Report Investment Potential in Retail Sector of India

INVESTMENT POTENTIAL IN RETAIL
SECTOR OF INDIA
Prepared For:
Prepared By: ,
IMRB International
February, 2009
PREFACE
Thai-Indian business relations have improved considerably over the past decade.
Thailand and India are close to concluding a Free Trade Agreement (FTA) covering trade
in goods by 2010. The Free Trade Agreement between Thailand and India is expected to
improve trade relations between the two countries further. The FTA covering trade in
goods would lead to long term mutual benefits in trade and investment and the
partnership would be expanded further to cover technology knowledge and expertise
India's primary imports from Thailand are machinery, electronic appliances, textiles,
plastic material, transport equipment, vegetable oil and latex. The major items of imports
under FTA are polycarbonate, cathode-ray tubes, color-TVs, air conditioners and
Aluminum products. Thailand‘s main imports from India are jewelry, gemstones, steel,
pharmaceuticals and ferrous metal ores.
India's trade with Thailand could touch USD 7 billion by 2010-11 propelled by a
doubling in transaction under Free Trade Agreement (FTA). The EHS was implemented
on September 1, 2004, under which tariffs on 82 items were to be phased out by
September 1, 2006 by both the sides.
The trade between Thailand and India is estimated to be US $ 7 billion by 2010-11 from
US $ 2.2 billion in 2005-06.
The total trade of 82 items under Early Harvest Scheme (EHS) of the FTA was increased
by over 140 percent to about US $ 358.63 million in 2005-06 from US $ 149 million in
2003-04. The share of these 82 items in India-Thailand trade increased from 10.34
percent in 2003-04 to 15.68 percent in 2005-06.
Thailand‘s export to India of the identified 82 EHS items was increased from US $ 84.64
million to US $ 275 million during the period from 2003 – 04 to 2005 – 06. During the
same time, India‘s export to Thailand of these items increased from US $ 64.28 million to
US $ 83.03 million during the same period.
INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 2

In 2007, Thailand‘s export for these 82 items was US $ 406.31 million. Due the FTA
between two countries, Thailand is able to manage the trade surplus of US $ 598 in 2007
in bilateral trade between Thailand and India.
With significant potential for growth of business between the two countries, the Ministry
of Commerce, Thailand and Royal Thai Embassy would like to understand the
investment potential in the following two sectors:-
1. Retail in India (with focus on Apparels & Fashion Accessories, Footwear, Food &
Grocery, Furniture & Furnishing, Personal Care, and Consumer Durables as
product verticals)
2. Logistics in India
In order to understand the trade potential across the above categories, the Ministry of
Commerce, Thailand and Royal Thai Embassy has commissioned Business and Industrial
Research Division (BIRD) of IMRB International to avail its research based consultancy
services.
Report for both the product categories are being submitted separately in two different
modules.
The following report ‘Investment Opportunities in Retail Sector of India’ is based on

the study conducted in Retail sector of India.

TABLE OF CONTENT
1. EXECUTIVE SUMMARY................................................................................................................. 8
2. RETAIL SECTOR IN INDIA ...........................................................................................................16
2.1. EMERGENCE OF MODERN (ORGANIZED) RETAIL IN INDIA ..........................................................16
2.2. INDIA: A PREFERRED RETAIL DESTINATION ...............................................................................17
2.3. KEY GROWTH DRIVERS FOR MODERN RETAIL IN INDIA .............................................................18
2.4. SIZE AND GROWTH OF RETAIL IN INDIA ......................................................................................21
2.4.1. Product Category-wise Break-up of Retail Market ...............................................................21

2.4.2. Organized Retail as Part of Total Retail ...............................................................................22
2.4.3. Product Category-wise Break-up of Organized Retail ..........................................................22
2.4.4. Category-wise Penetration of Organized Retail ....................................................................23
2.4.5. Food & Beverage based Servicing Retail in India ................................................................24
3. MODERN RETAIL STORE FORMATS ........................................................................................26
3.1. PREMIUM LIFESTYLE RETAILING ................................................................................................27
3.2. LIFESTYLE RETAILING ................................................................................................................28
3.2.1. Departmental Stores ..............................................................................................................28

3.2.2. Apparel and Fashion Stores ..................................................................................................28
3.3. VALUE RETAILING .......................................................................................................................29
3.3.1. Supermarkets .........................................................................................................................29

3.3.2. Hypermarkets.........................................................................................................................30
3.4. OTHER RETAIL FORMATS ............................................................................................................32
3.4.1. Specialty Stores......................................................................................................................32

3.4.2. Discount Stores/ factory outlets .............................................................................................33
3.4.3. Airport Retailing ....................................................................................................................34
3.4.4. Online, Telephone and Catalogue Buying .............................................................................34
3.4.5. Shopping Malls ......................................................................................................................34
3.4.6. Food Outlets as part of Modern Retail ..................................................................................36
4. CASH AND CARRY STORES .........................................................................................................38
4.1. GLOBAL RETAILERS ENTRY THROUGH CASH & CARRY FORMAT ...............................................38
4.2. DOMESTIC PLAYERS NOT FAR BEHIND .......................................................................................39

5. SUPPLY CHAIN INSIGHTS ...........................................................................................................40
5.1. SUPPLY CHAIN MODEL FOR MODERN RETAIL OUTLETS .............................................................40
5.1.1. Level 1: Product Sourcing .....................................................................................................41

5.1.2. Methods of Procurement........................................................................................................42
5.1.3. Level II: Storage and Distribution .........................................................................................46
5.1.4. Level III: Retail Stores ...........................................................................................................47
5.2. SUPPLY CHAIN FOR FOOD & BEVERAGE SERVICING RETAIL IN INDIA ........................................48
5.2.1. Level I: Suppliers ...................................................................................................................48

5.2.2. Level II: Distribution .............................................................................................................49
5.2.3. Level III: Outlets ....................................................................................................................50
5.3. LOGISTIC FACILITIES FOR RETAIL INDUSTRY IN INDIA ................................................................51
5.3.1. Cost of Logistics in Indian Retail ..........................................................................................52
6. RENT STRUCTURE IN RETAIL ...................................................................................................53
6.1. PREVALENT RENTAL MODELS IN INDIA ......................................................................................53
6.1.1. Fixed Lease Rental Model .....................................................................................................53

6.1.2. Revenue Sharing Model .........................................................................................................53
6.2. MAJOR COMPONENTS OF OCCUPANCY COSTS IN INDIA ..............................................................53
6.3. ANCHOR TENANTS VERSUS VANILLA RETAILERS ........................................................................54
6.4. INCREASE IN LEASE RENTAL .......................................................................................................54
6.5. ECONOMIC SLOWDOWN AND CHANGES IN STRATEGIES OF RETAILERS.......................................55
6.6. EXCESS SUPPLY OF RETAIL SPACE IN PIPELINE ...........................................................................56
6.7. CHANGING RENTAL MODELS ......................................................................................................56
6.8. THE ROAD AHEAD ......................................................................................................................57
7. PROFITABILITY ACROSS VERTICALS ....................................................................................58
7.1. A COMPARISON BETWEEN APPARELS, FOOD & GROCERY AND HOME APPLIANCES ....................58
8. LEADING RETAIL COMPANIES OF INDIA ..............................................................................61
8.1. STRENGTHS AND WEAKNESSES OF KEY ORGANIZED PLAYERS ...................................................62
9. INDIAN RETAIL INDUSTRY ANALYSIS ....................................................................................70
9.1. INDIAN RETAIL MARKET ANALYSIS BASED ON NINE FORCES MODEL ........................................70

