Key Drivers of Growth in Indian Retail

Presented By

Pinaki Basu200940

Introduction An Overview of Indian Retail Industry

• Size of Indian Retail Industry : $ 390 Billion or ₹ 18,10,000 crore

• Compounded Annual Growth Rate : 11.74%

Source: F & R Research

Value in ₹ BillionYear Organised Unorganised Total 2004 280 9020 9300 2005 375 9925 10300 2006 550 11450 12000 2007 783 12517 13300 2008 1120 13680 14800 2009 1600 14800 16400 2010 2300 15800 18100

CAGR 2004-2010 (%) 11.74

2004 2005 2006 2007 2008 2009 20100

5000

10000

15000

20000

280

375

550

783

1120 16

00 2300

9020 99

25 1145

0

1251

7

1368

0

1480

0

1580

0

9,30

0

10,3

00 12,0

00 13,3

00 14,8

00 16,4

00 18,1

00

Growth of Indian Retail - Total

Year

₹ B

illion

Organized

Unorga-nized

Total

Source: Source: F & R Research

2004 2005 2006 2007 2008 2009 2010

Organised 280 375 550 783 1120 1600 2300

250

750

1250

1750

2250

Organised Retail Growth in India

Year

₹ i

n B

illi

on

CAGR : 45.74%Source: Source: F & R Research

Key Drivers

Consumer or Demand-Side Drivers

• Personal Consumption as a percentage of GDP

• Only second to Vietnam in Asia• Fourth in the world• China (~35%), Singapore (~45%), Hong Kong

(~50%), South Korea (~46%) in 2007

Consumer or Demand-Side Drivers

• Population as a Growth Driver

20012003

20052007

20092011

20132015

20172019

1,000,0001,050,0001,100,0001,150,0001,200,0001,250,0001,300,0001,350,000

Projected Total Population

Year

Proj

ecte

d Po

pula

tion

Source: censusindia.gov.in

Consumer or Demand-Side Drivers

• Population as a Growth Driver– Adoption of Nuclear Family Culture

• Average Household Size in 1991 : 5.57• Average Household Size in 2001 : 5.36• Average Household Size in 2011 : 5.02

(Expected)

Source: censusindia.gov.in

Consumer or Demand-Side Drivers

• Population as a Growth Driver– Baby Boomer Effect

• Steep Growth in Earning Population (15-60 yrs)• 335 million people (54 % of total population) in 1975• 593 million people (58.3% of total population) in 2000• Growth in Earning Population over 25 yrs: 77% • ( CAGR of 2.3%)• Growth in Indian Population over 25 yrs: 64%• (CAGR of 2%)• 782 million people (62.8% of total population) in 2015 (Expected)

Source: censusindia.gov.in

Consumer or Demand-Side Drivers

• Population as a Growth Driver– Growing Working Women

Population • Working women can spend 1.3 times more than

housewives• Working women in 1991: 22%• Working women in 2001: 26%

Source: censusindia.gov.in

Consumer or Demand-Side Drivers

• Population as a Growth Driver– Growth in Urban Population

• Urbanization has increased at a rate of 2.7 percent from 1991-2001

• Urban population 2000 : 28.1 crore• Expected to grow at 2.4%

Source: censusindia.gov.in

Consumer or Demand-Side Drivers

• Plastic Money Becoming a Greater Pie of Credit– India is the second fastest growing Financial

Cards market in the Asia - Pacific region.– Growth at 30-35% p.a. from 27mn cards in 2007. – Credit Card Sales: 1.2% in 2008– Credit Card Sales: 1.4% in 2010

(Expected)

Source: Euro Monitor (www.euromonitor.com)

Consumer or Demand-Side Drivers

• Internet Driving Awareness and Online Purchases

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

010,000,00020,000,00030,000,00040,000,00050,000,00060,000,00070,000,00080,000,00090,000,000

Internet Users in India

No.

Of P

eopl

e

Source: Internet World Stats, Angel Research

Retailer or Supply-Side Drivers

• Increased Investments in Retail

Source: Ernst & Young (www.ey.com)

Organised Retail will possibly touch ₹ 2300 bn in 2010

Allow organised players in Retail to expand

Funds through Private Equity, IPO route and infusion of funds through warrants

Retailer or Supply-Side Drivers

• Increased Investments in Retail

Source: Ernst & Young (www.ey.com)

At an average investment of ₹ 3,000 per sq. ft. by Retailers, these investments would translate to 750 mn sq. ft. of Organised Retail space by FY2010

All key Retailers in India have chalked out substantial investments over next 3-4 years to fuel their expansion plans.

Retailer or Supply-Side Drivers

• Increased Investments in Retail

Source: Ernst & Young (www.ey.com)

Pantaloon is expected to invest around ₹ 6,000 cr over the next four years to fuel its three-fold expansion plan and take its total Retail space to 26mn sq. ft. by FY2012.

Vishal Retail is expected to invest ₹ 3,000cr to fuel its ambitious five-fold expansion plan to take its total Retail space to 10mn sq. ft. by FY2011.

Retailer or Supply-Side Drivers

• Tier- II & III cities to fuel future growth of Modern Retail– The Top-784 cities in India constitute about 26%

of population– They contribute 35% to Total Retail Sales.– Tier- II and III cities account for 18% of the overall

population– They contribute 22% to the Total Retail sales.

Retailer or Supply-Side Drivers

• Shortened Supply Chain benefits consumers – A Traditional supply chain in India

comprises 5-6 levels – Two major disadvantages:

• Cost of the product increases• Increase in shrinkage

Traditional v/s Modern supply chain

Company / Manufacturer Distributor

Buying Agent

Multi-Brand Outlets

Franchisees

Consumers

Company owned outlets / large

organized retailers

Back End

Front End

5% Margins for Distributors5%

Commission for Buying Agents

35% Margins for Multi-Brand Outlet Retailers

30% Margins for Franchisees

30-32% Margins for company owned outlets/ large retailers

Traditional v/s Modern supply chain

Company / Manufacturer

ConsumersRetailers

Back End

Front End

38-40% Margins for Retailers

Thank You