2012

RETAIL INDUSTRY IN 2015

Submitted To
Prof. Atul Mehta

Submitted By
Savan Bhatt

MBA (Retail Management) Center for Management Studies, Ganpat University

Retail at India Level

India is one of the largest emerging markets, with a population of over one billion. It is one of the largest economies in the world in terms of purchasing power. Retailing in India is at a nascent stage of its evolution, but within a small period of time certain trends are clearly emerging which are in line with the global experiences. Organized retailing has become more popular in big cities in India and most of the metropolitan cities and other big cities are flooded by modern organized retail stores. Many semirural areas have also witnessed entry of such organized retail outlets. India's retail sector is estimated to touch US$ 833 billion by 2013 and US$ 1.3 trillion by 2018, with a compound annual growth rate (CAGR) of 10%, which is quite lucrative. Retailing as a whole contributes almost 10% of Indias GDP, and employs almost 8% of Indias employable population. The organized sector accounts for a 5 per cent indicating a huge potential market opportunity that is lying in the waiting for the consumer-savvy organized retailer. Purchasing power of Indian urban consumer is growing and branded merchandise in categories like Apparels, Cosmetics, Shoes, Watches, Beverages, Food and even Jewellery are slowly becoming lifestyle products that are widely accepted by the urban Indian consumer. Organized retailing is witnessing a wave of players entering the industry. These players are experimenting with various retail formats. A number of large corporate houses like Aditya , Bharti, Reliance, Pantaloon, Vishal, Tata's, RPG, Raheja's and Piramals's have already made their foray into this arena, with beauty and health stores, supermarkets, self-service music stores, new age book stores, everyday low price stores, computers and peripherals stores, office equipment stores and home/building construction stores. Today organized players have attacked every retail category.

Growth after 2011

Before 2011, India had prevented innovation and organized competition in its consumer retail industry. Several studies claim that the lack of infrastructure and competitive retail industry is a key cause of India's persistently high inflation. Furthermore, because of unorganized retail, in a nation where malnutrition remains a serious problem, food waste is rife. Well over 30% of food staples and perishable goods produced in India spoils because poor infrastructure and small retail outlets prevent hygienic storage and movement of the goods from the farmer to the consumer. One report estimates the 2011 Indian retail market as generating sales of about $470 billion a year, of which a miniscule $27 billion comes from organized retail such as supermarkets, chain stores with centralized operations and shops in malls. The opening of retail industry to free market competition, some claim will enable rapid growth in retail sector of Indian economy. Others believe the growth of Indian retail industry will take time, with organized retail possibly needing a decade to grow to a 25% share. A 25% market share, given the expected growth of Indian retail industry through 2021, is estimated to be over $250 billion a year: revenue equal to the 2009 revenue share from Japan for the world's 250 largest retailers. The Economist forecasts that Indian retail will nearly double in economic value, expanding by about $400 billion by 2020. The projected increase alone is equivalent to the current retail market size of France. In 2011, food accounted for 70% of Indian retail, but was under-represented by organized retail. A.T. Kearney(global management consulting firm) estimates India's organized retail had a 31% share in clothing and apparel, while the home supplies retail was growing between 20% to 30% per year. These data correspond to retail prospects prior to November announcement of the retail reform. The Indian market offers endless possibilities for investors.

Retail industry in 2015

Retail Revolution in India
McKinseys report: Indias retail sector will be a $ 450 billion industry by 2015, one among top 10 retail markets in the world. Organized retail will create 1.6 million jobs in the next 5 years. Organized retail now accounts for only 5% of Indias retail business with an estimated 12 million mom-and-pop stores garnering the bulk of the trade. By 2015, organized retail is expected to have a share of 14-18 percent of the business. There will be a huge growth in the number of people with increasing disposable incomes. The huge Indian middle class consumer are now the blue eyed segment for biggies like Bharti, Wal-Mart, Reliance and loads of others, in race to capture their pie in Indian Retail Market. The modern retail Industry in BRICs (Brazil, Russia, India and China)is seen as having the maximum potential on growth world wide. It grew by almost 30% in India and 13% in China and Russia last year. A.T. Kearney, in their report, Growth Opportunities for Global Retailers have ranked India at No.1 position consecutively for the second year. The report sees Indian retail Industry to grow exponentially over next few years. The ranking has been done for30 upcoming global economies. It is based on 4 broad categories namely -Country Risk, Market Attractiveness, Market Saturation and Time pressure for a new entrant to start retail business.

Investment in Indian retail sector in Future

Convenience store chain operator Lawson Inc. is set to become the first major Japanese retailer to foray into India through a proposed JV with top Indian retailer Future Group

Pantaloon Retail India Ltd has earmarked US$195.59 mn expenditure over the next three years for expansion.

Havells India has announced its entry into the domestic appliances market with an aim to garner sales of US$ 112 mn in the next four years.

Sahara India has announced an expansion plan to launch a range of food and non-food items at over 10,000 retail outlets across 285 cities.

Yum! Brands Inc, the US owner of the KFC and Pizza Hut restaurants, expects its Indian operations to be around US$ 1 bn by 2015.

Indian Retail Sector The Future

The Government is considering a proposal to raise the foreign direct investment cap in singlebrand retail from 51 per cent.

Online retail is expected to touch approximately US$ 1,420 mn by 2015

INDIAN RETAIL SECTOR THE FUTURE

Consumer expenditure on food, beverages and tobacco is forecast to rise in absolute terms to US$ 507.2 bn in 2015, from an estimated US$ 325.8 bn in 2010.

Retail Sales(in volume terms) are forecast to grow by an annual average of 5.2% during 20112015

Opportunities for The Organized Retail Sector In India

1. Indias booming economy is a major source of opportunity. It is the third largest in the world in terms of purchasing power. India is the second fastest growing major economy in the world. 2. India's huge population has a per capita income of Rs 44,345. 3. The proportionate increase in spending with earnings is another source of opportunity. 4. With the Indian economy now expected to grow at over 8% and with average salary hikes of about 15%, manufacturers and retailers of consumer goods and services can expect a major boost in consumption. 5. The Demography Dynamics are also favorable as approximately 60 per cent of Indian population is below the age of 30. 6. Increasing instances of Double Incomes in most families coupled with the rise in spending power. 7. Increasing use of plastic money for categories relating to Apparel, Consumer Durable Goods, Food and Grocery etc. 8. Increased urbanization has led to higher customer density areas thus enabling retailers to use lesser number of stores to target the same number of customers. Aggregation of demand that occurs due to urbanization helps a retailer in reaping the economies of scale. 9. With increased automobile penetration and an overall improvement in the transportation infrastructure, covering distances has become easier than before. Now a customer can travel miles to reach a particular shop, if he or she sees value in shopping from a particular location.