retail industryppt

7/29/2019 retail industryppt

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Retail IndustryAmit Rai

Ankit SuranaAnish Pandey

Abhishek TiwariAnubhav Srivastava


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Retail Industry

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Evolutionof Indian Retail Industry

Barter system was known as the first form of Retail Followed by Kirana Stores and Mom & Pop Stores

Finally Manufacturing era necessitated the small stores and specialty stores

It was a sellers market till this point of time with limited number of brands

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

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

Post 1995 onwards saw an emergence of shopping centers

Emergence of hyper and super markets trying to provide customer with 3 Vs- Value, Variety and Volume

Expanding target consumer segment


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Overview

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Industry Description

Indian retail Industry is Fifthlargest in the world.

The current penetrationpegged at 5-7 per cent.

Accounts for 24% ofcountrys GDP and 8% ofthe total employment.

Food is the largestsegment in terms of its.

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8001000

1200

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1600

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2008 2009 2010 2011 2012

GDP(in

Billion $)

RetailsSales(InBillion $)


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Tax Impacts and Regulatory Environment

The retail sector has not been conferred an industry status till now. Hence,there are no specific rules and regulations governing the sector. However,there are certain laws pertaining to the establishment of stores and conductof activities, which retailers need to follow:

The Shop and Establishments Act

The Standards of Weights and Measures Act The Provisions of the Contract Labor(Regulations and Abolition) Act

The Income Tax Act

The Customs Act

The Companies Act

In addition to the above law: Retail companies have to follow certain regionalrules and regulations on the basis of their stores location; different stateshave different laws to regulate the retail trade.

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Tax Impacts

Presently, there are multiple indirect taxes:

Customs duty

Central Value Added Tax (CENVAT)

Service tax

Central Sales Tax (CST)State value added tax

Central value added tax

Entry tax

GST implementation :-In order to integrate all of these taxes into a singleunified tax system and bring about broad-based reforms in the indirecttax regime, the government of India has envisaged The introduction of auniform Goods and Services Tax (GST) across the country.

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Regulatory Environment

FDI Policy with regard to Retailing in India:

FDI up to 100% for cash and carry wholesale trading and export

trading allowed under the automatic route.

FDI up to 100 % with prior Government approval (i.e. FIPB) for

retail trade of Single Brand products. India allowed FDI of up to 51% in multi-brand sector.

Single brand retailers such as Apple and Ikea, can own 100% of

their Indian stores, up from previous cap of 51%.

The retailers (both single and multi-brand) will have to source atleast 30% of their goods from small and medium sized Indian

suppliers.


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Regulatory Environment Contd..

Multi-brand retailers must bring minimum investment of US$ 100million.

Half of this must be invested in back-end infrastructure facilities such

as cold chains, refrigeration, transportation, packaging etc. to reducepost-harvest with 3 years of setup.

Losses and provide remunerative prices to farmers.

The opening of retail competition (policy) will be within parameters ofstate laws and regulations.

Overseas companies must put half of their investment ininfrastructure such as processing, manufacturing, storage,warehouses and packaging


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Structure & Phase of The Industry

Retail formats in India:

Hyper marts/supermarkets

Mom-and-pop stores

Departmental stores Convenience stores

Shopping malls

E-trailers

Discount stores Vending

Specialty stores


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Stage The retail Industry is still in its nascent stage of growth

The foreign direct investment (FDI) inflows in single-brand retail

trading during April 2000 to June 2012 stood at US$ 42.70 million

Cash and carry represents an opportunity worth around Rs 8,250billion (US$ 149.19 billion) of the Rs 27,500 billion (US$ 497.29billion) annual retail business in India

India's e-retail industry is likely to touch Rs 7,000 crore (US$ 1.26billion) by 2015, up from Rs 2,000 crore (US$ 361.66 million)

Focus on rural sector increasing


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Size

The Indian retail market is currently estimated at USD 450 billion.

Food segment contributes largest part of total value of retail market,followed by fashion, leisure & entertainment and fashion accessories.

India's organized retail space is evolving fast and achieve penetrationlevel of 7%, which signifies huge potential growth.

Indian luxury market currently stands at USD 3.5 billion and expected togrow to make India the twelfth-largest luxury retail market in the worldby 2016.

Retail has become largest source of employment and has deeppenetration into rural India. Retailing contributes to 22% of GDP andaround 8% of the employment.


