Overview of Retail in India KRITHIKA G.K Asst. Professor FMS

Evolution of Retail in India Barter System Unique needs, due to size & complexity Special feature - Haats, Melas & Mandis

Haats Periodic markets (fixed times & locations) Public gathering of buyers & sellers Avg.sale per day: Rs.2.25 lakhs 300+ sale outlets per haat 4500+ visitors per haat Rs.900 avg. sale per outlet Approx. 20-50 villages Source: BW Marketing Whitebook, pp.99-101)

Melas Fairs (commodity / religious) 25000 annual melas across India Avg. outlets – 800 Avg sale per mela – Rs 143 lakh Source: BW Marketing Whitebook, pp.99-101)

Mandis Markets set up by State Govt. Direct sale of agricultural produce from farmers Avg. 600 mandis Population catered to 1.36 lakhs Source: BW Marketing Whitebook, pp.99-101)

India’s Largest Retail Chains PDS (Rationing System – British – WW )II 463,000 Post Offices 160,000 KVIC (1957) 7,000 CSD Stores (Canteen Stored Dept.) 3400 Source: Business World, Marketing Whitebook, 2005, pp.238)

Exclusive Retail Stores Hyper Markets Internal Retail Emerging Formats Exclusive Retail Stores Hyper Markets Internal Retail Malls/Speciality malls Multiplexes Rural Oriented Formats Fast Food Outlets Service Galleries Etc. Established Formats Kirana Shops Convenience / Departmental Stores Company / Multi-brand Showrooms PDS/Fair Price Shops Co-operative Stores Pan/Beedi Shops Traditional Formats Itinerant Salesman Haats Melas Mandis, etc. Source: Retailing Management, Swapna Pradhan, Retail in India. Pp.23

Indian Retail Industry Overview….

Changing customer profile Changing Income Profiles Diminishing difference b/w Urban & Rural Change in Consumption Patterns Average consumer today is richer, younger and more aspirational in his / her needs Explosion of organized retail formats Investment in retail more than 12 times that was invested during the last one decade. (Source: KPMG India analysis & http://nitine.blogspot.com/2008/03/retailing-rural-marketing-india-v.html)

Retailing in India is was estimated to be a US$ 200 billion industry, of which organized retailing made up 3 percent or US$ 6.4 billion. By 2010, organized retail is projected to reach US$ 231 billion.

Retail landscape in India Indian retail market is US$ 332.8 billion (Rs 1330,000 crore) Growing at 10.8 % p.a. Expected to grow to US$ 590 billion in 2011-12 @ 13%p.a. (Source:http://www.indianrealtynews.com/retail-market/indias-retail-business-estimated-to-touch-590-billion-in-2-years.html – 13/07/09) Organised retail – 5.9% (US$19.6 billion) - expected to touch US$ 57.5 billion in 2010 i.e 13% of the total retail market. Source: Images F&R Research Estimates; Images Retail; May 2008

Investment Climate Economic Growth of 9% p.a Can exceed China by 2015; Britan by 2022; Japan’s by 2032 Can become third largest economy after US & China Second largest economy after China by 2050 Source: Images F&R Research Estimates; Images Retail; May 2008

Contd…… FDI inflow in 2007 – US$ 19.16 billion 72% increase from US$ 11.12 billion in 2006 US$ 5 billion into retailing Industry (infrastructure, systems & shop-fit) Largest English speaking population than whole of Europe Source: Images F&R Research Estimates; Images Retail; May 2008

Cont’d… 300 million odd – middle class According to estimates 70 million Indians earn a salary of over USD 19,500 p.a. Middle class predicted to rise to 140 million by 2011 Expected consumers to swell to 600 million Will establish India as one of the largest consumer markets of the world. Source: Images F&R Research Estimates; Images Retail; May 2008

During the current financial crisis…. Dip in growth rate of GDP from an avg. of over 9% in the last three fiscal yrs. To 6.7% Sharp rise in wholesale price index to nearly 13% in Aug 2008 & sharp fall to close at)0% in March 2008 Gross capital flows peaked at 9% in 2007-08 before the global financial crisis Source: Images Retail; May 2009

India’s Retail Trade Not To Be Opened Any Further: Govt. (http://www

The Retail Revolution 15 million retailers & a rapidly evolving retail market 280 hypermarkets, 3200 supermarkets, 400 departmental stores and 1200 mega speciality stores & 20000 exclusive brand outlets across various retail categories by 2011 200 million sq ft. of gross leasable quality retail space (GLA) in Malls by 2011 Source: Images F&R Research Estimates; Images Retail; May 2008

