AN ANALYSIS OF INDIAN RETAIL INDUSTRY
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Acknowledgement We wish to sincerely express our gratitude to all those who helped us in achieving this moment of writing the Project Report on Retail industry for submission under the course of Industrial Analysis. We would like to thank, Dr. XYZ– Our Course coordinator for providing the opportunity to work on the project and always being there to help on any issue. This experience has enriched our knowledge in the concerned subject. Thank you
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DECLARATION
I would like to declare that the project on “Retail Industry” is an exclusive & detailed analysis carried by us. The information, facts & figures in the report have been taken from reliable sources such as Capitaline, Annual reports of companies & corporate websites. This work is different from other similar industry analysis & it truly represents our work.
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CERTIFICATE
This is to certify that XYZ of Marketing B has completed the project “Retail Industry ” under my guidance for the partial completion of the course: Industry Analytics term III PGP in Management Aug (2009-11).
Name of Faculty Guide: Prof. XYZ
Signature
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Table of Contents Executive Summary................................................................................................................9 1 Introduction:........................................................................................................................11 1.1 Global Retail Scenario:.............................................................................................................12 1.2 Indian Retail Industry...............................................................................................................16 1.2.1 India’s Retail Potential......................................................................................................18 1.3 Structure of Indian Retail Sector .............................................................................................20 1.4 Key Points of Indian Organised Retail Industry........................................................................21 1.5 Evolution in Organized Retail ..................................................................................................22 1.6 Role of Foreign Direct Investments..........................................................................................25 1.6.1 FDI in Retail not permitted ...............................................................................................26 1.6.2 Current FDI .......................................................................................................................26 1.6.3 Benefits of FDI...................................................................................................................26
2 OBJECTIVES.....................................................................................................................28 3 Industry Analysis.................................................................................................................30 3.1 Segment wise...........................................................................................................................30 3.1.1 Food and grocery retail:....................................................................................................32 3.1.2 Apparel retail:...................................................................................................................33 3.1.3 Gems and Jewellery retail:................................................................................................34 3.1.4 Pharma retail:...................................................................................................................34 3.1.5 Music and Book Retail:.....................................................................................................35 3.1.6 Consumer durables retail:.................................................................................................36 3.2 List of Retail Companies in India:.............................................................................................36 3.3 Market share:..........................................................................................................................41 3.4 Porter's Five Forces Analysis....................................................................................................41 3.5 PEST Analysis:..........................................................................................................................44 3.6 SWOT ANALYSIS.......................................................................................................................47 PGP 2009-2011
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3.7 Market concentration: ............................................................................................................51 3.7.1 Herfindahl Index...............................................................................................................51 3.8 Industry Challenges:................................................................................................................52
4 Company Profile: ..............................................................................................................55 4.1 SHOPPERS STOP.......................................................................................................................56 4.2 PANTALOON RETAIL ................................................................................................................60 4.3 VISHAL RETAIL .........................................................................................................................66 4.4 TRENT LIMITED........................................................................................................................69
5 Comparative Analysis and Interpretation:...........................................................................74 5.1 Quantitative Analysis:..............................................................................................................74 5.1.1 Profitability:......................................................................................................................75 5.1.2 Ratio Analysis:................................................................................................................80 5.1.3 Trend Analysis: Simple Linear Regression.........................................................................85 5.2 Qualitative analysis:.................................................................................................................89 5.2.1 SWOT Analysis:.................................................................................................................89 5.2.2 Pricing:..............................................................................................................................94 5.2.3 Advertising:.......................................................................................................................96
6 Recommendations and Conclusion:....................................................................................99 6.1 Future outlooks.......................................................................................................................99 6.2 Recommendations ..................................................................................................................99 6.3 Conclusion:............................................................................................................................100
Bibliography:.......................................................................................................................102
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List of Figures Figure 1.1 Global Retail Scenario.........................................................................................12 Figure 1.2 organised Retail Sector in the world.....................................................................14 Figure 1.3 Organised Retail with respect to total Retail........................................................15 Figure 1.4 Indian Retail industry contribution to GDP.........................................................16 Figure 1.5 Employment Generation by Retail sector in india................................................17 Figure 1.6 India’s Retail potential..........................................................................................18 Figure 1.7 Indian Retail Scenario..........................................................................................19 Figure 1.8 Evolution of Indian Retail.....................................................................................23 Figure 1.9 Penetration of Retail sector ..................................................................................24 Figure 1.10 FDI In Retail allowed.........................................................................................25 Figure 3.11 Segment wise contribution in Retail Sector........................................................32 Figure 3.12 Major players of Food and Grocery segment ....................................................33 Figure 3.13 Major players of Apparels segment ...................................................................33 Figure 3.14 Major players of Gems and Jewellery segment..................................................34 Figure 3.15 Major players of Pharma segment......................................................................35 Figure 3.16 Major players of Books and Music segment.......................................................35 Figure 3.17 Major players of consumer durables segment....................................................36 Figure 3.18 Market share of major players in Indian retail industry.....................................41 Figure 5.19 Sales Graph for all Major Companies in (crs)...................................................75 Figure 5.20 Net Profit Graph for all Major Companies in (crs)............................................76 Figure 5.21 ROCE Graph for all Major Companies ............................................................78 Figure 5.22 RONW Graph for all Major Companies ...........................................................79 Figure 5.23 Debt-Equity Ratio Graph for all Major Companies...........................................82 Figure 5.24 Current Ratio Graph for all Major Companies...................................................83 Figure 5.25 Sales Trend Graph for all major companies (crs)..............................................86 Figure 5.26 Profit Trend Graph for all Major Companies in (crs)........................................87 PGP 2009-2011
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List of Tables Table 1.1 Share of organised Retail sector.............................................................................13 Table 1.2 World Total Retail sector and Percentage in organized sector..............................14 Table 1.3 Advantages of conventional and Morden organised Retail Formats.....................22 Table 3.4 TOP Major Players in retail in India with respect to No. of stores, Formats and Brand names ..........................................................................................................................40 Table 3.5 Market share ..........................................................................................................52 Table 5.6 Sales of all Major Companies in (crs)....................................................................75 Table 5.7 Profit of all Major Companies in (crs)...................................................................76 Table 5.8 ROCE Percentage of all Major Companies............................................................78 Table 5.9 RONW Percentage of all Major Companies .........................................................79 Table 5.10 Debt-Equity Ratio of all Major Companies ........................................................81 Table 5.11 Current Ratio of all Major Companies ................................................................83 Table 5.12 Sales Trend of all Major Companies in (crs).......................................................85 Table 5.13 Profit Trend of all Major Companies in (crs).......................................................87 Table 5.14 Comparing Advertising Strategies of the four companies...................................96
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Executive Summary The Indian Retail industry is a significant contributor to the GDP of India. It also provides many employment opportunities in the country. It adds to the fashion quotient and lifestyle of the people. The industry earlier comprised of unorganized retail. The kirana stores and the local mom and pop stores were very popular among the consumers. Now organized retailing is slowly emerging in the form of malls and hypermarkets. The industry is in a transformational form as there is a shift from unorganized retailing to organized retailing. Emergence of key players like Shoppers’ stop, Pantaloon, Vishal, etc. has changed the face of retailing in India. These outlets have a huge advantage over the next door kirana stores in terms of better financial position and superior technological facilities. Through this report, an attempt is made to study the growth and sustainability of organized retail both from the customer view point and the industry viewpoint. The study provides an insight into the factors propelling the growth of organized retail in India, pricing strategy, Advertisement and Market leader of the Retail sector in India. Even this study focus on the role of FDI in India and what are the challenges facing by this industry. The analysis of this industry, by both quantitative and qualitative aspect.
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CHAPTER- 1 INTRODUCTION
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1 Introduction: Retailing includes activities accompanying to selling to ultimate consumer for their personnel family and household use, from a fixed location such as a department store or kiosk, in small or individual lots for direct consumption by the purchaser. It is an interface between the producer and the individual consumer buying for personal consumption. Retail is one of India’s largest industries, contributing to about 12 per cent of the GDP and providing employment to 8 per cent of the nation’s workforce. The retail sector is expanding and modernizing rapidly in line with India’s economic growth. The Retail sector in India is worth USD 394 billion and is growing at the rate of 30% annually. The industry which traditionally comprised of mom and pop stores spread hither and thither is in the revolutionary phase in the present era. It has come a long way with the emergence of modern retail outlets such as malls, speciality stores, etc. There are major players like Shoppers Stop, Pantaloons, etc. who, even though very small in number have changed the face of retailing India. These organized retailers have posed a threat to the traditional retail stores. They also have an upper hand in case of financial and technology support as compared to the unorganized retail outlets. According to AT Kearney, India is the next favourite foreign investment destination currently, as markets like China become increasingly saturated. India has the 4th largest economy with respect to the GDP (in PPP terms) and is expected to rank 3rd by 2010 just behind US and China. Over the past few years, the retail sales in India are hovering around 33-35% of GDP as compared to around 20% in the US. This can be attributed to the penetration of organized retailing in India. It has not only modernized the economy but also contributed to middle class’ savings. Middle
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class is the dominating income group in the entire population. The opportunities in organized Indian retail sector are also expected to grow over the next few years.
1.1 Global Retail Scenario: Retailing sector contributes to about 27% of the world’s GDP and has the largest number of establishments in the world. It also generates a huge amount of employment as compared to any other sector. Figure 1.1 Global Retail Scenario
Courtesy: www.fibre2fashion.com . The U.S retail industry is one of the largest industries in the world. It is the second largest among other industries in the US. It generates about 22 million jobs. It is worth US$ 9 trillion (figures as of 2007) and is still growing. The fact that 47 of the Global Fortune 500 companies & 25 of Asia’s Top 200 companies are retailers is a matter of pride to the Retail sector.
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The growth in retail sector is not only evident in the U.S, but also in other developed countries like U.K, European Union and Japan. Economies of countries like Singapore, Mexico, Thailand, Malaysia, Sri Lanka, etc. are also greatly dependent on the retail sector. Retailing all over the world can be divided into two basic categories: •
Organized retail
•
Unorganized retail
Unorganized retail refers to the Local Mom and Pop stores. Hypermarkets, Supermarkets, Malls, etc. constitute the organized retail segment. The percentage breakup of organized and unorganized retail varies from country to country all over the world. Actually this percentage breakup can even be an indicator of the level of economic development of a country. Developed countries have more organized retail than unorganized retail. In the developing countries, the trend is vice – versa. Unorganized retail dominates developing countries. Nevertheless, organized retail is steadily growing. Table 1.1 Share of organised Retail sector
Total retail (US$ billions) Organized retail (US$ billions) Share of Organized retail in %
1999 150 1.1 0.7
2002 180 3.3 1.8
2005 225 7 3.2
Courtesy: CSO MGI study The above table indicates the growth of organized retail in the world as a percentage of the total retail.
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Figure 1.2 organised Retail Sector in the world
Courtesy: CSO MGI study The breakup of organized retail among the developed and developing countries is as shown below. Developed countries like the US, European Union and Japan together constitute 80% of the total organized retail in the world. But, the developing countries are not to be neglected. Growth of organized retail in these countries is at a much faster pace than that in developed countries. This is because in the developing countries, there is more scope for future expansion as against the developed countries which may suffer from saturation.
Table 1.2 World Total Retail sector and Percentage in organized sector
USA JAPAN CHINA U.K FRANCE GERMANY INDIA BRAZIL RUSSIA PAKISTAN Courtesy: CSO MGI study
Total Retail 2983 1182 785 475 436 421 322 284 276 67
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Organized Retail 85% 66% 20% 80% 80% 80% 5% 36% 33% 1%
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The above table shows organized retail as a percentage of total retail in different countries. It is evident that developed countries like USA and UK have a higher percentage of organized retail than the developing countries like Brazil, China and Russia. India and Pakistan have to go a long way to match the other countries. Pakistan has the least percentage of organized retail as compared to the other countries mentioned above (1%) while India is no better off at 4%. The graphical depiction of the above table is as shown below. Here, the organized retail is given in terms of US$ rather than as just a percentage of total sales.
Figure 1.3 Organised Retail with respect to total Retail
Source: Planet Retail and Technopak Advisers Pvt. Ltd. In short, there is a lot of scope for growth of organized retail in developing countries. India and China are the targets. Growing population, increasing incomes and higher purchasing power in these countries will drive the growth of this sector. Some top retailers in the world are:
Retailer
Home country PGP 2009-2011
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1. The WalMart group, Inc
U.S
2. Carrefour group
FRANCE
3. The Kroger Co.
U.S
4. The Home depot, Inc
U.S
5. Metro
GERMANY
Courtesy: STORES/Deloitte Touche Tomahatsu
1.2 Indian Retail Industry Retail is a buzz word in India of late. The Indian Retail industry is the second largest employment provider in the country after agriculture. It contributes 12% to the GDP of India and at the same time generates 8% of employment in the country. Figure 1.4 Indian Retail industry contribution to GDP
Courtesy: CSO MGI study
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Figure 1.5 Employment Generation by Retail sector in india
Courtesy: CSO MGI study The Indian Retail industry was worth US $511 billion at the end of 2008. It is expected to post a Compounded annual growth rate of 13.2% which will place it at US $640 billion in 2010. Indian economy is the 4th largest in the world in terms of GDP. It is expected to become the 3rd largest by the end of 2010 by ousting Japan. With the saturation of the Chinese market, India is the next favorite destination for Foreign Direct Investment. Retail sales in India constitute around 33 – 35% of the GDP where as in US, retail sales makes up for 20% of the GDP. US has more of organized retail than unorganized. China is on the path of progress in terms of organized retail. India on the other hand, has about 2- 3% of organized retail while the rest is just filled with unorganized retail.
