Retail Industry

&
Competition
Analysis
What is the Retail Industry?
• The retail industry is a sector of the economy that is comprised of individuals and companies engaged in the selling
of finished products to end user consumers.
 Overview
 The global retail industry is a significant contributor to the overall economic activity globally that contributes about 27% to
world’s Gross Domestic Product
 The industry is highly fragmented as major eight players composed only about 8% share of the global market
 The global retail industry is dominated by US based companies including Wal-Mart, Home Depot, Kroger, Target Corp. and
Costco that comes under top ten global players
 Wal-Mart is the global leader in the industry .The global retail industry is estimated to grow at a CAGR of 5.5% till 2009
 However, industry has faced challenges outlook for 2009 as they dealt with liquidity issues, reduced consumer spending and
weak credit market conditions
— Most of the industry players are focusing on emerging markets including BRIC nations

Market Share of Global Major Players* Global Retail Industry Sales Growth

3.1% 16.00 5%
R +5..5 13.6
92.1% 1.1% 14.00 CAG 12.2 12.6 13.1
11.4
0.8% 12.00 10.5
9.5
10.00 8.4 8.4 8.6
0.7%
8.00
0.6%
6.00
0.6% 4.00
Wal Mart 0.5%
Carrefour
0.5%Metro AG 2.00

Tesco Home Depot Kroger Inc 0.00

2000 2001 2002 2003 2004 2005 2006 2007 2008E 2009E
Costco Wholesale Target Corp Others
Overview – Grocery Retail
 According to IGD estimates, the global grocery retail market in 2009 was estimated at $7,088 billion, with the largest markets being the US,
China and Japan
— Over the next five years it is predicted that India will overtake Japan to be in the top three markets

Top Grocery Retail markets ($bn)

Country Market Size
USA 970 Global Grocery Retail Industry contributes around
40% of the total retail industry (CY09)
China 450
Japan 394
France 278
UK 249
India 236
Germany 193 60% 40%
Russia 188
Italy 166
Spain 131

Grocery Retail Non Grocery Retail

Industry Timeline

Upcomin
1860 onwards 1930’s 1950’s 1990’s g

Introduction of Mom Online

Supermarkets Discount stores Hypermarkets
and Pop Store Retailing

Overview -They may Overview -A Overview -A discount Overview -A Overview - Online

be general stores supermarket is "a large store is a type of hypermarket is a shopping is the
catering to a limited self-service grocery department store which superstore which process consumers go
geographical range. store where sell products at prices combines a through to purchase
Decline -In highly merchandise are lower than those asked supermarket and a products or services
industrialized regions, arranged in open mass by traditional retail department store which over the Internet.
these type of outlets display”. outlets. It offers a wide carries an enormous Trends -Online
have decreased in Facts -Supermarkets as assortment of goods. range of products under shopping is convenient
number in favor of a concept began in the Development - Many of one roof, including full and has become
franchise operations. U.S. Traditional the major discounters lines of groceries and extremely routine and
supermarkets in many are now opening general merchandise. predictable, which is
countries face intense "supercenters", which Pioneering -The format one of its great
competition from add a full-service was pioneered by appeals to the
discount retailers grocery store to the Carrefour, France. consumer.
traditional format.

The evolution of retail industry clearly paves a path for a new phase. Online
retailing, relatively untapped, though at a very nascent stage is the market which will
have an explosive growth. But hypermarkets and discount stores will continue to
grow!!!
Key trends
Growth in online retailing
 The retail industry is experiencing a shift towards online retailing from normal retailing as consumers are turning towards internet
for convenient shopping at reasonable prices
 Facilitation in price-checking, best bargains deals, cost-saving elements as well as convenience of being able to shop from
home, all these factors have attracted consumers towards online retailing, resulting in increased share of online retailing in
overall retail revenues (7% in 2009 as compared to 6% in 2006
 The online retail sales is expected to grow in 2010 however, due to recession ,it is expected to slower down the growth rate
 The US online retail sales is expected to rise by 11% y-o-y in 2009, as compared to 13% y-o-y in previous year, to reach a
market size of $156bn

