Retail Segment analysis


      The structure of Indian retail is developing rapidly with shopping malls becoming increasingly common in the large cities and development plans being projected at 150 new shopping malls by 2008. However, the traditional formats like hawkers, grocers and tobacconist shops continue to co-exist with the modern formats of retailing.
      Modern retailing has helped the companies to increase the consumption of their products for example: Indian consumers would normally consume the rice sold at the nearby kiranas viz. Kolam for daily use. With the introduction of organized retail, it has been noticed that the sale of Basmati rice has gone up by four times than it was a few years back; as a superior quality rice (Basmati) is now available at almost the same price as the normal rice at a local kirana. Thus, the way a product is displayed and promoted influences its sales. If the consumption continues to grow this way it can be said that the local market would go through a metamorphoses of a change and the local stores would soon become the things of the past or restricted to last minute unplanned buying.

1 . Food and grocery retail

      The food business in India is largely unorganized adding up to barely Rs.400 billion, with other large players adding another 50 per cent to that. The All India food consumption is close to Rs.9,000 billion, with the total urban consumption being around Rs.3,300 billion.
      This means that aggregate revenues of large food players is currently only 5 per cent of the total Indian market, and around 15-20 per cent of total urban food consumption. Most food is sold in the local ‘wet’ market, vendors, roadside push cart sellers or tiny kirana stores. According to McKinsey report, the share of an Indian household's spending on food is one of the highest in the world, with 48 per cent of income being
spent on food and beverages.

2.  Apparel retail

       The ready-mades and western outfits are growing at 40-45 per cent annually, as the market teems up with international brands and new entrants entering this segment creating an Rs.5 billion market for the premium grooming segment. The past few years has seen the sector aligning itself with global trends with retailing companies like Shoppers’ stop and Crossroads entering the fray to entice the middle class. However, it is estimated that this segment would grow to Rs. 3 billion in the next three years.

3.  Gems and Jewellery retail

      The gems and jewellery market is the key emerging area, accounting for a high proportion of retail spends. India is the largest consumer of gold in the world with an estimated annual consumption of 1000 tonnes, considering actual imports and recycled gold. The market for jewellery is estimated as upwards of Rs. 650 billion.

4.  Pharmaceutical retail
 
       The pharma retailing is estimated at about Rs. 300 billion, with 15 per cent of the 51 lakh retail stores in India being chemists. Pharma retailing will follow the trend of becoming more organised and corporatised as is seen in other retailing formats (food, apparel etc).
       A few corporates who have already forayed into this segment include Dr Morepen (with Lifespring and soon to be launched Tango), Medicine Shoppe, Apollo pharmacies, 98.4 from Global Healthline Pvt Ltd, and the recently launched CRS Health from SAK Industries. In the south, RPG group’s Health & Glow is already in this category, though it is not a pure play pharma retailer but more in the health and beauty care business.

5.  Music Retail

       The size of the Indian music industry, as per this Images-KSA Study, is estimated at Rs.11 billion of which about 36 percent is consumed by the pirated market and organized music retailing constitutes about 14 percent, equivalent to Rs.1.5 billion.

6. Book retail

       The book industry is estimated at over Rs. 30 billion out of which organized retail accounts for only 7 per cent (at Rs.2.10 billion). This segment is seen to be emerging with text and curriculum books accounting to about 50 per cent of the total sales. The gifting habit in India is catching on fast with books enjoying a significant share, thus expecting this sector to grow by 15 per cent annually.

7.  Consumer durables retail

       The consumer durables market can be stratified into consumer electronics comprising of TV sets, audio systems, VCD players and others; and appliances like washing machines, microwave ovens, air conditioners (A/Cs). The existing size of this sector stands at an estimated US$ 4.5 Billion with organized retailing being at 5 per cent.

Retail in India - Current Status

Retail in India - Current Status :-


      India’s retail industry accounts for 10 percent of its GDP and 8 percent of the employment to reach $17 billion by 2010.

     The Indian retail market is estimated at US$ 350 billion. But organised retail is estimated at only US$ 8 billion. However, the opportunity is huge-by 2010, organised retail is expected to grow at 6 per cent by 2010 and touch a retail business of $ 17 billion as against its current growth level of 3 per cent which at present is estimated to be $ 6 billion, according to the Study undertaken by The Associated Chambers of Commerce and Industry of India (ASSOCHAM). Indian retailing is clearly at a tipping point. India is currently the ninth largest retail market in the world. And it is names of small towns like Dehradun, Vijayawada, Lucknow and Nasik that will power India up the rankings soon.

     Organised retail in India has the potential to add over Rs. 2,000 billion (US$45 billion) business by the Year 2010 generating employment for some 2.5 million people in various retail operations and over 10 million additional workforce in retail support activities including contract production & processing, supply chain & logistics, retail real estate development & management etc.

     It is estimated that it will cross the $650-billion mark by 2011, with an already estimated investment of around $421 billion slated for the next four years.

Investment Opportunities in the Retail Sector

      AT Kearney’s study on global retailing trends found that India is the least competitive as well as least saturated of all major global markets. This implies that there are significantly low entry barriers for players trying to setup base in India, in terms of the competitive landscape. The report further stated that global retailers such as Walmart, Carrefour,Tesco and Casino would take advantage of the more favourable FDI rules that are likely in India and enter the country through partnerships with local retailers. Other retailers
such as Marks & Spencer and the Benetton Group, who operate through a franchisee model, would most likely switch to a hybrid ownership structure.

      A good talent pool, unlimited opportunities, huge markets and availability of quality raw materials at cheaper costs is expected to make India overtake the world's best retail economies by 2042, according to industry players. The retail industry in India, according to experts, will be a major employment generator
in the future. Currently, the market share of organised modern retail is just over 4 percent of the total retail industry, thereby leaving a huge untapped opportunity.
The Potential of the Indian Retail Sector


The high growth projected in domestic retail demand will be fuelled by:

• The migration of population to higher income segments with increasing per capita incomes
• An increase in urbanisation
•  Changing consumer attitudes especially the increasing use of credit cards
•  The growth of the population in the 20 to 49 years age band

There is retail opportunity in most product categories and for all types of formats

• Food and Grocery: The largest category; largely unorganised today
•  Home Improvement and Consumer Durables: Over 20 per cent p.a. CAGR estimated in the next 10 years

• Apparel and Eating Out: 13 per cent p.a. CAGR projected over 10 years

Opportunities for investment in supply chain infrastructure: Cold chain and logistics

India also has significant potential to emerge as a sourcing base for a wide variety of goods for
international retail companies

• Many international retailers including Wal-Mart, GAP, JC Penney etc. are already procuring from India.

      The sector is expected to see an investment of over $30 billion within the next 4-5 years,catapulting modern retail in the country to $175-200 billion by 2016, according to Technopak estimates.Of the total organised retail market of Rs 550 billion, the business of fashion accounts for Rs 300.80 billion, which translates into nearly 55 per cent of the organised retail segment in the country.

      Total fashion sector was estimated at Rs 1,914 billion and forms about 15 per cent of the country's retail market of Rs 12,000 billion. Commanding such a large chunk of the organised retail business in India, fashion
retailing has indeed been responsible for single-handedly driving the business of retail in India.