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STRATEGIC MANAGEMENT- II
PROJECT REPORT
Retail in India has lot of opportunities but also challenges. Please discuss the challenges and advice how can a retail company overcome them .Do you have any advice for government policy makers?

Submitted to: Prof. Prashant Salwan

Submitted by: Group 10, Section C

Ashish Thakur Munda Manish Manohar Naveen Verma Puppala Mounika SasiSekaran Cl Sneha Pravin Runwal Sumanth K V (2011PGP579) (2011PGP710) (2011PGP741) (2011PGP802) (2011PGP852) (2011PGP889) (2011PGP903)

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CONTENTS

Indian Retail Scenario................................................................................................................3 Traditional and Modern Retailing: the India Story....................................................................3 Share of Major Retail Segments.................................................................................................3 Porters Analysis of the Retail Industry.....................................................................................4 Growth Drivers...4 Opportunities .............................................................................................................................6 Challenges..................................................................................................................................9 FDI in India..10 Recommendations to Government ..11 Recommendations to Retailers.12 List of Exhibits.14 References20

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Indian Retail Scenario

Indias GDP growth of 7.6 per cent as per Economic Survey is a reflection of the booming economy of the country. Growing in tandem with the economy is the Indian retail sector. The sector is on a high growth trajectory and is expected to grow by more than 30 per cent over thenext 5 to 6 years. The retail sector in India is the third most attractive world-wide with a present worth of $396.96 billion. It is one of Indias largest industries, contributing to about 22 per cent of the GDP and providing employment to around 30 million of the nations workforce, second only to agriculture. Indian retail business promises to be one of the core sectors of the Indian economy, with organised retail sector estimated to have an annual growth rate of 12.2 per cent and an estimated net worth of $785.12 billion.The retail industry in India gathered a new momentum with the establishment of different international brand outlets, hyper or super markets, shopping malls and departmental stores.The retail sector is experiencing exponential growth, with retail development taking place not just in major cities, but also in Tier-II and Tier-III cities. India's growing population and urbanisation provides a huge market for organised retail. Growing economic prosperity and transformation in consumption pattern drives retail demand.The country's franchise market is growing at a healthy pace of over 30 per cent per annum with Tier-2 and Tier-3 cities gradually getting attracted to the network of retailers and franchisers.

Traditional and Modern Retailing: the India Story

Traditional retailing continues to be the backbone of the Indian retail industry, with traditional/unorganised retailing contributing to over 90 per cent of total retail revenues. Over 12 million small and medium retail outletsexist in India. More than 80 per cent of these are run as small family businesses. Prevalence of traditional retailing is highly pronounced in small towns and cities with primary presence of neighbourhood kirana stores, push-cart vendors, melas and mandis. Leading retail players in the industry are beginning to explore these markets and the rural consumers are slowly beginning to embrace the newer organised retail formats.Modern/Organised retailing is growing at an aggressive pace in urban India, fuelled by bourgeoning economic activity. The organised retail segment is expected to grow from 5 per cent to about 7 to 8 per cent by 201213, as per Crisil report. A large number of domestic and international players are setting up base and expanding their business with newer organised retail formats and intense competition driving innovation in formats.

Share of Major Retail Segments

Retail sector in India is primarily categorised by the type of products retailed, as opposed to the different retail formats in operation. The Food and Beverages vertical accounts for the largest share of revenues at 62 per cent of the total retail market (See Exhibit 1for share of major retail segments, Exhibit 2 for Key Retail Formats and Exhibit 3 for Major

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Players). This category has the highest consumer demand across all income levels and various retail formats. Apparels and consumer durables are the fastest growing verticals in the retail sector with a share of 10 per cent. Mobile phone as a product category has witnessed the highest growth in consumerdemand amongst all retail product offerings, with increasing penetration of telecommunications in towns and villages. The Telecommunications sector has been adding on an average 5 million new users every month.The other product categories are gaining traction predominantly in the urban areas and emerging cities, with increasing average income and spending power of young urban India.

