Independent Food Retailers. Sustainability in a changing Retail Landscape?
UNIT-1 Changing Retail Landscape in India 2
-
Upload
rashmi-ranjan-panigrahi -
Category
Documents
-
view
13 -
download
6
Transcript of UNIT-1 Changing Retail Landscape in India 2
Changing Retail Landscape in India
Presented By: Uma Shankar Singh (Alumnus XLRI)
Indian Retail8.90%
9.0%
6.8%6.0%6.0%5.6%
5.2%
6.4%6.6%
5.4%
9.2%
0%1%2%
3%4%5%6%7%
8%9%
10%
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Projections of 8% sustainable real GDP growth rate till 2020 promise high growth potential for Indian Retail…
Real
Gro
wth
Rat
e
Source :Central Statistical Organization (CS0)
Source: Citigroup Research
Timeline of Retailing in India
India Experiencing Rapid Economic Growth
9.4% growth rate makes India the second fastest growing economy in the world
GDP
(US$
bn)
Real
Gro
wth
Rat
e
With High Private ConsumptionGDP
US$ 935 billion
Private ConsumptionUS$ 580 Billion
(62%)
Public Spending and Capital Formation
US$ 355 Billion (38%)
Retail US$ 342 Billion
(59%)
Non RetailUS$ 238 Billion
(41%)
Urban (5,100 towns) US$ 154 Billion
(45%)
Rural (6,27,000 villages)US$ 188 Billion
(55%)
Modern retail – US$ 12 billion 8% of urban retail spends
Modern retail Negligible
Food
Apparel
Beverages
Footwear
Consumer durables
Appliances
Stationery
Kitchen utensils
Furniture
Furnishings
Sports goods
Health & Beauty
Personal Care
Jewellery
Timing
Transport
Communication
Recreation
Cultural Services
Education
Rent
Utilities
Other Services
Source: Central Statistical Organization (CS0) and Technopak Analysis Conversion rate: 1 US$ = 40.86 Rs.
About US $530 Billion Retail Market by 2012
GDP* US$ 1,450 billion
Private ConsumptionUS$ 870 Billion
(60%)
Public Spending and Capital Formation
US$ 580 Billion (40%)
RetailUS$ 530 Billion
(61%)
Non RetailUS$ 340 Billion
(39%)
UrbanUS$ 252 Billion
(47.5%)
RuralUS$ 278 Billion
(52.5%)
Modern retail – US$ 78 billion 31% of urban retail spends
Modern retail – US$ 9 billion 3% of rural retail spends
Source: Technopak Analysis *All figures are in nominal terms after taking into account inflation
Which Makes Indian Retail an Attractive Market
India tops the Global Retail Development Index
Modern Retail – Organized Channels• The share of organized retail is less than 3% of the total retail
market • The size of modern retail is about US$ 8 Billion and has
grown by 35% CAGR in last five years
85% 81%
55%40% 36% 30%
20% 20% 3%
0%
20%
40%
60%
80%
100%
US Taiwan Malaysia Thailand Brazil Indonesia Poland China India
Traditional Channel Modern Channel
.. but Rapid Transformation is Anticipated
Current Size & Future Projections for Indian Retail Market
342 373 408 445 486 530
800
12 18 26 39 59 87200
0100200300400500600700800900
2007 2008 2009 2010 2011 2012 2017
US
$ Bi
llion
Total Retail Organized Retail
And may reach a share of 25% by 2017
Which categories will grow ?Food and Groceries• Sector that the largest amount of consumer spends is concentrated. • Maximum opportunity for investments
Consumer durables• With increasing purchasing power, consumers tend to spend the most on this
category. • There is nothing to prevent a company from putting up shops outside the city
limits, because consumer durables are a premeditated purchase. • Availability of finance options has increased spending in this sector.
Home products• With increasing private ownership of homes by relatively young couples,
across most major cities in India, national retail chains offering home furniture (and accessories) have great potential.