Source: Economist, Let gradualism guide FDI in retail, 2006.
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1.2.1 India’s Retail Potential Figure 1.6 India’s Retail potential
Source: ICRIER Retail Report 2008, Angel Research The above diagram shows the position of various countries with respect to market potential for retail and the risk involved in the country. The risks involved include economic and political risks. India has the highest market potential, even ahead of China, Brazil and Russia. It also involves lesser risk than China and Russia and almost on par with Brazil. In short, India is the most favourite destination for future retail investments. According to the A T Kearney study on Global Retail Development Index (GRDI), India is rated as the most attractive Investment destination in Retail for three consecutive years 2005, 2006 and 2007. According to GRDI 2008, India has maximum retail potential among the Top-5 attractive retail destinations. India has topped the study that ranks 30 Emerging countries on parameters like Country risk, Market potential, Market attractiveness, etc. The Indian Retail industry has grown tremendously in the past few years. There are many drivers of this growth. Some of them are: Changing consumer profile and demographics Credit availability PGP 2009-2011
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Improvement in infrastructure Technological innovations Liberalized government policies Efficient supply chain management methods Indian retail scenario can be broadly classified into two categories: Organized retail: The new face of Indian retail Unorganized retail Figure 1.7 Indian Retail Scenario
Courtesy: CSO MGI study Unorganized retail grabs a major share in Indian retail while organized retail accounts for a mere 5%. Indian retail industry is characterized by the widely dispersed retail outlets situated at every nook and corner all over the country. Large, medium and small grocery stores and drug stores constitute the unorganized retail sector. The paanwalas, kirana stores and the street hawkers are also a part of the unorganized retail in India. The presence of a large number of small players has made the Indian retail industry one of the most fragmented industries in the world. Organized retailing in the form of malls and supermarkets is finding its way into
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the Indian markets. But it is still largely confined to the metropolitan cities. The rest of India still remains an untapped segment for organized retail. The concept of organized retail is new to India and is slowly catching on. People still prefer the age old kirana stores located next to their house rather than the huge malls or supermarkets which offer all products under one roof. Nevertheless, the mall culture is growing in India. The youth are the main propellers of this growth. The plethora of brands on display at these malls and hypermarkets attracts today’s brand conscious customer.
The major forms of organized retailing available in India are:
Source: Sinha Piyush Kumar and Uniyal Dwarika, Retail Management - An Asian Perspective, 2005, Angel Research
1.3 Structure of Indian Retail Sector
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The Indian retail industry can therefore be broadly divided into organized and unorganized retailing. Unorganized sector constitutes of the local kiranas, hand cart, the vendors on the pavement etc. Unorganized retailing is still the backbone of the Indian retail industry contributing to over 95 per cent of total retail revenues. The organized sector on the other is hand trading undertaken by the licensed retailers who have registered themselves to sales as well as income tax. They constitute of corporate backed hypermarkets and retail chains. This modern retail has entered India as seen in sprawling shopping centres, multi-storeyed malls and huge complexes offer shopping, entertainment and food all under one roof.
1.4 Key Points of Indian Organised Retail Industry 1. Potential to be the third largest economy in terms of GDP in next few years . 2. It ranks high amongst the top 10 FDI destinations of the world . 3. Fastest growing tourist market in Asia. 4. World bank states, India to be worlds second largest economy after China by the year 2050. 5. Stable and investor friendly Central Government at the helm of affairs. 6. Introduction of Value Added Tax or VAT and tax reforms. 7. High degree of professionalism and corporate ethics. 8. Excellent Investment opportunities in Indian retail sector and in allied sectors; sure and high returns on investments. 9. To invest US $130 billion for the development of infrastructure, by year 2010. 10. Bullish stock markets. 11. Hordes of foreign investors are thronging in to invest in Indian retail markets. 12. Highly educated English speaking young workforce. 13. Vibrant and multi cultured cities. 14. Huge opportunity exists, especially in semi-rural and rural areas.
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15. Till date the second largest employer after agriculture sector, for the huge semi-skilled Indian population. 16. Offers highest shop density in the whole world. 17. Having almost 1, 20,000 shops, across the length and breadth of the country. Table 1.3 Advantages of conventional and Morden organised Retail Formats
Advantages of Conventional and Modern Organized Retail Formats Modern Organized
Conventional • • •
Large bargaining power Proximity to consumers Long operating-hours Strong relations with customers Convenience and hygiene
• • •
Low operating-cost and overheads Range and variety of goods Long operating-hours Quality assurance (brand related, durability) Quality assurance (brand related, durability)
1.5 Evolution in Organized Retail The Organized Retail Industry in India is estimated to be around US $25.4bn at the end of CY2008, which only around 5% of total retail market. Among the BRIC countries only in India the share of organized retail is low. The share of organized retail in other BRIC countries is, Brazil (36%), Russia (33%) and China (20%). Globally, Organised Retail accounts for around 52% of Total Retail. It is seen that the organized sector in India still has a long way to go because the unorganized retail still continues to dominate the retail market.
Evolution of Indian Retail
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Figure 1.8 Evolution of Indian Retail
But the organized retailing is growing at a fast pace. The organized retail market is presently ~5 percent of the total retail, that is around Rs 67,310 crores and is expected to compound at 27 percent per annum, aggregating to Rs 1,75,103 crores (7.44 percent of the total retail) in 2010-11. The organized Share of retail sector is expected to increase to 8-9 percent in 201011 as compared to 4 percent in 2007.However due to urban rural divide the growth is likely to concentrate more on metros and large cities. Kamal Nath, India‘s minister for Commerce & Industry was quoted as saying ―The India Retail Report 2009 is a well researched and professionally presented document that brings forth several opportunities that could benefit the Indian consumers. I look forward to the Indian retail sector continuing on its developmental growth path and spreading its benefit to all.‖ In the present the Indian retail sector provides employment to 8 per cent of the nation's workforce which is expected to augment in the future. The food and grocery constitutes the highest retail volume and this share has shown a tremendous growth over the years. This is the largest vertical of 74.4 percent of retail size that compromises of fruits and vegetables, PGP 2009-2011
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milk and milk products, staples, cereals and other eatables. According to NSSO 60th round, 54 percent of the rural and 42 percent of urban expenditure was on food.
Penetration of Organized Retail Figure 1.9 Penetration of Retail sector
The second largest share is commanded by the apparels. Clothing and textile is a large organised vertical and is dominated by big retailers like Pantaloon, Pyramyd, Koutons. This owes to the increasing disposable incomes and change in the lifestyle. The organized retail is attracting and will continue to attract the entry of new players both domestic and foreign as can be observed by the variety of domestic and international brands available in stores.
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1.6 Role of Foreign Direct Investments There have been huge controversies regarding the organized retail taking over the unorganized sector and the following adverse impact on the lives of various local retailers. The small retailers feel that they cannot fight the big retailers like reliance fresh, spencers, food bazaar that are taking away their market share. For the security of domestic retailers there was a ban on foreign investment in multi brand retailing that kept big foreign players like Wal Mart and Carrefour from entering India. But now FDI of 51% is permitted in India though only through single branded retail outlets and not through multi brand outlets. Again they can only enter the market through franchisees. This is how global players are entering India, like Wal-Mart entering India in join hands with Bharati Enterprises. However domestic companies like Reliance Industries, are confident that even if foreign players enter the Indian market the domestic retail players will continue to have a competitive advantage over them. Competitive advantage will be achieved due to low labor and property costs. New entrants to the organized retail sector will also face higher labor and property costs than traditional firms and must bear the additional expense of back-up power supplies. Other barriers will include expensive and often inadequate supply-chain infrastructure, inflexible labor laws, complicated property codes, multiple licensing requirements and a shortage of skilled managerial staff. Figure 1.10 FDI In Retail allowed
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1.6.1 FDI in Retail not permitted FDI not permitted in retail trade sector, except in:
Private labels.
Hi-Tech items / items requiring specialized after sales service.
Medical and diagnostic items.
Items sourced from the Indian small sector (manufactured with technology provided by the foreign collaborator).
For 2 year test marketing (simultaneous commencement of investment in manufacturing facility required).
1.6.2 Current FDI Metro Group of Germany Cash-and-carry wholesale trading Proposal faced strong opposition Entities established prior to 1997 Allowed to continue with their existing foreign equity components. No FDI restrictions in the retail sector pre-1997 Food world
51:49 JV between RPG and Dairy Farm International,
Leading food retailer in India now
Mc Donald’s
1.6.3 Benefits of FDI 1. Investment in technology Cold storage chains solve the perennial problem of wastage Greater investment in the food processing sector technology Better operations in production cycle and distribution 2. Better lifestyle Greater level of wages paid by international players usually PGP 2009-2011
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More product variety Newer product categories Economies of scale to help lower consumer price Increased purchasing capacity of consumers 3. Manpower and skill development Through retail training and Greater managerial talent inflow from other countries 4. Tourism Development A strong retailing sector boosts tourism as seen from the experience of Singapore and Dubai 5. Investment in whole supply chain Improved product basket from India for exports 6. Long term benefits Up-gradation of agriculture Development of efficient small and medium size industries
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CHAPTER -2 OBJECTIVE
2 OBJECTIVES •
To know the future prospects of retailing in India.
•
To know the pricing strategy.
•
To know the characteristics of market leader in terms of sales and profit.
•
To know the Challenges of the industry. PGP 2009-2011
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•
To know the role of FDI.
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INDUSTRY ANALYSIS
3 Industry Analysis Retail Industry one of the top most growing industry. the Indian retail though largely dominated by the unorganised retailers has witnessed a massive transition in the last decade. Of the total retail sales, the food & grocery segment constitutes the major chunk. However in case of organised retail, the apparel & footwear segment stands as the major contributor. With varied segments of retailing i.e. Food & Grocery, Clothing & Footwear, Furniture & Furnishing, Jewellery, Beverages etc.
3.1 Segment wise The Indian economy is growing rapidly. A major contribution is made by the rising number of shopping malls. Malls are becoming a major attraction centre or hang-out spot in the metro cities. But all this does not make us forget or ignore the traditional formats of retailing (hawkers, grocers and tobacconist shops, etc.). They continue to co-exist with the modern PGP 2009-2011
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formats. Modern retailing has helped companies to increase consumption and thus demand for their products in the market. 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 we can see that the way a product is displayed, talked about and how it wins consumers’ heart and mind 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. This means that the unorganized retail would suffer a severe setback due to obsolete technology, poor supply chain, inadequate marketing, etc. As a result, the local stores would soon become things of the past or restricted to last minute unplanned buying. An analysis conducted by the McKinsey Global Institute revealed that the retail sector .The segment-wise analysis of the Organized Indian Retail
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Figure 3.11 Segment wise contribution in Retail Sector
3.1.1 Food and grocery retail: This is the dormant segment of the retail industry in India. But mostly the food business is unorganized. But this adds up to only Rs. 40,000 Cr while almost 50% is contributes by the major players. Overall food consumption is close to Rs. 900,000 Cr. Total urban consumption is less than 50% with Rs. 330,000 Cr. This means that aggregate revenues of large food players is currently only 5% of the total Indian market, and around 15-20% of total urban food consumption. As mentioned earlier most of the food sold is the contribution of kirana stores, vendors, roadside push cart sellers, etc. According to McKinsey report, the share of an Indian household's spending on food is one of the highest in the world, with 48% of income being spent on food and beverages.
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Figure 3.12 Major players of Food and Grocery segment
3.1.2 Apparel retail: The apparel industry also makes a major contribution to retail industry. The ready-mades and western outfits are growing at 40-45% annually. This can be attributed to the fact that the Indian retail market has teamed up with international brands. As a result of new entrants entering this segment an Rs.500 crore market has been created 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 trying to attract the middle class who constitute the majority of Indian population. However, it is estimated that this segment would grow to Rs. 300 crore in the next three years. Figure 3.13 Major players of Apparels segment
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3.1.3 Gems and Jewellery retail: Indians have an ever increasing desire for Gems and Jewellery even if prices increase multifold. The gems and jewellery market is one of the key emerging area. It accounts for a high proportion of retail expenditure by people. India is the largest consumer of gold in the world with an estimated annual consumption of 1000 tonnes. This gold is obtained by imports and also by recycling gold within the country. The market for jewellery is estimated as upwards of Rs. 65,000 crores Figure 3.14 Major players of Gems and Jewellery segment
.
3.1.4 Pharma retail: Pharma is one of the few industry which has remained unaffected by the recent global meltdown. It is one of the very strong and stable segments and is always fed by innovation. The pharma retailing is estimated at about Rs. 30,000 crore, with 15% of the 51 lakh retail stores in India being chemists. Pharma is believed to become organized and corporatized very soon. According to Vikas Bali, Principal, A.T. Kearney (India) Ltd, "Pharma retailing will follow the trend of becoming more organised and corporatised as is seen in other retailing formats (food, apparel etc)". A few like Dr Morepen, first with Lifespring and Tang, Apollo pharmacies, 98.4 from Global Healthline Pvt Ltd, and the recently launched CRS Health from SAK Industries are examples of corporate entering into the pharma sector. 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.
