Post on 06-Apr-2018
8/2/2019 Indian Retail s Analysis
1/18
AN ANALYSIS
OF
INDIAN RETAILSECTOR
8/2/2019 Indian Retail s Analysis
2/18
Indian Retail Scenario
Retailing in India is one of the pillars of its economy &accounting 14% to 15% of GDP.
Employs 40 million Indians (3.3%).
The retail sector in developing markets has experiencedexplosive growth over the past 10 years.
As the population has increased by 11%, retail spaceexpanded by 225 %
Retail sales per capita increased almost 100 %,
Internet access grew more than 400 %.
Developing countries now represent 42 % of globalretail sales.
8/2/2019 Indian Retail s Analysis
3/18
8/2/2019 Indian Retail s Analysis
4/18
Structural changes
8/2/2019 Indian Retail s Analysis
5/18
Division of Retail Industry
Organized retailing -
licensed retailers, who are registered for sales tax, income tax, etc
constitute 3% of retail sector.
Growing 35% annually.
Unorganized retailing traditional formats of low-cost retailing, example, kirana shops,
owner manned general stores,paan/ beedi shops, conveniencestores, hand cart and pavement vendors,
Constitute 97% of retail sector.
Growth is pegged by 6% annually.
3%
97%
retail industry
organised retail
unorganised retail
8/2/2019 Indian Retail s Analysis
6/18
RETAIL FORMATS
Convenience Stores Discount Stores
Factory / company outlets
Supermarkets Department Stores
Hypermarkets
Rural Retailing
Airport Retailing
E-Retailing
8/2/2019 Indian Retail s Analysis
7/18
INDUSTRY CHARACTERISTICS
Highly unorganized (97%) & fragmented
industry.
Small to huge store (serves consumers through a smallgrocery store to a huge departmental store)
Long supply chain.
Working Capital intensive.
Hierarchy in retail. (Town Centers-District Centers- NeighborhoodCenters- Corner Stores.)
Linkages with the economic growth.
The rural-urban divide.
8/2/2019 Indian Retail s Analysis
8/18
INDUSTRY GROWTH DRIVERS
Demand factors
Rising Urbanization
Growing per capita
expenditures
Growing spread of plasticmoney'
Changing face of Indian
consumerism - from
necessities to luxuries Rising number of nuclear
families
Growing female working
population
Supply-side factors
Developments in the
real estate scenario
Retail growth
through VC/PE route
8/2/2019 Indian Retail s Analysis
9/18
Government policies FDI up to 100% for cash and carry wholesale trading and
export trading allowed under the automatic route.
100% FDI in integrated cold-storage chain & otherinfrastructure.
FDI up to 51 % with prior Government approval (i.e. ForeignInvestment Promotion Board (FIPB) approval ) for retail trade
of Single Brand products (now 100% allowed byjan10/2012)
50% jobs go to rural areas & 30% of inputs sourced fromSMEs.
India will allow 51% FDI in the multi-brand retail sector.
8/2/2019 Indian Retail s Analysis
10/18
Global development analysis
China ranks as the most
attractive emerging marketfor apparel retailersaccording to a study byglobal managementconsulting firm A.T. Kearney.
BrazilJumps to
First Placein Ranking ofTop
Developing Economies forGlobal Retail Expansion
Brazil, Uruguay and Chiletop China and India for newexpansion opportunities.
A.T. Kearney Global RetailDevelopment Index, 2011
Country
2011
Rank
2010
Rank Change
Brazil 1 5 +4
Uruguay 2 8 +6
Chile 3 6 +3
India 4 3 -1
Kuwait 5 2 -3
China 6 1 -5
Saudi Arabia 7 4 -3
Peru 8 9 +1
U.A.E. 9 7 -2
Turkey 10 18 +8
8/2/2019 Indian Retail s Analysis
11/18
Qualitative Aspects Threat of new entrant
Intensive Capital requirement.
Govt. policy on FDI.
Inability to build economies of scale.
Bargaining power of buyers High due wide variety of choices, FDI liberalization
Rivalry between existing competitors Highly competiveness due allowance of FDI.
Global competition increased.
Threat of Substitute Moderate to low due to unorganized retailing sector.
Bargaining power of suppliers Low as large number of potential suppliers.
Unorganized sector dominates the market.
8/2/2019 Indian Retail s Analysis
12/18
Industrial life cycle
The
graphically
representatio
n of growth of
retail industry
through years.
8/2/2019 Indian Retail s Analysis
13/18
Business analysis
Growth analysis
The growth in sales raised by 8.85% and earning by6.19%.(Last updated in January 2012)
Defensive industry
Retail sector considering food stores is less affected by
recession whereas luxury stores had an impact.
Cyclical industry
Consumer durables are most volatile.
8/2/2019 Indian Retail s Analysis
14/18
Impact of recession on retail sector
Earliest players -Subhiksha's -liquidityinjection.
Vishal Retail -debt restructuring (CDR) planfrom its lenders
Reliance Retail run by Mukesh Ambani and
Pantaloon led Kishore Biyani by went slowon expansion plans and even scaled downoperations.
organized segment suffered a set-back in the
form ofdeclining revenues and halt in theircapex plans.
Inventory being stacked up resulting in alow inventory turnaround ratio
8/2/2019 Indian Retail s Analysis
15/18
Challenges in India Barriers to FDI
FDI not permitted in pure retailing Franchisee arrangement
allowed.
High Cost of Real Estate
Complex Taxation System
Differential sales tax rates across states - Multi-point octroiSales tax avoidance by smaller stores.
Customer Preferences
Unavailability of Talent
Intermediaries dominate the value chain.
Infrastructure.
Absence of a farm-to-fork(PDS)
No Global Reach
8/2/2019 Indian Retail s Analysis
16/18
Indian retail will double in economic value,expanding by $400 billion by 2020.
25% market share an expected growth by 2021.
Huge Scope for Development Competitive MarketOrganized retail is fast growing at a rate of 30%YOY Greater opportunity for employment.
The industry is expected to grow at a rate of 12%
per annum for the next 5 years.
The Indian luxury market is expected to grow by25% per annum making India the 12th largest in the
world.
8/2/2019 Indian Retail s Analysis
17/18
Conclusion
Many investors like retail, because they are
personally familiar with itafter all, everybodyshops.
retail is overvalued due to many 1031 investors
searching for a safe investment.
8/2/2019 Indian Retail s Analysis
18/18
Any Question