THE INDIAN RETAIL INDUSTRY
May 2012
CREDIT ANALYSIS & RESEARCH LTD. 4th Floor, Godrej Coliseum, Somaiya Hospital Road, Off Eastern Express Highway, Sion (East), Mumbai 400 022
May 2012
THE INDIAN RETAIL INDUSTRY
Table of Contents
Executive Summary
SECTION- I CARE Researchs 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
May 2012
COST ANALYSIS Unorganised Retail
THE INDIAN RETAIL INDUSTRY
Organised Retail
Procurement of Raw Materials/Finished Goods Labour expenses Selling & Distribution expenses Rental expenses Profit margins
ANALYTICAL MODELS Porters 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
May 2012
Department Stores Hypermarkets
THE INDIAN RETAIL INDUSTRY
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
May 2012
THE INDIAN RETAIL INDUSTRY
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 o o o 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
May 2012
THE INDIAN RETAIL INDUSTRY
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 Indias Retail Hierarchy Annexure 3 List of clearances required for retailing operations Terminologies
List of Tables
SECTION- I CARE Researchs 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 (%)
May 2012
Profit margins of various players
THE INDIAN RETAIL INDUSTRY
SECTION- III ORGANISED RETAILING AN IN-DEPTH ANALYSIS
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 Total 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
List of Graphs
SECTION- I CARE Researchs OUTLOOK
PFCE Estimates FY13- FY15
May 2012
THE INDIAN RETAIL INDUSTRY
Indian Retail Sales Estimates - FY13- FY15 Organised Retail Market Size & Penetration level estimates Organised Retail Market Size estimates category-wise - FY13- FY15 Organised Retail- Market size & % penetration estimates segment-wise A comparative study Shrinkages as a % of total retail sales
SECTION- II RETAIL SCENARIO - FY11 & FY12
Same store sales growth (SSS): FY09- Q3FY12 Interest as a % of operating profit vis--vis PAT margin Average Inventory turnover ratio: FY09- FY11
SECTION- III ORGANISED RETAILING AN IN-DEPTH ANALYSIS
Organised retail Total revenues & % penetration Apparel & Footwear Total organised retail and % penetration Food & Grocery -Total organised retail and % penetration Furniture & Furnishing Total organised retail and % penetration Jewellery & Watches -Total organised retail and % penetration Entertainment, books, sports goods & other equipments Total organised retail and % penetration Other segments (Personal care, Non-institutional Healthcare and Beverages) -Total organised retail and % penetration Indian Organised Retail pie FY07 Indian Organised Retail pie FY11 Indian Organised Retail Pie FY12 (p) HNI Growth in India India Internet users & penetration level
SECTION- IV INDUSTRY BASICS
Indian Retail Pie FY07 (%) Indian Retail Pie FY11 (%) Share of Unorganised Retail in Total Retail
May 2012
Indias spending pattern FY11
THE INDIAN RETAIL INDUSTRY
Unorganised retailing sales by retailer type (%) GDP, PFCE & Retail sales CAGR for the period FY07-11 Rural - urban population divide (%) PFCE and Personal Disposable Income per capita Per capita monthly expenditure - Urban Per capita monthly expenditure Rural Age distribution of Indian population (%) Median age of population FY11 Credit card usage trend Debit card usage trend Changing consumption pattern FY07 -11 Growth trend of nuclear families Growth trend of density & population Proportion of female working population of the total working population Proportion of female working in Organised industrial activities Operational Mall space - Region-wise % Top 5 Indian Cities by GLA % Upcoming Malls State-wise % share
The report elucidates facts about the Indian Retail industry, supplemented by latest statistical data and comprehensive analysis. The report comprising five sections provides an in-depth view of the Indian Retail industry and market trends during FY10 with a focus on the future prospects of the Indian Retail industry. Section I OUTLOOK This section has been sub-divided into two broad heads illustrating the future prospects and challenges ahead for the Indian Retail industry. Estimates of PFCE for the period FY13-15 Estimates of Indian retail sales segment-wise for the period FY13-15 Segment-wise estimates of Indian organised retail market size and organised retail penetration upto FY15 Outlook on the growth prospects of the Indian retail industry with the analysis of current trends i.e. private labels, penetration of organised retailing in tier- II & III cities, capex plans and entry of foreign players Challenges in organised retailing such as issues pertaining to real estate availability, legal & regulatory framework, supply chain management, shrinkages etc. Section II RETAIL SCENARIO FY11 & FY12
May 2012
THE INDIAN RETAIL INDUSTRY
Effects of economic slowdown and its impact on the industry in terms of footfalls, conversion rate and other operational parameters such as inventory turnover, working capital position etc.