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Figure 3.15 Major players of Pharma segment
3.1.5 Music and Book Retail: There has been a maddening, and ever increasing demand for different genres of music and books. But here again there is a clash between the organized and the unorganized sector. The total size of the Indian music industry is estimated to be Rs.1100 crore of which about 36 percent is consumed by the pirated market and organized music retailing constitutes about 14 percent, equivalent to Rs.150 crore. As we can clearly see the growth of the organized music segment is affected by the unorganized sector, which is majorly remains to be consumer’s first choice. The book industry is estimated at over Rs. 3,000 crore. Here again the total sales generated by the organized retail is very low or only 7% (at Rs.210 crore)of the total. This segment is seen to be emerging with text and curriculum books accounting to about 50% of the total sales. The gifting habit in India is making rapid strides as many have made book reading their hobby. Thus this sector is expected to grow by 15% annually. Figure 3.16 Major players of Books and Music segment
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3.1.6 Consumer durables retail: The consumer durables market can be divided into (1) consumer electronics and (2) appliances. Consumer electronics comprise of TV sets, audio systems, VCD players and others. And appliances comprise of washing machines, microwave ovens, air conditioners (A/Cs). The existing size of this sector stands at an estimated USD 4.5 Billion with organized retailing being at 5%. Figure 3.17 Major players of consumer durables segment
3.2 List of Retail Companies in India: Aditya Birla Retail Ltd.Arvind Ltd . Balaji Distilleries Ltd. Bannari Amman Sugars Ltd. Bata India Ltd. Bharat Petroleum Corporation Ltd. Bombay Swadeshi Stores Ltd. Brandhouse Retails Ltd Crossword Bookstores Limited Damas Goldfields Jewellery Pvt. Ltd. Ebony Retail Holdings Ltd. Fabindia Garden Silk Mills Limited Gini Silk Mills Ltd Givo Ltd. Globus Corporation Ltd GR Thanga Maligai Guardian Lifecare Ltd. PGP 2009-2011
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Heritage Foods (India) Ltd. ITC Ltd – LRBD K. Raheja Corp. Kalanjali Arts and Crafts Kirtilal Kalidas & Co Koutons Retail India Ltd. Levi Strauss & CompanyLifestyle Manipal Cure and Care Pvt Ltd. McDonald's India Nalli NEXT Retail India Ltd. Nirula's Piramyd Retail Ltd. Provogue (India) Ltd. RayBan Sun Optics India Ltd Raymond Ltd Reliance Fresh Reliance Petroleum Ltd. Reliance World Sankalp Retail Value Stores Pvt. Ltd. Shopper'S Stop Ltd Siyaram Silk Mills Ltd Spencer's RetailStore One Retail India Ltd Subhiksha TCS Textile Pvt. Ltd. (The Chennai Silks) Titan Industries Ltd. Trent Ltd. Unilever India Exports Ltd. Vishal Retail Ltd Vivek Ltd. Wadhawan Food Retail Pvt Ltd. WITCO (India) Ltd. PGP 2009-2011
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Zodiac Clothing Co. Ltd Pantaloon Retail (India) Limited, is a large Indian retailer, which is part of the Future Group, and operates multiple retail formats in both the value and lifestyle segment of the Indian consumer market. Headquartered in Mumbai, the company has over 1,000 stores across 71 cities in India and employs over 30,000 people, and as of 2010, it was the country's largest listed retailer by market capitalization and revenue. With effect Jan. 1, 2010, the company separated its discount store business, which includes the Big Bazaar hypermarket and the Food Bazaar supermarket businesses, into Future Value Retail Ltd., its wholly-owned subsidiary, so that the company may be listed independently. The company’s brands include Pantaloons, a chain of fashion outlets, Big Bazaar, a hypermarket chain and Food Bazaar, a supermarket chain. Some of the company's other regional brands include, Depot, Shoe Factory, Brand Factory, Blue Sky, aLL, Top 10 and Star and Sitara. Big Bazaar is a chain of hypermarkets in India, with more than 100 stores in operation. It is a subsidiary of Pantaloon Retail India Ltd's, Future Group, and follows the business model of United States-based Wal-Mart. Central is a shopping mall brand, which has malls all over India. It has a food chain with 3 Amigos, Slambay, Baskin Robbins among many others and has three main restaurants like Bombay Blues and Copper Chimney. It is owned by Pantaloon Retail that also owns the Indian Big Bazaar supermarket chain. Spencer's Retail is one of India’s fastest growing retail stores based in Mumbai. It has multiple formats for retailing food, apparel, fashion, electronics, lifestyle products, music and books. It is owned by the RPG Group, a major business house. Established in 1996, Spencer’s is one of the popular destination for shoppers in India with supermarkets, hypermarkets and dailies spread all over India. Books & Beyond, a new vertical of Spencers Retail, is positioned as a “community engaging store”, that offers a wide selection of reading options, a comprehensive selection of toys and the entire gamut of art and stationery related merchandise for home school and office use. Books & Beyond offers an internationally designed, vibrant and engaging store environment with consumer activation events like author appearances, music releases and children’s activities that ensure that customers have a complete shopping experience.
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Shoppers Stop is an Indian department stores promoted by the K Raheja Corp Group (Chandru L Raheja Group), started in the year 1991 with its first store in Andheri, Mumbai Shoppers Stop Ltd has been awarded "the Hall of Fame" and won "the Emerging Market Retailer of the Year Award", by World Retail Congress at Barcelona, on April 10, 2008.[3] Shoppers Stop is listed on the BSE. With the launch of the Navi Mumbai departmental store, Shoppers Stop has 27 stores in 12 cities in India. Crossword Bookstores is a chain of bookstores in India based in Mumbai. Crossword has stores in Mumbai, Delhi, Bengaluru, Chennai, Hyderabad, Jaipur, Kolkata, Nagpur, Nashik, Vadodara, Navi Mumbai, Pune and Ahmedabad. Crossword is fully owned by Shoppers Stop. Lifestyle is a well-defined retail concept that imbibes the essence of a woman. It offers a wide range of exclusive products that celebrate the free spirit of today’s woman. From an exquisite variety of home décor, home furnishing & bath decor to home fragrance, make-up, perfumes, fashion accessories, fashion bags, spa products and teen gifts, the Lifestyle woman is spoilt for choice. So when a woman visits Lifestyle, she is sure to indulge herself in a world which truly reflects her femininity and understands exactly "What a woman wants" Westside is one of India’s largest and fastest growing chains of retail stores. Trent Ltd. established in 1988 as a part of the Tata Group, operates Westside. The Westside stores have numerous departments to meet the varied shopping needs of customers. These include menswear, women’s wear, kid’s wear, footwear, cosmetics, perfumes and handbags, household accessories, lingerie, and gifts. The company has already established 41 Westside departmental stores (measuring 15,000 - 30,000 square feet each) in Ahmedabad, Bengaluru, Chennai, Delhi, Gurgaon, Ghaziabad & Noida (to be considered as 1 city), Hyderabad, Indore, Jaipur, Kolkata, Ludhiana, Lucknow, Mumbai, Mysore, Nagpur, Nashik, Pune, Rajkot, Surat, Vadodara and Jammu. The company hopes to expand rapidly with similar format stores that offer a fine balance between style and price retailing Star bazaar provides an ample assortment of products made available at the lowest prices, aptly exemplifying its ‘helping you spend less’ motto. At present star bazaar has 4 stores in 3 cities located in ahmedabad, mumbai and bengaluru. This store offers customers an eclectic array of products that include staple foods, beverages, health and beauty products, vegetables, fruits, dairy products, consumer electronics and household items at the most PGP 2009-2011
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affordable prices. Star bazaar also includes a large range of fashionable in-house garments for men, women and children, exclusively available at the store. Land mark: At present landmark have 12 big stores , 7 hotel bookstores and 4 airport stores, varying in size from 12,000 sq. Ft. To 45,000 sq. Ft in chennai, bengaluru, gurgaon, mumbai, vadodara, gurgaon, pune, lucknow, ahmedabad and hyderabad. Until 1996, landmark’s product portfolio comprised books, stationery, and greeting cards. It was later that music was added to it. Landmark also sparked the trend of stocking curios, toys and other gift items. What separates landmark from other stores of its kind is the range and depth of its stock. Vishal is one of fastest growing retailing groups in India. Its outlets cater to almost all price ranges. The showrooms have over 70,000 products range which fulfills all your household needs, and can be catered to less than one roof. It is covering about 29, 90, 146 sq. ft. in 24 states across India. Each store gives you international quality goods and prices hard to match. The cost benefits that is derived from the large central purchase of goods and services is passed on to the consumer
TOP MAJOR RETAIL PLAYERS Table 3.4 TOP Major Players in retail in India with respect to No. of stores, Formats and Brand names
Retailer
Existing Formats
Brand Names
NO. Of Stores
Total Retail Space ('000 Sq.ft)
Pantaloon Retail India
Department Store
Pantaloon
13
1,948
Hyper markets
Big Bazaar
450
5000
Seamless Malls
Central
12
1200
Hyper markets
Spencer's
400
6000
Music stores
Music world
225
230
Book stores
Books & beyond
N/A
1000
Department Store
Shopper's stop
20
N/A
Book & Music stores
Crosswords
33
N/A
Home Furnishing
Home stop
N/A
N/A
Department Store
Lifestyle
8
370
RPG Retail
Shopper's Stop Ltd.
Landmark
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Trent India Ltd
Department Store
West side
19
350
Hyper markets
Star India Bazaar
1
N/A
Books & music stores
Land Mark
4
N/A
Hyper markets
Vishal Mega Mart
183
13,45
Vishal Group
3.3 Market share: Market share: The market share of the industry is calculated by Sales of the players in the industry divided by total sales of the retail industry. Figure 3.18 Market share of major players in Indian retail industry
From the graph we can say that Pantaloon holds the Maximum amount of share with 60.69% as a market leader, followed by Shopper’s stop with 12.75%, Vishal by 12.68%, Brand house by 5.05%, Trent with 4.6% Share, Provogue with 3.2% and others with 1.03% amount of shares in organised retail sector.
3.4 Porter's Five Forces Analysis Threat of New
Threat of
Bargaining PGP 2009-2011
Bargaining Page 41
Competitive
Entrants
Substitutes
HIGH
HIGH
Power of Suppliers LOW
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Power of Consumers MODERATE
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Rivalries
HIGH
1. Threat of New Entrants. The retail industry has seen the growth of its organized sector in the recent years. Even though the growth has not been by leaps and bounds, it still has been significant enough to affect the unorganized retailers. This trend started over a decade ago and has been a decreasing number of independent retailers. If we walk through any mall we can notice that majority of them are chain stores and there exist a just a hand full of standalone stores. While the barriers to start up a store are not impossible to overcome, the ability to establish favourable supply contracts, leases and be competitive is becoming virtually impossible. Their vertical structure and centralized buying gives chain stores a competitive advantage over independent retailers. 2. Power of Suppliers. In the 1970s, when Sears were dominating the household appliance market, they set high standards for quality. Suppliers that didn’t meet these standards were dropped from the Sears line. In this way retailers have tried to exploit relationships with the suppliers. This can be attributed to the fact that in the retail industry, suppliers tend to have very little power. We can also take the example of Wal-Mart which places strict control on its suppliers. A contract with a large retailer such as Wal-Mart can make or break a small supplier 3. Power of Buyers. Individually, customers have very little bargaining power with retail stores. Prices offered by the mall-stores are usually not negotiable. They come with a tag attached saying ‘fixed price’. This warns a customer from even entering the store if he wants discounted prices. It is very difficult to bargain with the clerk at Safeway for a better price on grapes. But as a whole, if customers demand high-quality products at bargain prices, it helps keep retailers honest. 4. Availability of Substitutes. There is no scarcity as such in the retail sector. It is not monopoly market. The tendency in retail is not to specialize in one good or service, but to deal in a wide range of products and services. This means that what one store offers you will likely find at another store. Therefore innovation and product differentiation are the indispensible ingredients needed to stand alone in the retailing industry. Retailers offering products that are unique have a distinct or absolute advantage over their competitors.
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5. Competitive Rivalry. There is no market without competition and there are no better ways than existence of competing forces in the market to improve upon quality, price, supply chain management, inventory control, etc. Retailers always face stiff competition. The slow market growth for the retail market means that firms must fight each other for market share. More recently, they have tried to reduce the cutthroat pricing competition by offering frequent flier points, memberships and other special services to try and gain the customer's loyalty. Given the relatively weak financial state of unorganised retailers and the physical space constraints on their expansion prospects this sector alone will not be able to meet the growing demand for retail. Hence organised retail, which now constitutes a small 4% of total retail sector, is likely to grow at a much faster pace of 45-50% per annum and quadruple its share in total retail trade to 16% by 2011-12.The major market players in the Indian context i.e
•
Shoppers' Stop
•
Vishal Mart
•
Westside (Trent)
•
Pantaloon (Big Bazaar)
•
Lifestyle
•
RPG Retail (Foodworld, Musicworld)
•
Crossword
•
Wills Lifestyle
•
Globus
•
Piramals ( Pyramid & Crosswords)
•
Ebony Retail Holdings Ltd
3.5 PEST Analysis: PEST analysis is concerned with the environmental influences on a business. Acronym for this is Political, Economical, social, technological. Political factor like government policies, tax policy, labour law, environmental law, trade restrictions, tariffs, and political stability. Economic factors include economic growth, interest rates, exchange rates and the inflation rate. These factors have major impacts on how businesses operate and make decisions. PGP 2009-2011
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Social factors include the demographic and cultural aspects of the external macro environment. These factors affect customer needs and the size of potential markets. Some social factors include: health consciousness, population growth rate, age distribution, career attitudes, emphasis on safety. Technological factors can lower barriers to entry, reduce minimum efficient production levels, and influence outsourcing decisions. Some technological factors include: R&D activity, automation, technology incentives, rate of technological change. POLITICAL / LEGAL ENVIRONMENT Retail marketing decisions are substantially impacted by developments in the political / legal environment. This environment is composed of laws, government agencies and pressure groups that influence and constrain various organisations and individuals in society. Legislation affecting retail business has steadily increased over the years. The legislation has a number of purposes. The first is to protect from each others. So laws are passed to prevent unfair competition. The second purpose of Government regulation is to protect consumers from unfair retail practices. Some firms, if left alone, would adulterate their products, tell 41lies in their advertising, deceive through their packages and bait through their prices. Unfair consumer practices have been defined and are enforced by various agencies. The third purpose of Government Regulation is to protect the larger interest of society against unbridled business behaviour. The retail marketing executive needs a good working knowledge of the major laws protecting competition consumers and the larger interests of society. SOCIAL/ CULTURAL ENVIRONMENT In recent years, the concept of social responsibility has entered into the marketing literature as an alternative to the marketing concept. The implication of socially responsible marketing is that retail firms should take the lead in eliminating socially harmful products such as cigarettes and other harmful drugs etc. There are innumerable pressure groups such as consumer activists, social workers, mass media, professional groups and others who impose restrictions on marketing process and its impact may be felt by retailers in doing their business.