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Retail Growth In India Organized Retail Growth In India


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Key Success Factors for the industry

Effective forecasting

Strong balance sheet

Stock control

Market position

Proximity to market Creating Systems In Retail

Hiring the Right Employees

Marketing

Buying The Right Merchandise

Customer Service


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Risks for Retail Sector Low-growth consumer markets

Regulation and compliance

Inability to control costs/rising input prices

Inability to benefit from e-commerce Wrong price image

Supply chain disruptions

Inability to penetrate emerging markets

Failure to respond to shifting consumer behavior

Sourcing

Volatility in commercial real estate markets


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Opportunities for Retail Sector

Rising emerging market demand and rise of global middle class

New marketing channels and social media

Competitive differentiation via CSR and green branding

Multichannel approach Demographic change

Private label

Launching new products and services

Global urbanization

Competitive differentiation via local branding

Enhancing efficiency in the supply chain


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Porters Five Force Model

Th t f N E t t P f S li


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Threat of New Entrants Power of Suppliers

95% of the market is made up ofsmall, uncomputerised family run

stores.

The ability to establish favorablesupply contracts, leases and becompetitive is becoming virtuallyimpossible.

The vertical structure andcentralized buying gives chainstores a competitive advantageover independent retailers.

On the whole threat from newentrants in retail industry is high.

Historically, retailers have tried toexploit relationships with supplier.

In retail industry suppliers tend tohave very little power.

Following examples explain thesame.

Sears in 1970 set very highstandards for quality; suppliers thatdid not meet these standards were

dropped from the Sears line.

Walmart places strict control on itssuppliers.


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Power of Buyers Availability of Substitutes

Customers have comparativelyhigh bargaining power inunorganized sector than inorganized sector.

As the customer will demandproducts from organized units hewill be more focused towardsquality aspect

The tendency in retail is not to

specialize in one good or service,but to deal in wide range ofproducts and services.

What one store offers is likely tobe same as that offered by anotherstore.

The threat from substitutes is high.


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Competitive Rivalry

Retailers always face stiff competition and must fight with eachother for market share and also with unorganized sector.

They have tried to reduce cut throat pricing competition by offeringfrequent flier points, memberships and other special services to try

and gain the customers loyalty.

Thus retailers give each other stiff but healthy competition which isevident from their aggressive marketing strategies and segmentpolicies.


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SWOT Analysis

StrengthsMajor contribution to GDP: the retail sector in India is hoveringaround 33-35% of GDP as compared to around 20% in USA.

High Growth Rate: High Potential: since the organized portion of retail

sector is only 2-3%, thereby creating lot of potential for future players.

High Employment GeneratorLow Labor CostTechnology intensive industry

Rising disposable incomeUrbanizationShopping convenienceChanging consumer habits and lifestylesHigh availability of quality retail space


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Weakness

Policy related issues

Lack of industry status for retail.

Numerous license, permits and registration requirement.

Limited consumer insight

Lack of detailed region specific customer data. Lack of Skilled Labor

Taxation hurdle

Inconsistent octori, entry tax structure, vat and multiple taxation issues.

large grey market presence. Underdeveloped supply chain

Underdeveloped logistics infrastructure &absence of national cold

chain networks.

Lack of adequate utilities

Lack of basic infrastructure like power, transport and communication.


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Opportunities

Potential for investment.

Locational advantage.

Sectors with high growth potential.

Fastest growing formats.

Rural retail. Create transparency in the system

Healthy Competition will be boosted and there will be a check on theprices (inflation)

Intermediaries and mandi system will be evicted, hence directly

benefiting the farmers and producers Quality Control and Control over Leakage and Wastage

Heavy flow of capital will help in building up the infrastructure for thegrowing population


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Threats

Political issues. Social issues.

Inflation.

Nostalgia

Lack of differentiation among the malls that are coming. Poor inventory turns and stock availability measures.

Big players can knock-out competition

Current Independent Stores will be compelled to close

India does not need foreign retailers

Remember East India Company it entered India as trader and thentook over politically.

The government hasnt able to build consensus.


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Demand-Supply Dynamics, Demand Trends

The global demand has been falling consistently due to crisis in USand Europe.

On the supply side, retailers are slowing down their expansion plansand many real estate developers are falling behind schedules in theirshopping mall projects, considering the credit crunch.