9.1.1. Threat of New Entrants (High) ..............................................................................................70
9.1.2. Threat of Substitutes (High)...................................................................................................74
9.1.3. Bargaining Power of Suppliers..............................................................................................74
9.1.4. Bargaining Power of Buyers (High) ......................................................................................76
9.1.5. Competitive Rivalry (Medium)...............................................................................................77
9.1.6. Government (Legal and Political Shifts) ...............................................................................78
9.1.7. Social Shifts ...........................................................................................................................79
9.1.8. Technological Shifts ..............................................................................................................80
9.1.9. Economic/ International Shifts ..............................................................................................80
9.2. MAJOR CONSTRAINTS FOR MODERN RETAIL IN INDIA ................................................................81
9.3. EMERGING TRENDS IN THE INDIAN RETAIL INDUSTRY ................................................................85
9.4. CRITICAL SUCCESS FACTORS IN RETAIL .....................................................................................89
10. RETAILERS’ PERCEPTION ABOUT THAI IMPORTS........................................................92
10.1. APPARELS ...................................................................................................................................92
10.2. PLASTIC GOODS ..........................................................................................................................92
10.3. HOME DÉCOR ITEMS & ELECTRIC GOODS ..................................................................................93
10.4. FURNITURE..................................................................................................................................93
10.5. FOOTWEAR ..................................................................................................................................94
10.6. PROCESSED FOOD .......................................................................................................................94
10.7. PERSONAL CARE ITEMS...............................................................................................................96
10.8. OTHER FACTORS RELATED TO THAILAND....................................................................................96
11. POSSIBLE WAYS FOR ENTRY OF FOREIGN RETAILERS IN INDIA ............................97
11.1. MANUFACTURING AND SOURCING...............................................................................................97
11.2. CASH-AND-CARRY OPERATION....................................................................................................97
11.3. FRANCHISING ..............................................................................................................................97
11.4. TEST MARKETING .......................................................................................................................98
12. CONCLUSIONS AND RECOMMENDATIONS ......................................................................99
12.1. LEVEL OF ATTRACTIVENESS VERSUS SUITABILITY FOR THAI INVESTORS ....................................99
12.2. PROPOSED ENTRY STRATEGY ...................................................................................................101
12.3. PHASE I .....................................................................................................................................102

12.3.1. As Suppliers ....................................................................................................................102
12.3.2. Look Out for Joint Ventures/ Franchisees/ 3 PL.............................................................103
12.4. PHASE II ....................................................................................................................................104
12.4.1. Single Brand Outlets .......................................................................................................105

12.4.2. Cash and Carry Stores ....................................................................................................108
12.4.3. Test Marketing ................................................................................................................109
12.5. PHASE III...................................................................................................................................110
12.5.1. Establishing Manufacturing Base in Select Product Categories ....................................111

12.5.2. Entering Theme / Specialty Malls ...................................................................................111
12.6. RECOMMENDATIONS ON FOCUS WITHIN EACH IDENTIFIED PRODUCT CATEGORY ....................112
1. ANNEXURE 1 ..................................................................................................................................113
1.1. COMPANY PROFILES IN RETAIL .................................................................................................113
2. ANNEXURE II .................................................................................................................................130
2.1. CITY-WISE RENTAL TRENDS .....................................................................................................130
3. REFERENCES .................................................................................................................................137

1. EXECUTIVE SUMMARY
1.1 Retail Sector in India
Retail business contributes around 11 percent of country‘s GDP and is the second largest
sector in India, only after agriculture. Retailing as a sector is witnessing revolution in
India. Modern retail has entered India as seen in sprawling shopping centres, multi-
storeyed malls and huge complexes that offer shopping, entertainment and food all under
one roof. Though at present, around 94-95% of India‘s retail market is unorganized, as
compared to unorganized retail, organized retail is experiencing much higher growth and
throwing open opportunities for new entrants to come and grow.
 India: A Preferred Retail Destination
For three years in a row (2005-07), India has been ranked as the top retail destination
globally by a study from A T Kearney that measured retail investment attractiveness for
30 emerging markets in the world.
 Key Growth Drivers for Modern Retail in India:
Higher disposable income coupled with favourable demographic changes (Increase in

working women population, rise in nuclear family, largest young population and higher
growth in urban and sub-urban population), changes in consumer needs, attitudes and
behaviour, and increased credit friendliness are some of the key growth drivers for
modern retail in India.
 Size and Growth of Retail in India
Retail sales in India have grown from $US 230 billion in 2003-04 to $US 330 billion in
2007-08. Organized retail at present accounts for only around 5-6% of the total retailing
in India. However, growth experienced by organized retail (more than 35% against an
overall retail growth of around 11% in 2006-07) is much higher as compared to
unorganized retail within India. The graphs below depict the product category-wise
break-up of total and organized retail.

THE INDIAN RETAIL PIE (INDIA) 2007- 08 THE ORGANIZED RETAIL PIE (INDIA) 2007-08
( M ar ket Siz e: $U S 19 .4 2 b iliio n)
( M a r k e t S i z e : $ US 3 3 0 bi l l i on)
Books, Music &
Ent ert ainment
Books, Music & Out -of -Home Gif t s Ent ert ainment
3.4%
Gif t s Foot wear Food Services 2.8% 3.1%
Jwellery Wat ches
1.2% 1.2% 7.3%
5.2% 0.3%
Out -of -Home
Healt h & Beaut y Food & Grocery
Food Services Clot hing,
Services, 0.3% 11.5%
5.4% 9.9%
Pharma Clot hing,
3.7% 38.1%
Furnit ure &
Consumer
Ut ensils
Durables Jwellery
6.4%
4.3% 2.9%
Food & Mobile, &
Gr o c e r y Mobile& Services Foot wear
59.5% Furnit ure & Services 3.5% Consumer Wat ches
9.9%
Ut ensils 2.0% Durables 2.7%
3.4% 9.1% Pharma Beaut y Services
2.0% 0.8%
Source: F &R Research
Coming to the category-wise share of organized retail out of total retail, timewear and
footwear are the categories with maximum organized retail (almost 50% of total retail in
each category). ‗Clothing & Textile‘ stands third with more than 20% of the trade in
organized retail.
1.2 Modern Retail Store Formats
Indian Retailers are experimenting with various modern retail formats customized to
customer categories and product mix. Following is a snapshot of various formats that
exist in India at present.
Modern Retail Store Formats
Premium Lifestyle Lifestyle based Value based Specialty Other Retail Destination
based Retailing Retailing Retailing Stores Formats Malls
Key product Departmental Supermarket Discount stores

categories with Stores
luxury brands:
Airport retailing
 Apparel Apparel and Hypermarket
 Jwellery Fashion Stores
 Time wear Online/ telephonic &
 Accessories catalogue buying
 Furniture
Food & grocery Clothing Footwear Jwellery, Furniture &

Accessories Furnishing
Other Retail
Formats
Books & Stationery Pharmaceutical
Electrical & Beauty &
Electronic Health Care
Music & Equipments
Entertainment

This section discusses in details each of the above mentioned formats, average store
space under each format, preferred store locations and key players and their principal
fascia operating under these formats.
 Cash and Carry Stores

As Government of India has allowed 100% FDI in cash and carry format, many foreign
companies are choosing to enter the market through this format. Amidst the increasing
interest from foreign players, domestic retailers have also been entering this format in
India.
1.3 Supply Chain of Modern Retail in India
Distribution Centre (Owned by

Company‘s Franchisee or its
Logistic Partner) Franchised Stores
Companies Manufacturing Branded

Products Company-owned
Company‘s In-house
Inventory outlets
Local Manufacturers supplying to a

single retail company for selling under
private labels Departmental stores
Distribution Centres or Warehouses

owned by Retail Company or by its Specialty Stores
Local Manufacturers supplying to more
Logistic Partners
than one retailing company for selling
under private labels
Hypermarket
Importer / Retail Supermarket

Products from other
company‘ Import
Partners
countries  These may be central or
regional distribution centres Other formats
Retail Company‘s own depending upon the structure
procurement office in adopted by the retailer
other countries
 Retailer may have common or
separate warehousing
arrange-ments for its different
retail formats
Level I: Sourcing Level II: Storage Level III: Retail Stores

& Distribution

The section discusses in details each of the three levels of supply chain alongwith details
on standard methods of procurement and margins enjoyed in case of select product
categories.
 Logistic facilities for retail industry in India