“Even as companies continue to struggle, the important take-away is that the Web is continuing to grow. It's taking
wallet share away from the rest of the retail world” Sucharita Mulpuru, Analyst, Forrester

Focus on improving customer experience

 Most of the retailers are focusing on enhancing customers’ experience. They are focusing more on offering an enjoyable,
informative, entertaining, and easy experience to its customers, depending on their interests and preferences
 Company’s like Wal-Mart, Apple’s istore, and Best Buy are enhancing their in-store customer experience through cutting-edge
fixtures, kiosks, merchandise, and technology
Industry Growth Forecast
 History
o 1919 small grocery stall
o 1924 Tesco Tea Launched (OwnProduct -1 st)
o 1929 1st Store Launched in UK
o 1932 TESCO stores limited more than 100
small stores
o 1947 1st service store
o 1956 1st supermarket
o 1960 Home 'n' Wear
o 1981 food sales
o 1983 Rename Tesco plc
o 1985 Ian MacLaurin - 100th superstore
o 1991 largest independent gasoline retailer
o 1996 suffered operating losses
o 2002 Cherokee cloth
o 2010: 1st zero carbon supermarket Launched
oi

• brand
TESCO v/s Wal-Mart
 SWOT Analysis
Strengths

• Tesco’s reputation for low • A Global powerful retail

cost products. brand.
• Substantial market share in • Growth & Expansion
the UK. • IT also supports Wal-Mart's
• Increasing growth of online efficient procurement.
sales • Scale , Cost Advantage
• Tesco’s growth in the • Strong Supply chain
insurance sector provides • Financial Position.
financial strength to Tesco in
• Every Day Low Prices / Cost
UK.
 Weakness
• Reliance upon the UK • Stagnant format innovation
market. in the US.
• Debt reduction. • Slow speed of checkout.
• Signs point to serial • Poor policy of
acquisitions. compensation.
• Business model that Tesco is • Huge Scale of operations.
using is suitable for UK and • Membership only for
not for the rest of the world. SAM’S Club  
 Opportunities
• Non-food retail. • In-store experience
• Health and beauty improvements.
• Further international growth. • Take advantage of internet
• Dominance over the Online shopping.
market. • Expand to other countries
• Tesco can exercise a high with the help of take overs
degree of buying power to & mergers.
ensure that it has economies • Banking, healthcare, other
of scale in its fair-trade services
cotton clothing line • In-store media network
 Threats
• UK structural change could • Being number one means
spark a price war. that you are the target of
• Overseas returns could fall. competition, locally and
• Wal-Mart/Asda challenge. globally.
• IT infrastructure • Increasing government
regulations.
• High Exit barriers.
• Pressure from unions.
 Jack Cohen
founder
Terry Leahy
Former CEO
Philip clarke
Present CEO
Mike Duke
Present CEO

Sam and James

Tony Keohane
Co-founders Cindy Davis CEO Tesco Ireland
VP
Key to Wal-Marts success
• Wal mart dominates American retailing because:
• Its competitors have not completely understood the wal-mart
business model.
• And this has led to these competitors not seeing, much less
exploiting ,Wal-Marts weakness.
• But ironically, the competitors suffer from one of the same
weaknesses Wal-Mart has, which would prevent them from
exploiting Wal-Mart’s weaknesses, even if they knew what
they were.
ALWAYS LOW PRICES.” That is Wal-Mart’s slogan and its “A business model —
low prices enabled by operating efficiency and buying power. Or is it?

• Why is Wal-Mart so successful?

• Not because it has lower prices — in most cases, its competitors
have lower prices. Wal-Mart is so successful because it is a master
of manipulating perceptions.