However in Future Indian retail is expected to grow 25 per centannually. Modern retail in India could be worth US$ 175-200 billionby 2016.

The Food Retail Industry in India dominates the shopping basket.

The Mobile phone Retail Industry in India is already a US$ 16.7billion business, growing at over 20 per cent per year.

The Retail sector in the small towns and cities will increase by 50%to 60% pertaining to easy and inexpensive availability of land anddemand among consumers.


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Markets for the Products India has emerged as the fifth most favourable destination for

international retailers.

Rural marketing through direct channel contributes about 23 per centof the firm's total sales, which it expects to increase to more than 35per cent in the next three years.

India's franchise market is growing at a healthy pace with tier II andtier III cities gradually getting attracted to the network of retailers andfranchisers.

Indian apparel retailers are increasing their brand presence overseasin developed markets. While most have identified a gap in countries

in West Asia and Africa, some majors also looking at US andEurope.

India will be a high potential market with accelerated retail growth of15-20 per cent expected over the next five years according to areport.


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Company Name Net Sales(Billion $) Country

Walmart $421,849.00 USA

Carrefour $120,297 French

Tesco $94,185 UK

Metro AG $89,081 German

The Kroger Company $82,189 USA

Schwarz UnternehmensTreuhand KG $77,220.00 German

Costco Wholesale $77,946 USA

Home Depot $67,997 USA

Target $67,390 USAAldi GmbH & Company

oHG $58,000 German


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Company Name Net Sales(Billion $)

Pantaloon Ret 0.79

Shoppers Stop 0.37

Trent 0.16

Brandhouse 0.14

REI Six Ten 0.11

Provogue 0.11

Koutons Retail 0.10

Kewal Kiran 0.05

Cantabil Retail 0.03

Arunjyoti Enter 0.01

Prozone Capital 0.00


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MajorPlayers

Source Moneycontrol.com

Pantaloon Ret

43%

Shoppers Stop

18%Brandhouse

8%

Trent

7%

Others

12%

Provogue6%

Koutons Retail6%

Pantaloons Retail India Ltd. is market leader with 43% of the marketshare in terms of turnoverFollowed by Shoppers stop, Brandhouse, Trent, Provogue


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Cost Structure

70.9

1.45

4.56

3.82

17.06

2.22 0

Raw Materials

Power & Fuel Cost

Employee Cost

Other Manufacturing Expenses

Selling and AdministrationExpensesMiscellaneous Expenses

Less: Pre-operative ExpensesCapitalised


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Profit Trend

1.83%

1.03%

-1.19%

-0.60%

1.34%

3.06%

3.76%4.05%

3.80%

4.37%

-2.00%

-1.00%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

1 2 3 4 5 6 7 8 9 10

Net Profit Margin

Linear (Net Profit Margin)


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ROCE

17.1

14.92

10.27 9.96

6.79 6.237.57

0

2

4

6

8

1012

14

16

18

2006 2007 2008 2009 2010 2011 2012

ROCE (%)

Linear (ROCE (%))


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Trent

The Companys operations consist of Westside stores, Star Bazaar and Landmarkstores.

The Westside stores include a private label fashion apparel format. During fiscalyear ended March 31, 2012 (fiscal 2012), 13 stores were opened, including theBhopal (DB City Mall), Pune (Phoenix Market City), Mumbai (Infinity Mall), Varanasi(Dhanushree Complex ), New Delhi (Moments Mall), Mumbai (R-City Mall),

Bilaspur (City Mall), Udaipur (Rkay Mall) and Bangalore (Orion Mall). The Star Bazaar is the discount hypermarket format. As of March 31, 2012, there

were 15 operational stores (three in Mumbai (Andheri, Dahisar and Thane), four inBangalore, two in Ahmedabad and Pune, one each in Aurangabad, Surat, Chennaiand Kolhapur).

The Landmark stores include the format retailing inter-alia books, music, toys andgaming, which are managed by a subsidiary of the Company, Landmark Limited.

The company disclosed rise of 24.70% in standalone net profit on y-o-y basis to Rs127.64 million, while total income rose 12.65% y-o-y basis to Rs 2.20 billion for thequarter ended June 2012.


