Post on 15-Oct-2014
Are Indian Retailers Are Indian Retailers ready for Mall ready for Mall
Culture? Culture? Authors:Authors:
1. Prof. Pritee Saxena1. Prof. Pritee SaxenaFaculty Member-MarketingFaculty Member-Marketing
ICFAI Business School, MumbaiICFAI Business School, Mumbai
2. Prof. Satish Ailawadi2. Prof. Satish Ailawadi Associate Professor-MarketingAssociate Professor-Marketing
VES’s Institute of Management Studies & Research, VES’s Institute of Management Studies & Research, MumbaiMumbai
THE ROADMAP….THE ROADMAP….
• The Changing Retail Scenario• Retail Real Estate in India• Malls or High-Streets?• The Study..• FDI in Retail• Conclusion….
RETAIL CHANGE….RETAIL CHANGE….
YEAR 2004
Total Retail Market: INR 13139 Bn
Total Organized Retail Market : INR 152 Bn
Share of Malls: INR 29Bn
YEAR 2010
Total Retail Market: INR 20850 Bn
Total Organized Retail Market : INR 524 Bn
Share of Malls: INR 384.47Bn
INDIAN RETAIL BY 2006-07INDIAN RETAIL BY 2006-07• 50 million sq. feet of space under development.• 7 major cities to account for 41 mill sq. feet under
development.• 300 malls, shopping centres and multiplexes under
construction.• To have 35 Hypermarkets,325 large Departmental Stores,
and 1500 Supermarkets.
(Source: Images Retail)
Key facts…Key facts…• Organised Retail to form 10% of total Retailing by the end of
this decade.• Cultural and Regional differences are the biggest challenges.
They deter Retailers, from adopting a single format.• Hypermarket is emerging as the most favourable format, for
the time being.• Convenience store is the best way to tackle Unorganised
market.• India’s vast middle class and its virtually untapped Retail
Sector are key attractions for global Retail Giants.• 51% FDI in single brand retailing allowed to attract
investment and technology and to cater to the demand for branded goods in India.
• Of the total organised retail space being developed pan-India, 35% is to come up in Tier –II and Tier – III cities.
( Source – Knight Frank Research & Bharat Book Review )
THE CHANGE…
Weekly MarketsVillage FairsMelas
Convenience StoresMom and Pop/Kiranas
PDS OutletsKhadi StoresCooperatives
Exclusive Brand OutletsHyper/Super MarketsDepartment StoresShopping Malls
Traditional/Pervasive Reach
Government Supported
Historic/Rural Reach
Modern Formats/ International
Evolution of Indian Retail
Source of Entertainmen
t
Neighborhood Stores/Convenie
nce
Availability/ Low Costs / Distribution
Shopping Experience/Efficiency
(Source: ICICI - FDI In Retail)
[While You Were Sleeping]
[A Phone Call Away]
[The Government Awakes]
[The Wonder Years]
THE CHANGING SHOPPING EXPERIENCE….
