retail march 2014

8/10/2019 Retail March 2014

1/46


2/46


3/46

27

220

2012 2020E

Indian modern retail market size (USD billion)

0.5

1.3

2012 2020E

Indian retail market size (USD trillion)

1.0

3.6

2010 2020EIndia consumption expenditure (USD trillion)

Source: PWC, Economic Times, Aranca ResearchNotes: CAGR - Compound Annual Growth Rate, E - Estimate

CAGR: 13.9%

CAGR: 12.7%

CAGR: 30.0%

Consumer expenditureestimated to be USD3.6 trillion

by 2020 vis--vis USD1.0trillion in 2010

Rising income and demand forquality products to boost

consumer expenditure

Retail market in India to reachUSD1.3 trillion by 2020 from

USD0.5 trillion in 2012

Indian retail one of the fastestgrowing markets in the world

due to economic growth

Modern retail market to expandto USD220 billion by 2020 from

USD27 billion in 2012

Favourable governmentpolicies to boost investorconfidence and thereby

investments across modernretail formats


4/46

Source: indiaretailing.com, Aranca ResearchNote: CAGR - Compound Annual Growth Rate

500

8,500

2006 2016E

Supermarkets in India

11,192

67,100

2006 2016E

Modern retail formats (store counts)

12

100

2006 2025E

FMCG market in India (USD billions)

CAGR: 7.6%

CAGR: 19.6%

CAGR: 32.8%

FMCG market expected toincrease to USD100 billion by

2025 from USD12 billion in2006

Robust consumption, ruralmarkets to augment FMCG

market

Modern retail stores projectedto reach 67,100 by 2016 from

11,192 in 2006

Increasing participation fromforeign and private players to

boost retail infrastructure

Supermarkets to total 8,500 by2016 from 500 in 2006

Rising number of tier-2 and tier-3 cities to enhance

supermarket space in thecountry


5/46


6/46

Source: Technopak Advisors Pvt Ltd, Firstpost, Aranca Research

Manufacturersopened their ownoutlets

Pure play retailersrealised thepotential of themarket

Most of them inapparel segment

Substantialinvestmentcommitments bylarge Indiancorporate

Entry in food andgeneral

merchandisecategory

Pan-Indiaexpansion to top100 cities

Repositioning byexisting players

Initiation

Conceptualisation

Expansion

Consolidation

Large scale consolidation Movement to smaller cities and

rural areas More than 5 6 players with

revenues more than USD700million

Large scale entry ofinternational brands

FDI in single-brand retail up to100 per cent from 51 per cent

Approval of FDI limit in multi-brand retail of upto 51 per cent

Rise in private label brands byretail players

Sourcing and investment rulesfor supermarkets were relaxed

Pre 1990s

1990 05

2005 102010 onward


7/46

Source: Aranca Research

Note: IT- Information Technology

Mono/exclusivebranded retail shops

Multi-branded retailshops

Convergence retailoutlets

Exclusive showrooms either owned orfranchised out by a manufacturer

Complete range available for agiven brand, certified product

quality

Focus on particular product categoriesand carry most of the brands available

Customers have more choices asmany brands are on display

Display most of convergence as well asconsumer/electronic products, including

communication and IT group

One-stop shop for customers;many product lines of different

brands on display

e-Trailers

It is an online shopping facility forbuying and selling products and

services; the facility is widely used forelectronics, health and wellness

Highly convenient as it provides24X7 access, saves time, and

ensures secure transaction


8/46


Grocery Food and beverage Department stores Pharmacy Books, music andgifts

RETAIL


9/46

Source: Company websites, Press Release, Aranca Research

Departmental stores HypermarketsSupermarkets/

Convenience stores Specialty stores Cash & Carry stores

Pantaloon has 75stores

Westsideoperates 74stores

Shoppers Stophas 66 stores

Reliance Retailhas launchedTrends in thisformat andcurrently hasnearly 100 storesacross India

Pantaloon Retailis the leader inthis format with162 Big Bazaarstores

HyperCITY (15stores), Trent,Spencers(Spencer Hyper),

Aditya Birla Retailand Reliance areother players

Aditya Birla Retail(additional 512stores)

Spencers (Daily,134 stores)

Reliance Fresh(700 stores)

REI 6Ten (350stores) are themajor players inthis format

Titan Industries isa large player,with 368 World ofTitan, 150Tanishq and 227Titan Eye+ shops

Vijay Sales,Croma and E-Zone are intoconsumerelectronics

Landmark, andCrossword focuson books and gifts

Metro started thecash-and-carrymodel in India; thecompanyoperates 16stores acrossMumbai, Kolkata,Delhi, Punjab,Hyderabad andBengaluru