Cost Analysis of players in the Indian retail industry Analytical models i.e. Porters Five Force Model & SWOT Analysis
Section III ORGANISED RETAILING AN IN-DEPTH ANALYSIS An analysis of the organised retailing segments outlining their growth and penetration in total retail Insights into emerging retail formats such as rural retailing, luxury retailing etc.
Section IV INDUSTRY BASICS Introduction to the global retailing scenario Evolution of Indian retailing organised and unorganised Detailed illustration of the characteristics inherent to the industry Factors driving the growth of Indian retail industry both demand & supply side factors Section V REVIEW OF INDIAN RETAILERS In-depth study of the players in the Indian retail industry i.e. Pantaloon Retail India Limited, Shoppers Stop Limited, Koutons Retail India Limited, Provogue (India) Limited and Trent Limited with an emphasis on their operational and financial performance (FY09-FY11), segment-wise store formats, segment-wise private labels and the size and number of stores of the major Indian retail players. For an in-depth analysis spanning the period FY07-12 and CARE Researchs outlook on the sector, please refer to the Report on The Indian Retail Industry, May 2012 by CARE Research. The subscription to this report includes 4 quarterly updates on the industry from the date of subscription.
Kindly click on the link below to subscribe a copy of the same [Link]
For any queries regarding the content & scope of the report kindly reach us at careresearch@[Link]
May 2012
Contact Ms. Revati Kasture Head Industry Research (D): +91-22-6754 3465 Mr. Vishal Ajmera Dy. Manager (D): +91-22-6754 3454 Mr. Dhananjay Birari Jr. Analyst (D): +91-22-6754 3479
THE INDIAN RETAIL INDUSTRY
[Link]@[Link]
[Link]@[Link]
[Link]@[Link]
CREDIT ANALYSIS & RESEARCH LTD. 4th Floor Godrej Coliseum, Off Eastern Express Highway, Somaiya Hospital Road, Sion East, Mumbai 400 022 Tel: +91-22-6754 3456 Fax: +91-22-6754 3457
All Rights Reserved. No part of this report may be reproduced or transmitted in any form without prior Written permission from CARE DISCLAIMER
This report is prepared by CARE Research, a division of Credit Analysis & REsearch Limited [CARE]. CARE Research has taken utmost care to ensure accuracy and objectivity while developing this report based on information available in public domain. However, neither the accuracy nor completeness of information contained in this report is guaranteed. CARE Research operates independently of ratings division and this report does not contain any confidential information obtained by ratings division, which they may have obtained in the regular course of operations. The opinion expressed in this report cannot be compared to the rating assigned to the company within this industry by the ratings division. The opinion expressed is also not a recommendation to buy, sell or hold an instrument. CARE Research is not responsible for any errors or omissions in analysis/inferences/views or for results obtained from the use of information contained in this report and especially states that CARE (including all divisions) has no financial liability whatsoever to the user of this product. This report is for the information of the intended recipients only and no part of this report may be published or reproduced in any form or manner without prior written permission of CARE Research . Published by Credit Analysis & REsearch Ltd. 4th Floor Godrej Coliseum, Off Eastern Express Highway, Somaiya Hospital Road, Sion East, Mumbai 400 022 Tel: +91- 22-6754 3456 Fax: +91-22-6754 3457