Porters Analysis of the Retail Industry:

The threat of new entrants has a high impact on the retail sector which is fuelled by increasing participation from domestic players to enter and supportive government policies towards willing foreign players. All this coupled with good access to supply anddistribution channels helps new entrants and increases the competitive landscape. Bargaining power of buyers has a low impact due to a large number of buyers and low volume of buying with low switching cost. Since there is no backward integration and high price sensitivity, buyers are in a relatively low powerful state. Threat of substitutes is very high in the retail industry due to the fact that consumers are price sensitive and there is low cost of switching due to presence of a large unorganized market. In such a scenario, better service and deals incline buyers towards substitution. The bargaining power of suppliers has a relatively medium impact due to presence of large number of sellers and low switching cost, inspite of having a credible threat of forward integration. The key is to procure standardized products with moderate differentiation. The competitive rivalry is moderate because even though there are many unorganized players, the organized players are limited. There are high industry fixed costs. There is low level of differentiation and moderate exit barriers.

Growth Drivers:
The driving factors behind the growth of retail in India can be segmented into two parts:Demand sidedrivers -which include factors like growing young population, increasing number of working members and rising disposable incomes, low organised retail penetration, growing urbanization etc. and Supply side drivers which include increasing and easy availability of credit, growing retail space and mall boom, increasing investments etc. Growing young population: India possesses the advantage of having a largely young population. 35 per cent of Indias population is under 14 years of age and more than 60 per cent of the population is estimated to constitute the working age group (15-60) till 2050. Two-thirds of Indian population is under 35, with the median age of 23 years, and India is home to 20 per cent of the global population under 25 years of age. The large proportion of the working-age population translates to a lucrative consumer base vis--vis other economies of the world, placing India on the radar as one of the most promising retail destinations of the world.

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Low organised retail penetration: Low organised retail penetration corresponds to huge scope for the retail market to grow in the future. Indian retail industry has been growing steadily over the last few years with strong expansion of organised retailing formats like malls and supermarkets. However, penetration of organized retail in India is still very low as compared to other developed countries. Apparel and footwear retail are the only segments which have a strong organised presence, and even that is restricted to the urban and semiurban regions. Low penetration level of organised retail reflects a huge untapped market, which is a strong driver for the retail market in India. (See Exhibit 4) Increasing number of working members and Rising income levels: India has a working population of 45% between the age group of 1845 years, who are increasingly dependent on organised retail stores for easy and convenient availability of necessities. Rising income levels will also enable consumers to spend more, thereby boosting consumerism. Increasing disposable income and higher consumption will act as a boon for the retail market in India and help it grow strongly. Per capita income by net national income of Indians has grown by 17.3% to INR 54,527 in 201011 as against INR 46,492 in 200910.India's consumption will continue to witness 14% growth over the next three years with consumer durables, food and personal care products having the highest potential. (See Exhibit 5) Urbanization: The top 20 Indian cities, which though accounting for only 10% of the countrys population, generate as much as 60% of its surplus income and 31% of its disposable income. These 20 large cities are categorised in three groups; Megacities (8), Boomtowns (7), and Niche Cities (5).These 20 cities, for the next eight years, will grow at a healthy rate of 10.1% per annum, compared to other cities growing at 7.9% per annum. In the past three years (2008-11), the top 20 have registered a growth of 11.2% per annum. In the next five years - by 2016, while, the share of middle-income households ($6,000 to $30,000 per annum) in these twenty cities will increase from current 39% to 55%, the share of high-income households (more than $30,000 per annum) will increase three-fold to 13%. More choice available to the consumers: The choice available to the customers has increased manifold over the past few years on account of advances in technology, increased competition and availability of number of Indian and global brands in the market. The strong economic growth and huge untapped markets have resulted in global brands making a beeline for India which has benefitted the organized retail sector. Segments like apparel, jewellery, watches, and eyewear have been aided by this phenomenon. There is a shift in attitude towards certain products, from luxury to being a necessity. The availability of retail ambience in the form of malls and hyper markets provides customers with world class shopping experience. Penetration of debit/ credit cards: Higher penetration and availability of credit facilities and increasing credit card and debit card subscriptions have further fuelled the growth of retail sector. Most of the banks and financial institutions have increased their range and amount of retail credit and loans service offerings. Emergence of quick and easy loans, easy monthly instalments (EMI), loan through credit cards and others has made it easy for Indian consumers to afford expensive products. Number of credit cards in circulation

