Synopsis
Indian Retail Industry-Consumer is the king Retailing, in a layman's language involves the procurement of varied products in large quantities from various sources/producers and their sales in small lot for direct consumption to the purchaser. Retailing can broadly be classified into: organised and unorganised retail.
Unorganised retailing refers to the traditional form of retailing with the retail outlets situated near the residential areas while organised retailing refers to the modern form of retailing with trading activities undertaken by licensed retailers generally located in commercial establishments/high-street areas.
Globally, the retail industry has grown at a brisk pace with a Compounded Annual Growth Rate (CAGR) of 7.77% during the period 2001-2006. The growing expanse of the top global
retailers has ensured globalisation of the industry; however the opportunity for growth of organised retail is immense in countries such as India, S. Korea, Vietnam etc. where organised retailing is still at a nascent stage.
The Indian retail industry has witnessed a massive transition during the last few decades. The Indian retail has grown at a CAGR of 11.2% during the period FY04-FY07, with food and grocery accounting for the major share. Despite the industry being dominated by the unorganised retailers, the organised retailing revenues have soared at a CAGR of 19.5%
during the period FY04-FY07. The apparel & footwear segment occupies the major share in the organised retail pie.
The Indian retail industry has strong linkages with the economic growth and development of the economy. It is primarily characterised by its hierarchical growth structure, high working capital requirements etc. The factors such as rising urbanisation, growing consumer class, growing per capita expenditure, greater interest evinced by the Venture capitalists/Private equity firms in the industry etc. have been driving the growth of organised retail.
The growth of modern retailing has led to the emergence of varied formats such as Departmental stores, Supermarkets etc. In addition, few other formats such as rural retailing, E-retailing, luxury retailing etc. too have found favours with the Indian retailers. Each format being distinct from the other, the viability of their operations depends upon various factors such as average footfalls, sales per sq.ft etc. However the numerous licensing requirements as compared to other countries have proved to be a bottleneck in the growth of Indian retailing.
We have further identified the requirements, advantages and disadvantages associated with the organised as well as unorganised retailing in India. On the basis of a detailed analysis incorporating the experience of other retailing locations across the globe, we feel that the co-existence of the organised and unorganised retailing in the Indian context cannot be denied.
To estimate the size of the Indian retail industry and the penetration levels of organised retail in the urban and rural Indian markets for the period FY08-FY11, We have evolved out an industry model incorporating three different scenarios i.e. Optimistic, Most Likely & Pessimistic. We expect that with the growing reach of modern retailers in the rural and urban areas, the penetration level of organised retailing would continue to grow, thereby resulting in the organised retail growth, surpassing the growth of total Indian retail during the period FY08-FY11.
