The Retail Niche in India

RAMMS INDIA

PERCEPTION

REALITY

Interesting facts on

Every 10th billionaire is a retailer. 25 of the top 50 Fortune 500 companies are in Retail. In India the Retailing Industry provides employment to over 18 m people, second largest after agriculture. 1 out of every 25 families in India are engaged in the business of retailing

retail

72% of Indian population staying in rural market.

In India Per Capita square feet area under retail is just 2 sq. ft. or 0.2 sq. m.

Source: CII Conference on Retailing

Retail in India comprises of four major channels

Note: PDS: Public Distribution System Source: Retail in India, ICICI Bank, Feb 2004

Penetration of organized retail in India will grow to catch up with other matured markets

Indian retail story remains intact with strong fundamentals:

Economic slowdown/ inflation not crippling the opportunity

Consumer incomes growing Consumer aspirations rising Growing urbanization

Still Very Low Penetration of Modern Retail

Growth in Modern retails capability to achieve and share efficiencies across the value chain

$220 BILLION and counting

Growing at 20% per annum
SOURCE: MCKINSEY REPORT

Indian Retail Scenario Today

Retail amongst the largest industries in India,
With over

10% of countrys GDP

& about

8% of employment

12th largest economy in the world 4th largest in purchasing-power

parity terms

Over

58% of Indian population below 26yrs.

That is over 564 million people, nearly twice the total population of the United States

Modern Indian Retail Lifecycle

CREATE AWARENESS INCREASE CLIENT EXPECTATION STRENGTHEN BACK END MANAGEMENT CONSOLIDATION

New retailers Driving growth

Consumer demands Organized forms

Retailers strengthening Backend

Retailers going global / M&A

1993

2004

2010

2012

FIRST GEAR

SECOND GEAR
2008

THIRD GEAR

FOURTH GEAR

SOURCE: KURT SALMON ASSOCIATES

Market & Composition

Total No. of Retail stores in India

12-15 Million
Hawkers

8-10 Million
Grocery Outlets

4-5 Million
Urban Grocery Outlets

1 Million

Over

96% of
SOURCE: CII RETAIL

Indian Retail is unorganized

Market & Composition

2004-5
LARGER MALLS (1M Sq.ft)

2000

Multiplex & Leisure Cinema

Discount Stores

MALLS

1990 1980
BEFORE

MALLS (Price, Quality, Service & Entertainment) DEPARTMENTAL STORES (Price, Quality, Service Sensitive) TRADITIONAL RETAIL (Price Sensitive)

1980

4%
rapidly evolving modern organized Retail

Characteristics of Unorganized Retail

Retail Products:
Mainly Food & Beverage Products, Staples, Cigarette, Personal Care

Retailer Characteristics:
Uneducated Has loyal Clientele

Location:
Residential Areas, Main Roads spread across the Indian geography

Retailing Characteristics:
Over the counter sale Space limitation Home delivery

Typical Size:
Over The Counter, Occupies a space ranging from 100 - 750 sq ft.

Customer Profile:
Lower to upper middle class

Forms of Unorganized Retail

OUTLET: Grocers Mom & Pop Stores Approx. SIZE: 200- 500 sq ft

Forms of Unorganized Retail

OUTLET: Kiosk store

Approx. SIZE: 40 sq ft

Forms of Unorganized Retail

OUTLET: Street vendors Approx. Size: 30 sq ft

Changing Scenario

BEFORE

AFTER

Shift from Unorganized to Organized self service outlets

Forms of Organized Retail

ANSALS PROJECTS

Forms of Organized Retail

ENTERTAINMENT CITY NEW DELHI

Forms of Organized Retail

GOLD SOUK TRIVANDRUM

The Changing face of the Indian Consumer

Large population of

young spenders
The shift from buying to the shopping experience Growing finance options

Brand conscious & lifestyle products

Indian Shopping Basket

16%

3%

9% 5% 4% 3%

GROSS RENT, FUEL & POWER MEDICAL & HEALTH CLOTHING & FOOTWEAR RECREATION, EDUCATION & CULTURAL FURNITURE APPLIANCES FOOD BEVERAGES & TOBACCO

50%

TRANSPORT & COMMUNICATION

Brands in India Today

Law & Regulations

Foreign Direct Investment allows 51%

stake

in single brands

FDI allows international retailers in

cash & carry (Metro 100%)

This law will be relaxed in the next 3 years Hopefully for gradual increase in ownership stake

International Retailers in India

International Players Eyeing India Shoprite South Africa (Hypermarkets) Already in Landmark, Dubai (Lifestyle stores) Already in Marks & Spencers (Lifestyle stores) Already in Metro Cash & Carry (Wholesale Hypermarket) Already in Mango (Apparel Retailer) Already in Carrefour (Multiformat Retailer) Evaluating Wal Mart (Hypermarkets) 7-Eleven (Supermarkets) Evaluating Tesco Evaluating Starbucks Evaluating

SOURCE: CYGNUS RESEARCH

Major Indian Players

RELIANCE

6.7 billion USD invested in setting up multiple retail Formats. Sales expectation of 20 billion USD by 2010
Presently Indias largest retail company.