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dropped by 1.16% to 180 mn, while value of credit card transactions increased to INR 755.15 bn in FY 2011. With independent service providers becoming active in the card space, retail outlets that accept payments by cards are expected to grow threefold by 2015. Easy availability of credit makes it convenient for consumers and encourages more spending.(See Exhibit 6) Growing retail space and mall boom:Real estate development in India has grown strongly, with rapid construction of shopping malls and other organised retail formats, augmenting the growth of the retail market. Mumbai, National Capital Region and Bangalore are leading in terms of retail space development, accounting for almost 70% of the total area developed during 201112. Most retail sector giants have now started expanding base in tier I and tier II cities, owing to the rapid transition of households from lower income groups to higher income groups. Number of malls in India grew by 47% over the last one year, supporting the prevailing mall boom culture in the country. Increasing retail space and strong growth in the number of shopping malls will stimulate the development of the retail market. Increasing investment activity:International retail giants are increasingly choosing India as the target market, with most of the global retail power-houses exploring entry options into the countrys retail market. Wal-Mart has entered into a 50:50 Joint Venture and Franchisee agreement with Bharti Retail Ltd. and has set up its first cash-n-carry outlet in 2007-08. It is anticipated that the Starbucks Pepsi Co. joint venture would provide Indian market access to the worlds largest coffee chain. Carrefour, Frances retail major is set to finalize its entry route to Indian retail sector. Increasing Technology Adoption: With modern retail store formats growing players are increasingly deploying advanced Information Technology tools for managing their supply chain, warehousing and logistics requirements. Apart from the industry giants, the small scale retailers are also embracing IT solutions to optimise their operational efficiencies. Big league IT firms like IBM India, Oracle and SAP are developing solutions for smaller retailers requirements.

Opportunities
Emergence of innovative retail formats: Specialty formats- Innovative formats like Wedding Malls with stores stocking the complete range of wedding needs from apparel to jewellery, are fast making their presence in the Indian market. Khadi& Village Industries Commission (KVIC) is set to roll out a string of swanky Khadi Plazas, which would showcase the handloom textiles in a new form, along with upgrading over 7,000 existing outlets to cater to the changing tastes of the young consumer. Village Malls with their fair price shops being revamped to cater to larger needs of the local populations are the new addition which the Gujarat Government has spearheaded with 512 malls launched and another 508 on the anvil. Luxury formats-Affluent households account for just about 4.5% of the national population, but account for more than 22% of the total retail sales, spurring the