Reliance openedits first cash-and-carry store inSeptember 2011and plans to open20 stores by theend of the fiscal

Retail


10/46


11/46

Source: KPMG International, Aranca Research

Offering discounts Most retailers have advanced off-season sales from 15 days to a month with discounts

ranging from 20-70 per cent on certain products Higher discounts and other value added services for members

Lowering prices Certain retailers adopt First Price Right approach. Retailers do not offer discounts underthis strategy they directly compete on the selling price by offering a best price without

any markdowns

Offering value-addedservices

Companies offer innovative value added services such as customer loyalty programmes,happy hours on shopping deals

Offers for senior citizens, contests for students, and lottery gains are now very common

Leveraging partnerships In order to keep customers on shop floors for a longer time and increase conversions,

retailers are now pitching to partner with manufacturers, service providers, financialcompanies, etc. to create a buzz around certain product categories


12/46


13/46

Source: Indian Retail Market January 2013,Deliotte, Aranca Research

Market break-up by revenues (2012)In 2012, Food and Grocery accounted for nearly 60.0 percent of total revenues in the retail sector followed by

Apparel (8.0 per cent)

In 2011, 48 per cent of total household income in India wasspent on food and groceries

Demand for western outfits and readymade garments hasbeen growing at 40-45 per cent annually; apparelpenetration is expected to increase to 30-35 per cent by2015 60%

8%

6%

5%

4%3%

3%

11% Food & Grocery

Appareal

Mobile and telecom

Food service

Jewellery

Consumer Electronics

Pharmacy

Others


14/46

Source: Indian Retail Market January 2013, Aranca Research

Organised retail penetration (2012)

Organised Retail Penetration (ORP) in India is low (8 per cent) compared to other countries such as the US (85 per cent)

This indicates strong growth potential for organised retail in India

Contribution to organised retail (2012)

92%

8%

Unorganised retailpenetration

Organised retail

penetration

11%

33%

11%7%

6%

8%

4%

20%Food & Grocery

Appareal

Mobile and telecom

Food service

Jewellery

Consumer Electronics

Footwear

Others


15/46

Source: indiaretailing.com, Deloitte report,Winning in Indias Retail Sector, Aranca Research

Note: Mom -and- pop stores are small stores that aretypically owned and run by members of a family

Significant scope for expansion in organised retailIndian retail market is in its nascent stage; unorganisedplayers control the market with 92 per cent market shareduring 2012

There are over 15 million mom-and-pop stores

Organised retail is expected to account for 20 per cent ofthe overall retail market by 2020 92%

80%

8%20%

0%10%

20%

30%40%

50%

60%

70%

80%90%

100%

2012 2020

Unorganised retail penetration Organised retail penetration


16/46

500

4,000

2006 2011

40

300

2006 2011

10,000

30,000

2006 2011

2

30

2006 2011

Hypermarkets number of storesSupermarkets number of stores

Speciality stores number of stores Cash and carry number of stores

Source: indiaretailing.com, Aranca Research


17/46

Source: Technopak Advisors Pvt Ltd,Cushman & Wakefield Research

Notes: * - NCR, Mumbai, Kolkata and Chennai,** - Bengaluru, Pune, Hyderabad and Ahmadabad

Additional mall space requirement by 2013-14(million sq feet)

Grocery sales growth across countries (2010)

18.4%

12.4% 11.1%10%

3%2%

0%

India China Russia Brazil UK USA Japan

45

21

Top 4 Cities* Next Four Cities**

Source: IGD International: Indian Retail Forum presentation - 2010


18/46


19/46

Source: Indian Retail Market September 2011, Times of India, Aranca Analysis

India is ranked fifth in the Global Retail Development Index in 2012

Indias strong growth fundamentals along with increased urbanisation and consumerism opened immense scope for retailexpansion for foreign players

Recent government reforms for attracting FDI and boosting investor sentiment

Rapid emergence of organised retail outlets like mega malls and hypermarkets are augmenting the growth of organisedretail in the country

Constant improvements in supply chains and logistics by retailers for competitive advantage and meeting consumerdemands


20/46

Source: A.T.Kearney 2011 & 2012 Global Retail Development Report, Aranca Analysis

India ranks sixth in the 2011 Global Apparel IndexIndia ranks fifth in the 2012 Global RetailDevelopment Index