Report Outline
Executive Summary
Section I-INDUSTRY OVERVIEW
1. Retailing-An Introduction
1.1 Retailing Basics
1.1.1 Unorganised Retail
1.1.2 Organised Retail
1.2 The International Retail Scenario
1.2.1 Stages of Evolution
1.2.2 Highlighting Features of Global Retailing
i Sizeable & Profitable Operations
ii Highly favoured Big-Box Formats
iii Regulatory Aspects
2. The Indian Retail Scenario
2.1 Industry Evolution
2.1.1 Indian Retail Story-Phase of Growth
2.2 The Unorganised Retail
2.3 The Organised Retail
2.3.1 The Growth Story
2.3.2 Gauging Organized Retailing in India-A statistical Approach
2.3.3 Segmental Analysis
i Apparel & Footwear
ii Food & Grocery
iii Furniture & Finishing
iv Jewellery & Watches
v Entertainment, Books, Sports Goods & Other Equipments
vi Other Segments
3. Industry Characteristics
3.1 Highly Unorganised & Fragmented Industry
3.2 Linkages with the Economic Growth
3.3 The Rural-Urban Divide
3.4 Hierarchy in Retail
3.5 Emergence of Multiple Retail Formats
3.6 Long Supply Chain
3.7 Working Capital Intensive
4. Industry growth Drivers
4.1 Demand-side Factors
4.1.1 Rising Urbanisation
4.1.2 Growing Consumer Class
4.1.3 Growing Per Capita Expenditure
4.1.4 Baby Boomer Effect
4.1.5 Growing spread of 'Plastic Money'
4.1.6 Changing Face of Indian consumeris-From Necessities to Luxuries
4.1.7 Rising Number of Nuclear Families
4.1.7 Growing Female Working Population
4.2 Supply-side Factors
4.2.1 Retail Growth Through VC/PE Route
4.2.2 Developments in the Real Estate Scenario
Section II-ORGANISED RETAILING: AN INDEPTH ANALYSIS
5. Retail Formats-An Insight
5.1 Major Forms of Retailing
5.1.1 Convenience Stores
5.1.2 Discount Stores
5.1.3 Factory/Company Outlets
5.1.4 Specialty Store
5.1.5 Supermarkets
5.1.6 Department Stores
5.1.7 Hypermarkets
5.2 Viability of various Retail Formats
5.2.1 Convenience Stores
5.2.2 Department Stores
5.2.3 Hypermarkets
5.2.4 Speciality Store
5.3 Determinants of Retail Format Viability
5.3.1 Average Number of Footfalls
5.3.2 Sales Per Sq. Ft.
5.3.3 Supply Chain Management
i) Minimization of Wastages
ii) Specialised Manufacturing
iii) Reducing Chances of Stock-out
5.3.4 Dependence on 'Private Labels'
5.3.5 Technological Upgradation
5.3.6 Repeat Sales Through Loyalty programmes
5.3.7 Advertising & Sales promotion Activities
5.4 Emerging Retail Formats
5.4.1 Rural Retailing
i) Benefits to the Retailers
ii) Benefits to the Rural Populace
5.4.2 Luxury Retailing
5.4.3 Airport Retailing
5.4.4 E-Retailing
i) Convenient Shopping
ii) Value for Money
iii) Change in the Consumers' Attitude
iv) Easy Payment Options
v) Lack of 'Touch & Feel' Experience
vi) Lack of Transparency in Transactions
vii) Untimely Delivery of Products
6. Cost Analysis
6.1 Unorganised Retail
6.2 Organised Retail
6.2.1 Procurement of Raw materials /Finished Goods
6.2.2 Labour Expenses
6.2.3 Selling & Distribution Expenses
6.2.4 Rental Expenses
6.2.5 Profit Margin
7. Licensing and Other Regulatory Aspects
7.1 Regulatory Structure
7.1.1 Strategic License Agreements
7.1.2 Manufacturing
7.1.3 Cash & Carry Wholesale Trading
7.1.4 Franchising
i) Unit Franchisee
ii) Multiple Franchisee
iii) Master Franchisee
iv) Regional Franchisee
7.2 Licensing Requirements
7.2.1 Shops & Establishment Act
7.2.2 Municipal Corporation Act
7.2.3 Agricultural Produce Marketing Committee Act
7.2.4 Standards of Weights and Measures Act
7.2.5 Drugs & Cosmetic Act
7.2.6 Prevention of Food Adulteration Act
7.2.7 The Competition Act
7.2.8 Liquor Licensing
7.3 Taxation Regime
7.3.1 Customs Duty
7.3.2 Duty on Export Promotion of Capital Goods (EPCG)
7.3.3 Service Tax
7.3.4 VAT
8. Organised v/s Unorganized Retailing-Death of Mom-&-Pop Stores in the Making ?
9. Challenges in Organised Retailing
9.1 Real Estate and Property Related Issues
9.2 Taxation & Policy Related Hurdles
9.3 Inefficiencies in Supply Chain Management
9.4 Increased Shrinkages
9.5 Scarcity of Workforce
9.6 Entry of Foreign Players
9.7 Political & Local Agitation
9.8 Analytical Model-PORTER'S FIVE FORCE MODEL
10. Industry Outlook
10.1 Scenario Drivers
10.1.1 Pessimistic Scenario Drivers
10.1.2 Optimistic Scenario Drivers
Section III-OVERVIEW OF INDIAN PLAYERS
11. COMPANY FOCUS
I) Pantaloon Retail India Ltd.(PRIL)
II) Shoppers Stop Ltd.
III) Vishal Retail Ltd (VRL)
IV) Koutons Retail India Ltd.
V) Trent Ltd.
ANNEXURES
1. Top 250 Global Retail Companies-A Statistical Overview
2. The Global Retail Development Index(GRDI)-2008
3. India's Retail Hierarchy
4. List of Brands / Stores Across Different Segments
5. List of Clearances Required for Retailing Operations
List of figures
Fig 1.1 Comparison of World GDP Growth & World Retail Growth (%)
Fig 1.2 Stages of Retail Growth
Fig 1.3 Top 5 Countries by Retail Sales as on 2006
Fig 1.4 Format-wise Venture of Top-250 Global Retailers
Fig 2.1 Evolution of Indian Retail
Fig 2.2 Indian Retail pie-2003-04
