The Emerging Indian Retail The Emerging Indian Retail SectorSector

Retail Philosophy — “By The People, For The People and of The People”

Retailing involves selling products and services to consumers for their individual or family use. As the final link between consumers and manufacturers, retailers are a vital part of the business world. Retailers add value to products by making it easier for manufactures to sell and consumers to buy. 

The Indian Retail Sector can be broadly classified into—

Indian Retail Sector

Food Retailers

Health & Beauty Products

Home Furniture & Household Goods

Clothing & Footwear

Durable Goods

Personal Goods

What is Retail??

Industry EvolutionIndustry Evolution

Traditionally retailing in India can be traced to Traditionally retailing in India can be traced to The emergence of the neighborhood ‘Kirana’ stores The emergence of the neighborhood ‘Kirana’ stores

catering to the convenience of the consumerscatering to the convenience of the consumers Era of government support for rural retail: Indigenous Era of government support for rural retail: Indigenous

franchise model of store chains run by Khadi & Village franchise model of store chains run by Khadi & Village Industries CommissionIndustries Commission

1980s experienced slow change as India began to open up 1980s experienced slow change as India began to open up economy. economy.

Textiles sector with companies like Bombay Dyeing, Textiles sector with companies like Bombay Dyeing, Raymond's, S Kumar's and Grasim first saw the Raymond's, S Kumar's and Grasim first saw the emergence of retail chainsemergence of retail chains

Later Titan successfully created an organized retailing Later Titan successfully created an organized retailing concept and established a series of showrooms for its concept and established a series of showrooms for its premium watches premium watches

The latter half of the 1990s saw a fresh wave of entrants The latter half of the 1990s saw a fresh wave of entrants with a shift from Manufactures to Pure Retailers. with a shift from Manufactures to Pure Retailers.

For e.g.Reliance Fresh, Subhiksha and Nilgiris For e.g.Reliance Fresh, Subhiksha and Nilgiris in food and FMCG; Planet M and Music World in in food and FMCG; Planet M and Music World in music; Crossword and Fountainhead in books.music; Crossword and Fountainhead in books.

Post 1995 onwards saw an emergence of Post 1995 onwards saw an emergence of shopping centers, shopping centers, mainly in urban areas, with facilities like car mainly in urban areas, with facilities like car

parking parking targeted to provide a complete destination targeted to provide a complete destination

experience for all segments of society experience for all segments of society Emergence of hyper and super markets trying Emergence of hyper and super markets trying

to provide customer with 3 V’s - Value, Variety to provide customer with 3 V’s - Value, Variety and Volumeand Volume

Industry Evolution…..Industry Evolution…..

At year end of 2000 the size of the Indian At year end of 2000 the size of the Indian organized retail industry is estimated at Rs. organized retail industry is estimated at Rs. 13,000 crore13,000 crore

Overall, India’s retail sector is expected to grow Overall, India’s retail sector is expected to grow from its current $350 billion to $427 billion by from its current $350 billion to $427 billion by 2010 and $635 billion by 20152010 and $635 billion by 2015..

India Experiencing Rapid India Experiencing Rapid Economic GrowthEconomic Growth

9.0% growth rate makes India the second fastest growing economy in the world

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MAJOR PLAYERS OF INDIAN MAJOR PLAYERS OF INDIAN RETAIL RETAIL

Retailing formats in IndiaRetailing formats in India Malls:Malls:

It Located mainly in metro cities, in proximity to urban outskirts. Ranges from 60,000 sq ft to 7,00,000 sq ft It Located mainly in metro cities, in proximity to urban outskirts. Ranges from 60,000 sq ft to 7,00,000 sq ft and above. They lend an ideal shopping experience with an amalgamation of product, service and and above. They lend an ideal shopping experience with an amalgamation of product, service and entertainment, all under a common roof.Examples include Shoppers Stop, Piramyd, Pantaloon. entertainment, all under a common roof.Examples include Shoppers Stop, Piramyd, Pantaloon.

Specialty Stores:Specialty Stores:Chains such as the Bangalore based Kids Kemp, the Mumbai books retailer Crossword, Chains such as the Bangalore based Kids Kemp, the Mumbai books retailer Crossword, RPG's Music World and the Times Group's music chain Planet M, are focusing on specific RPG's Music World and the Times Group's music chain Planet M, are focusing on specific market segments and have established themselves strongly in their sectors.market segments and have established themselves strongly in their sectors.

Discount Stores:Discount Stores:As the name suggests, discount stores or factory outlets, offer discounts on the MRP through selling in bulk reaching As the name suggests, discount stores or factory outlets, offer discounts on the MRP through selling in bulk reaching economies of scale or excess stock left over at the season. The product category can range from a variety of economies of scale or excess stock left over at the season. The product category can range from a variety of perishable/ non perishable goodsperishable/ non perishable goods

Department Stores:Department Stores:Departmental Stores are expected to take over the apparel business from exclusive Departmental Stores are expected to take over the apparel business from exclusive brand showrooms. Among these, the biggest success is K Raheja's Shoppers Stop, brand showrooms. Among these, the biggest success is K Raheja's Shoppers Stop, which started in Mumbai and now has more than seven large stores (over 30,000 sq. ft) which started in Mumbai and now has more than seven large stores (over 30,000 sq. ft) across India and even has its own in store brand for clothes called Stop!.across India and even has its own in store brand for clothes called Stop!.