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The society that people grow up in shapes their basic beliefs, values and norms. People live in different parts of the country may have different cultural values - which has to be analysed by retail business people/firm. This will help them to reorient their strategy to fulfill the demands of their consumers. Retail marketers have a keen interest in anticipating cultural shifts in order to spot new marketing opportunities and threats. Several firms such as ORG, MARG etc. offer social / cultural forecasts in this connection. For example, marketers of foods, exercise equipment and so on will want to cater to this trend with appropriate products and communication appeals. ECONOMIC ENVIRONMENT Retail markets consist of purchasing power as well as people. Total purchasing power is a function of current income, prices, savings and credit availability. Marketers should be cognizant of major trends in the economic environment. The changes in economic conditions can have destructive impacts on business plans of a firm. Economic forecasters looking ahead through the next decade are likely to find their predictions clouded by the recurrent themes of shortages, rising costs and up and down business cycles. These changes in economic conditions provide marketers with new challenges and threats. How effectively these challenges could be converted into opportunities depend on well-thought-out marketing programmes and strategies. Further, no economy is free from the tendency of variation between boom and depression, whether it is a free economy or controlled economy. In any event, economic swings affect marketing activity, because they affect purchasing power. Retail marketing firms are susceptible to economic conditions, both directly and through the medium of market place. For example, the cost of all inputs positively respond to upward swing of economic condition - which will affect the output price and consequently affect the sales. The effect on consumers also influences the marketing through changes in consumer habits. This is an indirect influence. For example, in the event of increase in prices, consumers often curtail or postpone their expenditures. Conversely, during time of fall in prices, consumers are much less conscious of small price differences and would buy luxury and shopping products. TECHNOLOGICAL ENVIRONMENT PGP 2009-2011
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The most dramatic force shaping people's lives is technology. Advances in technology are an important factor which affect detail marketers in two ways. First, they are totally unpredictable and secondly, adoption of new technology often is prevented by constraints imposed by internal and external resources. At the same time, it should be remembered that technological progress creates new avenues of opportunity and also poses threat for individual firms. Technology has helped retailers to measure the products with modern weighing machines. Earlier, they have used balances which could not measure the merchandise correctly.With the help of weighing machine, products can be measured with the result customer satisfaction can be enhanced. In the following areas where technology have been extensively used. 1. Packing of the products 2. Printing the name of the shop on the product visibly 3. Modern refrigerators where merchandise can be used for a long time and 4. Billing. Technological change faces opposition from one group of people-telling that it may lead to retrenchment of employees. But in the long run, this argument may not sustain, retail marketers need to understand the changing technological environment and how new technologies can serve human needs. They need to work closely with research and development people to encourage more consumer oriented research. The retail marketers must be alert to the negative aspects of any innovation that might harm the users and create consumer distrust and opposition.
3.6 SWOT ANALYSIS SWOT analysis of the organized Indian Retail Industry STRENGTHS 1. Technology: The organized Indian retail is driven by up-do-date technological innovations. This gives them an edge over the unorganized retailers since generally retailing itself is a ‘technology-intensive’ industry. The successful organized retailers work hand-inhand with the various vendors in order to know the current market demand for products, and product types, to reduce the lead times, to lessen inventory holding, to maintain Just-InTime arrivals of goods and through all this ultimately reduce costs and maintain
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competitiveness. For this purpose organized retailers have incorporated MIS in all their areas of operations. Example: Wal-Mart pioneered the concept of building competitive advantage through distribution & information systems in the retailing industry. They introduced two innovative logistics techniques – cross-docking and EDI (electronic data interchange). 2. Sufficient stock: The Organized retailers- supermarkets, departmental stores, etc. stock on an average 5000 SKU’s as against few hundreds of stock stored by the average unorganized retailer 3. Savings for consumers: Consumers have definitely gained from organised retail on multiple counts. Overall consumer spending has increased with the entry of the organised retail. While all income groups saved through organised retail purchases, the survey revealed that lower income consumers saved more. Thus, organised retail is relatively more beneficial to the less well-off consumers 4. Employment: Organized retailing brings many advantages to producers and also to urban consumers, while also providing employment of a higher quality. WEAKNESSES 1. Poor warehousing facilities and storage: The Organized retailers also suffer from lack of proper warehouse and storage facilities in case of stocking up inventories. This results in uncertainty in the amount of stocks purchased by the retailers for fear of poor maintenance. This in turn affects their sales of goods when demand fluctuates suddenly especially if the sales are seasonal in nature. Failure to supply products to customers, when demanded, would mean loss of firms’ sales to competitors. 2. Less Conversion level: It can be seen that the actual conversions of footfall of sales for a mall outlet is approximately 20-25% as against the high street store of retail chain which has an average conversion of about 50-60%. As a result the ROI (return on investment) of a stand-alone store is 25-30% but that of the retail majors is only 8-10%. Thus we can see that despite high footfalls, the conversion ratio has been very low in the retail outlets in a mall as compared to the standalone counter parts
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3. Customer Loyalty: Retail chains are yet to come out with proper merchandise mix for their mall outlets. The organized retail is a new term in India. It is the stand-alone stores that have been near and dear to the Indian customers for a very long time. Therefore they already stand stabilized in terms of footfalls & merchandise mix and thus have a higher customer loyalty
base.
OPPORTUNITIES 1. Single window clearance: Recently ‘Single window clearance’ was demanded recently by Retailer Association of India(RAI) in order to reduce the number of licenses needed for setting up a retail outlet chain. Under the single window clearance system, it will be possible to get an application cleared within seven days and those already having an existing store in the state will be able to get a licence for opening a new one by merely applying and taking an extension. This will help retailers to set up retail outlets without much hassles. 2. Growing middle class population: The Indian middle class is expected to double by 2010 and is projected to grow to over 60 Cr and thus making India one of the largest consumer markets of the world. Many studies reveal that India will have over 55 Cr people under the age of 20 - reflecting the enormous opportunities possible in the kids and teens retailing segment. 3. Organized retail is only 3% of the total retailing market in India. It is estimated to grow at the rate of 25-30% p.a. and reach INR 1,00,000 Cr by 2010. 3. Untapped cities: It has been found that the top 6 cities contribute for almost 66% of the total organized retailing. Now with the metros being already been tapped, the focus now shifts towards the tier-II cities. The 'retail boom', has to percolate down to these smaller cities and towns because out of the total organized penetration 85% has been restricted only to the metros. The contribution of these tier-II cities to total organized retailing sales is expected to grow to 20-25%. 4. Rural Retailing: India has a huge rural population which is still out of reach by the organized retailers. This segment shows huge potential if tapped in the right way.
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For Example: ITC launched India's first rural mall "Chaupal Saga" offering a diverse range of products from FMCG to electronic goods to automobiles, attempting to provide farmers a one-stop destination for all their needs. The Godrej group has launched the concept of 'agri-stores' named "Adhaar" which offers agricultural products such as fertilizers & animal feed along with the required knowledge for effective use of the same to the farmers. Pepsi on the other hand is experimenting with the farmers of Punjab for growing the right quality of tomato for its tomato purees & pastes.
THREATS 1. Underdeveloped supply chain: Indian retailers suffers from poor supply chain management. The supply chain is still not efficient enough to account for reduced lead time or JIT facilities. The intermediaries are not timely in their supply of goods especially during peak demand period. This leads to heavy costs suffered by the manufacturers as well the retailers. 2. Lack of a strong cold chain: The temperature-controlled logistics industry is very poor in keep up its core competency-maintaining proper temperatures. Even with improved international standards and intense public scrutiny, the integrity of the cold chain in not maintained efficiently. This in turn affects the quality and safety of the product delivered to the customer. 3. Proximity: Organized retail is not ‘next-door shopkeepers’. Thus proximity is a major comparative advantage of unorganised outlets. Unorganised retailers have significant competitive strengths that include consumer goodwill, credit sales, and amenability to bargaining, ability to sell loose items, convenient timings, and home delivery. 4. The unorganized retailers put together are equal to a large number of supermarkets with no or little overheads. Not only this, they also have high degree of merchandise flexibility, display, prices and turnover.
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5. Shopping Culture: Shopping culture has not developed in India as yet. Even now malls are just a place to hang around with family and friends and largely confined to windowshopping. Plus malls are usually perceived to sell goods at hiked prices as compared to stand-alone stores.
3.7 Market concentration: 3.7.1 Herfindahl Index "HHI" means the Herfindahl-Hirschman Index, a commonly accepted measure of market concentration. It is calculated by squaring the market share of each firm competing in the market and then summing the resulting numbers. Herfindahl index ranges from a low of 0, indicating perfect competition, to a higher of 10,000 indicating the complete monopoly. No concentration: The number of firms is so large that sum of the square of the market share is 0. Herfindahl index means perfect competition or at the very least monopolistic competition that are Extremely competitive at the low end. Total Concentration: At the high end, 10,000 Herfindahl index means Monopoly. This value is only achieved if one firm has a market share of 100 percent. Low concentration: A Herfindahl index of 0 to 1000 is commonly as an industry with low concentration. Monopolistic competition falls into the bottam of this with oligopoly emerging near upper end. Industries with concentration ratio between 0% to 50% have Herfindahl index values between 0 and 1000. Medium Concentration: A Herfindahl index of 1,000 to 1,800 percent is consider an industry with medium concentration. These industries are very much oligopoly. Concentration ratios between 50% and 80%. High concentration: An industry with a Herfindahl index of 1,800 to 10,000 percent is viewed as highly concentration. This level corresponds with Concentration ratios between 80% and 100%. As we have taken sales of the major players in organised sector. Market share is calculated by dividing sales of the individual company by Total sales of the all companies. Market share as follows: PGP 2009-2011
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Table 3.5 Market share
Pantaloon Retail Brandhouse .Retail Provogue (India) Shoppers' Stop Trent Vishal Retail Others
60.69% 5.05% 3.20% 12.75% 4.60% 12.68% 1.03%
Assumption made that all the above mentioned companies contribute to 100% of the market share in India Organised retail market. Now, Calculating of Herfindahl index is as follows: H= 60.692+5.052+3.202+12.752+4.62+12.682+1.032 H= 4064.58 Since the value of the index is between 1800 t0 10,000 percent therefore organised retail sector is highly concentrated. It has few significant players like Pantaloon Retail, Shoppers stop limited.
3.8 Industry Challenges: Ban on Foreign Direct Investment in Retail- According to a parliamentary standing committee, Blanket ban should be imposed on domestic corporate heavyweights and foreign retailers from entering into retail trade in grocery, fruits and vegetables. This, although, is at complete variance with the findings of an experts panel (ICRIER) appointed by the commerce ministry to go into the impact of Big retail on conventional retailers (also referred to as ‘Kiranas’) but it might affect the growth of Retail industry.
Regulations restricting Real estate Purchases- Government intervention – in the form of regulations, infrastructure investments and taxation – has a direct impact on urban land supply and on the demand for land which in turn effects the Retail business. Absence of developed supply-chain and IT management- From movement and storage of raw materials, inventory, and finished goods from points of origin to consumption – the PGP 2009-2011
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current retail boom in India can only sustain its momentum if supply chain management is given top priority by retail players. An underdeveloped supply chain cannot help retail stores. It will cause more harm. The most significant challenge that impedes the development of an efficient and modern retail sector is an underdeveloped supply chain. India today has an underdeveloped unidirectional supply chain that increases inventory build-up and operational inefficiencies for companies. Moreover, the usage of IT in the back-end supply is fairly low in India. The unorganized sector, a considerable portion of the retail industry, is lagging behind in IT usage. This could be one of the key reasons why IT usage percentage remains low in the Indian retail industry. Even though technology is available to cater to this segment, factors such as money and low understanding of benefits deter its usage. Lack of trained workforce- While investment in human resource is essential for running the retail business, ensuring a continuous supply of trained workers is proving to be a big challenge for employers.The retail industry, which is growing at a double digit pace, has been facing an acute shortage of trained personnel. The increasing emphasis on providing more value-added services is creating the demand for trained people. Human resource crunch- There has many times where concerns regarding insufficient manpower in the retail industry have been in the news.