While some of the modern retailers in India have been outsourcing their logistics needs to
specialist service providers, many large players with national footprint have opted to
develop in-house logistic systems. According to industry sources, level of satisfaction of
retailers with their logistic partners is mostly low in India and that speaks of the poor
level of logistic services.
1.4 Rent Structure in Retail
Two types of rental models are prevalent in India – fixed lease rental model and revenue
sharing model. Though mall developers have been chasing for fixed lease rentals, of late
the retailers are bargaining hard for revenue sharing rental model. Given the increasing
competition in retail industry, high lease rentals and the sudden economic slowdown,
many retailers have changed their business strategies to mitigate the negative impacts and
consolidate their position. Slump in real estate sector and excess supply of mall space in
pipeline has also forced real estate developers to either cut down on rentals or adopt
‗revenue sharing based rental‘ or any other rental models. The diagram below depicts
the rental models that are likely to be used more frequently in Indian retail sector in
future. Revenue Sharing Model
 A minimum guarantee on rental
and/or percentage share of the
revenue whichever is higher
 E.g: Inorbit mall in Mumbai
‗Select City Walk‘ mall in Delhi
Zero Rent System Franchisee Route

 Retailer exempt from paying
 ‗License‘ granted by a company
rental charges during the initial The Road
years of operation. Ahead… to a person or group allowing
them to use/ sell certain products
 E.g.: Pantaloon is learnt to have
signed such an agreement with a  E.g: Trent in tier II cities
developer.
Sub-letting
 Selling of space by retailers to
other brands (mostly happens as
part of Concessionaire model)
 E.g.: Shopper‘s Stop sub-lets
some space of its store to brands
like FCUK and CK.

1.5 Profitability across Verticals
A comparison between Apparels, Food & Grocery and Home Appliances concludes that
apparels enjoy maximum gross margins, followed by food & grocery and home
appliances. Key reasons for higher gross margins in case of Apparels among the three
verticals are: Scope for higher share of private labels in case of Apparels, Cost of
developing & training manpower and wage inflation in case of Home Appliances higher
as compared to Apparels and Food & Grocery, Smaller ticket size in case of food &
grocery, and Store space largest in case of Home Appliances followed by Apparels and
then Food & Grocery
1.6 Leading Retail Companies of India
Pantaloon Retail is at present the largest retail company in terms of turnover, whereas
Vishal Retail leads in terms of presence and penetration across in India. Reliance and
Aditya Birla have forayed into the retail market only in 2006, however, they are poised to
grow big and expand aggressively. Bharti-Walmart is expected to set new standards for
supply chain and back end logistics management and has aggressive growth plans in cash
and carry format. Subhiksha is India's largest supermarket, pharmacy and telecom retail
chain. In terms of turnover, Subhiksha is only next to Pantaloon Retail (figures from
2007-08). Shoppers‘ Stop and Lifestyle are leading in Departmental store format.
1.7 Indian Retail Industry Analysis
1.7.1 Indian Retail Market Analysis based on Nine Forces Model
 Threat of New Entrants is high. Retailing doesn‘t require huge capital investments
into owning machineries and other assets; required technology can be obtained by any
new entrant; Specialist Knowledge requirement is addressable through right
recruitment, training and technology support; New entrants can differentiate
themselves in multiple ways; Distribution Channel are largely standardized and
replicable by new entrants; However, for a foreign player, there are FDI related
restrictions.

 Threat of substitutes is high. Neighbourhood mom & pop stores, and other outlets
as part of unorganized retail, all are close substitutes of various Modern retail
formats. Cost of substitution is also not high in this case.
 Bargaining power of real estate suppliers can be perceived as high to medium.
Recent real estate slowdown has given modern retailers power to bargain for lower
rentals or adoption of alternate lease models (e.g. revenue sharing). Bargaining power
of vendors varies from product to product and depends hugely upon whether a
product is branded or unbranded and whether the relationship with supplier is
formalized or not.
 Bargaining power of buyers is high in case of modern retail largely because of
increased level of awareness among buyers on brands, quality, pricing etc., high price
sensitivity among Indian buyers and availability of close substitute in form of
unorganized retail.
 Competitive rivalry can be perceived as medium because of medium to low
industry concentration ratio, concentration of players in few pockets, presence of
untapped market with room for new players to enter and grow, and low exit barriers
 Government of India allows FDI in retail under two categories: Up to 100 per cent in
cash-and-carry (wholesale) retail and Up to 51 per cent in single brand retail.
Government regulations related to licenses, permits and taxation require further
simplification. Please refer to the section for further details on social, technological
and international/ economic shifts.
1.7.2 Major Constraints for Modern Retail in India
Poor physical infrastructure coupled with lack of 3 PL players, Absence of cold chain and
proper storage, High lease rentals, Inadequate Human Resources, and Stringent
Government Regulations are some of the key constraints faced by modern retail in India.
1.7.3 Emerging Trends in the Indian Retail Industry
Key emerging trends in the Indian retail industry are aggressive future plans of leading
retailers with higher focus on value retailing, more cases of market entry through

inorganic route, tie-up with global retailers, focus on tier II & lower cities, increased
share of goods under private labels and advent of self service outlets.
1.7.4 Critical Success Factors in Retail
Three most critical success factors for modern retail in India are: Location, Merchandize,
and Knowledge & Information. Knowledge & Information stands for Knowledge about
customers‘ tastes & preferences and Information is with regard to Efficient Supply Chain
and Inventory Management through Proper Information System.
1.8 Retailers’ Perception about Thai Imports
Apparels, plastic goods including kids‘ toys, home décor items, furniture, footwears, and
personal care items are some of the product categories in which Thai imports are being
preferred by retailers in India
1.9 Possible ways for entry of Foreign Retailers in India
Franchising, Cash and Carry Format, Test Marketing, and Manufacturing & Sourcing are
the possible routes through which International players can enter India
1.10 Conclusions and Recommendations
Among all product categories, Apparel comes out as the most attractive from Thai
Investors‘ point of view. Furniture, Footwear, Personal Care and Plasticware are the other
high potential categories for Thailand.
 Recommendations on Focus within Each Identified Product Category
Product Categories Category-wise Focus

 All types of denim based apparels for men, women and kids; Other fashion and casual
Apparel
apparels for men, women and kids
 Female footwear (specially the stiletto heel sandals); Thai manufacturers need to keep higher
Footwear
quality standards for female footwears
Personal Care  Various available range of products (skin care, cosmetics & health care products)
Plasticware  All types of plasticwares (including plastic containers)
Furniture  Rubber-wood/ Parawood based furniture

Home Décor  Artificial flowers, vases, lamp shades, electric lamps, paintings, wall hangings etc.
 Sauces, Ketch-ups, Spices based pastes, and few ready to cook items (preferably vegetarian);
Supply of fresh items such as lettuce leaf
 Thai manufacturers need to change the product packaging in following ways: no shrimps or
Processed & Fresh Food
fishes drawn on the packets; cooking instructions and other details to be in clear font; Green
and red labels standing for vegetarian, and non-vegetarian items respectively to be put
clearly on the packets
Food & Beverage Outlets  Fast food Outlets and Coffee Chains
 Proposed Entry Strategy : Thai Entrepreneurs should plan to invest in Indian Retail
Market in three phases that are briefed below:
Phase I: 1st Year

During the first year, it is being proposed that Thai investors explore the business
opportunities as suppliers to Indian retailers. In the meantime they should be at constant
look out for suitable business partners in India for opening of single brand outlets in
various product categories.
Phase II: 2nd and 3rd Year

Once the partner companies have been identified and the formal agreements have
happened, the branded products manufacturers of Thailand should then immediately
focus on opening of single brand outlets. Also, some of the leading Thai retailers,
preferably with past experience in the same categories, should plan to start Cash and
Carry business in India. In case of a few brands within select product categories, such
as Personal Care Items, Consumer Durables, and Processed food, Thai Manufacturers
may plan to enter India through the route of Test Marketing.
Phase III: 4th Year onwards

To stay profitable in long term, establishing local manufacturing base, rather than
continuing to import, is a much desired step for select product categories. Also, this
would be the time to decide about putting up manufacturing facilities for the products that
were Test Marketed during Phase II. By the time phase III is entered, Theme malls
would have grown big on popularity. Thai Investors may plan to develop Thai Specialty
Malls.