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Key Financials (Trent)Period & months 2012/03 2011/03 2010/03 2009/03 2008/03

Net Operating Income 8698.8 6861.5 5633.3 5117.3 5141.6

Cost of Sales 8827.3 6789.3 5479.1 5029.7 4958.6

Reported PBDIT -128.5 72.2 154.2 87.6 183

Other Recuring Income 902.5 695.8 430.7 259.7 42.9

Adjusted PBDIT 774 768 584.9 347.3 419

Depreciation 159.5 136.3 118.5 92.3 88.5

Other Write-offs 0 0 0 0 0

Adjusted PBIT 614.5 631.7 466.4 255 330.5

Finanical Expenses 77.1 123 95.1 43.3 42.9

Adjusted PBT 537.4 508.7 371.4 211.7 287.6

Tax Charges 100.7 172.3 105.7 30.7 47.4Adjusted PAT 436.7 336.5 265.7 181 240.2

Non-recurring Items -91.6 94.7 122 66.1 85.6

Other Non-cash Adjustments 127.6 -0.8 14.5 20.5 2.9

REPORTED PAT 472.7 430.4 402.2 252.1 325.8


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Shoppers Stop

Incorporated as a private limited company on June 16, 1997 The foundation was made by K Raheja Corp

Shopper's Stop Limited (SSL) is engaged in the business of retailingvariety of household and consumer products and books throughdepartmental stores.

As of March 31, 2012, SSL operated through 51 departmentalstores.

As of March 31, 2012, it opened 13 departmental stores, whichincludes two stores in Chennai and Pune and one each at Indore,Vijayawada, New Delhi, Mysore, Latur, Ahmedabad, Mumbai,

Bengaluru and Gurgaon. During the fiscal year ended March 31, 2012, the Company also

opened seven HomeStop one each at Lucknow, Vijayawada, Pune,Bengaluru, Ahmedabad, Mumbai, hydrebad taking its tally to 11stores.

In May 2012, it opened Shoppers Stop store at Jalandhar.


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Key Financials (Shoppers Stop)

Period & months 2012/03 2011/03 2010/03 2009/03 2008/03

Net Operating Income 20,347.60 19,290.00 15,683.70 13,275.10 11,460.10

Cost of Sales 17,134.20 16,264.90 13,122.20 11,478.70 9874.2

Reported PBDIT 3213.3 3025.2 2561.5 1796.4 1585.9

Other Recuring Income 186.9 90.8 43.2 79.5 1131.1

Adjusted PBDIT 3400.2 3116 2604.7 1875.9 1669.4

Depreciation 377.2 310 310.3 631.3 392.7


Adjusted PBIT 3023 2806 2294.4 1244.6 1276.7

Finanical Expenses 2039.1 1668.3 1601.1 1556.4 1131.1

Adjusted PBT 983.9 1137.7 693.4 -311.8 145.6

Tax Charges 335.5 386.5 211.3 58.9 62.8

Adjusted PAT 648.4 751.2 482.1 -370.7 82.8

Non-recurring Items -5.8 0.5 38.6 -266.5 -0.5

Other Non-cash Adjustments 0 0 -18.4 0 -12.7

REPORTED PAT 642.6 751.8 502.3 -637.2 69.7


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Provogue Provogue (India) Limited (PIL) was incorporated on 17th November

1997 as Acme Clothing Private Limited. Divisions of the company include accessories, women's wear and

men's wear.

The EPS of company has dropped from 12.56 in 2012 to 2.17currently.

The sales and Net worth have also dropped significantly.

PAT has come down to -25.08 crores from 17.85 crores from last year.

The tactical marketing policies, aggressive promotional campaigns,and unique distribution techniques through malls, stores have helped

Provogue grow to become a leader in the garments segment in India. This concept of being different has carved out a definite niche in the

hearts of the buyers.

Overall the outlook looks very strong and positive and is the best bet inthe companies among retail.