Hypermarts/Supermarkets:Hypermarts/Supermarkets:Large self service outlets, catering to varied shopper needs are termed as Supermarkets. Large self service outlets, catering to varied shopper needs are termed as Supermarkets. These are located in or near residential high streets. These stores today contribute to 30% These are located in or near residential high streets. These stores today contribute to 30% of all food & grocery organized retail sales. Super Markets can further be classified in to of all food & grocery organized retail sales. Super Markets can further be classified in to mini supermarkets typically 1,000 sq ft to 2,000 sq ft and large supermarkets ranging from mini supermarkets typically 1,000 sq ft to 2,000 sq ft and large supermarkets ranging from of 3,500 sq ft to 5,000 sq ft. having a strong focus on food & grocery and personal sales.of 3,500 sq ft to 5,000 sq ft. having a strong focus on food & grocery and personal sales.

MBO’sMBO’s ::Multi Brand outlets, also known as Category Killers, offer several brands across a single productMulti Brand outlets, also known as Category Killers, offer several brands across a single productcategory. These usually do well in busy market places and Metros.category. These usually do well in busy market places and Metros.

Convenience Stores:Convenience Stores:These are relatively small stores 400 -2,000 sq. feet located near residential areas. These are relatively small stores 400 -2,000 sq. feet located near residential areas. They stock a limited range of high-turnover convenience products and are usually They stock a limited range of high-turnover convenience products and are usually open for extended periods during the day, seven days a week. Prices are slightly open for extended periods during the day, seven days a week. Prices are slightly higher due to the convenience premium.higher due to the convenience premium.

Format-wise Share Of Format-wise Share Of Investments In Indian RetailInvestments In Indian Retail

* Other formats include specialty stores in Apparel, Footwear, Watches, Furniture & Furnishing, Toys, Convenience formats etc.

Majority of investment slated for hypermarkets and supermarkets

Source: Technopak Analysis

Format-wise Break-up of Expected Investments in Indian Retail in Next 6-7 Years

Hypermarkets33%

Other Formats26%

Department Stores

2%Warehouse / Cash & Carry

6%

Supermarkets33%

Recent Trends Recent Trends Retailing in India is witnessing a huge revamping exercise as can be seen in the graph Retailing in India is witnessing a huge revamping exercise as can be seen in the graph India is rated the fifth most attractive emerging retail market: a potential goldmine. India is rated the fifth most attractive emerging retail market: a potential goldmine. Estimated to be US$ 200 billion, of which organized retailing (i.e. modern trade) makes up 3 percent Estimated to be US$ 200 billion, of which organized retailing (i.e. modern trade) makes up 3 percent

or US$ 6.4 billionor US$ 6.4 billion As per a report by KPMG the annual growth of department stores is estimated at 24%As per a report by KPMG the annual growth of department stores is estimated at 24% Ranked second in a Global Retail Development Index of 30 developing countries drawn up by AT Ranked second in a Global Retail Development Index of 30 developing countries drawn up by AT

Kearney. Kearney.

Retail Sales in India

Major RetailersMajor Retailers India’s top retailers are India’s top retailers are

largely lifestyle, clothing largely lifestyle, clothing and apparel stores and apparel stores

This is followed by grocery This is followed by grocery stores stores

Following the past trends Following the past trends and business models in and business models in the west retail giants such the west retail giants such as Pantaloon, Shoppers’ as Pantaloon, Shoppers’ Stop and Lifestyle are Stop and Lifestyle are likely to target metros and likely to target metros and small cities almost small cities almost doubling their current doubling their current number of storesnumber of stores

These Walmart wannabes These Walmart wannabes have the economy of have the economy of scale to be low –medium scale to be low –medium cost retailers pocketing cost retailers pocketing narrow marginnarrow margin

Leading Retailers

Urban / Rural Share Of Urban / Rural Share Of InvestmentsInvestments

Lion’s share of investments directed to urban, though it may change

Source: Technopak Analysis

Break-up of Expected Investments in Indian Retail in Next 6-7 Years

Urban93%

Rural7%

Consolidation And Hyper Consolidation And Hyper CompetitionCompetition

There could be 4 categories of “survivors” There could be 4 categories of “survivors” emerging in 5-7 years:emerging in 5-7 years:

Large players with deep pocketsLarge players with deep pockets Intelligent niches / super-specialities Intelligent niches / super-specialities Regional players who may merge or partner Regional players who may merge or partner

with each otherwith each otherOnly a few of the existing national players Only a few of the existing national players

may remain in business profitablymay remain in business profitably

Consolidation And Hyper Consolidation And Hyper CompetitionCompetition

Examples of M&A activities witnessed in recent Examples of M&A activities witnessed in recent past:past:

Acquisition of Adani Retail by Reliance RetailAcquisition of Adani Retail by Reliance Retail Trinethra Super Retail Ltd. by A V Birla Group Trinethra Super Retail Ltd. by A V Birla Group Trent’s acquisition of 76% stake in Landmark Mega-Trent’s acquisition of 76% stake in Landmark Mega-

storesstores Acquisition of Barista by Lavazza, ItalyAcquisition of Barista by Lavazza, Italy

Early signs of significant PE investmentsEarly signs of significant PE investments

Sequoia in Cafe Coffee Day Sequoia in Cafe Coffee Day

Actis in Medicine Shoppe, Nilgiri’sActis in Medicine Shoppe, Nilgiri’s

Argonaut, UTI Ventures & Passport India in KoutonsArgonaut, UTI Ventures & Passport India in Koutons

Kotak Private Equity in Home Solutions RetailKotak Private Equity in Home Solutions Retail

Navis Partners in Nirula’sNavis Partners in Nirula’s

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