2. RETAIL SECTOR IN INDIA
With a population fast approaching 1.2 billion and an economy that is likely to double in
size by 2015, India seems destined to become one of the largest consumer markets in the
world over the next decade.
Retailing as a sector is witnessing revolution in India. Retail business contributes around

11 percent of country‘s GDP. From employment perspective, retail is already the second
largest sector in India, only behind agriculture. India's retail market is expected to grow
tremendously in next few years. According to AT Kearney, The Windows of Opportunity
shows that Modern Retailing in India was at opening stage in 1995, and has been in
peaking stage in 2006.
Window of Opportunity Analysis (based on GRDI rankings for 1995-2006)
Source: A T Kearney
2.1. Emergence of Modern (Organized) Retail in India
Retailing in India is gradually inching its way to becoming the next boom industry.
Modern retail has entered India as seen in sprawling shopping centres, multi-storeyed
malls and huge complexes that offer shopping, entertainment and food all under one roof.
The whole concept of shopping has altered in terms of format and consumer buying
behavior, ushering in a revolution in shopping. The Indian retailing sector is at an

inflexion point where the growth of organised retail and growth in the consumption by
Indians is going to adopt a higher growth trajectory.
Though at present, around 94-95% of India‘s retail market is unorganized, as compared

to unorganized retail, organized retail is experiencing much higher growth and throwing
open opportunities for new entrants to come and grow.
2.2. India: A Preferred Retail Destination
With markets in most of the developed countries reaching the stage of saturation, India
has emerged as one of the most preferred destination for global retailers. This is evident
from the number of retailers across the globe that have already forayed into India‘s retail
market or planning to do so soon.
For three years in a row (2005-07), India has been ranked as the top retail destination
globally, ahead of Russia and China by a study that measured retail investment
attractiveness for 30 emerging markets in the world.
2007 ranking Country 2006 ranking

1 India 1
2 Russia 2
3 China 5
4 Vietnam 3
5 Ukraine 4
6 Chile 6
7 Latvia 7
8 Malaysia 14
Source: A.T. Kearney, June, 2007
The same study, however, also identifies few key issues that stand in the way of India‘s
retail industry reaching its full potential. These issues have been discussed under ‗Major
Constraints for Modern Retail in India‘.

2.3. Key Growth Drivers for Modern Retail in India
2.3.1 Higher Disposable Income and Economic Prosperity
Disposable income of Indian consumers has increased steadily. The proportion of major
consuming class (with income above Rs 90,000 per annum) is expected to reach 48% by
2009-10 from 20% in 1995-96.
CHANGING INCOME DISTRIBUTION

(Incom e figures in '000 per annum at 2001-02 prices, households in '000
num bers)
10000+
5001-10000
100%
2001-5000
1001-2000
501-1000
201-500
91-200
0% < 90
1995-96 2001-02 2005-06 2009-10*
Source: NCAER
2.3.2 Demographic Changes
 Higher Level of Working Women

According to census 2001, working women population has increased to 26% in 2001 as
compared to 22% in 1991. This would lead to a higher retail spending as the buying
behaviour of working women differs from that of housewives because of low availability
of time. Also, working women‘ propensity for spending is higher by 1.3 times as
compared to Indian housewives.
 Rise in Nuclear Family

The per capita consumption increases in case of a nuclear family. During the last few
years in India, nuclear family as a percentage of total household population has increased.
The average household size has reduced to 5.36 in 2001 from 5.57 in 1991 and is

expected to decline further to 5.02 by 2011. This would further increase the consumption
and in turn, the retail industry.
 Baby Boomer Effect

India has the lowest median age of 24 as compared to developed countries like USA, UK,
Japan etc. The composition of the Indian population is shifting towards the age group of
20-49 i.e. the working population with purchasing power. Approximately 60% of the
Indian population is below 30 years of age. Thus, India has the largest ‗young‘ population
in terms of sheer size and this young segment is the major driver of consumption as they
have the ability (disposable income) and willingness to spend.
 Higher Growth in Urban and Sub-Urban Population

Over the last 10 years (1990-2000), urbanization has increased at a rate of 2.7 percent.
Around urban centres, huge sub-urban agglomerates are developing and expanding at a
huge scale. This trend is expected to continue and urbanization is likely to grow at 2.4
percent between 2000 and 2015. Over the next 10 years, growth in organized retailing is
likely to be concentrated in urban and semi-urban areas.
2.3.3 Changes in Consumer Needs, Attitudes and Behaviour
The growth of modern retail is linked to consumer needs, attitudes and behaviour. Rising
income levels, education and global exposure have contributed to the evolution of the
Indian middle class. As a result, purchasing and shopping habits have been inculcated
and are increasing day by day.
 Today, Indians are willing to try new things and look different, which has increased
spending on health and beauty products apart from apparels, food and grocery items.
 Also, in the last 4-5 years, Indian markets have witnessed a strong shift towards
branded products.

2.3.4 Increased Credit Friendliness
The use of plastic money (credit and debit cards) has increased significantly in the last 3-
4 years. In fact the ease of payments (ability to spend without cash) due to the use of
credit and debit cards, has also led to an increase in total spending on shopping and eating
out. With the acceptance of and the increase in the number of electronic data converter
machines installed in retailing outlets, credit and debit cards will provide further fillip to
organised retail.

2.4. Size and Growth of Retail in India
Indian Retail Market has experienced enormous growth during the last few years. Retail
sales in India have grown from $US 230 billion in 2003-04 to $US 330 billion in 2007-
08.
2.4.1. Product Category-wise Break-up of Retail Market

Out of the total market size in retail, Food & Grocery is the dominant category (valued at
$US 196.47 billion in 2007-08) followed by Clothing, Textile & Fashion Accessories
(valued at $US 32.57 billion in 2007-08).
THE INDIAN RETAIL PIE (INDIA) 2007- 08

(Market Size: $ US 330 billion)
Entertainment
3.4% Clo thing, Textile & Fashio n
B o o ks, M usic & Gifts A ccesso ries
1.2% 9.9%
Out-o f-Ho me Fo o d Jwellery
Watches Fo o twear
(Catering) Services 5.2%
0.3% 1.2%
5.4%
Health & B eauty Services
0.3%
P harmaceuticals
3.7%
Co nsumer Durables &
Ho me A ppliances
4.3%
M o bile, A ccesso ries &
Services
2.0%
Food & Grocery
59.5%
Furniture, Furnishings &
Utensils
3.4%
Source: Images F & R Research

2.4.2. Organized Retail as Part of Total Retail
Organized retail happens to be a very small part of total retail market in India. At present,
it accounts for only around 5-6% of the
total retailing in India. However, growth GROWTH OF TOTAL AND ORGANIZED
RETAIL MARKET IN INDIA
experienced by organized retail (more than 500 40
(Unorganized + Organized)
35% against an overall retail growth of 330
(in $ US billion)
Organized Retail
298
(in $US billion)

Retail Market
231 256
around 11% in 2006-07) is much higher as 14
19
7 9
compared to unorganized retail within
0 0
India. Owing to high growth rate,
2004 2005 2006 2007
organized retailing has finally emerged

from the shadows of unorganized retailing
and is contributing significantly to the growth of Indian retail sector.
2.4.3. Product Category-wise Break-up of Organized Retail

In the organized retail segment, the category-wise shares are very different from the
THE ORGANIZED RETAIL PIE (INDIA) 2007-08

(Market Size: $US 19.42 biliion)
B o o k s , M us ic & G if t s E nt e rt a inm e nt
2 .8 % 3 .1%
O ut - o f - H o m e F o o d
( C a t e ring) S e rv ic e s
7 .3 %
F o o d & G ro c e ry C lo t hing, T e xt ile &

11.5 % F a s hio n A c c e s s o rie s
3 8 .1%
F urnit ure ,
F urnis hings &
Ut e ns ils
6 .4 %
M o bile , A c c e s s o rie s
& S e rv ic e s
3 .5 %
F o o t we a r
C o ns um e r D ura ble s & 9 .9 % J we lle ry
H o m e A pplia nc e s 2 .9 %
9 .1% Wa t c he s
P ha rm a c e ut ic a ls 2 .7 %
2 .0 % H e a lt h & B e a ut y
S e rv ic e s
0 .8 %

overall retail picture. Clothing, Textile & Fashion Accessories is the largest category
followed by Food & Grocery. Footwear and Consumer Durables happen to be the third
and fourth largest categories followed by Consumer Durables in organized retail at
present.
2.4.4. Category-wise Penetration of Organized Retail