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growth of such luxury formats in India. Delhi and Mumbai are the prime contributors to the luxury retail space, with the highest density of luxury brand outlets. These outlets are typically located in fivestar hotels and highend mall spaces, with limited footfalls and consumer exposure. Transit formats -Fast paced infrastructure development including development of new international airports and metro rails is opening up new avenues for retail. Mass Rapid Transit System, currently in operation in Delhi, and in the pipeline in other metro cities like Bengaluru and Hyderabad is also expected to offer immense retailing potential. The Airport Authority of India is embarking on the up gradation of 9 metro airports and 15 nonmetro airports, with plans to spruce up the retail space in the airports well. Online Retailing:Online retailing has become a popular trend in India as large number of people has started using the online medium for purchasing their goods and services.The increase in the number of broadband and dial-up Internet connections, limited personal time, increased use of plastic money and a large young population that spends a considerable time online are facilitating the growth of online shopping. Recent players to enter this niche market include Pantaloon Retail India Ltd through its Futurebazaar.com venture.There is an increasing trend among retailers maintaining their own portals for easy consumer access, facilitating online purchase of merchandise such as Tata Indicoms i-choose.in and Godrej & Boyces godrejlifespace.com. Many smaller retail portals are mushrooming on the World Wide Web, meeting niche Indian consumer requirements for ethnic apparel, handicrafts and jewellery.With value-added services such as cash-ondelivery to facilitate online transactions by consumers without credit/debit card and unique bidding schemes, e-commerce is fast gaining acceptance in India.Online retail market in India is expected to grow at a CAGR of 35% over the next four years. (See Exhibit 7) Rural retailing: Rural hypermarkets are growing at an aggressive pace, providing multiple services, from creating platforms to buy and sell farm produce, to forming banks and restaurants. In the next phase of the retail revolution in India, retail companies are expected to tap the rural segment as key driver of growth. FMCG players are focusing on rural market as it constitutes over 33 per cent of FMCG consumer base in India. ChoupalSaagar retails products and also acts as a procurement hub for ITCs echoupals, where farmers are offered better rates for produce, compared with the prevalent mandi rates. DSCLs HariyaliKisan Bazaar has over 302 outlets cross eight states Haryana, Punjab, Uttar Pradesh, Rajasthan, Chhattisgarh, Madhya Pradesh, Maharashtra and Andhra Pradesh. Indian Oil Corporations KisanSeva Kendra offer fuel, agri-produce, FMCG and value-added services across a network of over 1,400 outlets. Reliance Retail and Pantaloon Retail are likely to venture more aggressively into the rural retailing space. Leisure and entertainment: Entertainment retail is redefining Indian lifestyles with as many multiplexes, gaming zones, etc., mushrooming as malls. The huge entertainment and leisure opportunity in India is reflected by fact that there exist 10 screens per million population in India compared to 40 screens in the European market and 117 in the US. Organised retail in leisure and entertainment grew at an average rate of 28 per cent over

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the period 2008 to 2011, and is expected to maintain pace in the coming years with Indian players investing heavily in this market. Reliance InfotechsAdlabs and Shoppers Stops Timezone have aggressive expansion plans, with both retailers exploring the joint venture option with international giants Large number of retail outlets:India has one of the largest numbers of retail outlets in the world. The sector is experiencing exponential growth, with retail development taking place not just in major cities and metros, but also in Tier-II and Tier-III cities.Players who have established their presence in the top metros are planning to set up establishments in emerging towns and cities to gain the first-mover advantage over other entrants. Emergence of India as the retail sourcing hub: Riding on the back of a strong manufacturing industry, India is fast emerging as an important global sourcing hub for top international brands. Indias price competitiveness attracts large retail players to use it as a sourcing base. Global retailers are increasing their sourcing from India and are moving from third-party buying offices to establishing their own wholly-owned/wholly-managed sourcing and buying office. India has had a continued presence in the global scenario as one of the leading exporters of apparels and textiles. Many international brands have identified India as one of the important supply centres for procurement of textiles and apparels. Unilever sources major portion of their fast moving consumer goods from its wholly owned Indian subsidiary, Hindustan Unilever Limited. Adidas, Next and Calvin Klein are expected to follow suit, with Adidas opening its first office in Bangalore. Private label opportunities: The organised Indian retail industry has begun experiencing an increased level of activity in the private label space. Private label strategy is likely to play a dominant role as its share in the US and the UK markets is 19% and 39%, respectively while its share in India is just around 6%. Private labels account for more than 21 per cent of their retail revenues, with Shoppers Stop clocking impressive total number of transactions to customer footfalls ratio (conversion ratio) of 27 per cent. Tourism related opportunities: With tourists inflow increasing impressively with each passing year, tourism holds the key to a large retailing opportunity. In 2010-11, approximately 6.45 million foreign tourists arrived in India. Retailing of regional handicrafts and artifacts holds an opportunity to capture the interest of foreign tourists, given the rich and diverse cultural heritage of India. The Indian Tourism Boards initiatives like DilliHaat (a crafts bazaar located in Delhi) retails the regional crafts of various states, attracting a large number of tourist footfalls. The concept is fast gaining traction in other destinations in India such as Jaipur, Mumbai and Hyderabad. SEZ Synergies: Special Economic Zones are government driven initiatives attracting higher investment into India, with about 584 Special Economic Zones notified as till Dec 2011, spread over states and union territories of India. SEZs offer ample retail opportunities, with a percentage of the SEZ area earmarked for retailing in the non processing zone. IT/ITeS based SEZs offer impressive retailing opportunities; the target segment for such SEZs would be the urban population with high-disposable incomes. Opportunities across various cities: Tier I cities are home to different income groups, each contributing significantly to retail revenues through various retailing formats. Retail activity in Tier II cities is growing exceptionally, with increasing mall space and rapid