But in general this fear is
groundless. The retail industry according to recent reports is growing at a rate of 100 percent. Kishore Biyani's Future Group (i.e.) the Big Bazaar chain of retail outlet alone provides employment to more than 18,000 people which would expand to accommodate 34,000 by June 2008. Along with this if we consider the expedition by mega players like Reliance and Bharti-Walmart then the fear can surely turn into a misperception. Retailing mainly deals with hard-selling of space, trade of stocks and building of relationships. It does require higher degrees of educational qualifications. Since most of the openings are for front line shop people, a graduation will be good enough. Nowadays many institutes also provide post-HSC and post-graduate retail-specific courses. Government hindrances- Retailers also have to consider the political parties interests before opening their outlets. Some political parties want the government to amend laws and improve ceilings so that the mega players can't openly destroy the unorganized retail sector. This is due the short-sighted view by the parties and should be adjusted to focus on a long PGP 2009-2011
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term strategy. The megastores will provide employment to the less educated masses and also provide savings for the middle class. It also true that they would reduce the profit share of the unorganized retailers but the organized retail taking business away especially from small food vendors is more easily said than done. Instead the limiting move will send wrong signals to the investors and will ward off investments when the country needs it most. Permitting 51 percent retail FDI in single brand retailing is a greeting move in this direction. It is also expected that in the near future the government will create further opportunities for the organized retail to come up as home grown investment is always sweeter than foreign investment. The advent of organised retailing in an economy where spending power is growing fast and with the Tier II as well as Tier III town dwellers becoming more and more brand aware and conscious is sure to bring a revolution and new look to the retail sector
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CHAPTER-4 COMPANY PROFILE
4 Company Profile: To study in detail about the Retail industry we are considering the major players in the market such as Pantaloon, shoppers stop, Trent and Vishal Retail. So, here is their detail company profile which covers the aspects like establishment, owner, Retail format vision, and sister stores and many more as follows.
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4.1 SHOPPERS STOP Shoppers Stop, established in 1991 with its flagship store-Shoppers Stop by the K. Raheja Group, has now expanded to over 100 retail outlets spread across 1.1 million square feet of built-up area, spanning a spectrum of retailing verticals and formats.It was incorporated on 16th june 1997 as a private limited company. The present chairman of the company is Mr Chandru L Reheja. The group offers formats in the lifestyle and luxury segment, with the growing affluent middle class population as their target consumer base. Shoppers Stop launched its e-store with delivery across major cities in India in 2008. The website retails all the products available at Shoppers Stop stores, including apparel, cosmetics and accessories. Today, Shopper's Stop is a household name, known for its superior quality products, services and above all, for providing a complete shopping experience. With an immense amount of expertise and credibility, Shoppers’ Stop has become the highest benchmark for the Indian retail industry. In fact, the company’s continuing expansion plans aim to help Shoppers’ Stop meet the challenges of the retail industry in an even better manner than it does today . In FY’09 company achieved a gross retail turnover of Rs.14001 million, showing at a growth of 16%, while the gross margin stood at Rs 4380 million showing a growth of 15%.
COMPANY BACKGROUND Incorporation Year
1997
Chairman
CHANDRU. L.RAHEJA
Company Secretary
PRASHANT MEHTA
Auditor
Deloitte Haskins & Sells Eureka Towers 9th Floor B Wing,
Registered Office
Mindspace Link Rd Malad (West), Mumbai, 400064, Maharashtra
investor@shoppersstop.co.in
Website
http://www.shoppersstop.com/
Face Value (Rs)
10
BSE Code
B
NSE code
SHOPERSTOP
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Bloomberg
SHOP IN
ISIN Demat
INE498B01016
Market Lot
1
Listing
Mumbai,NSE
Financial Year End
3
Book Closure Month
Jul
AGM Month
Jul
Registrar's Name &
Karvy Computershare Pvt Ltd, Plot No 17-24, Vittal Rao
Address
Nagar, Madhapur, Hyderabad-500081. 91-040-23420815/6/7
VISION "To be a global retailer in India and maintain its No. 1 position in the Indian market in the Department Store category." VALUES We shall not take what is not ours. The Obligation to dissent (against the viewpoint that is not acceptable) We shall have a environment conducive to openness We shall believe in innovation. We shall have an environment conducive to development. We shall have the willingness to apologise and/or forgive. We shall respect our customers rights The value of trust. We shall be fair.
SISTER STORES Crossword bookstores Homestop
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Brio Desicafe Hypercity M.A.C Arcelia MotherCare Naunce Group Hypercity-Agros Timezone FIRST CITIZEN PROGRAM First Citizen is a loyalty program by Shoppers Stop. In order to create more loyal customers for shoppers stop, the company came forward with a product called FIRST CITIZEN. For getting the benefits of First Citizen, the customer need to take a membership card by paying Rs.200. Product Details As a first citizen, the shopping experience of the customers becomes more enjoyable with: Reward points for each shopping at shoppers stop. Reward points can be redeemed for a wide variety of merchandise at company’s stores. Exclusive benefits and privileges. Exclusive offers ever so often. Updates on what customers can look forward to shop for at shoppers stop. Exclusive cash counters at shoppers stop so people can spend more time shopping than waiting in a line. Home delivery of altered merchandise. PGP 2009-2011
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Technology Initiatives: E-Com Portal: Your company launched its online shopping site in July 2008. This portal will help our customers access our merchandise 24 x 7. Currently the site also offers books from Crossword in addition to Shopper’s Stop merchandise and has a country wide delivery foot print. First Citizens can earn and redeem all their points online. Distribution Center Automation System: Your company has deployed a mobility solution at all its Distribution Centers (DC). This application has automated all the activities at the DCs in addition to providing an online monitoring system to the central logistics team. Deployment of this application has resulted in increased availability of merchandise at all our stores Web Security Solution: The Company has deployed a web security solution to protect its network perimeter against spyware and a wide variety of web-based threats. This solution further strengthens the network security arrangement by helping both securing and controlling web traffic at Shopper’s Stop.
Server & Storage Virtualization: The Company is one of the early adopters of Virtualization technologies. This has helped reduce up to 50% of our physical servers count, operating in our data centre. Most importantly it has ensured optimal usage of available computing resources and made it easier to address the growing requirements. With the help of Virtualization, we now have an agile provisioning process that has reduced the time to create new IT infrastructure from 4-6 weeks to a few days. PGP 2009-2011
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Steps towards ‘Green IT’: The Company has managed to lower the carbon footprint at its computing facilities by effectively implementing virtualization technologies and also thru various other measures, such as implementing power management features at user computing devices with the help of Microsoft Windows Group Policies. These initiatives have resulted in lowering power consumption while ensuring efficiency.
Shopper‘s Stop has launched co-branded credit cards with Citibank with a meaningful proportion of sales already on credit cards, it would only increase going forward
4.2 PANTALOON RETAIL Pantaloon Retail (India) Limited, is India’s leading retailer that operates multiple retail formats in both the value and lifestyle segment of the Indian consumer market. Headquartered in Mumbai (Bombay), the company operates over 16 million square feet of retail space, has over 1000 stores across 73 cities in India and employs over 30,000 people. The company’s leading formats include Pantaloons, a chain of fashion outlets, Big Bazaar, a uniquely Indian hypermarket chain, Food Bazaar, a supermarket chain, blends the look, touch and feel of Indian bazaars with aspects of modern retail like choice, convenience and quality and Central, a chain of seamless destination malls. Some of its other formats include Brand Factory, Blue Sky, aLL, Top 10 and Star and Sitara. The company also operates an online portal,futurebazaar.com. Future Value Retail Limited is a wholly owned subsidiary of Pantaloon Retail (India) PGP 2009-2011
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Limited. This entity has been created keeping in mind the growth and the current size of the company’s value retail business, led by its format divisions, Big Bazaar and Food Bazaar. The company operates 120 Big Bazaar stores, 170 Food Bazaar stores, among other formats, in over 70 cities across the country, covering an operational retail space of over 6 million square feet. As a focussed entity driving the growth of the group's value retail business, Future Value Retail Limited will continue to deliver more value to its customers, supply partners, stakeholders and communities across the country and shape the growth of modern retail in India. A subsidiary company, Home Solutions Retail (India) Limited, operates Home Town, a large-format home solutions store, Collection i, selling home furniture products and eZone focussed on catering to the consumer electronics segment. Pantaloon Retail is the flagship company of Future Group, a business group catering to the entire Indian consumption space. FUTURE GROUP Future Group, led by its founder and Group CEO, Mr. Kishore Biyani, is one of India’s leading business houses with multiple businesses spanning across the consumption space. While retail forms the core business activity of Future Group, group subsidiaries are present in consumer finance, capital, insurance, leisure and entertainment, brand development, retail real estate development, retail media and logistics. Led by its flagship enterprise, Pantaloon Retail, the group operates over 16 million square feet of retail space in 73 cities and towns and 65 rural locations across India. Headquartered in Mumbai (Bombay), Pantaloon Retail employs around 30,000 people and is listed on the Indian stock exchanges. The company follows a multi-format retail strategy that captures almost the entire consumption basket of Indian customers. In the lifestyle segment, the group operates Pantaloons, a fashion retail chain and Central, a chain of seamless malls. In the value segment, its marquee brand, Big Bazaar is a hypermarket format that combines the look, touch and feel of Indian bazaars with the choice and convenience of modern retail.
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The group’s speciality retail formats include supermarket chain - Food Bazaar, sportswear retailer - Planet Sports, electronics retailer - eZone, home improvement chain -Home Town and rural retail chain - Aadhaar, among others. Future Group believes in developing strong insights on Indian consumers and building businesses based on Indian ideas, as espoused in the group’s core value of ‘Indianness.’ The group’s corporate credo is, ‘Rewrite rules, Retain values.’
COMPANY BACKGROUND Incorporation Year
1987
Chairman
Shailesh Haribhakti
Managing Director
Kishore Biyani
Company Secretary
Deepak Tanna
Auditor
NGS & Co
Registered Office
Knowledge House Shyam Nagar, Jogeshwari (East), Mumbai, 400060, Maharashtra
investorrelations@pantaloon.com/sanjay.rathi@panta
Website
http://www.pantaloonretail.in/
Face Value (Rs)
2
BSE Code
523574
BSE Group
A
NSE Code
PANTALOONR
Bloomberg
PF IN
Reuters
PART.BO
ISIN Demat
INE623B01027
Market Lot
1
Listing
Mumbai,NSE
Financial Year End
6
Book Closure Month
Nov/Dec PGP 2009-2011
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AGM Month
Dec
Registrar's Name & Address
Link Intime India Pvt Ltd, C-13 Pannalal Silk, Mills Cmpd LBS Road, Bhandup West, Mumbai - 400 078. 91-022-25963838
VISION Future Group shall deliver Everything, Everywhere, Everytime for Every Indian Consumer in the most profitable manner.
MISSION We share the vision and belief that our customers and stakeholders shall be served only by creating and executing future scenarios in the consumption space leading to economic development. We will be the trendsetters in evolving delivery formats, creating retail realty, making consumption affordable for all customer segments – for classes and for masses. We shall infuse Indian brands with confidence and renewed ambition. We shall be efficient, cost- conscious and committed to quality in whatever we do. We shall ensure that our positive attitude, sincerity, humility and united determination shall be the driving force to make us successful. AFFILIATE COMPANIES HOME SOLUTIONS RETAIL (INDIA) LIMITED Home Solutions Retail (India) Limited (HSRIL) offers complete retailing solutions for all products and services related to home building and home improvement. The key product categories are Consumer Durable & Electronics (CDE), Furniture, Home furnishing & decor, Home improvement and Home services. HSRIL operates retail format Collection-i, Furniture Bazaar, Electronics Bazaar, Home Town and e-zone PGP 2009-2011
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FUTURE BRANDS LIMITED Future Brands Limited (FBL) has been incorporated on November, 2006 and is involved in the business of creating, developing, managing, acquiring and dealing in consumer-related brands and IPRs (Intellectual Property Rights). FUTURE MEDIA (INDIA) LIMITED Future Media (India) Limited (FMIL) was incorporated as the Group’s media venture, aimed at creation of media properties in the ambience of consumption and thus offers active engagement to brands and consumers. FMIL offers relevant engagement through its media properties like Visual Spaces, Print, Radio, Television and Activation. FUTURE SUPPLY CHAIN SOLUTIONS LIMITED Future Supply Chain Solutions Limited (FSCS) has been incorporated as a separate entity and is involved in the business of providing logistics, transportation and warehousing services for all group companies and third-parties. FUTURE AXIOMTELECOM LIMITED Future Axiom Telecom Limited is a Joint Venture with Axiom Telecom LLC, UAE. The Company has a 50% stake in Future Axiom Telecom Limited (FATL) which is a joint venture Company with Axiom Telecom LLC, UAE. The Company would be engaged in sourcing and wholesale distribution of mobile handsets, accessories and in setting up service centres for mobile handsets in India. PANTALOON FOOD PRODUCT (INDIA) LIMITED Pantaloon Food Product (India) Limited (PFPIL) was incorporated with the object of sourcing and backward integration of food business of the Company. PFPIL has sourcing and distribution bases at all key cities across the country. FUTURE KNOWLEDGE SERVICE LIMITED
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Future Knowledge Services Limited (FKSL) was incorporated on January, 2007 and is engaged in the business of business process outsourcing and knowledge process outsourcing. FUTURE CAPITAL HOLDINGS LIMITED Future Capital Holdings Limited (FCH) was formed to manage the financial services business of Pantaloon Retail (India) Limited and other group entities. FCH is one of the fastest growing financial services company in India, with presence in Asset Advisory, Retail Financial Services and Proprietary Research. The company operates a consumer finance retail format, Future Money and manages assets worth over US$ 1 Billion through Indivision, Kshitij, Horizon and Future Hospitality Funds. FCH subsidiary companies include Kshitij Investment Advisory Company Ltd., Ambit Investment Advisory Company Ltd., and Indivision Investment Advisors Ltd. FUTURE GENERALI INDIA INSURANCE COMPANY LIMITED Future Generali India Insurance Company Limited (FGIICL) was incorporated on October 30, 2006 to undertake and carry on the business of general insurance. The approval for carrying on General Insurance Business has been received from the Insurance Regulatory and Development Authority of India (IRDA) on September 4, 2007. FUTUREBAZAAR INDIA LIMITED Futurebazaar India Limited (FBIL) is set up as the e-Retailing arm of the Future Group for providing on-line shopping experience. Futurebazaar.com was launched on January 2, 2007, and has emerged as one of the most popular online shopping portals in India. It was awarded with the “Best Indian Website” award, in the shopping category, by the PC World Indian Website Awards. STAPLES FUTURE OFFICE PRODUCTS PRIVATE LIMITED Staples Future Office Products Private Limited (SFOPPL) was incorporated on January, 2007 and is involved in the business of dealing in all kinds of office supplies, office equipments and products. SFOPPL is a joint venture between the Company and Staples
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Asia Investment Limited (a subsidiary of Staples Inc USA). The company’s first retail outlet opened in Bangalore in December, 2007.
