The document provides an analysis of the Indian retail sector from 2007-2008. It notes that India has high GDP growth projected to be 8% over the next 15 years. The retail sector is large and growing, but currently only 3% is organized/modern retail. Key trends include rapid urbanization, a young population, and expanding categories of spending beyond just food and clothing. The future of Indian retail is projected to reach $800 billion by 2017 with organized retail making up a larger share and becoming more prevalent in rural areas as well.

1. Presentation
On
Retailing: Present & Future
Part 1 -Analyze till 2008
Presenter:
Baldeep Mann
Monte Carlo Fashions Ltd.

2. Indian Economy
India is the fourth largest economy in terms of Purchasing Power Parity.
India is the second country having more than 1 billion population and population growth
rate is 1.6 %
Indian GDP growth is 8.90 % in the current year and projected 8 % constant growth for
next fifteen years.
Indian Textile Sector accounts for over 14% of the Industrial Production. Textiles
industry contributes 14 per cent to industrial production, around 17 per cent to the total
export earnings.
Currently India has a 3.5-4 per cent share in world export of textiles and 3 per cent in
clothing exports. Textile exports increased from around US$ 14 billion to US$ 22 billion in
2007-08 which will be around US$ 40 billion in 2010.
Readymade garments exports from India are expected to touch US$ 14.5 billion by 200910.
The total investment in the textiles and clothing industry during 2007-08 amounted to
US$ 16.32 billion and touch US$ 32.14 by 2012.
Textile industry provides direct employment to over 35 million


3. Indian GDP Growth…
9.0%
10%
9.2%
Real Growth Rate
9%
6.4%
8%
7%
6%
6.6%
5.4%
5.2%
5.6%
6.0%
6.0%
8.90%
6.8%
5%
4%
3%
2%
1%
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
0%
Projections of 8% sustainable real GDP growth rate till 2020 promise
high growth potential for Indian Retail…

4. Real Growth Rate
GDP (US$ bn)
India Experiencing Rapid Economic
Growth
9.4% growth rate makes India the second fastest growing economy in the world

5. Growth in Per Capita Income
With the increase in inflation rate PCI is also increased.

6. With High Private Consumption
GDP
US$ 935 billion
Food
Private Consumption
US$ 580 Billion
(62%)
Apparel
Beverages
Public Spending and Capital
Formation
US$ 355 Billion (38%)
Footwear
Consumer durables
Appliances
Stationery
Transport
Retail
US$ 342 Billion
(59%)
Non Retail
US$ 238 Billion
(41%)
Communication
Recreation
Cultural Services
Kitchen utensils
Furniture
Furnishings
Urban (5,100 towns)
US$ 154 Billion
(45%)
Education
Modern retail – US$ 12 billion
8% of urban retail spends
Utilities
Sports goods
Health & Beauty
Personal Care
Jewellery
Timing
Rent
Other Services
Rural (6,27,000 villages)
US$ 188 Billion
(55%)
Modern retail
Negligible

7. What is Retail…
Retail Philosophy — “By The People, For The People and Of The People”
Retailing involves selling products and services to consumers for their individual or
family use. As the final link between consumers and manufacturers, retailers are a vital
part of the business world. Retailers add value to products by making it easier for
manufactures to sell and consumers to buy.
The Indian Retail Sector can be broadly classified into—
Food Retailers
Clothing &
Footwear
Indian Retail Sector
Health &
Beauty
Products
Durable Goods
Home Furniture
& Household
Goods
Leisure &
Personal
Goods

8. Growth Of Indian Retail …
Indian Retail expected to grow by over 9% p.a. in the next 10 years

9. Retail in India
Over 12 million outlets in India
95% of outlets are smaller than 500 sq ft
Highest number of outlets per person (7 per thousand)
Indian retail space per capita at 2 sq ft/ person is lowest in the world
Indian retail density of 6% is highest in the world
Most of the fragmented markets in the world.

10. Current Channels : Organized Retail


The share of organized retail is very small approximately 3% of
the total retail market
The size of modern retail is about US$ 12 Billion and has
grown by 35% in last five years
100%
80%
60%
55%
85%
Taiwan
40%
36%
30%
Thailand
Brazil
Indonesia
20%
3%
Poland
China
India
81%
US
20%
40%
20%
0%
Malaysia
Traditional Channel
Modern Channel

11. Retailing Formats in India

Department Stores:
Large stores ranging from 20000-50000 sq. ft, catering
to a variety of consumer needs. Further classified into
localized departments such as clothing, toys, home,
groceries, etc.