PANTALOON

10 million sq ft of retail space expansion

& expected sales 2 billion $ by 2008
Opening 50 hypermarkets of 4

RPG

million sq ft million dollars

Currently operating in lifestyle, books retail

RAHEJAS

& hypermarkets Investing 100 in

55 hypermarkets by 2015

PYRAMID

Opening 150 lifestyle department stores by 2010 Expanding to 10

TATA

to 40 departmental stores by 2010.

Also in hypermarkets & consumer electronic multi brand stores

Current Scenario of Indian retail

Proliferation of modern retail formats
400 new malls 350 50 1500 Departmental Hypermarkets Supermarkets Stores by 2008

100 MILLION Sq ft in retail space by 20102 15,000 small & big outlets to undergo facelifts

Opportunities

Signage & Graphics

Visual Merchandizing Mall & Store / Management Mall Planning

Retail Education

Shopper Research

Retail Technology

Opportunities Signage & Graphics

INFINITI RETAIL

20,000 sft. 6,000 products. 8 categories.

INVESTMENT: Rs.

From 30 to 100 large multi-brand consumer electronics & durables stores

FABINDIA

275 Cr in retail expansion. From 42 to over 150 over next 4 years. Prime strategy: to enter tier-III towns. 21 Cr in retail expansion. stores by 2008.

INDUS CLOTHING

1st phase: 30 Disney Jeans Stores by 2007 - 3 each in

INVESTMENT: Rs.

Delhi & Mumbai. 2nd phase: 50

LUXURY NICHE

Tommy Hilfiger, Gucci, Jimmy Choo & Tumi.

SEEKING: 50-20M

Mike Murjani to set up luxury niche in India with

40 free standing stores planned over 5 years Million Sft. Set to target 1,500 Indian cities
West Bengal Government to invest

RELIANCE RETAIL

RETAIL CHAIN

Rs. 100 Cr in vegetable retail chain.

Opportunities Mall Management

200 existing malls 400 new malls

65 malls coming up in 1 street:

Gurgaon, a high street near Delhi

Specialized malls:
Car, Jewelry, Weddings

Emerging need for Mall Management Services.

Opportunities Mall Management Services to Mall Developers

MALL DESIGN DEVELOPMENT
MALL FIT OUT & TENANT MIX GUIDELINES

MALL PLANNING

MALL TRAFFIC MANAGEMENT SYSTEM PLANNING

MALL COMMUNICATION SYSTEM PLANNING

Opportunities Mall Management Services to Retailers

STORE DESIGN & PRESENTATION

IN-STORE WAYFINDING & COMMUNICATION

INTEGRATED MARKETING PROMOTIONS & VM CALENDAR

CUSTOMER EXPERIENCE MANAGEMENT SERVICES

Opportunities Store Design

Existing stores have commonplace designs Growing popularity of

Experience Shopping
Emerging trend of new

store design concepts

with international brands

Most new innovations in apparel

stores

Indian fashion labels setting up boutique

Store fixtures in high

stores

demand

Opportunities Store Design & Build

Store design conversion & adaptation to

International concepts
Store designs for Indian

Brands

Shop fitting design & development:

China emerging as source, India: needs to adapt

Opportunities Visual Merchandizing

VM design, execution & management for retail chains

VM Academia Set-up

Opportunities Marketing at retail (POP)