61.4%58.9%

48.6%46.4%

43.9% 42.0%40.1%

37.4% 37.3% 36.9%

73.8%

65.3%

63.8% 63.1%60.8% 60.6% 60.6%

58.9%58.5% 58.0%


21/46

Source: A.T.Kearney 2013 FDI Confidence Index, Aranca AnalysisNotes: FDI - Foreign Direct Investment;

* - The FDI Confidence Index assesses the impact of political,economic and regulatory changes on FDI preferences

FDI Confidence Index 2013India has occupied a remarkable position in global retailrankings; the country has high market potential, loweconomic risk, and moderate political risk

In market potential, India ranks fifth after United States,China, Brazil and Canada

Net retail sales in India is also quite significant amongemerging and developed nations; the country is ranked thirdafter China and Brazil

From an overall perspective, given its high growth potential,India scores well among foreign investors compared toglobal economy peers

1.83

1.85

1.86

1.97

2.02

2.09

0 0.5 1 1.5 2 2.5

Australia

India

Canada

Brazil

China

United States


22/46

Source: 2013 Global Retail Development Index - AT Kearney, Aranca ResearchNotes: GRDI - Global Retail Development Index, * - based on weighted score of market attractiveness, market saturation and time pressure of top 30 countries

2013 GRDI country attractiveness in retail investment


23/46

Source: MasterCard Worldwide Insights 4Q 2010, Aranca Research

E-commerce industry in India (USD billion)

E-commerce is expected to be the next major area for retail growth in India. The industry is projected to increase fromUSD70 billion in 2011 to USD200 billion in 2020

With growth in the E-commerce industry, online retail is estimated to reach USD70 billion by 2020 from USD0.6 billion in2011

Online retail in India (USD billion)

0.6

70

2011 2020E

Online retail in India (USD billions)

10

200

2011 2020E

E-commerce industry in India (USD billions)


24/46

Source: MasterCard Worldwide Insights 4Q 2010, Aranca Research

Note: APMEA - Asia/ Pacific, Middle East and Africa

APMEA Master Card Regional Online ShoppingIndex

The key drivers for growing importance of online retail are ayoung population aided by easier access to credit andpayment options; increasing internet penetration and speed,24-hour accessibility, convenient and secured transactions

Computer peripherals, camera and mobiles, and lifestylesegments account for a majority of total purchases

6570

25 21 2528

65 62

30 31 30 33

6357

3832 29

36

0

20

40

60

80

SouthKorea

Japan China India HongKong

GlobalIndex

2008 2009 2010


25/46


Favourabledemographics

Rise in income andpurchasing power

Change inconsumer mindset

Easy consumercredit and increasein quality products

Brandconsciousness


26/46


1991

1997

2006

2008

2012

Liberalisation: FDI of upto 51 percent allowed under the automatic

route in select priority sectors

FDI of upto 100 per cent allowedunder the automatic

route in Cash & Carry(wholesale)

Government proposedintroducing FDI in multi-brand

retail (2008); follows up in 2012by approving plan to raise the FDI

limit to 51 per cent

FDI of upto 51 per cent allowedwith prior government

approval in single-brandretail

Government approved 51 per

cent FDI in multi-brand retail andincreased FDI limit to 100 per

cent (from 51 per cent) in singlebrand retail


27/46

Increase in employment Infrastructure investment Removing middlemen Benefiting Indianmanufacturers

Benefits of FDI in Indian retail

FDI limitSector Entry route

Whole sale cash andcarry trading

Single brand productretailing

Multi brand, front endretail

100%

100%

51%

Automatic

Foreign Investmentand Promotion Board

Foreign Investmentand Promotion Board


28/46

51% FDI in multi -

brand retailStatus: Policy passed

100% FDI in singlebrand retail

Status: Policy passed

Minimum investment cap is USD100 million

30 per cent procurement of manufactured or processed products must be from SMEs

Minimum 50 per cent of total FDI must be invested in back-end infrastructure (logistics, cold

storage, soil testing labs, seed farming and agro-processing units)

Removes the middlemen and provides a better price to farmers

Development in the retail supply chain system

50 per cent of the jobs in the retail outlet could be reserved for rural youth and a certain amountof farm produce could be required to be procured from poor farmers

To ensure the Public Distribution System (PDS) and Food Security System (FSS), government

reserves the right to procure a certain amount of food grains

Multi brand retail would keep food and commodity prices under control

Will cut agricultural waste as mega retailers would develop backend infrastructure

Consumers will receive higher quality products at lower prices and better service

Products to be sold under the same brand internationally

Sale of multi brand goods is not allowed, even if produced by the same manufacturer