Discount Stores:
As the name suggests, discount stores or factory
outlets, offer discounts on the MRP through selling in
bulk reaching economies of scale or excess stock left
over at the season. The product category can range
from a variety of perishable/ non perishable goods


EBO’s:
Chains such as the Ludhiana based Monte Carlo, the
Mumbai books retailer Crossword, RPG's Music
World and the Times Group's music chain Planet M,
are focusing on specific market segments and have
established themselves strongly in their sectors.
MBO’s :
Multi Brand outlets, also known as Category
Killers, offer several brands across a single product
category. These usually do well in busy market
places and Metros. For examplef Monte Carlo

Hypermarkets/Supermarkets:
Large self service outlets, catering to varied shopper needs
are termed as Supermarkets. These are located in or near
residential high streets. These stores today contribute to
30% of all food & grocery organized retail sales. Super
Markets can further be classified in to mini supermarkets
typically 1,000 sq ft to 2,000 sq ft and large supermarkets
ranging from of 3,500 sq ft to 5,000 sq ft. having a strong
focus on food & grocery and personal sales.

Convenience Stores:
These are relatively small stores 400-2,000 sq. feet located
near residential areas. They stock a limited range of highturnover convenience products and are usually open for
extended periods during the day, seven days a week.
Prices are slightly higher due to the convenience
premium.

Malls:
The largest form of organized retailing today. Located
mainly in metro cities, in proximity to urban outskirts.
Ranges from 60,000 sq ft to 7,00,000 sq ft and above.
They lend an ideal shopping experience with an
amalgamation of product, service and entertainment, all
under a common roof. Examples include Shoppers Stop,
Pantaloon.

12. Consumption Will Shift Towards Lifestyle &
Health Oriented Categories
Food, Beverages & Tobacco
Market
Size
US$
billion
2007
%
Share
2007
Growt
h rate
(200712)
Market
size
US$
billion
2012
%
Share
2012
Growt
h Rate
(201217)
Market
Size
US$
billion
2017
%
Share
2017
212.0
62%
8%
307.3
58%
7%
430.9
54%
Personal Care
15.4
5%
8%
22.6
4%
8%
33.2
4%
Apparel
26.4
8%
12%
45.5
9%
10%
73.2
9%
3.4
1%
9%
5.3
1%
8%
7.7
1%
Furniture & Furnishings
10.3
3%
13%
18.5
3%
11%
31.2
4%
CDIT
15.4
5%
12%
26.5
5%
9%
40.8
5%
Jewellery & Watches
13.7
4%
12%
23.6
4%
10%
38.0
5%
Medical Care & Health Services
34.2
10%
13%
61.6
12%
12%
108.6
14%
0.6
0.2%
15%
1.3
0.2%
24%
3.8
0.5%
Others
10.6
3%
11%
17.5
3%
13%
32.2
4%
TOTAL
342
100.0%
11.9%
530
100%
11.4%
800
100%
Footwear
Recreation
Share of basic categories like F&G will fall from 62% in 2007 to 54% in 2017

13. Retail Share Of Different Categories

14. Retail Market : Rural/Urban Split

Almost half of retail market in 2007 is in rural
India; although share of urban market is
increasing by almost 5% every 8-10 years.
Market
Urban
Rural
% Split
45%
55%

15. Retail Market : Rural Split

Rural India consists of 720 Million
consumers across 627,000 villages.

17% of these villages account for
50% of the rural population and 60%
of the rural wealth implying reaching
out to almost 100,000+ villages to
address even 50% of this rural
opportunity.

16. Leading Players : Turnover
Name
US $ Million
Future Group (Pantaloon)
600
Shoppers Stop
400
Landmark (Lifestyle)
150
Trent
75
Subhiksha
210
Vishal Mega Mart
220
The above analysis does not include the specialty retailers like Bata, Titan
and Tanishq

17. Current Features: Scenario of Indian
Retail Industry

18. Creation Of Large Retailer Brands

At the mass market, most Indian consumers are
brand-blanked through aspiring for brands (that can
denote quality, trust, value)

Most major new entrants will start with heavy
proportion of Private Labels, and will probably use
branded goods to demonstrate the price – value
imbalance between such branded goods and their
private labels.

19. Creation Of Large Retailer Brands

National brands have following opportunities to
collaborate with big retailers:
Category
Captainship
Collaboration
The manufacturer
manages a product
category for the
retailer. The
retailer benefits
from the
manufacturer’s
expertise in their
categories.
Developing a brand
exclusively for a
retailer enabling the
retailer to offer
unique products /
offers to the
customer and saving
marketing costs to
the manufacturer.
Co-Branding
Develop a new
product cobranded with the
retailer’s brand and
treated as a private
label by the
manufacturer
saving marketing
costs and building
retailer equity.
Key Account
Management
Due to the
importance of the
retailers (referred
to as ‘accounts’),
the manufacturer
appoints a
manager for each
account.