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transition of households to the higher-income group. Many metro retailers are expected to open outlets in these cities to benefit from the First-Mover advantage, and gain a foothold in these cities. These cities provide ample opportunities, especially for the food and grocery formats, with lower lease rentals and high availability of retail space, access to farms and agricultural produce. Consuming class accounts for over 60 per cent of the total households, offering potential in the food and grocery, consumer goods and apparel verticals.

Challenges
Underdeveloped supply chain: India is the 7th largest country in the world and catering to people across such a vast region is difficult, leading to complexities in merchandise and inventory management. Long intermediation chains would increase the costs by 15 per cent. Inadequate and insufficient supply chain existing in Indias retail sector is a major deterrent to the growth of this market. There is a strong need for retail to concentrate on developing a backend solid chain support especially for perishable products to help reduce wastages which is estimated to be at 40% of national produce. Lack of cold chain infrastructure in India poses storage threat and acts as a major challenge for the retail sector. Due to Indias complex tax structure and large geographic spread, companies have developed regional distribution and redistribution networks. Retailers need to work closely with the suppliers and try to shorten the supply chain network to save both time and money.
Traditional Retail Supply Chain Company/Manufacturer Modern Retail Supply Chain Company/Manufacturer

Distributors/Buying Agents
Retailers Franchisees/Multi-brand outlets Consumers Consumers

Real estate hurdles: Location of retail outlets are indispensable for their success and issues pertaining to procurement of suitable real estate is another major challenge this sector faces. Finding suitable properties in central locations is difficult due to fragmented private holdings, infrequent auctioning of large government owned lands and litigation disputes between owners. Rent also plays a very significant role as it forms around 610% of the total expenditure and can easily convert a profitable store into a loss making one if not decided upon carefully. Available spaces in most big cities are easily interchangeable between commercial and retail use, which makes their availability even scarce. Difficulty

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in retail planning, especially relating real estate issues, is a major impediment for this market in India. Inadequate general and specific infrastructure:Information technology implementation and digitization of services will make transfer of goods easy and an improvement in supply chain management will definitely play a significant role in attracting more consumers and less consumer grievances and it will generate easier payments option for customer and easier money movement. Lack of adequate infrastructure with respect to roads, electricity, cold chains and ports has further led to the impediment of a pan-India network of suppliers. Due to these constraints, retail chains have to resort to multiple vendors for their requirements, thereby, raising costs and prices. Laxity in implementation of policies:At present, indirect tax structure in India with varying tax rates is complex with multiplicity of taxes and multiple tax enforcement authorities. This has an impact on the supply chain model and cost structure of distributive trade followed by consumer packaged goods companies. Multiplicity of taxes and requisite licences leads to delay in the entire supply chain process, hampering the productivity of the retail sector. Government restrictions and delays on the FDI are leading to an absence of foreign players resulting into limited exposure to best practices. Shortage of skilled manpower:Store operations account for 7580% of the total manpower employed in the organized retail sector, and frontend and retail assistant profiles also occupy a significant proportion. In India retail training opportunities are there only for areas like merchandising and supply chain and there are very few good educational institutes in India offering specific courses relating to the retail sector. In the unorganized sector, the manpower is not even equipped with the basic retail specific or customer service skills. The available talent pool does not back retail sector as the sector has only recently emerged from its nascent phase. Limited consumer insights: Retail differentiation and merchandising mix are improperly planned due to limited consumer insights. As we are moving to the next phase of retail development, the focus is shifting towards offering experiential shopping. For customers it is very difficult to find the uniqueness of retail stores. Merchandising planning involves getting the right mix of product, which is store specific across organization, and is a combination of customer insight, allocation and assortment techniques. Insufficient Government incentives: The retail sector does not have industry status yet making it difficult for retailers to raise finance from banks to fund their expansion plans. Multiple clearances are required by the same company for opening new outlets adding to the costs incurred and time taken to expand presence in the country. Zonal restrictions make it difficult to find a good real estate in terms of location and size. Lack of clear ownership titles and high stamp duty has resulted in disorganized nature of transactions.