For FDI above 51 per cent, 30 per cent sourcing must be from SMEs

Consumerism of the retail market

Any additional product categories to be sold under single brand retail must first receive

additional government approval


29/46


30/46


31/46

Source: IMF, Aranca Research

Notes: E- Estimate, F - Forecasts

Rising per capita income in IndiaReal income growth projections

0.0%

3.0%

6.0%

9.0%

12.0%

0

350

700

1050

1400

2 0 0 5

2 0 0 6

2 0 0 7

2 0 0 8

2 0 0 9

2 0 1 0

2 0 1 1

2 0 1 2

2 0 1 3 E

GDP constant prices, USD Billion Annual growth rate

-10.0%

-1.0%

8.0%

17.0%

26.0%

35.0%

0

400

800

1,200

1,600

2,000

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6

2 0 0 7

2 0 0 8

2 0 0 9

2 0 1 0

2 0 1 1

2 0 1 2

2 0 1 3 E

2 0 1 4 F

2 0 1 5 F

2 0 1 6 F

2 0 1 7 F

2 0 1 8 F

Per capita income, USD Annual growth rate


32/46

1.4 1.5

2.0

2.5 2.4

FY08 FY09 FY10 FY11 FY12*

Source: Reuters Knowledge, Aranca Research

Notes: FY Jul to Jun, * - Jan to DecThe company changed its financial year from Jul Jun to Jan - Dec

Future retail sales growth (USD billion)Revenues expanded at a CAGR of 14.9 per cent duringFY08-12

Hypermarket and supermarket formats have a network ofnearly 315 stores encompassing an area of over 11 millionsquare feet.

Under Future Fashion, the company owns a portfolio of 24leading brands and covers more than 121 cities

CAGR: 14.9%


33/46

Source: Company Annual Report, Aranca Research

Note: msf - Million Square Feet

Has a good understanding of the Indian retail sector and its customers

Future Retail Ltd (FY12)

Revenue: USD3.3 billion for

18 months Operational retail

space:16.3 msf

Over 1000 stores in 121cities

Employees: 36,000

Ground-upDevelopment

The Right JVs at theRight Time Winning Team Versatile Retailing

Multiple Formats,Multiple Brands-AComprehensive

Retail Experiment

Pantaloon retailsuccess factors


34/46


35/46

Non Apparels35%

Apparels65%

Apparels59%

FY05 FY13

Shoppers Stop(apparel, accessories,footwear, jewelry and

dcor)

Homestop(home furnishing)

Crossword(Books and otherentertainement)

Mothercare(infant and toddler

care)

Estee Lauder, Macand Clinique

(Beauty)

Shoppers Stop(Brands and JVs)

276.5 284.7307.8

491.0

581.7 583.8

FY08 FY09 FY10 FY11 FY12 FY13

Shoppers Stops diversified p ortfolioShoppers Stops sales growth (USD million)


CAGR: 16.1%

Non Apparels40%

Apparels60%


36/46

Average selling price (INR)Footfalls (in million)


Average transaction size (INR)Members ('000)

24.922.8 23.3

30.9

36.740.2

0

9

18

27

36

45


759821 856

913 977 1,062


1,013 1,2771,611

2,017

2,5032,880

0

700

1400

2100

2800

3500


1,720 1,843 2,029

2,2072,311

2,481



37/46

Source: KPMG International 2011, Aranca Research

D e m a n

d F a c

t o r s

Higher brand consciousness

Growing young populationand working women

Rising incomes and purchasing power

Changing consumer preferences andgrowing urbanisation

Indian Retail Opportunity

Rapid real estate and infrastructuredevelopment

Development of supply chain improvingefficiency

Easy availability of credit

R&D, innovation and new productdevelopment S

u p p

l y F a c t o r s


38/46


39/46

Source: Indian Retail Market September 2011, Deliotte,Winning in Indias Retail Sector, PwC, Aranca Research

Investment options in organised retail IndiaRetail component of real estate is an attractive opportunitywhich is currently attracting 29 per cent of total investmentin real estate

26 per cent of the overall investors are interested ininvesting in Tier II and III cities

Training and warehouse spacing are the other viableoptions for investments

29%26%

20%

10% 8%4% 3%

C u r r e n

t r e a

l e s t a

t e

v a

l u e s

T i e r

I I & I I I t o w n s

T r a

i n e

d

m a n p o w e r

C u s t o m

i s e

d

w a r e

h o u s i n g

s p a c e

I T

S u p p

l y c h a

i n

m a n a g e m e n

t

M o r e r e

t a i l

r e s e a r c

h


40/46

Source: Cushman & Wakefield, Aranca Research

Migration trend towards urban areas(Urban population as share of total) (2011)