Weekly MarketsVillage Fairs
Melas
Convenience StoresMom and Pop/Kiranas
PDS OutletsKhadi StoresCooperatives
Exclusive Brand OutletsHyper/Super Markets
Department StoresShopping Malls
Traditional/Pervasive Reach
Government Supported
Historic/Rural Reach
Modern Formats/ International
Evolution of Indian retail
Source of Entertainmen
t
Neighborhood Stores/Convenie
nce
Availability/ Low Costs / Distribution
Shopping Experience/Efficie
ncy
Price, concern and typical Indian features are some examples
Adaptation to Local Market – Road for Success
Source: McKinsey Quaterly, winning the Indian consumer, 2005
Chicken hamburger to reach segments that do not eat beef
McDonalds Maharaja Mac
Nokia 1100
Anti dust keypad for dirty roads, anti slip grip for the heat and flash-light in case of electricity shortage
Indian menus with singe touch
Samsung microwaves
Memory backup to compensate for frequent power shortage
Samsung laundry machine
10 milli lt. sachet for less than 5 cents increased the shampoo buying population dramatically
Head & Shoulders
Recent Trends
Experimentation with formats: Retailing in India is still evolving and the sector is witnessing a series of experiments across the country with new formats being tested out. Ex. Quasi-mall, sub-urban discount stores, Cash and carry etc.
Store design : Biggest challenge for organized retailing to create a “customer-pull” environment that increases the amount of impulse shopping. Research shows that the chances of senses dictating sales are upto 10-15%. Retail chains like MusicWorld, Baristas, Piramyd and Globus are laying major emphasis & investing heavily in store design.
Emergence of discount stores: They are expected to spearhead the organized retailing revolution. Stores trying to emulate the model of Wal-Mart. Ex. Big Bazaar, Bombay Bazaar, RPGs.
Unorganized retailing is getting organized: To meet the challenges of organized retailing such as large Cineplex's, and malls, which are backed by the corporate house such as 'Ansals' and 'PVR‘ the unorganized sector is getting organized. 25 stores in Delhi under the banner of Provision mart are joining hands to combine monthly buying. Bombay Bazaar and Efoodmart formed which are aggregations of Kiranas.
Recent changes:
Unorganized : Vast majority of the twelve million stores are small "father and son" outlets
Fragmented : Mostly small individually owned businesses, average size of outlet equals 50 s.q. ft. Though India has the highest number of retail outlets per capita in the world, the retail space per capita at 2 s.q. ft per person is amongst the lowest.
Rural bias: Nearly two thirds of the stores are located in rural areas. Rural retail industry has typically two forms: "Haats" and “Melas". Haats are the weekly markets : serve groups of 10-50 villages and sell day-to-day necessities. Melas are larger in size and more sophisticated in terms of the goods sold (like TVs)
Traditionally three factors have plagued the retail industry:
Retail Market not limited to metros but widely across India
• The classic ”skimming” strategy in the metros is not longer sufficient– 100 cities strategy
• Over 250 large size shopping malls are currently under construction
• Leading cities 2030 are forecasted to be– Mumbai– New Delhi– Chandigarh
New Delhi
Bangalore
Mumbai
Chennai
Kolkata
Ahamabad
HyderabadPune
Above 10 Mn inhabitants
Above 4 Mn inhabitants
Above 2 Mn inhabitants
Above 1 Mn inhabitants
Kanpur
Lucknow
Jaipur
Nagpur
Coimbatore
Bhopal
Madurai
Kochin
Varanasi
Visakhapatnam
Patna
Indore
Surat
Vadodara
Ludhiana
Drivers for Indian RetailHigh Income
OpportunitiesChanging Attitude International
ExposureNecessities to
Lifestyle
•Service Sector: creating new jobs.
•Working Population in 2010 will 70%
•IT Industry: increasing professional opportunities
•Rising Salary levels
•MNCs entering India and homegrown companies going global
•From Save to Spend
•High disposable income family structures on a rise
•Nuclear Families
•DINKS (Double Income No Kids)
•Multi income families
•International travel
•Exposure to global trends
•Highest Growth in outbound tourists in the world
•Shift of expense basket from basics to lifestyle products
•Increased spend on Apparel, personal care, entertainment
•Easy Bank credit boosts retail
Customer value drivers are continuing to fragment as a result of changing demographics & value systems
Consumption expenditure is 60 % of India’s GDP
Market & Government
•Easing out on Import barriers, Government sponsorship taking shape (FDI Policy, Tax and Duty structure, Subsidies)
•Fluid retail Segments
•M-Commerce & e-Commerce boosts retail
Global Heavyweights in Indian RetailingJoint Ventures Product Range Retail Formats
Bharti-Walmart (with $2.5 Billion investment by Bharti)
Food & grocery, electronics & appliances, clothing & footwear, furniture & furnishing, household articles.
