
the world.
2. India's huge population has a per capita income of Rs 44,345.
3. The proportionate increase in spending with earnings is another source of opportunity.
4. With the Indian economy now expected to grow at over 8% and with average salary hikes
of about 15%, manufacturers and retailers of consumer goods and services can expect a
major boost in consumption.
5. The Demography Dynamics are also favorable as approximately 60 per cent of Indian
population is below the age of 30.
6. Increasing instances of Double Incomes in most families coupled with the rise in spending
power.
7. Increasing use of plastic money for categories relating to Apparel, Consumer DurableGoods, Food and Grocery etc.
8. Increased urbanization has led to higher customer density areas thus enabling retailers to
use lesser number of stores to target the same number of customers. Aggregation of
demand that occurs due to urbanization helps a retailer in reaping the economies of scale.
9. With increased automobile penetration and an overall improvement in the transportation
infrastructure, covering distances has become easier than before. Now a customer can
travel miles to reach a particular shop, if he or she sees value in shopping from a particular
location.