Skylar Company

8/11/2019 Skylar Company

1/9

Executive Summary

Retailing is one of the pillars of the economy in India and accounts for 35% of GDP.

The retail industry is divided into organized and unorganized sectors. Over 12 millionoutlets operate in the country and only 4% of them being larger than 500 sq ft(46 m 2) in size. Organized retailing refers to trading activities undertaken by licensedretailers, that is, those who are registered for sales tax, income tax, etc. Theseinclude the corporate-backed hypermarkets and retail chains, and also the privatelyowned large retail businesses. Unorganized retailing, on the other hand, refers to thetraditional formats of low-cost retailing, for example, the local kirana shops, ownermanned general stores, paan/beedi shops, convenience stores, hand cart andpavement vendors, etc.

Organized retail such supermarkets accounts for just 4% of the market as of2008.Regulations prevent most foreign investment in retailing. Moreover, over thirtyregulations such as "signboard licenses" and "anti-hoarding measures" may have tobe complied before a store can open doors. There are taxes for moving goods tostates, from states, and even within states.

Growth

An increasing number of people in India are turning to the services sector foremployment due to the relative low compensation offered by the traditionalagriculture and manufacturing sectors. The organized retail market is growing at 35percent annually while growth of unorganized retail sector is pegged at 6 percent.

The Retail Business in India is currently at the point of inflection. Rapid change withinvestments to the tune of US $ 25 billion is being planned by several Indian andmultinational companies in the next 5 years. It is a huge industry in terms of size andaccording to management consulting firm Technopak Advisors Pvt. Ltd., it is valuedat about US $ 350 billion. Organized retail is expected to garner about 16-18 percentof the total retail market (US $ 65-75 billion) in the next 5 years.

India has to pped the A.T. Kearneys annual Global Retail Development Index (GRDI)for the third consecutive year, maintaining its position as the most attractive marketfor retail investment. The Indian economy has registered a growth of 8% for 2007.The predictions for 2008 is 7.9%. The enormous growth of the retail industry hascreated a huge demand for real estate. Property developers are creating retail realestate at an aggressive pace and by 2010, 300 malls are estimated to be operationalin the country.

With over 1,000 hypermarkets and 3,000 supermarkets projected to come up by2011, India will need additional retail space of 700,000,000 sq ft (65,000,000 m 2) ascompared to today. Current projections on construction point to a supply of just


2/9

200,000,000 sq ft (19,000,000 m 2), leaving a gap of 500,000,000 sq ft(46,000,000 m 2) that needs to be filled, at a cost of US$15-18 billion. (8)

According to the Icrier report, the retail business in India is estimated to grow at 13%from $322 billion in 2006-07 to $590 billion in 2011-12. The unorganized retail sector

is expected to grow at about 10% per annum with sales expected to rise from $ 309billion in 2006-07 to $ 496 billion in 2011-12.

The Indian Retail Market

Indian market has high complexities in terms of a wide geographic spread anddistinct consumer preferences varying by each region necessitating a need forlocalization even within the geographic zones. India has highest number of outlets

per person (7 per thousand) Indian retail space per capita at 2 sq ft (0.19 m2)/ personis lowest in the world Indian retail density of 6 percent is highest in the world. (9) 1.8

million households in India have an annual income of over 45 lakh (10) delvingfurther into consumer buying habits, purchase decisions can be separated into twocategories: status-oriented and indulgence-oriented. CTVs/LCDs, refrigerators,washing machines, dishwashers, microwave ovens and DVD players fall in thestatus category. Indulgence-oriented products include plasma TVs, state-of-the-arthome theatre systems, iPods, high-end digital cameras, camcorders, and gamingconsoles. Consumers in the status category buy because they need to maintain aposition in their social group. Indulgence-oriented buying happens with those whowant to enjoy life better with products that meet their requirements. When it comes tothe festival shopping season, it is primarily the status-oriented segment thatcontributes largely to the retailers cash register.

While India presents a large market opportunity given the number and increasingpurchasing power of consumers, there are significant challenges as well given thatover 90% of trade is conducted through independent local stores. Challengesinclude: Geographically dispersed population, small ticket sizes, complex distributionnetwork, and little use of IT systems, limitations of mass media and existence ofcounterfeit goods.

Indian apparel Retailers

Indian apparel retailers are increasing their brand presence overseas, particularly indeveloped markets. While most have identified a gap in countries in West Asia and

Africa, some majors are also looking at the US and Europe. Arvind Brands, MaduraGarments, Spykar Lifestyle and Royal Classic Polo are busy chalking out foreignexpansion plans through the distribution route and standalone stores as well.

