Abstract
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“Consumer is the King”
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The Indian Retail industry has grown at a CAGR of 14.6% for the period
FY07-12(p). The said growth can be attributed to the growing Indian economy,
increase in Private Final Consumption Expenditure (PFCE) and the change in
consumption pattern of the Indian populace. The changing consumption pattern,
in turn, primarily remains driven by higher standard of living, growing
middle-class population, greater proportion of working women, increase in
penetration levels of organised retail etc.
Of all the retailing segments, the contribution of ‘food & grocery' is
estimated to have remained the highest at 58% of the total retail sales during
FY12 (p) with the ‘clothing & footwear' segment remaining the
second-largest contributor occupying 10.5% of the total retail pie during the
same period. However in terms of growth figures, the ‘entertainment,
books & sports goods equipment' segment is estimated to have outperformed the
other retail segments, registering a CAGR of 21.3% during the period FY07-12
(p).
Despite the said growth, the Indian retail industry remains highly fragmented,
with the organized retailing still at a nascent stage accounting for a
miniscule percentage of the total Indian retail market. During FY07- 12 (p),
the organised retailing in India has grown at a CAGR of 26.4%; higher to the
growth of total retailing in India during the same period under consideration.
Of the organised retail sales during FY12, the contribution of ‘Clothing
& Footwear' segment remained the highest at 37% with the ‘Food &
Grocery' segment being the second-highest contributor accounting for 24.2% of
the total organised retail sales. Notably, the penetration of ‘Food &
Grocery' segment remained low at 2.8% owing to greater sale of fresh produce
and groceries from the unorganised retail outlets.
With the global as well as Indian economy reviving post recession, the
organised retail industry witnessed gradual increase in footfalls and
correspondingly an increase in the Same store sales (SSS) during FY11. Despite
of increase in sales volume across product categories, the operating margins
of the retailers failed to improve on the backdrop of rising input costs and
discounted product offerings. To aggravate the situation, escalating interest
burden adversely affected the retailers' net profit margins.
During the latter half of FY12, the retailers however witnessed slowdown in
consumer spending as reflected through their SSS performance. This in turn
resulted in higher inventory days for the retailers, on an average, ultimately
affecting their working capital cycle. Also, with the interest rates at its
peak during FY12 and lack of fund-raising avenues from the capital markets,
the availability of capital remained a major constraint to the Indian
retailers. In addition, the Indian retailers continued to be faced with
challenges such as higher store rentals and unavailability of desired store
location especially in tier- I cities, taxation & other policy regulations,
inefficiencies in supply chain management and higher rate of shrinkages.
Despite the said challenges, CARE Research expects the growth in country's
PFCE to propel the growth of retailing in India. Correspondingly, CARE
Research expects the Indian retail industry to grow at a CAGR of 14.8% during
FY12-15. Importantly, CARE Research expects the penetration of organised
retail in the total retail pie to increase to 8.8% by FY15 owing to the
expanding reach of the retailers in tier- II & III cities accompanied by
higher consumer spend on discretionary items. Also, in an attempt to increase
margins, CARE Research expects the retailers would resort to measures such as
increasing the share of private labels in the total store sales, reducing
store-level operating expenses etc. .
Table of Contents
Executive Summary
SECTION - I: CARE Research's OUTLOOK
INDUSTRY OUTLOOK
- Rising PFCE - to fuel Indian Retailing growth story
- Indian Retail sales to surge by 1.5 times by FY15
- Organised Retail penetration expected at 8.8% by FY15
- Organised retailing growth to be fuelled by spend on discretionary goods
- Comparative study of Organised retailing segments
- Emphasis on private labels to boost profit margins
- Organised retailing in tier-II & III cities to expand further
- Capex plans of organised retailers: slow but steady
- Focus on reducing store-level operating expenses
- Relaxation of FDI norms a welcome move but riders to be deterrent
CHALLENGES TO ORGANISED RETAILING
- Real estate and property-related issues
- Taxation & policy-related hurdles
- Inefficiencies in supply chain management
- Increased Shrinkages
- Scarcity of workforce
- Political & local agitation
SECTION - II: RETAIL SCENARIO - FY11 & FY12
RETAILING TRENDS FY11 & FY12
- Improvement in footfalls and Same-store sales post- recession
- Operating Profit margin continued to remained affected
- Higher interest cost dented the net profit margins
- Slower Inventory turnover
- Crunch in working capital position
- Expansion albeit at a slower pace
COST ANALYSIS
- Organised Retail
- Procurement of Raw Materials/Finished Goods
- Labour expenses
- Selling & Distribution expenses
- Rental expenses
- Profit margins
ANALYTICAL MODELS
- Porter's Five Force Model
- SWOT Analysis
SECTION - III: ORGANISED RETAILING - AN IN-DEPTH ANALYSIS
THE GROWTH STORY
SEGMENTAL ANALYSIS
- Apparel & Footwear
- Food & Grocery
- Furniture & Furnishing
- Jewellery & watches
- Entertainment, books, sports goods & other equipment
- Other segments
RETAIL FORMATS - An Insight
- Major forms of Retailing
- Convenience Stores
- Discount Stores
- Factory / company outlets
- Specialty Store
- Supermarkets
- Department Stores
- Hypermarkets
DETERMINANTS OF RETAIL FORMAT VIABILITY
- Average number of footfalls
- Sales per sq ft.