Coming to the category-wise share of organized retail out of total retail, timewear and
footwear are the categories with maximum organized retail (almost 50% of total retail in
each category). ‗Clothing & Textile‘ stands third with more than 20% of the trade in
organized retail.
CATEGORY-WISE SHARE OF ORGANIZED RETAIL OUT OF TOTAL RETAIL IN

INDIA
100%
2007 2006
2005 2004
50%
40%
30%
20%
10%
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2.4.5. Food & Beverage based Servicing Retail in India
The Indian F&B services sector is estimated to be worth US $ 15.56 billion in 2007, out
of which about US $ 1.28 billion is
SIZE OF F & B (SERVICING) RETAIL
accounted for by the organized sector. (in US $ billion)
This is roughly 8.2 percent of the 18 3
market being organised as compared to
Organized Segment
Total Market
just 6.9 percent of the market being
organized in the previous year.
India currently has more than 1000 fast

0 0
food restaurants and coffee joints as 2004 2005 2006 2007
part of modern retail and there exists Total F&B (Servicing) Retail
Organized F&B (Servicing) Retail
huge potential for more number of
Source: Business Standard
similar outlets to come in different
parts and different cities of India. All key players have major expansion plans in the
coming few years. Organized food outlets are expected to grow at the rate of 20 - 25%
even under the present situation of economic slowdown.
 Mc Donald‘s has 160 restaurants in India at present (in 2008). With an aim to
achieve 30-35 per growth per annum, the company plans to add 40-60 outlets each
year nationally and also intends to invest Rs 400 Crores over the next three years
(that is 2009-2011).
 Cafe Coffee Day, part of the Bangalore-based Amalgamated Bean Coffee Trading
Company Limited (ABCTCL), is planning to spend Rs 120-150 crore for expansion
during next year to take its number of cafes to around 1,000 from the current 700.
Cafe Coffee day is also working towards creating more formats like selling coffees
through dine-ins (for lunch and dinner) and coffee pubs for youths to hang out in
strategic locations. (Source: Business Standard, Dec 23, 2008)

 Domino‘s intends to increase its outlets to 250 by March 2009 from the present
number of 230. The company has announced an investment of Rs220-230 crore in
India over the next three years for expanding its retail fast-food chain and
manufacturing capacities. (Company Sources, 17 Nov, 2008)
 Over the past 10 years, Yum! has become the largest and fastest growing restaurant
company in India. As of the first quarter 2008 earnings, the company had 140 Pizza
Huts in 35 cities and 33 KFCs in nine cities. Yum plans to scale up Pizza Hut to 175
by 2010 and also add 15-20 new restaurants every year. (Source: Business Wire)

3. MODERN RETAIL STORE FORMATS
Indian Retailers are experimenting with various modern retail formats customized to
customer categories and product mix.
Modern Retail Store Formats
Premium Lifestyle based Value based Specialty Other Retail Destination

Lifestyle based Retailing Retailing Stores Formats Malls
Retailing
Discount
Departmental stores
Stores Supermarket
Airport
Apparel and Hypermarket retailing
Fashion
Stores Online/
Key product telephonic
categories with & catalogue
luxury brands: buying
 Apparel
 Jwellery
 Timewear
Food & Clothing Footwear Jwellery, Furniture &
 Accessories
grocery Watches/ Furnishing
 Furniture
Accessories Other Retail
Formats
Books, Magazine Electrical & Electronic Beauty & Health

& Stationery Equipments Care
Pharmaceutical
Music & Entertainment

Following section deals in detail with these broad categories and sub-categories within
them:
3.1. Premium Lifestyle Retailing
The premium lifestyle retailing caters to the affluent by providing them the high-end
luxury brands/ services. Under premium lifestyle based retailing, key product categories
are accessories, electronics, apparel, Jwellery and Furniture. The brands in this category
have a unique appeal and touch upon psychological needs such as esteem, status and
pride in owning expensive items.
Given the constant rise in affluence with the GDP growth and boom in capital markets in
the last few years, many retailers are looking at tapping this segment. However, main
challenges for the sustenance of these luxury brands are high import duty structures and
lack of appropriate real estate.
Opening up of FDI up to 51 percent in single brand retailing coupled with the boom in
luxury retailing has led international luxury brands such as Loius Vitton, Chanel, Ralph
Lauren, Armani, Dolce and Gabbana to enter the country and the already present brands
such as Gucci, Tommy Hilfiger and Hugo Boss to expand their operations
 Average size of retail outlets in this category ranges between 20,000 sq ft & 75,000
sq ft
 Major concentration of Premium Lifestyle based Retail outlets are in some select
locations of the top 4-5 cities of India such as South Mumbai, South Delhi, Chennai
and Bangalore
S. No. Verticals Luxury Brands
Gucci, Calvin Klein, La Perla, Jimmy Choo, Fcuk, Nine West, Promod,
1 Clothing
Crocodile, Daks, Saville Row, Trussardi, Gas and S Oliver
2 Jwellery Tiffany, Cartier, Zales and Harry Winston
3 Watches Seiko, Fendi, Rado, Omega, Breguet, Christian Dior, Tag Heuer, Corum
4 Furniture Baker and Henredon, Bernhardt and McGuire

3.2. Lifestyle Retailing
Higher disposable income, increased level of awareness, international exposure, and

higher aspiration, all this has influenced the consumption pattern of the Indian
consumers. The Upper, Upper Middle and Middle class Indian customers are willing to
pay more for a brand or better product that keeps him/her up-to-date and in style. Major
growth drivers for Lifestyle retailing are: rising lifestyle aspirations, increasing
urbanization and changing mindset of Indian consumers
Two popular formats under this category are: Departmental stores and Apparel and
Fashion stores
3.2.1. Departmental Stores

Departmental stores are large stores having a wide variety of products, organized into
different departments such as clothing, houseware, furniture, appliances, toys, accessories
and cosmetics, among others. They offer value in terms of being a one-stop shop with
different brands in each category, catering to varied consumer needs. These stores target
primarily the SEC A, where the ticket size is larger in spite of a footfall lower than other
store types.
Major Players
Pantaloon, Shoppers‘ Stop, Lifestyle (Landmark Group), Ebony, Indiabulls Retail (Piramyd)
3.2.2. Apparel and Fashion Stores

These are stores with prime focus on apparel and will a small percentage of their mix
being fashion accessories, trinkets and home décor items. These may be multi-brand
stores or exclusive showrooms.
 Average size of apparel and fashion stores in India is 20,000 sq ft

 These stores are targeted primarily at high end consumers, primarily SEC A & B

Major Players
Pantaloon, Lifestyle (Max retail), Shoppers‘‘ stop, Westside, Globus, Provogue, Raymonds,
Madura Garments, Arvind brands, Guess, Fab India, and Koutons
The apparel segment, which is fairly organized, is profitable in comparison to other

product segments. This segment sees the presence of more international players than
most other retail segments.
3.3. Value retailing

Value retailing covers stores offering lower prices, better variety and a convenient and
improved shopping experience. It is based on the concepts of ‗Value for Money‘ and
‗Ways to Convenient Shopping‘.
The popular formats under this category are: Supermarkets and Hypermarkets
3.3.1. Supermarkets
A supermarket is a self-service one stop shopping store offering a wide variety of food
and household merchandise, organized into sections. It is larger in size and has a wider
selection than a traditional grocery store but is smaller than a hypermarket or superstore.
Supermarkets primarily cater to nearby residential areas and therefore throw a direct
competition to neighbourhood grocery stores and fresh fruits & vegetables retail mandis.
The basic appeal of supermarkets is the availability of broad selection of goods of
multiple brands as well as store‘s private labels under a single roof at relatively low
prices (possible on account of ‘Economy of Scale’ and ‘Efficient Warehousing and
Merchandizing’). Many of the superstores have discount and promotional offers on
various products at different points of time in a year. The concept of ‗Value retailing‘ is
catching up fast among middle class urban families.
 Average size of supermarkets ranges from 3,000 to 10,000 sq ft and in some cases it
is upto 25,000 sq ft as well