Employment opportunities, increased urban amenities andbetter lifestyle opportunities are attracting rural populationtowards cities for better life style every year

In 2011, the urban-rural migration was at 33.0 per cent, upfrom 27.8 per cent in 2010

This could be a major driver for the organised retail sector infuture as the working population would consequentlyincrease

17.3% 18.0% 19.9%

23.3% 25.7%

27.8% 33.0%

1951 1961 1971 1981 1991 2001 2011


41/46


42/46

Source: Bloomberg and Thomson ONE Banker, Aranca Research

Acquirer name Target name Year Deal type

Trent Ltd Landmark Ltd February 2013 Acquisition

Future Venture India Ltd Big Apple (convenience store) September 2012 Acquisition

Peter England Ltd Pantaloons Retail India Ltd September 2012 Acquisition

Pantaloons Retail India Ltd R&R salons May 2012 Private Equity

Phoenix Mills Ltd Classic Housing Projects Pvt Ltd March 2012 Acquisition

Flipkart online services Pvt Ltd eTree Marketing Pvt Ltd February 2012 Acquisition

Gitanjali Gems Ltd Crown Aim, China December 2011 Acquisition

Shoppers Stop Ltd Gateway Multichannel Retail India Ltd June 2011 Acquisition

TTK Prestige Ltd Triveni Bialetti Pvt Ltd September 2011 Acquisition

TV18 On-graph Technologies Pvt Ltd July 2011 Acquisition

Pantaloons Retail India Ltd Home Solutions Retail(India) Ltd August 2010 Acquisition

Shoppers Stop Ltd HyperCITY Retail India Pvt Ltd (hypermarket) June 2010 Acquisition

TPG Capital, Bain Capital Lilliput Kidswear Ltd (branded kidswear retail) April 2010 Private Equity


43/46

Retailers Association of India111/112, Ascot Centre,Next to Hotel Le Royal Meridien, Sahar Road, Sahar,

Andheri (E),Mumbai 400099.Tel: 91- 22 - 28269527 - 28Fax: 91- 22- 28269536E-mail: [email protected]: www.rai.net.in

The Franchising Association of India A-13, Kailash ColonyNew Delhi 110048Tel: 91- 11- 2923 5332Fax: 91- 11- 2923 3145Website: www.fai.co.in


44/46

FDI: Foreign Direct Investment

FMCG: Fast Moving Consumer Goods

FY: Indian Financial Year (April to March)

So FY10 implies April 2009 to March 2010

IT: Information Technology

MoU: Memorandum of Understanding

MT: Million Tonnes

MTPA: Million Tonnes Per Annum

SEZ: Special Economic Zone

USD: US Dollar

Wherever applicable, numbers have been rounded off to the nearest whole number


45/46

Year INR equivalent of one USD

2004-05 44.95

2005-06 44.28

2006-07 45.28

2007-08 40.24

2008-09 45.91

2009-10 47.41

2010-11 45.57

2011-12 47.94

2012-13 54.31

2013-14* 59.23

Exchange rates (Fiscal year)

Year INR equivalent of one USD

2005 45.55

2006 44.34

2007 39.45

2008 49.21

2009 46.76

2010 45.32

2011 45.64

2012 54.69

2013* 57.72

Exchange rates (Calendar year)

Average for the year2013* - from January to October 20132013-14* - from April to October 2013


46/46

India Brand Equity Foundation (IBEF) engaged Aranca to prepare this presentation and the same has been preparedby Aranca in consultation with IBEF.

All rights reserved. All copyright in this presentation and related works is solely and exclusively owned by IBEF. Thesame may not be reproduced, wholly or in part in any material form (including photocopying or storing it in any mediumby electronic means and whether or not transiently or incidentally to some other use of this presentation), modified or inany manner communicated to any third party except with the written approval of IBEF.

This presentation is for information purposes only. While due care has been taken during the compilation of thispresentation to ensure that the information is accurate to the best of Aranca and IBEFs knowledge and belief, thecontent is not to be construed in any manner whatsoever as a substitute for professional advice.

Aranca and IBEF neither recommend nor endorse any specific products or services that may have been mentioned inthis presentation and nor do they assume any liability or responsibility for the outcome of decisions taken as a result ofany reliance placed on this presentation.

Neither Aranca nor IBEF shall be liable for any direct or indirect damages that may arise due to any act or omission onthe part of the user due to any reliance placed or guidance taken from any portion of this presentation.

retail march 2014

Documents