20. New Distribution Paradigm
 Logistics …
Consolidation of
Retailer Base
& Direct Sourcing
Modern - The Emergence of Vertical Silos
Consumers
(Shop in one store)
Stores of Few
Chains
(Supplied by
chain RDC)
Distribution
Centres
Reliance
Big Bazaar
Bharti - Wal-Mart
Hypercity
Suppliers
Branded Suppliers supply some chains. P/L Suppliers supply to single chain
Monte Carlo
Reliance

21. New Genre Of Distribution

Emergence of Wholesale Retailers:
 A significant amount of retail investment is likely to be in
wholesale formats (Cash & Carry)
 Historically these (C&C) formats are known for efficient
supply chains
 In India the format has enhanced the reach – All Under One
Roof, easy accessible format for upcountry retailers

Increasing the value of Point Of Sale, POS, remarkably.

Cooperative ownership has potential :


Farmers/producers owned such as Spar, GCMMF etc.
Consumer owned such as Sahakari Bhandar, Apna Bazar etc.

22. Diminishing Impact Of Mass Media

The stagnating affect of the mass media


Exposure of about 340 advertisements a week
Remarkable growth in number of new programs &
channels, the number of News Channels has
grown 3 times in last 4 years.

23. Key Trends Impacting The
Market….

24. 
Urbanization?



Changing family structures?




How rapid is it going to be?
What is the likely impact on consumption and its
growth/trends?
What is the future family structure?
How is it going to impact shopping behavior?
How is it going to impact the spending power and hence
consumption?
Demographic Changes?



What would be the demographic structure of India in
next 5, 10, 15 years?
How is it going to impact shopping behavior?
How is it going to impact the spending power and hence
consumption?

25. 1 Billion+ Population In The World’s
Youngest Country

At 24 years, India has the lowest median age of population in the
world

50% of India’s population is less than 25 years & 70% is less than 35
years.
Proportion of Young Population
(< 25 years)**
India
53%
Median Age of Population (in years)
45
31
35
42%
Indonesia
30%
30%
29%
Japan
27%
Germany
37
38
30
15
Brazil
39
44
25
USA
39
36
40
China
44
2000
2025
26%
30
24
20
10
5
0
India
USA
China
Russia
UK
Increasing number of people in working population, increasing number in retail
spending.

26. In View Of The Rapidly Expanding Spend
Categories…
1991
1991
1.
2.
3.
4.
5.
6.
7.
Food and Grocery
Clothing
Footwear
Consumer durables
Home linen
Movies and theatre
Eating out
2008
2008
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
Shopping as Hobby
Food and Grocery
Clothing
Footwear
Consumer durables
Expenditure on DVDs and VCDs
Home linen
Home accessories
Accessories
Gifts
Take-away/ Pre cooked / RTE meals
Movies and theatre
Eating out
Entertainment parks
Mobile phones and service
Household help
Travel packages
Club membership
Computer Peripheral & Internet Usage
The above categories account for 80% of consumer spending
2017
2017
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
Shopping & Shopping
Food and Grocery
Clothing
Footwear
Consumer durables
Expenditure on DVDs and VCDs
Home linen
Home accessories
Accessories
Gifts
Take-away/ Pre cooked / RTE meals
Movies and theatre
Eating out
Entertainment parks
Mobile phones and service
Household help
Travel packages
Club membership
Computer Peripheral & Internet Usage
???
???
???
???

27. Two-faced Indian Consumers…


Seeking upgradation in some categories & value in the others!
Key issue for any retailer is to identify the “upgrades” and “valuefocused” product categories to rationalize the product mix and
maintain healthy margins
Seeking cheaper
options
Grocery
Apparel
Eating Out
Consumer Spends
Upgrading
Mobile phones
Housing
Automobiles
Durables
Education

28. Future Of India Retail

29. About US$ 800 Billion Retail Market By
2017
GDP*
US$ 2,175 billion
Private Consumption
US$ 1,305 Billion
(58%)
Retail
US$ 800 Billion
(61%)
Public Spending and Capital
Formation
US$ 646 Billion (42%)
Non Retail
US$ 505 Billion
(39%)
Urban
US$ 400 Billion
(50%)
Modern retail – US$ 165 billion
41% of urban retail spends
Rural
US$ 400 Billion
(50%)
Modern retail – US$ 35 billion
9% of rural retail spends
*All figures are in nominal terms after taking into account inflation

30. Rapid Transformation Anticipated
US$ Billion
Current Size & Future Projections for Indian Retail Market
900
800
700
600
500
400
300
200
100
0
25% share
16%
share
3.5% share
342
373
408
486
445
800
530
200
12
2007
18
2008
26
2009
Total Retail
39
2010
59
2011
Organized Retail
It may reach a share of 25% by 2017
87
2012
2017

31. Retailer Brands Will Offer Formidable
Competition
Turnover Comparison*: Leading Retailer Label vs. Brand Leader - 2012
14000
12000
12000
10000
8000
6000
6000
4000
4000
3500
1800
500
2000
3500
1500
1500
650
50
9001000
2000
0
Consumer
Durables
FMCG&
Personal
Care
Apparel &
Acc,
Home
Furnishing
Brand Leader
Pharmacy
Footwear
Furniture
Leading Retailer
*Numbers estimated based on available information and expected investments by top retailers.
**FMCG & Personal Care for Own Label is across categories, whereas for brand leader is only for one category.