1. Wal-Mart makes consumers think that its prices are much lower than its competitors’ prices
using “price spin”.
2. Wal-Mart keeps consumers from seeing that its prices are higher than competitors’ prices.
3. Once consumers are convinced Wal-Mart’s prices are lower, they become “stuck” in a self-
reinforcing loop that keeps them shopping at Wal-Mart.
WAL-MART SELLS ITSELF as being much cheaper than other channels
• media advertising.
• opening price point.
• Comparisons of the price of the other items in each section show that only
15% to 20% of the items Wal-Mart sells are actually priced lower than
competing retailers.
• 80% to 85% of the items Wal-Mart sells are more expensive than at other retailers.
• This is Wal-Mart’s “price spin” — creating a strong impression of lower prices.
 Wal-Mart is more successful than its competitors

because of the illusions it creates:

• Consumers think that Wal-Mart’s prices are lower than anyone else’s.
• Because of that perception, prices have become more important to consumers.
• Because of that perception, Wal-Mart seems to be the best at what consumers want
most.
• Because of that perception, consumers forgive Wal-Mart for its poor quality, poor
service, and poor convenience.
• Because of producers’ perceptions, Wal-Mart gets better prices from its suppliers than
any other retailer we have studied.
• Wal-Mart operates more efficiently than any other retailer we have studied.
• So Wal-Mart’s margins are higher.
• Result: Wal-Mart captures more customers and makes more money from each one.
Tesco plc (TSCO:LN)
United Kingdom | [Link]|

Market Cap: £32,778m PE: 13.078 Last Trade : 407.25

Business Overview
Tesco plc is a British-based international grocery and general merchandising retail chain.
It is the largest British retailer by both global sales and domestic market share with profits exceeding £2 billion. Tesco is among the world's top five largest
[Link] the third largest.
Originally specializing in food and drink, it has diversified into areas such as clothing, consumer electronics, financial services, telecoms, health insurance, dental
plans, retailing and renting DVDs, CDs, music downloads, Internet services, and software.
It has approx 472000 average employees and 4504 stores across the world
Tesco operates in UK, USA, Ireland, Czech republic, Poland, Hungary, Slovakia, Turkey , China , Thailand, Malaysia, South Korea and Japan.
Tesco received two outstanding accolades on 11 April 2008 as it was named Retailer of the Year and E-retailer of the Year at the World Retail Awards in Barcelona.
Tesco PLC on 12 August 2008 announced agreement with Tata that it intends to develop a wholesale cash-and-carry business in India, with an initial investment of up
to £60m in the first two years.

Market Performance
Walmart(WMT:US)
USA [Link]
Market Cap:186,953.700 PE:13.093

Business Overview
Wal-Mart Stores, Inc. operates retail stores in various formats across the globe. They basically deal in discount stores, supercenters and neighborhood markets.
It is the world's largest public corporation by revenue, according to the 2008 Fortune Global 500. It is the largest private employer in the world and the third-largest utility
or commercial employer. As of 31 Jan’09 it had around 2.1 million employees.
The Company's discount stores and supercenters offer merchandise such as apparel, housewares, small appliances, electronics, and hardware.
Their operations comprise of three different business segments: Wal-Mart stores, Sam’s club and International. Wal-mart stores segment is the largest segment of their
business, accounting for 64% of their fiscal 2008 net sales.
Wal-Mart operates in the United States, Canada, Argentina, Brazil, Mexico, United Kingdom, Puerto Rico, Japan, South America and China.
Net sales for the third quarter of fiscal year 2009 were approximately $97.6bn, an increase of 7.5% over the third quarter of fiscal year 2008. Net income for the quarter
was $3.033bn, which is 6.6% above the third quarter of fiscal year 2008.
Bharti and Wal-Mart Private Limited are joining hands . The joint venture is establishing wholesale cash-and- carry and back-end supply chain management operations in
India. The first wholesale cash and-carry facility was targeted to open in 2009.

Market Performance
 CONCLUSION
• The success of the Tesco shows how far the branding and effective
service delivery can come in moving beyond splashing one's logo
on a billboard.
• It had fostered powerful identities by making their retiling concept
into a virus and spending it out into the culture via a variety of
channels: cultural sponsorship, political controversy, consumer
experience and brand extensions.
• Tesco will compete, in a way that focuses resources to convert
distinctive competence into competitive advantage.
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