Fig 2.3 Indian Retail pie-2006-07
Fig 2.4 Share of Unorganized Retail in Total Retail
Fig 2.5 India's Spending Pattern-FY 2007
Fig 2.6 Unorganised Retailing-Sales by Retailer Type (%)-2006
Fig 2.7 Organised Retail-Total Revenues & % Penetration
Fig 2.8 Global Organised Retail Penetration vs. Purchasing Power-Great Room for Improvement in India
Fig 2.9 Apparel & Footwear-Total Organized Retail and % Penetration
Fig 2.10 Food & Grocery-Total Organized Retail and % Penetration
Fig 2.11 Furniture & Furnishing -Total Organized Retail and % Penetration
Fig 2.12 Jewellery & Watches-Total Organized Retail and % Penetration
Fig 2.13 Entertainment, Books, Sports Goods & Other Equipments-Total Organized Retail and % Penetration
Fig 2.14 Other Segments (Personal Care, Non-Institutional Healthcare and Other
-Segments Beverages)-Total Organized Retail and % Penetration
Fig 2.15 Indian Organised Retail pie-2003-04
Fig 2.16 Indian Organised Retail pie-2006-07
Fig 3.1 Real GDP, Real PFCE & Retail Sales-CAGR for the Period 1994- 2007
Fig 4.1 Rural-Urban Population Divide
Fig 4.2 PFCE and Personal Disposable Income-Per Capita
Fig 4.3 Consumption Categorization as a % of GDP-2005
Fig 4.4 Per Capita Monthly Expenditure-Urban
Fig 4.5 Per Capita Monthly Expenditure-Rural
Fig 4.6 Age Distribution of Indian Population
Fig 4.7 Median Age of Population
Fig 4.8 Credit Card Usage Trend
Fig 4.9 Debit Card Usage Trend
Fig 4.10 Changing Consumption Pattern-1995 to 2025
Fig 4.11 Growth Trend of Nuclear Families
Fig 4.12 Growth Trend of Density & Population
Fig 4.13 Proportion of Female Working Population of the Total Working Population
Fig 4.14 Proportion of Female Working in Organised Industrial Activities
Fig 4.15 Total PE & VC Investments in India
Fig 4.16 Trends in Mall Development
Fig 4.17 Trends in Mall Area Occupancy
Fig 4.18 Tier-wise Distribution of Operational Mall Space
Fig 4.19 Tier-wise Distribution of Upcoming Mall Space
Fig 4.20 Distribution of Mall Ownership
Fig 4.21 Mall Ownership-Rental Distribution
Fig 4.22 Expected Mall Supply: 2008-11
Fig 5.1 High Net Worth Individual (HNI) Population Growth-2007 (%)
Fig 5.2 Market Share of Premium & Luxury Brands in India- US$ bn
Fig 5.3 India- Internet Users & Penetration Level
Fig 8.1 Adverse Impact on Unorganised Retailers by Region (%)
Fig 8.2 Adverse Impact on Unorganised Retailers by Category (%)
Fig 9.1 Shrinkages as a % of Total Retail Sales
Fig 9.2 Distribution of External Shrinkages (%)-India
Fig 9.3 Distribution of Internal Shrinkages (%)-India
Fig 10.1 Sale of Private Labels as a % of Total Sales
Table index
Table 1.1 World Retail Growth
Table 1.2 Top 250 Retailers Split –up by Regions/Countries
Table 1.3 Global Retailers in the Fortune 500 List-Year 2008
Table 2.1 Total Indian Retail Revenue-Rs. Bn
Table 2.2 Indicative Industry Growth on Reaching the Average Penetration Level
Table 3.1 Rural-Urban Retail Sales Divide
Table 3.2 India's Retail Hierarchy
Table 3.3 Net Working Capital as a % of Total Capital Employed
Table 4.1 Income Distribution of the Households
Table 4.2 Major Investments by VC/ PE Firms
Table 5.1 Spread of Convenience Stores
Table 5.2 Spread of Discount Stores
Table 5.3 Spread of Speciality Stores
Table 5.4 Spread of Department Stores
Table 5.5 Spread of Hypermarkets
Table 5.6 Comparative Margins of Various Retail Formats
Table 5.7 Retail Formats-Characteristics
Table 5.8 Sales Per sq.ft of Various Modern Retail Formats
Table 5.9 Cost & Margins of Intermediaries in the Supply Chain (in Case of Potatoes)
Table 5.10 Private Labels of Leading Indian Retailers
Table 5.11 Loyalty Programmes of Retailers
Table 5.12 Media-wise Advertisement Expenditure by Retailers for the Period Jan-July, 2008
Table 5.13 Initiatives of the Modern Retailers in Rural India
Table 5.14 Global Luxury Brands in India
Table 5.15 JV's in Indian Airport Retailing
Table 6.1 Raw Material Expenditure as a % of Total Expenditure
Table 6.2 Labour Expenditure as a % of Total Expenditure
Table 6.3 Selling & Distribution Expenditure as a % of Total Expenditure
Table 6.4 Rental Expenditure as a % of Total Expenditure
Table 6.5 Sensitivity Analysis of Rental Expenditures
Table 6.6 Gross Margins of Organised Retailers Across Various Product Categories (%)
Table 6.7 Profit Margins of Various Players
Table 7.1 Status of Market Reforms in Agriculture (APMC Act Amendments)
Table 8.1 Reasons Underlying the Falling Share of Turnover of Unorganised Retailers (%)
Table 8.2 Annual Growth in Turnover of Unorganised Retail Outlets
Table 8.3 Annual Growth in Profit of Unorganised Retail Outlets
Table 8.4 Distribution of Average Monthly Spending of Indian Households
Table 8.5 Savings (as a % of Spending) from Buying at Organised Outlets by Format
Table 10.1 FY08 Industry Estimates
Table 10.2 FY11 Industry Estimates
Table 10.3 Q3FY09 Performance Comparison of Various Players
