OGFI Session III

8/8/2019 OGFI Session III

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SEC

A

THEGOL

DEN

BIRD

SEC A THE GOLDEN BIRD


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The phoenix is the bird which visits Egypt every

500 years, but the rest of the time it flies about in

India. It is unique in that it gives out ray of sunlight

and shines with goldfrom Philostratus II


3/80

The inescapablecrush of

thousands of

people in search

of a bargain

adds urgency &excitement to a

heady mix of

heat, humidity,


4/80

During Diwali, zillions of shoppers

surge into cramped and chaotic

lane, eager to get the best pricefrom one of the many shops &

stalls, plus scores of itinerant

hawkers offering food, sweets,

clothing, shoes, books,

homewares,jewelry, toys, knick-


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Welcome to Indias 21st

century store wars!!


6/80

12 million mom n pop stores

(kirana stores)

500 million shoppers


7/80

rising incomes => more

consumers switching from

local markets/stores to

MALLS


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As per Economic Survey of India

and Technopak analysis, Mar2008

Organised retail : 2008 USD 400

bn

2013 USD 615 bn2018 USD 860 bn


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Organised retail is 5% share of total

retail in India Its 20% for China and 85% for

USA!!!

BUT,India is growing fastest @ 30-35% a

year


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India has highest retail density in

the world

BUT

Low labour productivity

lack of capital

Technology

management talent

distribution infrastructure


11/80

Modern retail Vs. traders +

middlemen


12/80

Champion of discount shopping

Its slogan lowest prices in the nation

Standalone roughly finished wellworn stairs chipped & cracked

Storage cartons/product

leftovers piled everywhere

SARVANA STORE a case study
http://chennai.metblogs.com/archives/images/2007/05/Saravana%20Stores_resize.JPGhttp://chennai.metblogs.com/archives/images/2007/05/Saravana%20Stores_resize.JPGhttp://chennai.metblogs.com/archives/images/2007/05/Saravana%20Stores_resize.JPGhttp://chennai.metblogs.com/archives/images/2007/05/Saravana%20Stores_resize.JPG


13/80

Seven floors holds everything a

lower-middle-class family aspires to own

Apparel, furniture, kitchenware, whitegoods, electronic, luggage, toys.

..and a top floor caf!

25,000 sq.ft. Rs.2 billion/year

courtesy 1L shoppers per day!



14/80

Kishore Biyani studied Sarvana for weeksHis findings low margin + high

turnover is a powerful crowd puller AND

a commercial winner



15/80


16/80

More than 500 malls are in

pipeline

Many will die a fund-starved

death OR will morph into office

blocks

Current retail situation


17/80

Arvind SinghalTechnopakretail

consultancy firm

Dont worry about consumer

demand. Its there all right.

Worry about supply.both real estate and human

talent are in scarce supply

Current affairs


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A.T.Kearney has ranked India as top

retail destination globally, ahead of

Russia and China!

BUT, it has also identified 10 key issues

that need immediate attention

1.under developed supply chain

2.inadequate utilities

3.inadequate human resources

From A.T. Kearneys stable


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10 key issues that need immediate

attention

5.product supply base

6.limited consumer understanding

7.insufficient government incentive

8.hurdles in taxation

9.real estate

10.regulatory policies



20/80

10 key issues that need immediate

attention

e.g. Hypermarket in Mumbai 29unique licences 6 months.

open another store repeatthe same process!!!



21/80

Substantial help required from the

govt.

Staff training is of paramount

importance

Need for new generation retailmanager

Retailers to sponsor courses on



22/80

Dearth of warehousing &

distribution centres

Fresh food spoilage 40% !!

because of interstate bureaucracy,

poor transport link, inadequate coldchain



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*A.T. Kearney has suggested a

consortium by retailers, transporters

and cold storage

BUT.. cooperation is rare where

competitive juices run so freely!!*consolidations can help cut costs but

firms are wary about sharing



24/80

ultimately a retailer drawsstrength from its cost structure

and its supply chain. These two

variables can make or break you


R. Subramanian Subhiksha - chain of

1500 no-frills convenience stores

benchmarks for efficiency & income psfpd
http://2.bp.blogspot.com/_m0H9ETBBVg0/ST5x6IshPqI/AAAAAAAAAD8/k09cbuBqfuk/s1600-h/R_Subramanian.jpg


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India is likely to become worlds 5th

largest market by 2025

290 million people moved up from BPL to

middle class which has swelled to 600

million

Rising incomes more discretionary

lifestyle purchases increased benefit to

retail

Ocean of Opportunity


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TODAY, despite the impression of over-

building, theres still paucity of right real

estate.