FDI in India
Government of India has gradually opened up the retail sector to FDI amidst reservations concerning fear of job losses, procurement from international market, competition and loss of entrepreneurial opportunities. Extensive liberalization of the FDI policy over the

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last decade has been one of the key factors for transforming India from a closed economy into one of the favoured destinations for foreign investments. (Exhibit 8 for Available routes for Foreign Players) Current Regulations for FDI a) Products should be sold under the same brand internationally, in countries other than India. b) Single Brand product retail trading would cover only products which are branded during manufacturing. c) Foreign investor should be the owner of the brand d) Proposals involving FDI beyond 51% would need to ensure mandatory sourcing of at least 30% of the value of products sold, to be done from Indian small industries or village and cottage industries, artisans and craftsmen e) Government has defined small industries as industries with a total investment in plant and machinery of not more than ~INR 50 mn Benefits of FDI Opening up of FDI in multi-brand retail in India is expected to reap benefits in the medium to long-term as it will help improve the balance sheet and liquidity profile of cash-starved retailers with aggressive expansion plans, supply chain and back-end infrastructure while reducing margins for middlemen through direct sourcing from farmers and arrest inflationary pressures through increased supplies facilitated by improved productivity of farmers and reduction of agri-waste. Once 100% FDI is allowed in retail that is when the landscape will become extremely competitive. Policy reforms will require investment from retailers in areas of supply chain, especially for perishable products, thus helping farmers to generate higher incomes leading to inclusive growth in India. Small and Medium Enterprises (SME) sector will also stand to gain due to preference given by retailers to private labels and it will also encourage smaller suppliers to take their products to a national platform. This policy will also open up avenues for attracting, developing and retaining talent, and even contract manufacturers would benefit from these policy changes. Retailers entering this market will need to bank on the local knowledge to effectively reduce the lead time required by them to setup operations and make a foothold in the Indian market

Recommendations to Government
Government needs to accord it an Industry status first. Inspite of contributing extensively to GDP at almost 22% and providing employment to over 30 million, it does not have the benefits of an industry. The Government should strive for the speedier implementation of the long pending goods and services tax (GST) as it would balance differential taxation. Steps should be taken to avoid elongated procedures of permission from respective State governments to open new stores. In order to supplement the working of FDI in India, the Government should identify states for FDI investment and address any additional State conditions for allowing or approving FDIs in a phased

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manner. Areas of backend should be prioritized for investment and the return on investment made in backend infrastructure should be targeted. Margins and quality of products sourced from SMEs and demand of consumers for products from SMEs should be warranted for. There should be simplification of taxes and investment in infrastructure development should be encouraged. Reduction/ abolition of Central Sales Tax (CST) would favourably impact the expansion of the organised retail, so the necessary steps should be undertaken by the Government.

Recommendations to Retailers
Acting throughout the value chain, an approach of Walmartization would work in favor of Indian retailers and contribute to improving the efficiency of operations. Working across the value chain, we propose the following activities at each level: Firm Infrastructure Focus on cost utilization and close unviable stores Take advantage and increase involvement in rural areas, where there is a huge untapped market Consider entering into foreign alliances as it would help with capital and expertise

Human Resource Management Implement IT in manpower training Collaborate with institutes for providing retail specific courses Implement marketing training modules for employees

Technological Development Implement IT in supply chain management, store operations and logistics management Invest in technologies like satellite system integration, centralized computing, EDI Introduce e-commerce based formats to increase reach

Procurement Invest in areas of procurement, especially for perishable products, thus helping farmers to generate higher incomes leading to inclusive growth in India Diversify supplier base to improve bargaining power

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Maintain central and automated repository for procurement related information

Inbound Logistics Manage costs by optimizing resources, managing inventory Enable vendors and suppliers to handle inbound shipments Introduction of channelization for speedier delivery