32. Demand Generation Through Supply Of
Space
 The retail space created will increase the secondary demand
80
Mn Sqft
70
Additional Shelf Space Created
Space Required
60
50
40
30
20
10
0
2007
2008
2009
2010
2011
2012

33. Consolidation And Hyper Competition


Maximum action is going to be in top 50-60
urban markets.
There could be 4 categories of “survivors”
emerging in 5-7 years:




Large players with deep pockets
Intelligent niches / super-specialities
Regional players who may merge or partner with
each other
Only a few of the existing national players may
remain in business profitably.

34. Future Market Share of 50 Big Players
Year 2013
Total Market
Share of Top 7 Players
Share of Next 43
Share of Top 50 Players
Market Share in Top 150 Cities*
100%
31%
8%
39%
Big Retailers will become bigger and will leverage the channel to their benefit

35. Urban / Rural Share Of Investments
Break-up of Expected Investments in Indian Retail in Next
6-7 Years
Rural
7%
Urban
93%
Lion’s share of investments directed to urban, though it may change

36. Rapid Transformation Anticipated In
Next 5-7 Years…
Retailer
Estimated* Investment
(US$ Billion) by 2013
Estimated Turnover
(US$ Billion) by 2014
R1
6.0 +
25 +
R2
4.0 +
15 +
R3
2.5 +
10 +
R4
2.0 +
10 +
R5
2.0 +
7+
R6
2.0 +
6+
R7
2.0 +
5+
R8
1.5 +
2+
R9 – R50
14.0 +
30 +
$ 36.0 + Billion
$ 110 + Billion
Total

37. City-wise Share Of Investments
Top 24 cities (type A and above) expected to attract 62% of urban investments

38. Format-wise Share Of Investments In
Indian Retail
Format-wise Break-up of Expected Investments in Indian Retail in Next 67 Years
Other Formats
26%
Department
Stores
2%
Warehouse /
Cash & Carry
6%
Supermarkets
33%
Hypermarkets
33%
* Other formats include specialty stores in Apparel, Footwear, Watches, Furniture & Furnishing, Toys, Convenience
formats etc.
Majority of investment slated for hypermarkets and supermarkets

39. Increasing Power Of POS

Emergence of POS, Its now POS = Point Of Everything
60% of the decisions are made at Point of Sales – Moment of Truth
Implication:
TODAY
Point of
Sales
TOMORROW
Point of
Purchase
Decision
Point of
Service
Point of
Brand Building

40. Large Retailers V/s Large Brands

The top – 5 retailers by 2013 are likely to have private label
scale by volume and value – for many consumer product
categories – comparable with the total size of many consumer
product companies

Limited chance for companies whose brands are not the top 1
or 2: they will be forced to “buy” shelf space at greatly
increased margin for the retailer thereby eroding their own
profitability

Consumer Durables, Electronics and Lifestyle brands likely to
be the only ones remaining somewhat immune to the
challenge from retailers’ brands

41. Implications….

42. 
Profile of the Indian consumer is changing
and so are the aspirations and buying
behavior.

Consumer understanding and consumer
orientation will be one of the key drivers of
future success.

43. Implications – Branded Goods
Companies

Value growth going to be under pressure in 2008, and
severely constrained from 2009 onwards barring a very select
few.

Reduced pricing power for most companies other than topbranded consumer electronics / entertainment firms.

Increased pressure on margins.

Potential changes in sales & distribution organization
structure & emerging conflict.

44. Implications – Suppliers.…

Better market access and lower distribution cost.

Better environment for new product / packaging trials,
understanding consumer behavior.

More efficient supply chain management; “farm to fridge”
concept.

Opportunity for co-branding with retailers.

Overall increase in consumptions, which is win-win for all
stakeholders in the long run.

45. To Conclude.….

46. 
Better market access and lower distribution cost.

Better environment for new product / packaging trials,
understanding consumer behavior.

More efficient supply chain management; “farm to fridge”
concept.

Opportunity for co-branding with retailers.

Overall increase in consumptions, which is win-win for all
stakeholders in the long run.