Hypermarkets, Supermarkets and Convenience
Carrefour-Landmark Food and groceries, FMCG, apparel and electronics Hypermarkets
Home Retail Group plc - Shopper's Stop Ltd and Hypercity Retail India Private Ltd
Franchising the Argos concept under the terms of the arrangement, Argos will be providing its brand, catalogue and multi-channel expertise and IT support
Multi Channel propositions
Tata-Woolworths Sourcing agreement for Consumer durables and Foods under brand name CROMA
Multi brand retail chain
Staples Inc – Pantaloon Retail
Global Sourcing of Office equipments across various businesses
Cash and carry
Reliance Food & grocery, electronics & appliances, clothing & footwear, furniture & furnishing, household articles.
Multi format and Multi Category
Birla Food & grocery, electronics & appliances, clothing & footwear, furniture & furnishing, household articles.
Convenience and Supermarket
Format Definition
Formats Description Key categories retailed Typical size Sq.ft.
Example
Hyper markets
A large superstore, combining a supermarket and departmental store, offering full lines of grocery and general merchandise all under one roof
Food, groceries, apparel, furnishings, consumer durables
15,000-100,000 Big Bazaar, Hypercity, Spencer, Star India Bazaar, Vishal Megamart
Super markets
A large self service outlet offering food and household goods
Food, groceries, medicines 3,000-15,000 FoodWorld, Trinethra, Subshiksha, Food baazar
Departmental stores
A large self service outlet offering a variety of merchandise
Apparel, Jewellery, watches, fashion accessories, footwear, furniture, furnishings
10,000-50,000 Shopper’s Stop, Lifestyle, Pantaloon, Westside
Category killers
Large speciality stores focussed on one or a few categories of merchandise, offering a wide selection at low prices
Electronics, office supplies, apparel 20,000-100,000 Best Buy – Circuit City, Staples
Convenience stores
Small size, easily accessible stores offering a quick shopping, fast check out experience and extended working hours
Food, groceries, medicines 500-2,000 In&Out, Trinethra, Subhiksha, traditional stores
Format Definition (Contd.)
Formats Description Typical size Sq.ft. Example
Single brand outlets
Retail outlet offering products of a single brand
Apparel, footwear, tyres, food services, furniture
•1,000-5,000 Nike, Adidas, Colourplus, McDonalds, Gautier, Gucci, TBZ
Multibrand speciality stores
Retail outlet offering multiple branded products belonging to a single category class
Footwear, apparel, electronics, books
•1,000-20,000 Planet Sports, Planet Fashion, Crosswords
Warehouse clubs
Warehouse style large stores, offering goods in bulk at discount prices to members
Food, groceries •100,000 + Metro cash and carry, Costco, Sam’s Club
Key categories retailed
Retail Challenges
Organizing Retail in India-Challenges
• Heterogeneous market
– Product offerings in different stores across the country will be very different
– No standard mode of operation across formats
– Market not mature (has to be validated)
• Infrastructure will bring about logistical challenges
– Though, improvements in road networks, power supply are underway
• Trained employees with understanding of retail business are inadequate compared to the needs of organized retail
• Barriers to Entry
– High taxes, bureaucratic clearance process and labour laws
• High cost of real estate
– though over 600 malls are to come up all over the country by the next 4 years
• Indian retailers are deeply entrenched, are expanding and building on logistics and technology initiatives
Processes
• Complex Processes - Multiple MRP, Deals & Promotions, Forecasting & Replenishment, Lean supply chain – JIT inventory, flow through warehouse
• Evolving processes in Supply chain & merchandising• Global Best Practices not adopted
Consumer
Infrastructure
• High disposable income• Changing consumer preferences• 28 states, 100+ religion, 250+ festivals
• Supply chain not reliable. Cold storage infrastructure evolving• Outsourced transportation• Low level automation in warehouses
Supplier/Vendor
Current IT
• Little or no collaboration between vendor & retailer• Low fill rates from vendors• Highly localized assortments leading to relationship with multiple vendors • Complex trading contracts and off invoice discounts
• Multiplicity of disparate Systems & Data Formats• No architecture roadmap• Base ERP and home grown POS solutions. Low investments in store systems• No investments in planning & optimization technologies
At ground level ….