Operations Develop a competent supply chain management system Establish warehouses, cold chains and distribution centres Implement backward integration and avoid internal overlapping of functions

Outbound Logistics Develop a hub and scope distribution network Invest in (CRM) and consumer research analytics to better relationships with consumers

Marketing and Sales Devise a strategy for a wide consumer base across different geographical regions Use customer engagement practices to increase footfalls and conversion ratio Improve store visibility through tie-ups

Services Innovate products and business models to provide differentiated consumer solutions Look at increasing their private label offerings Try mix such as offering discounts, providing value added services to attract and retain consumers

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EXHIBIT 1
70% 60% 50% 40% 30% 20% 10% 0% 62%

10%

8%

6%

4%

4%

3%

2%

1%

Share of Major Retail Segments

EXHIBIT 2

Key retail formats:

Convenience Stores These stores are of an average size of ~800 sq ft and are mostly present as relatively small retail stores located near residential areas, open for longer hours and carry a limited line of convenience products. Ex. In & Out, Safal, Easy Day, Twenty Four Seven These Stores are of an average size of ~1,000 sq ft and offer a wide range of products, mostly branded, at discounted prices. Ex. Levis Factory Outlet, Reebok Factory Outlet These are shops located within the premises of large shoppingmalls, airports, public places and others and this format requires less retail space and entails lesser costs than other retail formats. Ex. Infinity, Cafe Coffee Day, MAC These stores are of an average size of ~8,000 sq ft and are mostly large specialty retailers carrying a deepassortment of products in a particular category. They provide consumers a wide range of choice to consumers, usually at affordable prices, due to economies of scale. Ex. The Loft, Central, Croma, Home Town These are singlecategory stores which focus on individuals and group clusters of the same class with high product loyalty. They carry a narrow product line with a deep assortment of products such as bookstores. Ex. Brand Factory, Food Bazaar, Music World, Crossword

Discount Stores

Shopinshop

Category Killers

Specialty Stores

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Supermarkets

They are large in size and typical in layout, offering not only food products but also household products. They have low cost, low margin, high volume, and selfservice operations. Ex. More, D Mart, Apna Bazaar The average size of these stores varies between 10,000 sq ft and 60,000 sq ft and they offer a large layout with a wide merchandise mix, usually across various categories, including apparel, fashion accessories, gifts and home products. Ex. Shoppers Stop, Westside, Pantaloons, Lifestyle These stores are of an average size of ~75,000 sq ft. They offer several thousand stockkeeping units (SKUs) and generally have bulk buying requirements. They follow a business model which is based on a Business to Business (B2B) concept, focused on meeting the needs and requirements of business customers. Ex. Carrefour, Best Price Modern Wholesale

Department Stores

Cash and Carry Stores

Hypermarkets

Average size of these stores varies between 50 000 sq ft and 100,000 sq ft. These stores offer a large variety of products, ranging from grocery, fresh and processed food, beauty and household products, to clothing and appliances. Ex. Spencers Hypermarket, SPAR Hypermarket, more, MEGASTORE.

EXHIBIT 3

Major Players
Player Archies Ltd. Brief Description It is Indias market leader in the social expression industry with over 60% market share in the organized sector and presently has 203 owned outlets along with 280 franchised outlets It has entered into a license agreement in Jan 2011 with Hallmark Cards, Inc the global market leader in Social Expressions, to open up exclusive Hallmark retail outlets across India It also has exclusive tieups with many other global majors such as Russ Berrie, Inc. of USA, Keel Toys, Carte Blanche, Paper Island, History and Heraldry of UK It is one of the leading retailers of readymade and fashion wear brands with more than 1,400 outlets across India Value for money and high on fashion is the companys USP and it has given the brand an extension by delving into specific consumer segments It is also looking to change its business model from franchise to cashandcarry or wholesale format It is Indias leading retailer, serving customers in 85 cities and 60 rural

Koutons Retail India Ltd.