TODAY’S RETAIL TODAY’S RETAIL FORMATSFORMATS
• Malls. • Hyper marts/Supermarkets• Department Stores• Discount Stores• Specialty Stores• Convenience Stores• MBO’s• FEC (Family Entertainment Centre)
CATEGORIES OF INDIAN CATEGORIES OF INDIAN RETAILERSRETAILERS
• Corporate Houses• Tatas: Tata Trent• RPG group: Food World, Health and Glow, etc• ITC: Wills Life Style• Rahejas (Shoppers Stop), Hiranandani (Haiko),
DLF(DT cinemas) etc.• Dedicated brand outlets
– Nike, Reebok, Zodiac etc• Multi-brand outlets
– Vijay Sales, Viveks etc• Manufacturers/ Exporters
• Pantaloons, Bata, Weekender
1
43
121
0
20
40
60
80
100
120
140
1998 2004 2007E
25
48
80
0
10
20
30
40
50
60
70
80
1998 2004 2007E
Rising Income Levels … Cheaper Credit ... … & Benign Inflation
3.84.3
4.0
5.4
3.4 3.93.8
7.1
3.4
3.6
6.5
3.4
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
2000 2001 2002 2003 2004 2005
Consumer Price Inflation
Wholesale Price Inflation
6.06.06.36.57.0
8.0
12.5 12.0 12.011.5 11.0 10.8
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
2000 2001 2002 2003 2004 2005
Bank Rate Prime Lending Rate
Cellular Phones(millions) Cable TV Subscriptions
(million)
Per Capita - At Current Prices
18.9 20.2 21.423.7
26.1
0.0
5.0
10.0
15.0
20.0
25.0
30.0
2001 2002 2003 2004 2005
Rs
'000
(P
er A
nn
um
)
Young Demographics (average age 24 years) with Increasing
Consumerism Instigated by Media Leading to Consumption Wave
(Source : CMIE, Enam, Eco Survey)
CONSUMPTION-LED GROWTH IN INDIA
• India – World’s Youngest Population, Median age of 24 yrs
• More than Half the Population has Grown up in Post Liberalization Era
• Population in the Age Group 15-44yrs (consuming class) Expected to Increase from 330mn in 2001 to 700mn by 2010
• Indian Youth – more Ambitious & Confident
• From ‘Save Now & Consume Later’ to ‘Affordable Indulgence’
Median Age (yrs)
YOUTH : NO GUILT OF CONSUMPTION
(Source: SSKI)
INDIAN RETAIL-LED REAL ESTATE
Source : Images KSA Technopak Study
• Not a Single Mall a Decade Ago - Less than Half a Dozen Malls a Year Ago
• Currently approximately 96 malls in India, expected to Rise to 158 by End of Current Year and 200 in next 3 years.
• By year 2006-07 :
– 50 mn sq.ft of Quality Space under Development
– 7 Major cities to account for 41 mn sq.ft Development
– To open - 35 Hypermarkets, 325 Large Department Stores
– 1500 Supermarkets and over 10,000 New Outlets
• Mall Space spread Across India by 2007
DRIVERS OF CHANGEDRIVERS OF CHANGE
• Housing sector expected to sustain strong growth in light of attractive interest rates and tax incentives
• Commercial sector to grow in tandem with sectors like IT, ITES, Banking, Telecom, etc.
• Increasing numbers of shopping malls
• Lease v/s Buy gaining ground for commercial developments
Contd…..Contd…..• Heightened development in real estate in
Tier II & III locations
• New Residential Models-Townships• FDI would improve construction quality
and improve efficiencies
• Potential Entry of Real Estate Mutual funds and Real Estate Investment Trusts
REAL ESTATE RATES….REAL ESTATE RATES….
( Source: JM Morgan Stanley Research)
THE STUDY……
CATEGORIES IN INDIAN CATEGORIES IN INDIAN RETAIL SECTOR RETAIL SECTOR
SAMPLE SIZESAMPLE SIZECategory Brands Interviewed
Men’s Wear Zodiac, Daks, Numero Uno, Lacoste, Koutons, Oxemberg, Men’s Boulevard, Tuille, John Players, Blue Tonic
Women’s Wear Amarsons, Satya Paul, Peppertree, After shock, Hakoba, Jashn
Unisex apparels Blackberry, Colorplus, Pepe
Kidswear Me & Moms, Scrams, Barbie, 4214
Time wear Ethos, Watches N More, Citizen, Swatch, Titan
Jewellery D’damas, Gili, Orra, TBZ, Tanishq, Sia Art Jewellery
Luggage VIP, Samsonite
Gifts Archies, Galleria, Hallmark
Shoes Regal, Minis, Catwalk, Charles & Keith, In-touch, Lords, Clarks, Kittens, Metro, Bata
Home furnishings Spaces, Hasthkala, Hobby ideas, Pampered Home, Dreams