 Supermarkets of various Retail Companies are now present in many pockets of top
6-7 cities of India catering to the daily requirements of nearby residential areas. There
is an increasing focus on opening such outlets in Tier II cities (such as Ludhiana,
Patna, and Chandigarh etc.)
Key Players at National Level
Food Bazaar (Future Group), Reliance Fresh (Reliance), More (Aditya Birla Retail), Spencer
-Fresh, Daily and Super (RPG Group), Subhiksha , Indiabulls‘ Mart and Indiabulls‘
Megastore (Piramyd retail)
Modern Retail Players with presence in some specific regions and planning to grow big
Spinach (including Sabka Bazaar), Big Apple, Nilgiris, Marginfree, MK Retail, Namdhari‘s
Fresh, Easyday
3.3.2. Hypermarkets
Hypermarket is a large outlet which combines the format of a supermarket and a
department store. The result is a very large retail facility with an enormous range of
products catering to a spectrum of segments such as food and grocery, FMCG, apparel &
accessories, consumer durables, furniture & furnishing, entertainment & leisure, books
& stationery and other household items. Generally, they are located in the outskirts of
cities or as anchors in shopping malls. Hypermarkets offer lot of discount and
promotional offers to promote sales.
Margins depend on the product mix, volumes and supply chain management. A higher
share of food and grocery would mean lower margins. On the other hand, apparel and
furniture could increase margins.
Hypermarkets are becoming popular among consumers because products are available at
prices lower by 5% to upto 50% than the regular market price. Consumers are fine
traveling little far to shop in hypermarkets because of the price advantage they get.
 Average size of hypermarkets ranges from 50,000 to 70,000 sq ft or more. Retail

outlets prefer to have their hypermarkets on one floor. However, in few cases the
space might be split into two or more floors as well.

 There is an increasing focus on opening hypermarkets in Tier II cities. Retail
companies like Vishal Megamart and Big Bazaar are already operating their
hypermarkets in various tier II cities in India. Most of the Retail Outlets that are
present as supermarkets are now foraying into hypermarket format as well.
Key Players at National Level

Big Bazaar (Future Group), Reliance Hypermarket (Reliance), Spencer -Hyper (RPG Group), Star
Bazaar (Trent – Retail Arm of Tata) Subhiksha , Indiabulls‘ Mart & Megastore (Piramyd retail)
Business Break up of Big Bazaar (Pantaloon Retail) Break up of General Merchandise

(Pantaloon Retail)
G e ne ra l
M e rc ha ndis e
16 % F M C G_F o o d
13 % F o o t we a r,
16 %
Lugga ge &
F M C G _ N o n- O t he r
C lo t hing F o o d B a za a r fo o d P la s t ic It e m s , 4 2 %
30% 40% 12 % It e m s ,
17 %
S t a ple s Ut e ns ils
F ruit s &
12 % & Steel
V e ge t a ble s
2% It e m s , 2 5 %
E le c t ro nic s ,
F urnit ure , Liv e Kit c he n
F urnis hing & 1%
O t he rs
14 %
Business break up of Aditya Retail in Staples Business break up of Vishalmart

Category
Spices & Dry Fruits, O t he rs , 1%
12%
Cereals, 30% FM CG
Sugar & Salt, 8% 22%
A ppa re l
59%
N o n- a ppa re l
Edible Oil, 30% 18 %
Pulses, 20%
Source: Primary Data

3.4. Other Retail Formats
3.4.1. Specialty Stores

Specialty stores are category specific stores and are meant to cater to some specific needs
of consumers. A specialty store offers different brands of any specified category under
one roof. Specialty store can be dedicated to any of the following categories – Food &
grocery, Apparel, Footwear, Jwellery & Time wear & related accessories, Furniture &
Furnishing, Electrical & Electronic Equipments, Books & Stationery, Personal Care
(Beauty & Health Care), Consumer Durables (including home appliances),
Pharmaceuticals, Entertainment, Mobile Handsets & Accessories & Services, and
Others.
 Average space for a Specialty Store ranges between 8,000 – 10,000 sq ft
Verticals Key Players and their Principal Fascia

 Pantaloon (Brew bar, Café Bollywood, Chamosa)
Food & Grocery
 Shoppers‘ Stop (Desi Café, Brio)
 Pantaloon (All, Brand Factory, Fashion Station, Top 10)
Clothing  Shoppers‘ Stop (Mother Care)
 Reliance Retail (Reliance Trendz)
 Pantaloon (Shoe Factory)
Footwear
 Reliance Retail(Reliance Footprint)
Jwellery & Watches/  Pantaloon (Blue Sky, Navaras)
Accessories  Shoppers‘ Stop (Arcelia)
 Pantaloon (Collection-i, Furniture Bazaar, Home Town)
Furniture & Furnishing
 Shoppers‘ Stop (Home Stop)
 Pantaloon (Electronics bazaar, e-zone, Got It)
Electrical & Electronic  Tata Trent (Croma)
Equipments  Reliance Retail (Reliance Digital)
 Videocon (Next)
Books, Magazine &  Pantaloon (Depot)

Stationery  Shoppers‘ Stop (Crossword)
 Pantaloon (Health Village, Star Sitara, Tulsi, Turmeric)
Personal Care (Beauty &
 Shoppers‘ Stop (MAC Cosmetics)
Health Care)
 Reliance Retail (Reliance Wellness)
 Pantaloon (Bowling Co., F123, Sports Bar)
Music & Entertainment  Shoppers‘ Stop (Time Zone)
 Videocon (Planet M)
 Pantaloon (Gen M, M Bazaar, M-port)
Mobile Handsets,  Spencer‘s Retail (RPG‘s Cellucom)
Accessories & Services  Subhiksha (Subhiksha Mobile)
 Essar Group (Mobile Store)
3.4.2. Discount Stores/ factory outlets

These are sales outlets offering goods at a discounted price. Goods sold by discount
stores are generally the unsold or excess stock or slightly defective pieces. In general,
Manufacturers have their factory outlets. Discount outlets help manufacturers and
retailers to dispose of the excess or unsold stock while consumers get the benefit of
branded products at affordable prices.
Name of Store Key Players

The Loot Jay Retailing and Merchandizing Pvt. Ltd.
Megamart Arvind Brands
Shoe Factory Liberty Shoes and Pantaloon Retail (JV between two parties)
Globus Factory Outlet Globus
Maxretail Landmark group
Brand Factory JV of Pantaloon with Planet M, Globus, Staples and Dollar stores

3.4.3. Airport Retailing
Airport retailing is a new concept in India. Retailers are now capitalizing on the
increasing traffic at Indian airports. Domestic players are tying up with global retailers
having relevant experience in airport retailing in other countries.
Shopper‘s Stop has tied up with Nuance from Switzerland whereas Tata‘s Consumer
Durable and Electronic Retail Company – Croma has tied up with Woolworth‘s to set up
retail stores at airports.
However, the recent economic slowdown has impacted many of the retailers‘ plans in
Airport retailing.
Pantaloon Retail had tied up with UK‘s Alpha Retail. However, because of major losses
faced by Alpha Retail, Pantaloon Retail has recently divested from the company and the
tie-up has ended.
3.4.4. Online, Telephone and Catalogue Buying

These are some other retail formats and are in their take off stage in India. There are
challenges in growth of these retail formats because of the ‗touch and feel‘ based buying
culture in India.
 Indiatimes, rediff and ebay are some of the popular portals for online purchase
 Pantaloons have ventured into e-tailing through their portal futurebazaar.com
 Shopper‘s Stop has tied up with the UK based Home Retail group to develop the
Agros format of catalogue retailing in India
3.4.5. Shopping Malls

They are enclosures having different formats for retailers, both value and lifestyle based,
all under one roof. These are sophisticated versions of old shopping centres with huge
space, air-conditioned ambience, elevator and escalators. A variety of shops
(departmental stores, hypermarkets, and specialty stores), food court, parking space, and
entertainment (cine-multiplex and gaming zones) all together make it a One Stop

destination. Mostly, shopping malls have anchor tenants, who cover large areas in the
mall and are important from the point of attracting footfalls.
‘Central’ is a first of its kind seamless mall in India. It is an initiative of Pantaloon