….. Most of retail growth may come from more than 1000 tier II towns of India. Striking features of Indian Retail: At Subhiksha, 40 per cent of revenues and space come from cities that are not state capitals. At Vishal Megamart, 80 per cent of revenues come from tier II and III cities Around 70-75 per cent of visitors end up buying from retail outlets in smaller places, whereas, in large cities, it is around 50-55 per cent Retail Operations in smaller cities result in extra 3 – 4 percent margin (Source:http://nitine.blogspot.com/2008/03/retailing-rural-marketing-india-v.html; Nitin Srivastava)

Rural Retailing Corporate retailers (ITC, Godrej, Reliance, AV Birla, Pepsico) – Farm Linkages Loan wavier from Indian govt. of Rs.60,000 to farmers to lighten their debt. Consumer spending – urban : rural = 9 :11 i.e Rural India accounts for 55% of pvt. Retail consumption. Half of growing retail market in Rural India Source: Images F&R Research Estimates; Images Retail; May 2008

Growing at 10% of India’s GDP New Assocham study “The Rise of Rural India” – rural retail mkt. = 40% of total size of retail market in India Growing at 10% of India’s GDP Currently 10,000 of the 6 lakh+ villages have access to organised retail Source: Images Retail; May 2009

Rural Marketing According to National Council of Applied Economic Research (NCAER) Reports – There are 720 million consumers in 627,000 villages. 17% of these villages account for 50% of rural population & 60% of rural wealth! Leading to ‘bottom of the pyramid’ marketing Egs. DCM Hariyali Kisaan Bazaar, ITC Chaupal Sagar, Godrej Aadhar, Tata Kisan Sansar, Reliance Fresh, Naya Yug Bazar etc. Source: Images F&R Research Estimates; Images Retail; May 2008

Indian Retail Market Size

Overall Retail Market Overall Retail market size – US$ 332.8b (Rs.1330,000cr) Food & Grocery – 59.5% (Rs.792,000cr) Clothing & Accessories – 9.9% (Rs. 131,300cr) Catering Services – 5.4% (Rs. 71,300cr) Jewelry (Rs. 69,400cr) Consumer Durables – (Rs.57,500cr) Health & Pharma – (Rs 48,800cr) Entertainment – (Rs. 45,600) Furniture, furnishings & kitchenware – (Rs.45,500cr) Mobiles & Accessories - (Rs.27,200cr) Leisure Retail - (Rs.16,400cr) Footwear - (Rs.16,000cr) Health & Beauty Care Services - (Rs.4,600cr) Watches & Eyewear - (Rs.4,400cr) Source: Images F&R Research Estimates; Images Retail; May 2008

Overall Retail Market Fastest Retail Growth (2007) over the previous year in the following categories … Mobile & Accessories – 25.6% Out-of-home Food (Catering Services) – 25.1% Books, Music & Gifts – 23.3% Source: Images F&R Research Estimates; Images Retail; May 2008

Organized Retail Segment Organized Retail Size – US$ 19.6b (Rs. 78,300cr) Clothing & Fashion Accessories – 38.1% (Rs.29,800) Food & Grocery – 11.5% (Rs.9,000cr) Footwear – 9.9% (Rs. 7,750cr) Consumer Durables – 9.1% (Rs. 7,100cr) Out-of-Home Food (Catering Services ) Services & Furniture Furnishings & Kitchenware … Source: Images F&R Research Estimates; Images Retail; May 2008

Organized Retail Segment Fastest Growth in 2007 over previous yr. recorded in… Tiny Health & Beauty Care Services – 65% (Rs. 660cr) Entertainment – 53.8% Mobile & Accessories – 55.2% Food & Grocery – 55.2% Source: Images F&R Research Estimates; Images Retail; May 2008

Other Emerging Sectors…… Jewelry Retail (Branded) Footwear Retail Time Wear Eye Wear Fuel / Petrol Retail

Comparative Growth in Both Categories Overall Retail Market Organized Retail Segment 2006 26.1% 41.7% 2007 25% 37% Source: Images F&R Research Estimates; Images Retail; May 2008

“ India is an important growth market with tremendous long-term potential for our company……” Richard H. Lenny President & CEO The Hershey Company