Food & Beverages Bombay Blues, Thai Lotus, Ruby Tuesday, Bateel, Sweet World, Subway, Rajdhani
OBSERVATIONS…OBSERVATIONS…Category Price range
(Rs.) Average
Margin (%)
Avg Shop Size
(sq.ft)
Location in Malls
Men’s Wear 500-5,000 10-15 800-1,000 Ground Floor
Women’s Wear 300-30,000 20-30 1,500-2,000 Women’s Zone
Unisex apparels
850-8,000 25 1,500 Ground
Kidswear 200-1,000 25-30 1,000 First Floor/ Child Zone
Time wear 300-30,000 30 500-700 Ground Floor
Jewellery 600-30,000 37 1,500-2,000 Ground Floor / Women’s’ Zone
Luggage 500-2,000 27 1,000-1,200 Ground Floor
Gifts 50-1,000 27 5,00-7,00 Ground Floor
Shoes 200-4,000 28 1,200-1,500 Ground Floor
Home furnishings
500 onwards 25 1,500-2,000 Ground Floor /Women’s’ Zone
Food & Beverages
50 onwards 15 1,500 Food Zone
Avg.Profit Margin Across Categories
27%
37%
30%
15%
28%25%
27%
0%5%
10%15%20%25%30%35%40%
Categories
Avg.Profit margin (%)
Avg.Store Area (per sq.ft)
1380
1900
660
12071020
1890
700
0
200
400
600
800
1000
1200
1400
1600
1800
2000
Categories
Avg.Store Area (per sq.ft)
Avg.Ticket Price across categories
2245
14950
51750
1443 483 16070
10000
20000
30000
40000
50000
60000
Categories
Avg.Ticket Price
15%
85%
70%
30%
65%
35%27%
73%
0%
20%
40%
60%
80%
100%
Men's Womens Kids Unisex
Apparels (Malls Vs High Street)
Malls High Street
Jewellery ( Malls vs High Streets)
2%
98%
In Malls Outlets
In High Street outlets
Home Furnishings ( Malls Vs High Streets)
71%
29%
In Malls Outlets
In High Street outlets
ISSUES TO BE ADDRESSED?ISSUES TO BE ADDRESSED?• Efficacy of Mall Management- Contractual agreement
• Consumer traffic
• Real estate cost
• Mall Promotional schemes
• Mall layout and design
• Mall facilities like parking, safety, lighting and air conditioning, housekeeping and maintenance
• Mall location and shop neighborhood
• Mall Brands
FDI IN RETAIL..
FDI IN INDIAN RETAILING
• Current Indian FDI Regime
– FDI not permitted in retail trade sector, except in:
• Private labels
• Hi-Tech items / items requiring specialized after sales service
CONTD….CONTD….• Medical and diagnostic items
• Items sourced from the Indian small sector (manufactured with technology provided by the foreign collaborator)
• For 2 year test marketing (simultaneous commencement of investment in manufacturing facility required)
WHY FDI?
• Improve competition• Develop the market• Greater level of exports due to increased sourcing by major
players Investment in technology• Better lifestyle• Manpower and skill development Investment in whole supply chain• Tourism Development
HOW FDI ?• FDI should be allowed in stages
– Initial stages: 26% FDI
– Establishment Phase: 49% FDI
– Mature Phase: 100% FDI
• FDI policy– No incentives needed to attract FDI
– Market size and potential are sufficient inducers
– No need for costly tax breaks, import duty exemptions, land and power subsidies, and other enticements
2 Years
2 Years
2 Years
BENEFITS TO THE BENEFITS TO THE GOVERNMENTGOVERNMENT
Greater Per Capita Income
Greater ConsumerSpending due to
economic boom
Increasing Tax Paying Population
Greater Sourcing
From India
Reduced TaxEvasion
GDP Growth
Increased Tax Revenues
Greater Exports
Employment
Benefits to Govt.
Challenges ahead…Challenges ahead…• Differences between urban and rural consumers
• Cultural preferences and tastes that differ from global economy
• Fragmented Market
• Extensive Distribution network required
• High Capital Requirement
• Real Estate and Infrastructure
Thank You!
• Questionnaire
ReferencesReferences
• http://news.moneycontrol.com/india/newsarticle/stocksnews.php?autono=225909http://www.ciionline.org/Common/313/BACKGROUNDNOTE2004.pdfhttp://www.garnerasia.com/gbiad6.htmlhttp://www.imagesfashion.com/Cover_story1_jan05.htmlhttp://www.imagesfashion.com/index.html
• Books Referred :
Retail Management - A Strategic Approach by Barry Berman and Joel R Evans