4.3 VISHAL RETAIL Vishal Retail Limited is a humble one store enterprise in 1986 in Kolkata (erstwhile, Calcutta) is today a conglomerate encompassing 180 showrooms in 100 cities / 24 states. India’s first hyper-market has also been opened for the Indian consumer by Vishal. Situated in the national capital Delhi this store boasts of the singe largest collection of goods and commodities sold under one roof in India.The group had a turnover of Rs. 1463.12 million for fiscal 2005, under the dynamic leadership of Mr.Ram Chandra Agarwal .
COMPANY BACKGROUND
Incorporation Year
2001
Chairman
Ram Chandra Agarwal
Company Secretary
Arun Gupta
Auditor
Haribhakti & Co
Registered Office
PLOT NO 332, NEAR TELCO SER STA,BH SHOKEEN FARMLANDS RANGPURI,NEW DELHI,110037
investor@vrpl.in/vishalipo@vrpl.in.
WEBSITE
http://www.vishalmegamart.net/
Face Value (Rs)
10 PGP 2009-2011
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BSE Code
532867
BSE Group
T
NSE Code
VISHALRET
Bloomberg
VISH IN
Reuters
VIRL.BO
ISIN Demat
INE945H01013
Listing
Mumbai,NSE
Financial Year End
3
Book Closure Month
SEP
AGM Month
SEP
Registrar's Name & Address
Link Intime India Pvt Ltd,
C-13 Pannalal Silk,
Mills
Cmpd LBS Road, BhanduP west, Mumbai-400078. 91022-25946969 The group’s prime focus is on retailing. The Vishal stores offer affordable family fashion at prices to suit every pocket. The group’s philosophy is integration and towards this end has initiated backward integration in the field of high fashion by setting up a state of the art manufacturing facility to support its retail endeavours. Vishal is one of fastest growing retailing groups in India. Its outlets cater to almost all price ranges. The showrooms have over 70,000 products range which fulfils all your household needs, and can be catered to under one roof. It is covering about 29, 90, 146 sq. ft. in 24 states across India. Each store gives you international quality goods and prices hard to match. The cost benefits that is derived from the large central purchase of goods and services is passed on to the consumer. During the year 2007-08, the company established five new companies, namely VRL Foods Ltd, VRL Movers Ltd, VRL Consumer Goods Ltd, VRL Fashions Ltd and VRL Infrastructure Ltd for diversifying the business operations. Also, they set up their
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manufacturing units at Manesar and Dehradun, with production capacities of 1.5 million pieces each per annum. With this, the company is having three manufacturing facilities. During the year, the company added 52 new stores, out of which 34 were in Tier-III cities, two in Tier-II cities and 16 in a Tier-I city. Also, they added 9 warehouses with an area of 581,640 sq ft, taking the total number of warehouses to 29 spread across 1.1 million sq ft of space. Also, they added a fleet of 40 trucks taking the total number of trucks in the fleet to 98. As on March 9, 2009, the company had 182 stores spread across India. In March 2008, the company entered into a an agreement with Hindustan Petroleum Corporation Ltd, in which Hindustan Petroleum Corporation Ltd will provide space to the company for either Retail store or Warehousing at their mutually selected retail outlets. The company opened two such stores on a trial basis and had plans to increase. The company plans to open nine new formats two categories in apparel, fashion mart and separate formats for menswear and women's wear, restaurant & consumer durable as well. They are intending to open new stores through franchisee model to minimize the companies cost in opening up stores and minimize the risk. The company is also working in the feasibility of launching the convenience model (small formats through franchisee). These stores would have a size of about 800-2000 sq ft.
Strategy employed by Vishal Retail Ltd.
To compete with its competitors, Vishal Retail follows the strategy of value pricing,
time pricing and discount pricing.
The company also rolls out festive offers like ‗Dhanteras Dhamaal‘ to keep the
customers interested and loyal.
The company is in Tier II, III and IV cities strategically to rech the target customers
that prefer value pricing as done by them.
Vishal promotes heavily through print media and rarely ahs come out with
television or other means of advertisement. Advertisements as offer brochures and
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pamphlets along with the local dailies serve them to be in an effective reach for their customers.
The company sports an effective website that displays all the products under
Vishal‘s roof.
Sales promotios like ‗shop and fly‘ and ‗ghar basane ke char bahane‘ offers are
also effective as far as promotion is considered for Vishal Retail Ltd.
Vishal Retail is moving into strategic alliances with the local kirana stores turning
them into their franchise which would help the kirana stores to compete with the organized sector and observe economies of scale while Vishal would completely take over the kirana stores which would help them expand fast . PRODUCTS Food Mart Garments Household Home Furnishing Lifestyle Stationery Telemart Travel Accessories
4.4 TRENT LIMITED Trent is the retail arm of the Tata Group. It is a retail operations company that owns and manages a number of retail chains in India. Established in 1998, Trent runs lifestyle chain Westside, one of India’s largest and fastest growing chain of lifestyle retail stores, Star Bazaar, a hypermarket chain, Landmark, a books and music chain, and Fashion Yatra, a complete family fashion store. The headquarters of Trend is in Mumbai. Trent’s retail model — based on long-term operational sustainability and uncompromising quality — has been different from that of many of the big players. The company has been PGP 2009-2011
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unhurried, methodical and discerning as it has gone about unfurling its retail umbrella over different segments of the industry. The company has strategically expanded its portfolio, from the flagship Westside apparel and fashion store, launched in Bangalore in 1998, to acquiring India’s biggest book and music retailer, Landmark, and then associating, in 2008, with the world’s third-largest retailer, Tesco, for its hypermarket brand Star Bazaar. Trent’s expansion has been strongest in the fashion and apparel segment, with a new store brand, Fashion Yatra, and international brand Sisley, and the imminent entry of Zara and TopShop, adding to Westside’s offerings. Landmark’s expansion drive has been in the form of forays into new formats and e-retailing. The hypermarket business, too, has been registering steady growth, with Star Bazaar looking to set up more outlets in urban India. “The acquisitions and expansions have been a part of Trent’s overall strategy — apparel, fashion, footwear, food and groceries are within the same creative sphere,” explains Mr Tata. The successful implementation of the strategy has been driven by Trent’s focus on two key factors: customer-centricity and the building of scaleable models. At Trent, the core belief is that a pragmatic and profit-oriented perspective on expansion is infinitely more preferable to a scaleoriented, non-profit model of business.
COMPANY BACKGROUND Incorporation Year
1952
Chairman
F K Kavarana
Managing Director
N N Tata
Company Secretary
Mehernosh M Surti
Auditor
N M Raiji & Co
Registered Office
Bombay House,24 Homi Mody Street, Mumbai-400001. Maharashtra
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investor.relations@trent-tata.com
WEBSITE
http://www.mywestside.com/
Face Value (Rs)
10
BSE Code
500251
BSE Group
B
NSE Code
TRENT
Bloomberg
TRENT IN
Reuters
TREN.BO
ISIN Demat
INE849A01012
Market Lot
1
Listing
Mumbai,NSE
Financial Year End
3
Book Closure Month
Aug
AGM Month
Aug
Registrar's Name & Address
TSR Darashaw Ltd, Ind.Estate,
6-10 Haji Moosa,
Patrawala
DrEMoses Rd Mahalaxm, Mumbai-400011.
Maharashtra, 91-22-66568484 “When starting a new format we try and validate the business in different scenarios,” says KVS Seshasai, who joined Trent in 1999 and is currently business head for Fashion Yatra and Sisley. “We start wrapping up the platform only when we are sure it’s going to be rewarding for both customers and shareholders.” It is this solid foundation that has led to the company establishing itself as a leading operator in a challenging environment. While Trent has been learning to craft a sustainable model for growth, it has had to contend with a rapidly morphing business milieu. “The growth of the mall culture has changed the way people shop,” says Smeeta Neogi, head of marketing at Westside. “Shopping is now a form of entertainment, a whole-day event that includes buying, a movie and eating at PGP 2009-2011
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restaurants. The mall brings to the table multiple reasons why customers can visit you, so Westside’s focus is on having a presence there rather than going for stand-alone stores. Malls have become a hub and a footfall driver.” A continuous process of tracking customer preferences and consumer behaviour, and emphasis on adequate store level profitability rather than maximising revenue per square foot has helped Trent ride through the recent global economic recession. And, as the Indian economy turns around and the retailing industry delivers newer opportunities and a greater range of possibilities, Trent is all set to scale up — to increase its footprint across segments, expand into new geographies and increase penetration into existing markets – and to expand its bouquet of offerings by exploring new channels and new formats. AREAS OF BUSINESS •
Westside: With a number of stores across India, this chain offers clothes, footwear and accessories for men, women and children, along with furnishings, artifacts and a range of home accessories.
•
Star Bazaar: This hypermarket chain offers a wide choice of products, including staple foods, beverages, health and beauty products, vegetables, fruits, dairy and non-vegetarian products.
•
Landmark: A leader in the books and music category, this chain has a range of over 100,000 titles in books and music, and also stocks movies, toys, gift items and stationery.
•
Fashion Yatra: The stores bring quality fashion at low prices to value conscious customers in towns across India.
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CHAPTER-5 Comparative Analysis and Interpretation
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5 Comparative Analysis and Interpretation: The Retail industry in India has basically eight major players according to capitaline. A comparative study of these companies forms the essence of this chapter. To properly judge how well a company or investment is performing it is imperative that the company be compared to the performance of the industry in which it competes. The performance analysis can look into various aspects like sales, profitability, Ratio analysis and Trend analysis(i.e.) Quantitative Analysis and qualitative analysis based on pricing, Advertisement, investment and merger and acquisition. The company which we are considering for analysis are: Pantaloon Retail India Limited Shopper’s Stop Trent Vishal Retailing Limited.
5.1 Quantitative Analysis: Quantitative analysis is a business or financial analysis technique that seek to understand behaviour by using complex mathematical and statistical modelling, measurement and research. This comparative analysis based on following points: •
Profitability
•
Ratio Analysis
•
Trend Analysis
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5.1.1 Profitability: In this profitability we will take sales, profit and ROCE (Return on Capital Employed) and RONW (Return on Net Worth) which give as clear picture about the major player in the market.
5.1.1.1 Sales: The sales are usually an important measure for those companies in the retail industry. it measure the amount of product that a company sells relative to its competitors, and can also reflect consumer spending habits. Table 5.6 Sales of all Major Companies in (crs)
Sales of the company Pantaloon Shopper’s Stop Trent Vishal Retailing Source: Capitaline
2009 6,661.42 1,400.10 514 1,393.03
2008 5,295.88 1,206.93 515.66 1,005.31
2007 3,392.79 899.55 451.99 602.65
Figure 5.19 Sales Graph for all Major Companies in (crs)
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2006 1,961.96 677.96 346.44 288.44
2005 1,084.95 507.12 234.32 146.31
Source- Done by group, data taken from Capitaline Interpretation: From this graph it is clearly seen that Companies are growing rapidly interms of sales. Majority of the share is held by Pantaloon followed by Shoppers Stop, Vishal and Tent. This is because pantaloon has more outlets as compared to other players. If we see the graph pantaloon had the tremendous growth during 2008, but when seeing the shoppers stop they had the smooth growth by equal level. Vishal retail is also growing at the good phase .Trent retail had fall in the sales by nearly 1% from 2008 to 2009 due to some external problems. Finally overall situation of the retail industry is good in terms of sales.
5.1.1.2 Profit: Company’s revenue minus cost of goods sold is Gross profit, which is not the exact profit. The exact profit of the company is calculated by deducting the cost associated with its production and sales, even deducting the depreciation and tax. Table 5.7 Profit of all Major Companies in (crs)
Profit
of
the
company Pantaloon Shopper’s Stop Trent Vishal Retailing Source: Capitaline
2009 140.58 -63.72 26.75 -94.48
2008 125.97 6.97 32.86 40.64
2007 119.99 26.2 32.41 25.06
Figure 5.20 Net Profit Graph for all Major Companies in (crs)
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2006 64.16 27.11 24.38 12.39
2005 38.55 19.03 19.06 3.02
Source- Done by group, data taken from Capitaline
Interpretation: From this graph it is clearly seen that Pantaloon has the highest Profit throughout all 5 years which tells us that the company is in good position followed by Trend, Shopper stop and Vishal. This is because pantaloon are able to attract much customer when compare with others through their pricing strategy, advertisement and other strategy. The profit in the 2005 was low because of the fixed cost involvement but pantaloon company had over came the fixed cost by selling more products, thus they lead to huge profit . That is it had achieved the breakeven point. But considering the shoppers stop their profit is in negative due to less sales and opening of new outlets which lead them loss but any how they will have a profit in upcoming year. Tents retail is next company which had the profit in year 2009 other than pantaloon. Similar case, with Vishal they are opening many branch in southindia which leads to huge investment, thus the reason their profit is in negative .Finally Pantaloon had the good profit and followed by Trent In 2009.