Government Policies• 51% FDI allowed in single-brand formats• 100% FDI in cash-and-carry format• NO FDI in multi-brand stores ( like Wal-Mart)• Trends indicate that the FDI would open up in
retail sector, however political consensus has to be reached before that happens
Benefits of FDI in retail Drawbacks of FDI in retail
Inflow of investment and funds. Improvement in the quality of
employment. Generating more employment. Increased local sourcing. Provide better value to end
consumers. Investments and improvement in the
supply chains and warehousing. Franchising opportunities for local
entrepreneurs. Growth of infrastructure. Increased efficiency. Cost reduction. Implementation of IT in retail. Stimulate infant industries and other
supporting industries.
Would give rise to cut-throat competition rather than promoting incremental business.
Promoting cartels and creating monopoly.
Increase in the real estate prices. Marginalize domestic entrepreneurs. The financial strength of foreign
players would displace the unorganized players.
Absence of proper regulatory guidelines would induce unfair trade practices like Predatory
Pros and Cons of allowing FDI in retail
The Way Ahead• India is amongst the least saturated of all major global markets in
terms of penetration of modern retailing formats
• Many strong regional and national players emerging across formats and product categories
• Most of these players are now gearing up to expand rapidly after having gone through their respective learning curves
• Real Estate Developers are also moving fast through the learning curve to provide qualitative environment for the consumers
• The Shopping Mall formats are fast evolving
• Partnering among Brands, retailers, franchisees, investors and malls
• Improved Infrastructure
In view of a compressed evolution cycle, retailers need to
simultaneously address issues of speed, Execution and efficiency
Retailers’ Marketing Decisions• Target market
• Product assortment:o Must match target market expectationo Decide product assortment breadth and depth
• Procurement
• Prices:o Must be decided in relation to the target market, the product
assortment and the competition
Retailers’ Marketing Decisions• Services:
o Pre-purchase services as advertising and accept telephone and mail orders
o Post-purchase services as gift wrapping and shipping and delivery
o Ancillary services as parking, general information and rest room
• Store atmosphere as walls, lighting, Product placement, and floor
• Store activities
• Communications tools as ads, run special sales, and issue money saving coupons
Retailers’ Marketing Decisions
• Location decision:o Central business district “down town”o Regional shopping centerso Community shopping centerso Shopping strips “cluster of stores”o A location within a larger store
Retail Category Management
Tips for Increasing Sales in Retail Space
• Attract and Keep shoppers in the store• Honor the transition zone• Don’t make them hunt• Make merchandise available to the reach and touch• Note that men do not ask questions• Remember women need space• Make checkout easy
Indicators of Sales Effectiveness
• Number of people passing by• Percent who enter store• Percent who buy• Average amount spent per sale
Private Label Brands
A privatee- label brand( a reseller, store, house) is a brand that retailers and wholesalers develop
Why do intermediaries bother to sponsor their own brands?• They can be more profitable• Retailers develop exclusive store to differentiate themselves from
competitorsEx: Canadian company LOBLAW which start as local store brand
and then become global
Wholesaling
Wholesaling includes all the activities in selling goods or services to those who for resale or business use
Wholesaling Functions
Major Wholesaler Types
Market Logistics
Market logistic includes planning the infrastructure to meet demand, then implementing and controlling the physical flow of materials and goods from points of origin to points of use to meet customer requirements at profit
Market Logistics Planning
• Deciding on the company’s value proposition to its customers• Deciding on the best channel design and network strategy• Developing operational excellence• Implementing the solution
What are Integrated Logistics Systems?
An integrated logistics system (ILS) includes materials management, material flow systems, and physical distribution, aided by information technology.
Market Logistics Activities
• Sales forecasting• Distribution scheduling• Production plans• Finished-goods inventory
decisions• Packaging
• In-plant warehousing• Shipping-room processing• Outbound transportation• Field warehousing• Customer delivery and
servicing
Market Logistics Decisions
• How should orders be handled?(Order processing)• Where should stock be located?(Warehousing)• How much stock should be held?(Inventory)• How should goods be shipped?( Transportation)
Thank You