Another denim wear brand, Spykar, which is now moving towards becoming a casualwear lifestyle brand, has launched its store in Melbourne and London recently.


3/9

The low-intensity entry of the diversified Mahindra Group into retail is uniquebecause it plans to focus on lifestyle products. The Mahindra group is the fourthlarge Indian business group to enter the business of retail after Reliance IndustriesLtd, the Aditya Birla Group, and Bharti Enterprises Ltd. The other three groups arefocusing either on perishables and groceries, or a range of products, or both .

Major apparel Retailers in India

SPYKAR LIFE STYLE PVT. LTD.

WILLS LIFE STYLE PVT. LTD.

LEVI

S

PEPE

LEE

KILLER

ARMANI

WRANGLER

UMM

REEBOK

NIKE

ADIDAS

PUMA

TURTLE


4/9

Major Indian Retailers

Vivek Limited Retail Formats: Viveks, Jainsons, Viveks Service Centre,Viveks Safe Deposit Lockers

REI AGRO LTD Retail Formats:6TEN Hyper & 6TEN Super RPG Retail Formats: Music World, Books & Beyond, Spencers Hyper,

Spencers Super, Daily & Fresh Pantaloon Retail Formats: Big Bazaar, Food Bazaar, Pantaloons, Central,

Fashion Station, Brand Factory, Depot, aLL, E-Zone etc. The Tata Group Formats: Westside, Star India Bazaar, Steel junction,

Landmark, Titan Industries with World of Titans showrooms, Tanishq outlets,Chroma.

K Raheja Corp Group Formats: Shoppers Stop,Crossword, Hyper City, Inorbit Lifestyle International Lifestyle, Home Centre, Max, Fun City and International

Franchise brand stores. Pyramid Retail Formats: Pyramid Megastore, TruMart Nilgiris Formats: Nilgiris supermarket chain Subhiksha Formats: Subhiksha supermarket pharmacy and telecom discount

chain. Trinethra Formats: Fabmall supermarket chain and Fabcity hypermarket chain Vishal Retail Group-Formats: Vishal Mega Mart BPCL Formats: In & Out Reliance Retail Formats: Reliance Fresh Reliance ADAG Retail Format: Reliance World German Metro Cash & Carry Shoprite Holdings Formats: Shoprite Hyper Paritala stores bazar: honey shine stores Aditya Birla Group - more Outlets


5/9

Entry of MNCs

The world's largest retailer by sales, Wal-Mart Stores Inc and Sunil Mittals BhartiEnterprises has entered into a joint venture agreement and they are planning toopen 10 to 15 cash-and-carry facilities over seven years. The first of the stores,which will sell groceries, consumer appliances and fruits and vegetables to retailersand small businesses, is slated to open in north India by the end of 2008.

Carrefour, the worlds second largest retailer by sales, is planning to setup twobusiness entities in the country one for its cash-and-carry business and the other amaster franchisee which will lend its banner, technical services and know how to anIndian company for direct-to-consumer retail.

The worlds fifth largest retailer by sales, Costco Wholesale Corp (Costco) known forits warehouse club model is also interested in coming to India and waiting for the

right opportunity.Opposition to the retailers' plans have argued that livelihoods of small scale and ruralvendors would be threatened. However, studies have found that only a limitednumber of small vendors will be affected and that the benefits of market expansionfar outweigh the impact of the new stores.

Challenges

To become a truly flourishing industry, retailing needs to cross the following hurdles:

Automatic approval is not allowed for foreign investment in retail. Regulations restricting real estate purchases, and cumbersome local laws. Taxation, which favours small retail businesses. Absence of developed supply chain and integrated IT management. Lack of trained work force. Low skill level for retailing management. Intrinsic complexity of retailing rapid price changes, constant threat of

product obsolescence and low margins.