POP strategy Design & Development

POP Deployment & Maintenance Management

International Designers, Architects & Mall Planners in India

JHP LONDON WD PARTNERS OHIO HELLMUTH OBATA KASSBAUM (HOK) Inc. NEW YORK

CHUTE GERDEMEN OHIO

SPAR Inc. NEW YORK: IN-STORE MERCHANDIZING

BENTEL ASSOCIATES, SOUTH AFRICA

Visual Merchandizing & Indian Stores

Visual Merchandizing & Indian Stores

Visual Merchandizing & Indian Stores

Visual Merchandizing & Indian Stores

Visual Merchandizing & Indian Stores

Visual Merchandizing & Indian Stores

Visual Merchandizing & Indian Stores

Visual Merchandizing & Indian Stores

Visual Merchandizing & Indian Stores

Visual Merchandizing & Indian Stores

Visual Merchandizing & Indian Stores

Scope for Retail Education

8 Million
Retail jobs in the next

More than

2 Million
Skilled job opportunities

Need for

6 years

by 2008

quality education

Retail Training

Increasing Modern Retail Outlets

100 Million sq ft

Increasing Demand of Skilled people

8 Million Jobs

Huge shortage of

Skilled people

Retail Training The Opportunity

Despite perception

Large Indian retailers have

of huge people availability

Skilled People
in retail is at

in-house training
departments this whole area can be

premium

outsourced

Retail Design The Opportunity

Few schools today have national presence in

Retail Design
National Institute of Design National Institute of Fashion Design
(affiliated to the Birmingham Institute of Art & Design)

Retail Education The Opportunity

Opening of professional Retail training academy

National Footprint For the academy

Training based on Global Practices

International Visiting Faculty

Retail Education Immediate Opportunities Real Estate Management Visual Merchandising Design School Store Design Institute Retail Operations Management

Retail Research The Opportunity

As retail grows the Indian shopper is becoming more and more savvy

There is an untapped need for

understanding the Indian shopper is key

shopper research agencies

Retail Technology The Opportunity

Large players
in the organized retail are using technology from companies like

Various in-store technologies like

JDA, IBM, Wincor Nixdorf & Bizerba

POS, Narrow casting, Digital Signage's

have a huge market

Retail Supply Chain

The market size for logistics spend in India is Logistics cost for

$50 billion per annum, which is about 13%

of the country's GDP Huge opportunity for

manufactured goods
in the country accounts

for almost 30% of the total cost

Companies like

supply chain solution providers,

as the international standard for logistics costs ranges between 5% &

Bax GLobal, Manugistics, DHL, have already

set up shop in India

10%

Issues Facing The Indian Retail Industry

Retail has no Industry status

Fragmented supply chain

Regional & Seasonal Differences

Non availability of quality retail space

Non availability of skilled people

Lack of Infrastructure

Entry Challenges

Need long term perspective & financial Staying power

Cultural adaptability in working Style: Cannot transplant western retail practices

To develop an ability to deal with govt. red tape

(Improving Rapidly)

India is a regionally diverse market

29 states, 18 official Languages 325 spoken languages

a marketers challenge

The challenges of Indian retail

The Positioning Challenge

The Location Challenge

The Format Challenge

The Manpower Challenge

The Viability Challenge

The Positioning Challenge

Positioning on range

Position on price

Position on convenience

Position on store experience

Positioning mix of store retail brands

Retail Brand Wal-Mart Zara Differentiating Supporting Price Range Range Price Competitive Convenience Experience Qualifying Experience Convenience

Starbucks
Dollar General Nordstrom McDonald's Disney Store

Experience
Price Convenience Convenience Experience

Range
Convenience Range Price Range

Convenience
Range Experience Experience Convenience

Price
Experience Price Range Price

The Positioning Challenge

Retail Brand Big Bazaar Reliance Fresh Food world More Wal -Mart Subiksha Differentiating Supporting Price Price Price Price Price Price competitive qualifying

The Positioning Challenge

The biggest challenge for these retailers is

on how to differentiate.

There can only be one or two winners on

best price position

The Location Challenge

Lack of availability
of stores locations convenient to shopper

The infrastructural problems to get to a store The rising cost of leasing Mad rush to open stores contributing to increased cost

The Format Challenge

Multiple formats being experimented
on which are the few formats that will be future

Convenience versus supermarkets versus hypermarkets Size versus experience versus viability Specialty stand alone stores to
formats in malls and hypermarkets

Emerging trends with

Retailers

Format Diversification
Rapid Scale Up

By 2013, Modern Retail would have reached at least top 600 Indian cities and towns
Source: Mindscape

The Manpower Challenge

Big disconnect between quality of personnel and customer experience desired
Floor Personnel, Managing staff, visual merchandisers big - gap in skill sets required

Where is retail going to find skilled personnel when there is a total lack of organized training and understanding of the consumer experience desired

The Viability Challenge

The biggest question? Is Modern Retail Viable if so over what period of time Will there be a fall out ? Who will survive?

Is the path leading to mergers and acquisitions?

Where are we heading?