Pantaloon

P a g e | 16 Retail Ltd. India locations across the country through over 15 mn square feet of retail space Pantaloons has 46 stores across India while Central has 12 locations, offering over 500 foreign and Indian brands across merchandise categories It operates 148 Big Bazaar stores and 169 Food Bazaar stores across 70 cities in India It operates 145 own stores and 140 shopinshops in 74 markets pan India and plans to open over 30 stores in 201213 It has recently introduced a range of fashion watches, footwear, innerwear and sunglasses to compliment its existing apparel collections It has recently exited the discount retail business, selling its troubled Promart brand to Vemb Lifestyle Pvt. Ltd. for INR 9 mn It operates more than 146 retail outlets across 22 cities pan India covering more than 4 mnsqft of retail space It has acquired the remaining 49% stake in Gateway Multichannel Retail (India) Ltd. from Hypercity Retail (India) Ltd. in Nov 2011 Its operations have expanded to 49 stores in 22 cities in 2011 It plans to invest INR 3.5 bn and open 120 Shoppers Stop and 10 Hyper City over the next 3 years It is a joint venture between Bharti Enterprises one of India's leading groups and Walmart, the worlds leading retailer The joint venture aims at establishing wholesale cashandcarry stores and backend supply chain management operations under the brand name Best Price Modern Wholesale in line with Government of India guidelines It has recently received INR 1.20bn in funding from Bharti Enterprises and WalMart Stores Inc.

Provogue India Ltd.

Shoppers Ltd.

Stop

BhartiWalmart Ltd.

EXHIBIT 4
100% 80% 60% 40% 20% 0% USA France Japan Malaysia Brazil Russia China India 85%

80% 66% 55% 36% 33% 20% 5%

Percentage of Organized retail penetration

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EXHIBIT 5

100% 50% 0%
2005 2015e 2025e
Aggregate Consumption (INR tr)

Globals >1000 Strivers 500-1000 Seekers 200-500

Aspirers 90-200
Deprived <90

Globals >1000
100%

Strivers 500-1000
50% 0% 2005 2015e 2025e Aggregate Disposable Income (INR tr)

Seekers 200-500 Aspirers 90-200 Deprived <90

EXHIBIT 6
80 60 40 20 0 Jan'10 Jan'11 53.8 69.4

Growth

Growth in Credit Card Transactions

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EXHIBIT 7
80 70 60 50 40 30 20 10 0 70

20

2011

2015E

Online Retail Market

EXHIBIT 8

Available routes for foreign players to enter the retail sector

Strategic license agreements

Franchisee route

Cash and carry wholesale retailing

Manufacturing

Distribution

Joint ventures

This route involves a foreign company entering into a licensing agreement with a domestic retailer or partnering with Indian promoterowned companies.

This entry route is widely used by many international brands, who opt for the master franchise route and the regional franchise route for an entry into India.

100 per cent FDI is allowed in wholesale trading,which involves building a large distribution network.

A company can establish its manufacturing unit in India along with standalone retailing outlets.

An international company can set up a distribution office in India and supply products to local retailers. Franchisee outlets can also be set up by this route.

International firms can enter into agreements with domestic players and set up base in India. The share of MNCs is restricted to 49 per cent in this route.

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EXHIBIT 9
Evolving FDI in India

1991: Indian economy opened FDI up to 51% allowed under the automatic route in select priority sectors

1997: FDI up to 100% allowed under the automatic route in cash & carry wholesale

2006: FDI up to 51% allowed in single brand retail with prior Government approval

2008: Government mulled over the idea of allowing 100% FDI in singlebrand retail and 50% in multibrand retail

2010: Government proposed to allow FDI in multi-brand retailing

EXHIBIT 10
Future Outlook
Leveraging technology in traditional formats for modern retail Consolidation, high investments, confluence of Indian retail

Entry, growth, expansion, top line focus for organised retail

Range, portfolio, format options, beginning of the rural-urban retail merge

Growth

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References
http://www.ibef.org http://www.fibre2fashion.com http://business.mapsofindia.com http://www.dnb.co.in/IndianRetailIndustry/overview.asp http://www.icra.in/ http://www.capitalmarket.com http://www.marketlineinfo.com/ http://www.crisil.com/ Annual Reports of various companies in Retail Industry