6/9

Spykar Lifestyle Pvt. Ltd

Spykar Lifestyle Pvt. Ltd. is committed to being the first choice casual wear brand ofthe youth. The company s brand does not have a fixed definition but has alwaysbeen relevant to the youths and also to the changing market dynamics.The company s brand building activities will continue to maintain the premiumpositioning and make it one of the most inspirational, trendy and obviously the mostsought after brand. The Company is compliant, eco friendly, socially responsible,evolving, profit oriented, always people-centric and doing justice to those who workfor it. To continuously innovate, and to bring new styles, cuts and fabric to themarket, the company has a team of young and dedicated designers andmerchandisers, who are extremely aware of the latest trends in the internationalmarket. The company experiments a great deal on new styles and accessories,making them trendy and accessible to the Indian consumer. Since Spykar designs

specifically for Indian audiences, it has the best fits and designs in its repertoire.SPYKAR products are available at more than 800 MBOs (Multi-Brand BusinessOutlet) across the country, apart from the LFS (Large Format Stores) like Shopper'sStop, Globus, Lifestyle, Pantaloons, Pyramids, etc. and at the Exclusive SpykarJeans Outlet at Ahmadabad, Ghazi bad, Hyderabad, Indore, Kolkata, Lucknow,Mumbai, Nasik, New Delhi and Pune. Spykar Jeans currently has 250 ExclusiveBrand Outlet . To mark its foray in the international arena, Spykar has also openedits Exclusive Brand Outlet in Australia and England.Spykar believes that retail expansion is the key to future growth. Developingadequate sourcing ability to match sales growth would entail expansion of designing

and sampling ability along with creation of infrastructure for world class qualitycontrol.Spykar Life Style Pvt. Ltd. Has two brands addressing different market segment: onewould be for the kids wear segment i.e. OYO and other for youth i.e. Spykar . Theentry in other life style product has also been made with world class eyewear,footwear, junk-jewelry and other lifestyle accessories already launched. The focus isaddressing the fashion needs of youth segment which is extended on both sides ofthat spectrum and to deliver world-class fashion products consistently. As an incidentof identifying fashion need Spykar has been only one to offer concept of style labs inselected cities where the youths gets entire makeover including hairstyle, tattooing,body piercing, eyewear/ colored lenses and of course the Spykar clothing withmatched accessories.

Wills Lifestyle, Levi's, PEPE, Lee, Killer, Wrangler, UMM, Reebok, Nike, Adidas andPuma etc. are the big competitors of the Company.

Spykar's turnover of about 250 Crores in 2008-09 will take quantum jumps toRs.300 Crores in 2009-10 . Further Spykar has will plan towards its IPO byDecember, 2009.


7/9

Company Business Analysis

Spykar Lifestyle Pvt. Ltd. has sales their Apparels and Accessories through MBO(Multi-Brand Business Outlets), EBO (Exclusive Brand Outlet), LFS (Large FormatStores), FSO (Factory Sales Outlet).There are more than 800 MBO s of the Company all over India. Spykar Lifestyle Pvt.Ltd. gets average 33% margin on sales to MBO. EBO (Exclusive Brand Outlet)consists around 250 stores all over the India. The company provides average 28%margin on apparels and average 18% margin on accessories. LFS (Large FormatStores) like as Shoppers Stop, Central, Lifestyle, Globus, Pantaloon, etc. TheCompany provided lesser margin on LFS than EBO and MBO. All non-moving itemsand unsold stock sold through FSO (Factory Sales Outlet). There are around 50Factory Sales Outlet of the company.


8/9

Contribution:-Contributions of MBO, EBO, LFS and FSO in Companys sales are as following -

Business Format Contributions inCompanys Sales

MBO (Multi-Brand Business Outlet) 25%

EBO (Exclusive Brand Outlet) 50%

LFS (Large Format Store) 20%

FSO (Factory Sales Outlet) 05%

25%

50%

20%

5%

MBO (Multi-Brand BusinessOutlet)

EBO (Exclusive Brand Outlet)

LFS (Large Format Store)

FSO (Factory Sales Outlet)


9/9

In these all business format EBO (Exclusive Brand Outlet) plays an important role in

Compan ys Sales. Because, 50% of Company s sales done through EBO. For

Exclusive Brand Outlet, the company hires a shop from shop owner and pay monthly

Rent and CAM (Common Area Maintenance) charges to the shop owner. Before

taking possession on shop, company made Rent Agreement and CAM agreement.

In this Rent Agreement and CAM Agreement all terms and conditions are mentioned,

which are signed by both parties. It is also called as Leave and License Agreement.

Project Description:-

This project is carried out for Spykar Life Style Pvt. Ltd., for the period 15 th May to

15 th July 2009 at Corporate Office, Goregaon (East), Mumbai.

The project Title is Micro Finance and the project is based on finance costrationalization and systems improvement.

Documents

Skylar Company