Retail. Pantaloon Retail (India), is expanding its retail chain ‘Central’ by setting up
new mall stores in metro cities like Mumbai and Bangalore and tier-II and tier-III
cities like Ahmedabad, Nashik, and Vashi.
In India, there is a new culture towards Specialty malls (also known as Theme Malls) –
catering to specific needs of customers. Specialty malls for luxury goods and premium
lifestyle segment is expected to catch up in India. At present, there are only few specialty
malls in India, but the Retailers Association of India (RAI) expects to push specialty
malls constituting nearly 10 per cent of the total malls in India.
There are divided opinions about success of specialty malls in India – while one
segment feels that Specialty malls are a step towards adding value to retailing in
India, the other segment feels that Indian market is still not mature enough and it is a
bit early to introduce this concept here.
 The first specialty mall was the Gold Souk in Gurgaon. Dedicated entirely to the
Jwellery collection, the mall houses some of the big brands in the Jwellery business in
India as well as abroad.
DISTRIBUTION OF MALL SPACE DISTRIBUTION OF MALL SPACE

ACROSS ZONES IN INDIA (2007) ACROSS ZONES IN INDIA (2011)*
(Total Supply: 47.4 mn sq ft) (Total Supply: 236 mn sq ft)
West Zone,
North 28%
West Zone, 35% North
Zone, 44% Zone, 39%
East Zone,
South 9%
South
Zone, 14%
East Zone, 24%
Zone,
7%
Source: Images F & R Research

3.4.6. Food Outlets as part of Modern Retail
Home-grown as well as international restaurant chains present in both high street
locations and malls represent the organised food and beverages (F&B) services retail
sector. Major categories in which modern food & beverage outlets can be put basis front
end formats are discussed below.
Food Outlets as part of Modern Retail
Multi-cuisine Specialty Hot Beverage/ Food Courts

Restaurant Chains Restaurant Chains Coffee Chains
These are restaurant These are restaurant These are outlets with These are areas where
chains with wide range chains with focus on a coffee or other hot counters of multiple
of menu catering to single cuisine or with beverage in different food vendors are
different cuisines. some specialty to flavours and varieties present with a
offer. They may be as their major common space for
Example: chains based on a offerings. Alongside, self-serve dining. Food
- Ohri‘s particular concept or they generally serve courts are mostly
- Blue foods theme. Fast food some some snacks or found as part of
- Indijoe chains would also fall bakery items. In some shopping malls. In
in this category. cases, there may be some cases they may
Some regional Indian more food items to be standalone
chains that are Example: offer, however, coffee development as well.
growing fast: - Mc Donald‘s or other hot beverage
- Nirula‘s - Pizza Hut remains at the core. Food courts may have
- Haldiram‘s - KFC food stalls belonging
- Subway Example: to various cuisines,
- Jumboking - Café Coffee Day concepts and brands.
- Yo! China - Barista Coffee chains may
- Pizza Corner - Mocha also present as part of
- Papa John‘s - Costa Coffee food courts.
While some of the specialty restaurant chains are based only on take away or home
delivery format and don‘t have any seating arrangements, most of these modern
restaurant chains have both types of arrangements – home delivery as well as on the spot
consumption option.

Apart from the above mentioned categories, there are many traditional and regional
Indian restaurants that are now expanding their presence in different parts of India and
growing as Chain restaurants. However, their supply chain models are not exactly on
same lines as modern restaurant chains. Example: Sarvana Bhavan, Karim‘s, Hyderabadi
Biryani House, Vasanta Bhavan
Modern restaurant chains in India compete against the traditional vegetarian and non-
vegetarian restaurants and food stalls which constitute almost 92-93% of the total food &
beverage servicing segment in India. Some of the traditional cuisines of India are:
Kashmiri, Punjabi, Mughlai, Bengali, Gujarati, Rajasthani, and Hyderabadi.
 Entry and Operating Format
Most of the modern food outlets are either franchised or company-owned. Most of the
global food chains have entered India either through franchise route or through JVs with
any existing Indian players. An international company can get into JVs with different
local players for opening and operating outlets in different parts of India.
Example: Mc Donald's India is a joint-venture company managed by Indians. In Western and

Southern India, Hardcastle Restaurants Private Limited owns and manages McDonald's
restaurants. In Northern and Eastern India, McDonald's Restaurants are owned and managed
by Vikram Bakshi‘s Connaught Plaza Restaurants Private Limited. Almost all the outlets of
Mc Donalds are company owned.
Pizza Hut has entered Indian market through Franchise route in 1996. The pizza franchise
soon expanded itself in India and now has the KFC brand beneath its umbrella.
Domino's entered India in 1996 through a franchise agreement with Vam Bhartia Corp. Vam
Bharti Corp. acts as master franchisee and in turn further extends franchises to different sub-
franchisees

4. CASH AND CARRY STORES
Targeted at and open only to business customers - cash and carry scheme focuses on
small-wholesale customers who buy in bulk and pay in cash. Unlike hypermarkets where
any consumer can walk-in and buy goods, cash-and-carry outlets allow only
authenticated bulk buyers to transact business. Medium-sized businesses such as retail
stores, hotels, restaurants, caterers, exporters etc can buy from cash-and-carry outlets at
prices much cheaper than market rate.
In its original form, owners of cash and carry outlets (i.e. large retail chains) buy from
producers directly at very high volume, dispensing with middlemen like wholesalers and
stockiest. They also establish their own brands - asking producers to manufacture as per
their product and packaging specifications. Volume purchase and removal of middlemen
result in substantial cost reduction - a part of which is passed on to b2b customers. So,
b2b customers get products of assured quality throughout the year at less than market
price.
Wholesale cash-and-carry operations would provide small retailers and business owners a
wide range of products at the wholesale prices.
4.1. Global Retailers Entry through Cash & Carry Format

As Government of India has allowed 100% FDI in cash and carry format, many foreign
companies are choosing to enter the market through this format. Global retailers plan to
use the opportunity to set up wholesale stores in India to understand the market. Opening
of 'Cash and Carry' stores throughout the country shall provide a golden opportunity to
these global retailers to make in-roads into India. When the restrictions on the retail
industry are lifted, international retailers will be in a prime position to easily convert their
'Cash and Carry' stores into highly profitable supermarkets and hypermarkets.
 German wholesale major Metro Cash and Carry has already forayed into Indian
market and is taking its stores to Mumbai, Kolkatta, NCR and Punjab.
 Bharti-Walmart is expected to roll out its first store in Punjab (One of the North
Indian States of India) between April and June, 2009.

 French Retailer Carrefour has announced its entry in cash and carry segment of India
in 2009
 Britain‘s largest retailer Tesco Plc announced its investment (in August, 2008) to
develop a wholesale cash-and-carry business in India. Also, Tesco has tied-up with
Trent Ltd, the retail arm of the Tata group, to help develop the Indian company‘s Star
Bazaar hypermarkets.
 Costco, one of the largest retail chains of US has also shown interest in joining the
bandwagon
 Australian retail giant Woolworths is in discussion with Future Group (Pantaloon

Retail) for an equal equity joint venture for entry into Cash and Carry format in India
4.2. Domestic Players Not Far Behind
 Amidst the increasing interest from foreign players, domestic retailers have not been
left behind. Videocon Industries has floated a separate subsidiary company for its
cash and carry retailing business — Bolld Cash & Carry.
 While Bharti has already stuck a deal with Wal-mart, Pantaloon is exploring the
options to foray into cash and carry business.
 Wadhawan Food Retail, which owns Spinach, Sabka Bazaar and Home Store retail
formats, is also eyeing the cash and carry format.
 Reliance is also planning to launch its B2B format