IT sector will boom, itll deliver electronic

infrastructure to retail

Cold chain, packaging, housekeeping,

security, advertising will grow

2 million new jobs will be generated by

Ocean of Opportunity


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Rural India 70% population =

800 million people in 620,000

villages

Urban India 30% population =

350 million people in 5000 cities and

Rural Role


28/80

Rural people irregular income

rural credit cycle

Solution enable them

Rural Role


29/80

GDP is USD 1000 70% stay in

countrysidehalf the population more consumers for

many years to come

Middle class is fast emerging,spurring demand

Rural Role


30/80

India needs a faster and more

inclusive growth strategy to correct

imbalances within and betweendifferent parts of the country and to

avoid social unrest.

Rural Role


31/80

Inclusive growth can come from

freeing the business, making

education & health available toeveryone, developing rural sector

Key challenges

labour reformsIndias manufacturing & service

sectors only can create enough

Rural Role


32/80

Indias youth little direct experience of socialism

experiment of Indias first 40 yearspost independence

Buying a car or hand phone was analien concept

Different Outlook


33/80

Extensive survey by CLSA

revealed:

Indian 20 year olds are incrediblyoptimistic about the future

WORK HARDPARTYHARDER!!!

Balance hard work with leisure

Different Outlook

redit Lyonnais Securities Asia


34/80

Brands constitute a major part of

consumption in India

For many young Indians, business

Entrepreneurs have replaced Bollywood

stars

E.g. Vijay Mallya kingfisher beer,

F1 racing team,

much-in-demand ..annual swimsuit

Survey by CLSA
http://www.google.co.in/imgres?imgurl=http://im.in.com/connect/images/profile/b_profile5/Vijay_Mallya_300.jpg&imgrefurl=http://connect.in.com/vijay-mallya/profile-404.html&usg=__P8I-VNopMQQlQbcWvcNwz_FqH_c=&h=360&w=300&sz=18&hl=en&start=3&zoom=1&um=1&itbs=1&tbnid=LN7zSnvzuJsd_M:&tbnh=121&tbnw=101&prev=/images?q=vijay+mallya&um=1&hl=en&safe=active&tbs=isch:1http://www.google.co.in/imgres?imgurl=http://im.in.com/connect/images/profile/b_profile5/Vijay_Mallya_300.jpg&imgrefurl=http://connect.in.com/vijay-mallya/profile-404.html&usg=__P8I-VNopMQQlQbcWvcNwz_FqH_c=&h=360&w=300&sz=18&hl=en&start=3&zoom=1&um=1&itbs=1&tbnid=LN7zSnvzuJsd_M:&tbnh=121&tbnw=101&prev=/images?q=vijay+mallya&um=1&hl=en&safe=active&tbs=isch:1http://www.google.co.in/imgres?imgurl=http://provence.blogs.com/photos/uncategorized/kingfisher.jpg&imgrefurl=http://www.go-provence.com/2006/12/kingfisher_cale.html&usg=__vh2IzSly9U0bAAYSnHW6QBdH4o8=&h=320&w=500&sz=33&hl=en&start=16&zoom=1&um=1&itbs=1&tbnid=aNVrKImR_Pp3lM:&tbnh=83&tbnw=130&prev=/images?q=kingfisher+calendar&um=1&hl=en&safe=active&tbs=isch:1http://www.google.co.in/imgres?imgurl=http://provence.blogs.com/photos/uncategorized/kingfisher.jpg&imgrefurl=http://www.go-provence.com/2006/12/kingfisher_cale.html&usg=__vh2IzSly9U0bAAYSnHW6QBdH4o8=&h=320&w=500&sz=33&hl=en&start=16&zoom=1&um=1&itbs=1&tbnid=aNVrKImR_Pp3lM:&tbnh=83&tbnw=130&prev=/images?q=kingfisher+calendar&um=1&hl=en&safe=active&tbs=isch:1http://www.google.co.in/imgres?imgurl=http://im.in.com/connect/images/profile/b_profile5/Vijay_Mallya_300.jpg&imgrefurl=http://connect.in.com/vijay-mallya/profile-404.html&usg=__P8I-VNopMQQlQbcWvcNwz_FqH_c=&h=360&w=300&sz=18&hl=en&start=3&zoom=1&um=1&itbs=1&tbnid=LN7zSnvzuJsd_M:&tbnh=121&tbnw=101&prev=/images?q=vijay+mallya&um=1&hl=en&safe=active&tbs=isch:1


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Survey by CLSA

1993 MMS FM : opened up the retail

sector to FDI

1996 P.C. F.M. : revoked FDI bowing

to pressure from Communist Party in

United Front govt

Objections raised

1.colonisation of Indian economy,

2.great damage to small shopkeepers &


36/80

Survey by CLSA

Objections raised

3.loss of jobs for people

like handcart vendors,

4.blow to SSI,

5.pressure on local

culture and tastes


37/80

Steering Group on FDI

Aug2002 Steering Group on FDIreported to Indias PlanningCommission that:

the retail sector in India is dispersed, wide-

spread, labour intensive & disorganised,

therefore it is not desirable to lift the ban on

FDI


38/80

Early 2006

Govt. relaxed the rules a little,

allowed 51% FDI in single brand retailing

100% FDI in wholesale cash-and-carry

FDI in multi-brand retailing remained off

limits


39/80

Obstacles

So, what are the obstacles to asocially-inclusive retail-ledrevolution?