5.1.1.3 ROCE (Return on capital Employed): Return on Capital Employed is one the measure which company used to ascertain the return on their capital (equity plus long term outsider liability).This measure narrows a better understanding of company’s ability to generate returns from its availability base.
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Table 5.8 ROCE Percentage of all Major Companies
Year/companies ROCE 2005 2006 2007 2008 2009 Source: Capitaline
Industry Pantaloon 19.87 15.9 10.59 12.69 11.8
Shoppers stop 15.19 16.79 14.42 5.87 0
Trent 9.86 13.48 10 5.87 3.6
Vishal 16.11 24.02 22.17 17.45 0
Average 10.52625 16.2925 9.17625 9.91125 8.14375
Figure 5.21 ROCE Graph for all Major Companies
Source- Done by group, data taken from Capitaline Interpretation: When Comparing with the industry average in year 2005 Pantaloon takes the lead with 19.87% almost all the other companies are above industry average 10.5% except Trent. In PGP 2009-2011
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year 2006 Vishal retail had the highest ROCE with 24.02% and the industry average is 16.2%, the other industry which is above the average is Shoppers stop because of increase in borrowing, which reduce the shareholders earnings. In year 2007 all the companies are above the industry average 9.17%, again lead by Vishal retail. In year 2008 ROCE reduced for the Shoppers stop and Trent to 5.87% because the industry average is 9.9%, vishal retail had highest return with 17.45%.but when we see the year 2009 Pantaloon takes a lead and its only company which is above industry average 8.14% and all other companies are falls below the industry average. Over all ROCE decreased for all the company this because of the increased capital base.
5.1.1.4 RONW (Return on Net worth): Return on net worth describes the return generated on the owned funds which represents the owners of the business. Table 5.9 RONW Percentage of all Major Companies
Year/companies RONW 2005 2006 2007 2008 2009 Source: Capitaline
Industry Pantaloon 24.6 17.21 7.4 8.57 6.83
Shoppers stop 21.22 14.87 9.27 2.36 0
Trent 7.12 10.02 8.55 5.07 3.46
Figure 5.22 RONW Graph for all Major Companies
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Vishal 13.89 25.44 25.86 20.43 0
Average 11.74 13.81875 8.8575 11.32 4.11
Source- Done by group, data taken from Capitaline
Interpretation: In year 2005 the RONW for pantaloon is high with 24.6% above the industry average 11.74% this mainly due to the high sales by the company, followed by Shoppers stop, Vishal and the Trent which is below the industry average. In year 2006 Vishal retail had the high RONW with 25.44% which tells the rate at which this company is growing and above the industry average13.81%, followed by pantaloon, shoppers stop and Trent. In year 2007 again Vishal retail had 25.86% of return above the industry average 8.8%, followed by shoppers stop, Trent and for the first time pantaloon falls below the industry average with 7.4% of return. In year 2008 Vishal retail the only industry above the industry average with 11.32% and all other industry falls below the industry average this is because the companies had invested much in the retail outlet that they are not able to get return that much. In year 2009 pantaloon takes a lead with 6.83% above the industry average 4.11%, followed by Trent for other industry data’s are not available so it’s difficult to compare. Over all if we see that Vishal retail had the good RONW throughout the five years.
5.1.2
Ratio Analysis:
Ratio analysis is a technique of analysis and interpretation of financial statements. As compared to other tools, the ratio analysis provides useful conclusions about various aspects
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of the working of an enterprise. It is the process of analyzing and interpreting the various ratios for helping in decision making. But for analysis we are considering only two main ratio like Debt–Equity Ratio and Current Ratio
5.1.2.1 Debt- Equity: It is also known as “External – Internal equity ratio”. The relationship between borrowed fund and capital fund is shown in the debt – equity ratio. It indicates the relative proportion of debt and equity in financing the assets of a firm. Debit – Equity ratio may be calculated as follows: Debt – Equity ratio = Debt/Equity (or) Outsiders Fund/Shareholders Funds (or) Long-Term Debts/Shareholders Funds The ideal ratio is 2:1. High ratio shows that, the claims of creditors are greater than the owners. A low ratio implies a greater claim of owners than creditors.
Table 5.10 Debt-Equity Ratio of all Major Companies
Year/companies debit Equity 2005 2006 2007 2008 2009 Source: Capitaline
Pantaloon 1.67 1.19 1.17 1.19 1.22
Shoppers stop 0.84 0.4 0.3 0.48 0.72
Trent 0 0.14 0.2 0.13 0.19
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Vishal 0.71 0.75 1.49 1.94 2.86
Industry Average 0.52875 0.45875 0.63875 0.6975 0.7575
Figure 5.23 Debt-Equity Ratio Graph for all Major Companies
Source- Done by group, data taken from Capitaline Interpretation: We can see that the Debt-equity ratio has decreased for Pantaloons from the year 2005 to 2009 from 1.67 to 1.22. This means that the outsiders’ claim was 1.22 times the owners’ claim. This ratio has shown a increase in the following year 2008. The debt-equity ratio for the years 2006 and 2007 were 1.19 and 1.17 respectively. Again in the previous year this ratio has shown a slight upswing. By observing the data of the last five years it can generally be seen that the Debt-equity ratio of Pantaloons is well below the industry standard of 2 and above the industry average. This implies that the company has a good capital structure. When we see for shopper stop the ratio has decreased from the year 2005 to 2009 from 0.84 to 0.72 and even below the industry average for the last four years. Debt-equity ratio for Trent was 0 in 2005. This is because the company had negligible debt of Rs.26 lakhs(equity was Rs.217.14(Cr) in 2005. This ratio has shown an increase in the following two years2006 and 2007. The debt-equity ratio for the years 2006 and 2007 were 0.14 and 0.2 respectively. In the year 2008 it again went down to 0.13. This shows that the company funds its investments mainly through owners’ contributions than borrowings. but in case of Vishal retail it is opposite they are rising fund for outsider much. In year 2005 the Pantaloon had high debt equity ratio with 1.67 followed by Shoppers stop with0.84 and Vishal with 0.71 all this companies are above the industry average of 0.52 which is good for the industry. In year 2006 only two companies are above the industry PGP 2009-2011
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average 0.45 which tells us that companies are using the owners fund instead of borrowing it. In year 2007 Vishal retail had high ratio with 1.94, followed by pantaloon both of this companies are above the industry average 0.63. Same in case of year 2008 and 2009 both pantaloon and Vishal Retail are above the industry average 0.69 and 0.75.
5.1.2.2 Current Ratio: Current ratio is the most common ratio for measuring the liquidity. Current ratio is the ratio of total current assets to total current liabilities. Current assets are easily converted into cash within a period of one year. They are cash in hand, cash at bank, debtors, bills receivable, stock, prepaid expenses and amount receivable within a year. Current liabilities are payable within a period of one year. They are creditors, bills payable, bank overdraft, expenses outstanding, instalment payable over on long term loans and amount payable in short period (one year). The formula for the calculation of current ratio is: =Current Assets/Current Liabilities Current ratio is preferred to be more than 1 as it is the ratio of current assets to current liabilities even though the industry standard requires it be 2:1 for the company to be considered to have operational stability.
Table 5.11 Current Ratio of all Major Companies
Year/companies Current Ratio 2005 2006 2007 2008 2009 Source: Capitaline
Pantaloon 1.6 1.45 1.96 1.88 1.74
Shoppers stop 0.9 1.39 1.54 1.11 0.96
Trent 1.75 1.41 1.4 1.53 2.17
Figure 5.24 Current Ratio Graph for all Major Companies
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Vishal 2.7 1.84 1.55 1.74 1.59
Industry Average 1.6975 1.95625 2.06125 2.16125 1.8225
Source- Done by group, data taken from Capitaline Interpretation: We can see that Pantaloons has rendered efficient operations by maintaining a current ratio of 1.45 and above over the last five years. The current ratio of Pantaloons has come close to industry standards in the last two years with 1.96 in 2007 and 1.83 in 2008 and below the industry average in all years. When we see for Trent, it has rendered efficient operations by maintaining a current ratio of 1.4 and above over the last five years. Since the ratio is started declining because the current liabilities increased at a faster rate as compared to the current assets. But in the year 2009 the Current ratio had crossed the industry standards and above the industry average 1.8 which is not a good sign for the company. Shoppers Stop’s current ratio was 1.02. In 2005 this ratio slightly went below 1 (i.e.), current liabilities were more than current assets. In the following years this ratio slightly increased to 1.54 in the year 2007. But as we see the last five years’ data this company has always been below industry standard and industry average throughout the five year. Vishal retail has crossed the industry standards in year 2005 with ratio as 2.7 very huge which is not good for the company but it had reduce the standard to 1.84 in year 2006 and finally in 2009 current ratio is 1.59. over all in this ratio, most of the years the companies falls below the industry average.
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5.1.3 Trend Analysis: Simple Linear Regression The growth of the five major players of the retail sector is being studied with the trend analysis by taking the variables like sales and profit. With the past five year values a trend equation by using least square method is obtained. The line has an equation, Y = a + bt.
Where, Y – Projected value (sales and profit) a – Intercept of Y b – Slope of the line t – Any value of the time series Using this equation the values of the sales and profit for the year 2010 and 2011 is being forecasted for the major four companies.
5.1.3.1 Sales Trend: From the past five years value the linear equation for the different variables the linear equation is calculated as, o Pantaloon sales Turnover(Y1) =-666.658+1448.686*t o Shopper’s shop sales Turnover(Y2) =243.853+231.493*t o Trent sales Turnover (Y3)=193.908+72.858*t o Vishal sales Turnover(Y4) =-275.945+321.031*t With the help of the linear equation shown above the forecasted values are being found and shown in the table and graph Table 5.12 Sales Trend of all Major Companies in (crs)
Year
Time
Pantaloon
Shoppes stop Trent sales Vishal sales
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period (t) Sales (y1) sales(y2) 2004-2005 1 1,084.95 507.12 2005-2006 2 1,961.96 677.96 2006-2007 3 3,392.79 899.55 2007-2008 4 5,295.88 1,206.93 2008-2009 5 6,661.42 1,400.10 2009-2010 6 8025.458(E) 1632.811(E) 2010-2011 7 9474.144(E) 1864.304(E) Source: Capitaline and Estimation done by group
(y3) 234.32 346.44 451.99 515.66 514 631.056(E) 703.914(E)
(y4) 146.31 288.44 602.65 1,005.31 1,393.03 1650.241(E) 1971.272(E)
Figure 5.25 Sales Trend Graph for all major companies (crs)
Source- Done by group
Interpretation: From the graph it’s clear that trend of all major companies are having increasing trend. when we compare with the companies the pantaloon has high sales which is estimated for the year 2010 as Rs.8025.458 (crs) followed by Vishal retail with Rs.1650.241 (crs), Shopper’s stop with Rs. 1632.811 (crs) and Trent by Rs. 631.056 (crs). In Year 2011 its PGP 2009-2011
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sales estimated as pantaloon with Rs.9474.144 (crs) followed by Vishal retail with Rs.1971.272 (crs), Shopper’s stop with Rs. 1864.304(crs) and Trent by Rs. 703.914 (crs). Over all the companies sales will be good in future according the regression method.
5.1.3.2 Profit Trend: From the past five years value the linear equation for the different variables the linear equation is calculated as, o Pantaloon Total income(Y1) =-666.658+1448.686*t o Shopper’s shop Total income (Y2) =243.853+231.493*t o Trent Total income (Y3)=193.908+72.858*t o Vishal Total income (Y4) =-275.945+321.031*t With the help of the linear equation shown above the forecasted values are being found and shown in the table and graph Table 5.13 Profit Trend of all Major Companies in (crs)
Time period Pantaloon Shoppers stop Year (t) Profit (y1) profit (y2) 2004-2005 1 38.55 19.03 2005-2006 2 64.16 27.11 2006-2007 3 119.99 26.2 2007-2008 4 125.97 6.97 2008-2009 5 140.58 -63.72 2009-2010 6 177.611(E) -52.574(E) 2010-2011 7 204.198(E) -71.138(E) Source: Capitaline and Estimation done by Group
Trent Profit(y3) 19.06 24.38 32.41 32.86 26.75 34.25(E) 36.636(E)
Figure 5.26 Profit Trend Graph for all Major Companies in (crs)
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Vishal profit (y4) 3.02 12.39 25.06 40.64 -94.48 -52.699(E) -69.374(E)
Source- Done by group Interpretation: From the graph it’s clear that trend of pantaloon and Trent will be increasing in terms of Profit but the companies like Shopper’s stop and Vishal will have profit in negative even for next two years which is estimated. When we compare with the companies the pantaloon has a high profit which is estimated for the year 2010 as Rs.177.611 (crs) followed by Trent with Rs. 34.25 (crs), Shopper’s stop with Rs. -52.574 (crs) and Vishal retail by Rs. -52.699 (crs). In Year 2011 its Profit estimated as pantaloon with Rs.204.198 (crs) followed by Trent with Rs.36.636 (crs), Shopper’s stop with Rs. -71.138(crs) and Vishal retail by Rs. -69.374 (crs). Over all the companies profit will be good for Pantaloon and Trent in future according the regression method.
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5.2 Qualitative analysis: Qualitative Analysis is the process of examing the health of the company by loking at non financial Information such as the management team, culture of the company, business model, and competitors. Qualitative analysis of the companies done by SWOT, PRICING and ADVERTISING
5.2.1 SWOT Analysis: To have comparative analysis in terms of qualitative first we can see about SWOT Analysis which means Strength, Weakness, opportunities and threats. by looking into this component we can easily do the comparative analysis for the major companies.