- Supply Chain Management
- Minimisation of wastages
- Specialised manufacturing
- Reducing chances of stock-out
- Dependence on ‘Private labels'
- Technological upgradation
- Repeat sales through loyalty programs
- Advertising & sales promotion activities
EMERGING RETAIL FORMATS
- Rural Retailing
- Benefits to the retailers
- Benefits to the rural populace
- Luxury Retailing
- Airport Retailing
- E-Retailing
- Convenient Shopping
- Value for money
- Change in the consumers' attitude
- Easy payment options
- Lack of ‘touch & feel' experience
- Lack of transparency in transactions
- Untimely delivery of products
LICENSING AND OTHER REGULATORY ASPECTS
- Regulatory Structure
- Licensing Requirements
- Taxation Regime
SECTION - IV: INDUSTRY BASICS
RETAILING - AN INTRODUCTION
- Retailing Basics
- Unorganised Retail
- Organised Retail
THE INTERNATIONAL RETAIL SCENARIO
- Stages of Evolution
- Highlighting Features of Global Retailing
- Sizeable & Profitable Operations
- Highly favoured Big-Box Formats
- Regulatory Aspects
THE INDIAN RETAIL SCENARIO
- Industry Evolution
- Indian Retail story - Phases of Growth
- The Unorganised Retail
INDUSTRY CHARACTERISTICS
- Highly unorganised & fragmented industry
- Linkages with the economic growth
- The rural-urban divide
- Hierarchy in retail
- Emergence of multiple retail formats
- Long supply chain
- Working Capital intensive
INDUSTRY GROWTH DRIVERS
- Demand-side factors
- Rising Urbanisation
- Growing consumer class
- Growing per capita expenditures
- Baby Boomer effect
- Growing spread of ‘plastic money'
- Changing face of Indian consumerism - from necessities to luxuries
- Rising number of nuclear families
- Growing female working population
- Supply-side factors
- Retail growth through VC/PE route
- Developments in the real estate scenario
SECTION - IV: COMPANY SECTION
- Pantaloon Retail India Limited
- Shoppers Stop Limited
- Koutons Retail India Limited
- Provogue (India) Limited
- Trent Limited
SECTION - V: ANNEXURES
- Annexure 1. The Global Retail Development Index (GRDI) - 2011
- Annexure 2. India's Retail Hierarchy
- Annexure 3. List of clearances required for retailing operations
Terminologies
List of Tables
SECTION - I: CARE Research's OUTLOOK
- Expansion plans of the retailers
SECTION - II: RETAIL SCENARIO - FY11 & FY12
- IPO plans of Indian Retailers
- Raw material expenditure as a % of total expenditure
- Labour expenditure as a % of total expenditure
- Selling & Distribution expenditure as a % of total expenditure
- Rental expenditure as a % of total expenditure
- Gross margins of organised retailers across various product categories (%)
- Profit margins of various players
- Sales per sq.ft of various modern retail formats
- Private labels of leading Indian retailers
- Loyalty program - Pantaloon Retail India Limited
- Globus - Card Rewards and Privileges
- Globus Fashions - Loyalty Program
- Advertisement & Sales promotion expenses as % of sales
- Initiatives of the modern retailers in Rural India
- Global luxury brands in India
- JVs in Indian Airport retailing
- E-retailing M&A - Inbound
- E-Retailing M&A - Outbound
- E-retailing M&A- Domestic
- Private Equity Entry in E- retailing
- Status of market reforms in Agriculture (APMC Act amendments)
- APMC Rules- Status
SECTION - IV: INDUSTRY BASICS
- Global Retailers in the Fortune 500 list - Year 2010
- Indian Retail Revenue - FY07 - FY12 (p)
- % share of All- India GLA
- Net Working Capital as a % of Total capital employed
- Income Distribution of the Indian Households
- Retail M&As
- Private Equity Deals - Organised Retail
Indian Retail Industry published by CARE Ratings in May 3, 2012. This report price starts from US $ 750.
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