Start with Indias dysfunctional supply

system

Lack of cold storage chain

Scarce management expertise

Market fragmentation

Rising real estate price


40/80

Obstacles

Fractious body politic that waxes and

wanes about FDI

Top it with hyper-competition as 6 major

retailers clash in Indias top 20-30 cities

RETAIL OUTLOOK SEEMS LESS

ROSY


41/80

Obstacles

YET YOU INSIST THAT

Indian Retail Opportunity is the biggest

and best in the world

Lets see how Indias store wars might

play on..

T


42/80

EC

BWHA

TD

OCO

NSU

ME R

SWAN

T

SEC B WHAT DO CONSUMERS WANT


43/80

WHAT IS BREATHTAKING ABOUT

INDIA TODAY

?


44/80

Y

O

U

!

Who else did you think!
http://www.damer.com/pictures/digicamera/pix2004/2004-collage/2004-collage-medium.jpghttp://www.damer.com/pictures/digicamera/pix2004/2004-collage/2004-collage-medium.jpghttp://www.damer.com/pictures/digicamera/pix2004/2004-collage/2004-collage-medium.jpg


45/80

More than half of the country is market is big enough to

accommodate many players

TECHNOPAK


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TECHNOPAK survey

change drivers of consumption boom

high literacy rate of young age groups

+ access to informationBasic necessities lifestyle & health

oriented goods

)


67/80

agency)

India is the fastest growing telephony

market + largest consumer of gold

major spending will continue to come

from Maharashtra, T.N., Karnatak,

Gujarat, Punjab, Haryana, Delhi

These states will urbanise faster =>

large markets for processed food,

consumer durables, FMCG

D A it Mit S t G l FICCI


68/80

Dr. Amit Mitra Secretary General FICCI

An Indian slum in reality is an

enterprise center but the daily struggle

is unrelenting

Above these urban slums are 100 mn.

households which earn 72k/yr.

Sellers should know how to reach these

households rural + urban

One such solution micro packaging

A

B

D A it Mit S t G l FICCI


69/80

Dr. Amit Mitra Secretary General FICCI

45 mn. have more households

Rs.525/day

18 mn. have lots households

Rs.1850/day (Rs.3085)*

4 mn. have all households

Rs.4930/day (Rs.14800)*

C

BIG BUSINESS


70/80

BIG BUSINESS

Retail is worlds largest private industry

with sales > USD 12 TRILLION (1/4 of

world gross product)

Biggest retail market USA USD 4

trillion

2nd rank Japan USD 1.2 trillion

China USD 700 bn

India USD 400 bn

McKinsey report


71/80

India to become 5th largest consumer market by

Apparel spend has remained constant at 5-6% of

household income .and across incomesegments

McKinsey report

McKinsey report


72/80

in line with global benchmarks

SOURCE : Euromonitor; MGI

McKinsey report

Class Structure


73/80

Class Structure

75% of all consumer spending is by

poor class

By 2025

2% globals 20% of total spending

Middle class 59% of total

spending

Lower class - 21% of total

spending

Class Structure


74/80

Class Structure

marketers need to go out and look for

new customer as their profile is changing

very fast

India has 784 towns with population >

50k

Mumbai (18 mn) + Delhi (14 mn) +

Kolkata (14 mn) + Chennai + Hyderabad

+ Bangalore + Ahmedabad + Pune = 6%

Class Structure


75/80

Class Structure

Almost 2/3 of Indias middle class

opportunity will lie outside top tier urban

areas

Chandigarh, Ludhiana & Amritsar have

average incomes top tier cities

Technopak short term assessment 2008


76/80


Trend 1. Socio-economic differences are

blurring. Different consumer groups

share the same aspirations

Trend 2. The chasm between India's

flourishing cities and bleak rural

hinterland is narrowing. A new prosperity

is sprouting in rural India.



77/80


Trend 3. Society wants to look young

forever. Youthful behaviour persists into

adulthood; 40-year-old men and women

look, talk, act and dress like people in

their twenties

Trend 4. Focus has given way to multi-

faceted. Most people today are engaged

in multiple activities at the same time



78/80


Trend 5. Sharing is in, be it wealth or

content, as typified by iTunes, YouTube

and blogs.

Trend 6. Increased demand for leisure

travel, real estate and unique lifestyle

experiences has fuelled the concept of

renting ownership.

Trend 7. Mobile phones represent a



79/80


Trend 8. Media-aware kids with access to

global information are being consulted by

their parents on decisions over holidays,

cars, consumer durables, and so on.

Trend 9. Indian consumers are becoming

environmentally conscious, using

recycled products and opting for eco-

friendly items where possible.



80/80


Trend 10. There is an interest in the

heritage and history of modern concepts.

This search for roots is evident in music,

fashion, and design trends.

OGFI Session III

Documents

Transcript of OGFI Session III