5.2.1.1 Pantaloon: Strengths: Presence of the Company and its group formats in almost all segments
Specialized services give niche advantage to the Company to have better and faster access to the customer needs.
Cost control initiatives and frugal culture that is critical in a retail operations business
Periodical reviews of the various operations have been done on regular basis to identify the any possible threat and address the same within time.
Process of Enterprise Risk Management as a continuing process, in order to identify the new risks and to define and establish the control process to mitigate the identified risks. Controls in SAP. Weakness: Increased size of operation has the risk of execution and management.
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Opportunities: The Company has formats for various segments of the customers and capturing the maximum customers from each segment by having appropriate locations for each format.
Competitive advantage over competitors and also ensuring that the Company‘s expansion plans on track.
Threats: The organized retail business is evolving faster and with the availability of various options from the Company as well as the competitors, the business risk has increased. In the current environment, for any company the cost of doing business, including costs associated with energy, real estate, people etc and this can have an impact on the margins. With the increase of the size of operation the Company will also have the risk of the execution and management.
5.2.1.2 Shoppers stop: Strengths: Pioneer in departmental format. Loyal customer base accounts for 63% of revenue. Low risk and sturdy business model. Presence across retail segments; lifestyle, value and specialty retailing. Healthy financial position with low gearing. Opportunities: Low rentals due to long lease contracts. Weakness: Late foray into value retailing with 51% stake in promoter owned company.
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High spend on store makeovers and interiors to ensure pleasant shopping experience.
Competition from standalone specialty stores. No standardization of product. Opportunity: 30% CAGR in organized retailing to result in better footfalls and conversion rates. Entry into TIER II and III cities.
Benefit from the 16% increase in discretionary spend in Indian consumers because of presence across formats.
Collaborations with foreign players because of a national brand. Threats: Impact of slowdown in consumer spends to be felt on department stores. Opening up of economy for free entry of foreign retail players. Employee shortage due to rapid growth in retailing. As it could be observed that percentage of sales dropped till 2006 but after that, the company seems to be more stable and less risky. Revenue of the company is increasing over the years. This signifies that company is trying to increase their market share and with the increasing consumption. It sales has increased very steeply over the years.
5.2.1.3 Trent: Strengths: Sold in house brand only – higher margins, more control over manufacturers (quality, cost), no intermediary costs. Focus on 2 parameters – style and affordability Huge financial base is there at the company‘s disposal which amounts to around Rs 2 billion from sale of Lakme Adept at conducting marketing research often and has a good in house team for it. PGP 2009-2011
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Reach is very good with continuous growth in the number of stores at a rapid rate. Trent has a strong supply chain functioning. Weakness:
The company is too focused only on apparels and jewellery which are seasonal in nature and is not willing to diversify into other product types.
The company is still concentrating much on the renowned brands instead of own brands with the ratio of 70:30. If own brands could be focused on, they could bring in more loyalty, flexibility and high returns. (Source: Crisil)
Trent invests very heavily in promotion and brand building but still suffers from poor economies of scale.
Opportunities: There is 10 billion dollar untapped market in India for Trent to capitalise on.
Trent could enter the food retail business as a study on food and grocery retail market as the food retail sales make up for close to 63 per cent of total retail sales in American retail chains. (Source: KSA Technopak)
Trent positions its products in Westside as value for money which could be further enhanced by venturing into low cost product business to tap the lower middle class market through a downward stretch.
Threats: Organised sector is open for other players and with new and new retailers improving the competition in the market by mushrooming their retail outlets. Market share of the unorganised sector still is ranges to 95% and if not looked upon, might increase further. (Source: Crisil)
5.2.1.4 Vishal: Strengths: PGP 2009-2011
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Vishal follows the concept of EDLP, time pricing and price discounts.
Vishal Retail is into wide range of consumer goods which are sold under the value retail tag.
Vishal emphasizes on backward integration.
To reduce cost, Vishal does in house production of apparels, procurement of goods directly procurement of goods from the small and medium size vendors and manufacturers.
Vishal has a very strong logistics and distribution system.
Vishal targets the middle and lower middle class customers that form a very huge percentage of the total shopping population in India.
Vishal has a strong recruitment cell that manages its human resources very well. Weakness:
Apparels comprise of 63% of the revenue of the company which could be a risky figure looking at the season nature of the products. The company should try focus on evening it out and concentrating on the other product offerings as well. (Source: BLB Research)
Vishal suffers from a high attrition rate of 35% which is not a good figure for a retail sector company to manage its resources. (Source: BLB Research)
With the store cost skyrocketing, Vishal still operates in large space outlets. Opportunities:
Vishal could focus more on the FMCG retail and has huge scope of own brand promotion to a different level.
Vishal retail could extend itself into tier III and tier IV cities more to challenge the unorganized retailers with a different shopping experience for the consumers.
Vishal could diversify into a brand retailer, retailing the major apparel in India as well.
Threats: PGP 2009-2011
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Vishal faces serious competition from the unorganized sector with whom it directly competes with through its pricing strategies. More and more stores are mushrooming in India providing latest in fashion apparels, to compete with these and maintain its value prices, Vishal Retail needs to devise strong strategies.
5.2.2 Pricing: Pricing is the most important in the retail industry. we can have the comparison of the pricing strategy of major players in retail sector.
5.2.2.1 Pantaloon: The major pricing strategies followed by pantaloon are,
Value Pricing
A pricing strategy in which a product's price is actively dependent upon its demand
Special-event Pricing
It advertised sales or price cutting that is linked to a holiday, season or event to increase sales volume
Cash Rebates
A refund of part of sometimes the full price of the product following purchase, though some rebates are offered at the time of purchase
Bundle Pricing
It is the practice of offering two or more different products or services at one price. Price bundling is used to increase both unit and rupee sales by bringing traffic into the store.
By-Product Pricing
Setting the price for by-products in order to make the price of the main product more competitive.
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5.2.2.2 Shoppers stop: The major pricing strategies followed by shoppers stop are,
Premium Pricing
It is the practice of keeping the price of a product or service artificially high in order to encourage favourable perceptions among buyers, based solely on the price. The practice is intended to exploit the (not necessarily justifiable) tendency for buyers to assume that expensive items enjoy an exceptional reputation or represent exceptional quality and distinction.
Vouchers
5.2.2.3 Trent: The major pricing strategies followed by Trent are,
Segmented Pricing
For different segment people it will follow the different pricing base on age and gender.
Mark-up Pricing
It drives cost-oriented pricing wherein a retailer sets prices by adding per unit merchandise costs, retail-operating expenses, and the desired profit.
5.2.2.4 Vishal: The major pricing strategies followed by Vishal are
Discount Pricing
Here low prices are used as the major tool for competitive advantage as it works best for value based customers .The store portrays a low status image and offers fewer shopping frills. Profit margins are kept low to target price-based customers. The model works on high inventory turnover and lower operating costs.
Wide-price range
The pricing range may be varied from wide range in one particular product.
Competitive Pricing PGP 2009-2011
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Comparing with the market they will keep pricing for the product.
Psychological Pricing
Psychological pricing is a method of setting intended to have special appeal to consumers. Prestige pricing, reference pricing and odd –even pricing, are all different types of psychological pricing.
5.2.3 Advertising: Based on advertisement we can made comparative analysis of the major players in the industries like Pantaloon, shoppers stop, Trent, and Vishal Retail. Advertisement helps the companies to increase their sales. some brief comparison are made based on advertisement between companies.
Comparing Advertising strategies of the four companies: Table 5.14 Comparing Advertising Strategies of the four companies
Advertisement strategy Brand Endorsement
Shoppers stop
Trent
Vishal
Pantaloon
-
Billboards
-
Print Ads Audio Promotion Catalogues
-
-
Events
-
Interpretation: Above table represents comparison between the advertising strategies of the four companies. Shoppers stop focuses on brand endorsement, print ads and events as it is a premium store. Its brand ambassador is Neil Nitin Mukesh who is a rich and stylish model. Now shoppers PGP 2009-2011
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stop is also coming up with billboards but it doesn’t offer audio promotion (announcements) and catalogues inside stores Whereas Trent stores follow brand endorsement and all other discussed strategies for shoppers stop except providing catalogues to the customer. Its brand ambassador is yuvraj singh which conveys that this store is meant for young generation. Vishal retail stores only follow Print ads in newspapers and catalogues containing discounts and offers as their advertising strategy but they don’t go for brand endorsement, billboards, audio promotion or events because they focus on earning maximum revenue. Pantaloon focuses on all kind of advertising strategies to attract as many customers as it can. Its brand ambassadors are Bipasha basu and zayed khan who are considered as fashion icons. So it targets those middle class people who follow fashion trends. Overall pantaloon is leading in the advertisement sector.Followed by Trent, shopper stop and Vishal retail.
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CHAPTER-6 Recommendations and Conclusion
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6 Recommendations and Conclusion: 6.1 Future outlooks Organized Indian retailers are trying out a variety of formats, ranging from discount stores to supermarket to hypermarkets to specialty chains. However, of late, most players appear to be gravitating towards the hypermarket format. Retailers such as Pantaloon, Provogue, or the Tatas are working towards exploiting this model which is perceived by consumers as more value-enhancing. But in the long run, what is most likely to succeed is a more balanced multi-format strategy. This helps retailers adapt to the very different shopping patterns that can exist within the country and even within regions. So, we can look forward to the emergence of balanced multi format models. The retailers will exploit every possible avenue, come up with innovative and affordable products and create a desire among the masses for their products. Every year, organized retail will grow and enhance its market share. It will certainly out do unorganized retail in the near future.
6.2 Recommendations Poor quality of infrastructure, coupled with poor quality of the distribution sector, results in logistics costs that are very high as a proportion of GDP, and inventories, which have to be maintained at an unusually high level. Distribution and marketing is a huge cost in Indian consumer markets. It's a lot easier to cut manufacturing costs than it is to cut distribution and marketing costs.
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To compete in this sector one needs to have up-to-date market information for planing and decision making. The second most important requirement is to manage costs widely in order to earn at least normal profits in face of stiff competition. Indian companies know Indian markets better, but foreign players will come in and challenge the locals by sheer cash power, the power to drive down prices. That will be the coming struggle.Strategic course of action for the coming years is required to be taken by the major players to sustain and grow in this ever growing market The Indian retailing sector is at an inflexion point where the growth of organized retailing and growth in the consumption by the Indian population is going to take a higher growth trajectory. Rural markets emerging as a huge opportunity for retailers reflected in the share of the rural market across most categories of consumption.It provides ample opportunities to the market players to capitalize on the same and take the first mover advantage. IT is a tool that has been used by retailers which has improved and eased thw way with which modern opeartions are carried on efficiently and still with foreing players coming up the opportunities for IT implementation in Retailing sector is very high . The increase in FDI flow has strengthened the foreign political relations and now foreign companies are trying to persuade the Indian Parliament to increase FDI capital depending on the sector.
6.3 Conclusion: The Indian retail industry is going through a boom period. Even though penetration of organized retail is very low, they have a brought revolution in the country. They need to overcome the challenges before them and transform into the next-door stores which offer discounts. They should also establish a good supply chain network and maintain good warehouses. They should prove themselves as ‘customer-oriented’. This would change the consumers’ average spending pattern, make them brand sensitive, and when they do have brand knowledge they would demand more. Direct selling and personal selling should also be added to the services offered by the stores in the malls. If they succeed in achieving the above requirements, then they can surely turn even window shoppers into buyers. This PGP 2009-2011
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would take retailing in India to new heights. Hence there is need for organized retailers to analyze and understand the factors that would influence consumer behavior and tailor themselves accordingly. The Indian retail industry is directly based upon income of consumer, so it depends both upon microeconomic and macroeconomic factors. This industry offers the large variety of products for all types of consumers from middle class to high end premium users. It plays a major role in contributing towards country’s GDP too. Here we have compared various companies in Indian retail industry on various aspects like market share, retail formats, promotion advertising, pricing startegies etc. This report provides an industry analysis of Indian retail sector, comparing the major players in the country like reliance, trent, shoppers stop, pantaloon. it reveals oppurtunities, challenges and future prospects in Indian retail sector. The report also reflects the evolution of Indian retail industry, its growth drivers and different retail formats in india. The industry analysis of the Indian retail industry high lights many significant patterns prevailing in india. The PEST analysis investigates political, economic, social and technological factors of industry. SWOT analusis boasts of the strength and reveals weaknesses of Indian retail industry and enlightens on the oppurtunities and threats before Indian retail industry. Retail industry is largely led by private industries. The Indian retail environment has attained $210 billion witnessing a strong development paced at 5% per year. Existing retail space in 160 malls is nearly 32 million square feet. Organized retailing now accounts for 6% out of total retailing however same is predicted to extend to 10 % by the year 2010. A huge number of shopping malls have come up in the recent past generating 20 million square feet retail space. The global retail giants like walmart, gap, tesco, Versace, k mart, zara, fcuk, next, mother care, ikea, trussardi, DKNY and Debenhams made plans to enter the Indian market. Spirit, guess, chanel, mango and many other global brands marked their presence in india by implementing licensing and franchisee agreements. Companies like shoppers stop, trent reliance, lifestyle, tanishq and crossroads have planned to invest over 500 crores. PGP 2009-2011
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Trent is on the edge to take its both the brands star bazaar and Westside to new cities. Meanwhile shoppers stop has recently geared up for expansion of present ones to add 11 new stores including 2 hypermarkets. Also pantaloon planned to add 8 big bazaar malls within next 6-8 months. Pantaloon is the market leader in the organized Retail sector. Finally the objective of the study has been full filled.
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