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Key Financials (Provogue)Period & months 2012/03 2011/03 2010/03 2009/03 2008/03


Cost of Sales 5499 4921.6 4287.1 3211.6 2885.4

Reported PBDIT 596.9 701 519.6 356 476

Other Recuring Income 152.7 151 187.4 231.7 164.2

Adjusted PBDIT 749.6 852 707 587.8 565.5

Depreciation 118.1 119.3 122.8 95.1 81.1


Adjusted PBIT 631.5 732.7 584.2 492.7 484.4


Adjusted PBT 309.4 472.3 384.7 343 320.2Tax Charges 45.8 85.6 119.4 109.5 63.5

Adjusted PAT 263.6 386.8 265.3 233.5 256.7

Non-recurring Items -13.3 -48.3 13 60.1 7.5

Other Non-cash Adjustments 0 -4.4 5.3 1 -6.1

REPORTED PAT 250.3 334.1 283.5 294.6 259.7


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Brand House Retail

Brandhouse Retails was established as a pure play retailorganization. As a company that caters to the entire spectrum of thesocio-economic stratum in the Indian market

BHRLs retail expertise extends from mid-price to the lifestyle andluxury segment.

HRL is amongst the leading fashion retailers in India. It currentlymanages the retailing of the following brands through exclusivebrand outlets across India Reid & Taylor, Belmonte, CarmichaelHouse and dunhill.

A network of 784 company-operated and franchise stores across thecountry of approximately 8.93 lac sq ft. each one focus on garments,fashion accessories and home furnishings offering international &domestic brands.

91 Cities, 784 Stores and 6.6 Sq. Ft of retail area covered.


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Key Financials (Brand House Retail)Period & months 2012/03 2011/03 2010/03 2009/03 2008/03


Cost of Sales 7286.5 6777.8 6010.2 5108.2 2833.8

Reported PBDIT 548.3 596.6 564.4 415.3 304.1

Other Recurring Income 0.9 2.7 22.9 0.6 38.8

Adjusted PBDIT 549.2 599.4 587.3 415.9 311.6

Depreciation 97.4 98.8 85.6 82.8 47.1


Adjusted PBIT 451.8 500.6 501.7 333.1 264.5


Adjusted PBT 154.1 217.5 310.1 245.3 225.8Tax Charges 54.3 60.5 113.8 104 95.1

Adjusted PAT 99.7 157 196.4 141.3 130.7

Non-recurring Items 0 -0.2 0.1 -4.1 0.5

Other Non-cash Adjustments -14.7 44.4 -34.4 -3.4 -0.1

REPORTED PAT 85 201.2 162.1 133.9 131.1


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Pantaloon Retail (India) Ltd

Pantaloon Retail India Limited (PRIL), a retailer was incorporated in 12th

October of the year 1987, headquartered in Mumbai Company operates through primarily the Lifestyle' and Value' formats through

multiple delivery mechanisms and lines of business, some of them being,fashion, food, general merchandise, home, leisure and entertainment,financial services, communications and wellness.

The Company has stores in 51 cities across the country, constituting over 6million square feet of retail space.

Caters to the Lifestyle' segment through its 35 Pantaloons Stores and 5Central Malls, as well as through 78 Big Bazaar hypermarkets, 113 FoodBazaars.

In the year 1991, the company had launched BARE, the Indian jeans brand.Initial public offer (IPO) was made in May of the year 1992

Multiple retail formats including Collection i, Furniture Bazaar, Shoe Factory,EZone, Depot and futurebazaar.com are launched across the nation in theyear 2006


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Key Financials (Pantaloon Retail (India) Ltd)Financial Year Ending 2012/06 2011/06 2010/06 2009/06 2008/06

Net Sales 4,326.79 4,840.96 5,630.21 7,026.81 5,941.22

Cost of Sales 3,966.22 4,385.83 4,953.65 6,346.09 5,449.77

Reported PBDIT 785.56 455.13 676.56 680.72 491.45

PBDT 486.99 261.66 375.52 356.28 279.01

PBIT 593.1 308.76 514.68 540.67 408.06

PBT 294.53 115.29 213.64 216.23 195.62

PAT 285.05 76.67 179.56 140.58 125.97


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Future Prospects


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Uncertain macroeconomic environment Prices of apparel also surged concomitantly with the increase in

cotton prices and the levy of excise duty on branded apparel

Store expansion to drive revenue growth

Retail consumption growth to remain strong

The overall retail market is likely to grow at healthy compoundedrate of 15 per cent from Rs 24 trillion in 2011-12 to Rs 47 trillion in2016-17

Organized retail penetration to cross 10% by 2016-17

Food , Grocery & Beauty products to grow faster Slower growth expected in books, home dcor, and consumer

durables.

Focus on reducing store-level operating expenses

Future Prospects Cont.

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