5. SUPPLY CHAIN INSIGHTS
5.1. Supply Chain Model for Modern Retail Outlets
The given supply chain model exists across various product verticals with slight
modifications
Distribution Centre
(Owned by Company‘s
Franchisee or its Logistic Franchised
Partner) Stores
Companies Manufacturing
Branded Products Company‘s In-house Company-
Inventory owned outlets
Local Manufacturers
supplying to a single retail
company for selling under Departmental
private labels Stores
Distribution Centres or
Specialty
Local Manufacturers Warehouses owned by
Stores
supplying to more than one Retail company or by its
retailing company for selling Logistic Partners
under private labels Hypermarket
Importer / Retail Supermarket

Products from company‘ Import
other countries Partners  These may be central
or regional distribution Other formats
Retail centres depending
Company‘s own upon the structure
procurement adopted by the retailer
office in other
countries  Retailer may have
common or separate
warehousing arrange-
ments for its different
retail formats
Level I: Level II: Storage Level III:

Sourcing & Distribution Retail Stores

5.1.1. Level 1: Product Sourcing
Modern retailers in India largely procure branded products in various categories
(apparels, consumer durables, electrical & electronic equipments, furniture and furnishing
items, footwear etc.) directly from companies‘ factories and send the procured lots to
their distribution centres. Procurement is done centrally for all the retail outlets. In case of
private label items also sourcing is done directly from manufacturing points and the lots
are sent to distribution centres. From the distribution centres, the lots are further
distributed across various retail outlets.
There are two ways in which retailers usually import goods from other countries:
 Maintaining their own offices in other countries: The offices act as procurement
points (from manufacturing units), quality check points and they take care of
shipment of procured goods to India. This method is mostly adopted for countries
from where large volume imports are happening on regular basis.
 Sourcing from importers: In many cases, retailers don‘t import directly from
manufacturing points in other countries, rather source the products from already
existing importers present in India. This method is adopted if volume of procurement
is neither huge nor on regular basis.
India is a country of diverse culture, lifestyle and food habits. Taste and preferences of
buyers vary from region to region. Retailers in India need to maintain in their retail
outlets some products and brands that are locally popular in the regions where the retail
stores are present. Procurement of these locally popular products are done only in the
specific regions with the procured goods mostly moving to the specific regional
warehouse or in some cases directly to the specific retail stores.

5.1.2. Methods of Procurement
There are three ways of getting supplies from vendors in case of retail stores:
 Outright: Under this method of procurement, a retailer places an order with any vendor
and buys the entire ordered merchandize from the vendor. Inventory management and
risk of sale/non-sale of the merchandise is entirely on the retailer.
 Consignment: Under this method of procurement, vendor shares the risk of non-sale of
any merchandize items along with the retailer. In case any merchandize doesn‘t sell,
the vendor takes it back and tries to clear the stock through some other channels.
 Concessionaire: Under this model, retailer rents out some space of its store to a
vendor. The vendor is in charge of managing the provided space to display and sell its
products. Managing the inventory of its product is entirely the vendor‘s responsibility.
6.1.2.1. Product Category-wise Standard Methods of Procurement & Margins
 Apparels
 Mode of Procurement: In Apparels, model of procurement varies depending upon
the source and product labels.
Apparels Procurement Model Remarks
All procurements from local manufacturers are
Private labels 100% outright
on outright basis (make to order basis)
New brands/ Consignment is
Retailers avoid taking risk with new or less
less known preferred (however, it
known brands
brands may be Outright as well)
Consignment or  In case of established brands, consignment is
Established Concessionaire (In some a preferred way. Alongwith retailer, this is
brands cases, it may be Outright preferable for brand vendors as well. In case
as well) a supplied stock is not selling in any retail

store, then the vendor takes the stock back
and tries selling it through other channels.
This helps in placing of fresh stock.
 Retailers prefer Concessionaire model as they
don‘t need to maintain any inventory of
vendor‘s supplies. Example: Brands FCUK
and CK operate in Shopper‘s Stop stores
under Concessionaire model.
All imports in apparels are largely based on
Imports 100% outright
supply orders or Outright
 Margins on Apparels: As found during the study, margins on apparels in Indian

retail vary depending upon
 whether it is a private label product or a brand
 within brands, markup varies depending upon the popularity of the brand and
the brand‘s market share
 Also, it varies from one retailer to another depending upon the ticket size and
mark up policy of the retailers
Mark up on Product
Apparels Stores with big ticket size Stores with small ticket size
(Example: Shopper’s Stop) (Example: Vishalmart)
Private labels 250% - 350% 80 – 100%
25% - 60% 20% - 60%
(25% markup indicates that the (Stores with small ticket size avoid
Brands
brand is very strong and 60% keeping big brands and their product
markup indicates that the brand is mix has very high share of private
new or less popular) labels)

 Furniture and Furnishing
 Furniture
 Mode of procurement: For a non-manufacturer retailer in furniture segment,
around 90% of the furniture procurement happens on ‗Outright‘ basis whereas
only the balance 10% is on vendor ‗consignment‘ basis. In case of
consignment based sourcing, money is paid to the vendor only on the final
purchase of the product from the retail stores.
 Margins on Furniture: Both for wooden as well as metal furniture, Indian
retailers in general, are enjoying margins in between 30% - 50%.
 Soft furnishing
 Mode of procurement: For a non-manufacturer multi-brand retailer in
furnishing segment, ‗Outright‘ buy and ‗Concessionaire‘ model are the two
main modes of operation.
 Margin on soft furnishing: In soft furnishing vertical, the share of private
labels is the range of 35-40% for large retailers. Private labels in soft
furnishings provide retailers a higher (gross) margin of 35-40% as compared
to 25-30 % in case of national level brands.
 Consumer Durables
 Method of procurement: In case of consumer durables, due to fast changing
technology, most retailers have an arrangement with brand manufacturers to take
back the unsold inventory. In other words, they follow the ‗consignment‘ based
procurement.
 Margins on Consumer Durables: On branded products, the retailers enjoy a
margin of 10-14%. In case of private labels, the margin lies in the region of 15 -
20%

 Footwear
 Mode of procurement
Footwear Mode of Procurement
Private labels 100% outright
Brands Consignment
Imports 100% outright
 Margins on Footwear
Footwear Margin
Private labels 50-100%
Brands (such as Red Tape, Lee Cooper etc.) 30-40%
 Food and Grocery
 Method of procurement: In food and grocery, almost all the procurement in case
of both branded as well as private labels happens on ‗Outright‘ basis.
 Margins on Food & Grocery

Product Margin
Food & Grocery Modern stores (such as Discount stores (such as
Big Bazaar, More etc.) Subhiksha)
Branded 10-15% 2-3%
Private Labels 15-25% 5-7%

5.1.3. Level II: Storage and Distribution
Most of the leading retailers or their logistic partners in India have been maintaining
regional warehouses or distribution centres (DCs) at state level, for stocking and
movement of their goods. With Central Sales Tax (CST) in place, it is cheaper to have
distribution centres in each state than pay CST for inter-state movement of goods.
However, with the introduction of VAT and phasing out of CST, there is a growing trend
towards larger and consolidated warehouses.
Shift from Regional to Central Warehouses/ Distribution Centres

Now, with the introduction of VAT system, Central sales tax (CST) is being phased out.
With CST going away, it is no longer pertinent to have a warehouse or DC in each state.
Retailers or their logistic partners are now encouraged to consolidate their warehouses/
distribution centres at a few strategic locations in India. There is a growing trend towards
having few consolidated and larger warehouses or DCs. With warehouses/ DCs becoming
larger the processes, infrastructure and technology has to be more sophisticated.
6.1.2.2. Product Specific Insights into Inventory Management
 ‘Apparels’ as a category require huge investment towards inventory management, as

apparel stocks in general are churned around five times a year.
 Retailing in ‗Consumer Durables and other Electrical & Electronic Equipments‘,
requires comparatively lesser investment in inventory. Due to fast changing
technology, most retailers have an arrangement with brand manufacturers to take back
unsold inventory.
 Supply chain management in case of furniture is a challenge in India given the
constraint of poor physical infrastructure. Furniture are prone to lot of damages while
transporting. Also, to make various types of furniture available at the selling point at
the right time requires very intelligent inventory management.
 Fresh food: In case of fresh and highly perishable food items (example: dairy items)
retailers generally maintain very little or no inventory. This is largely because of

absence of well developed chain of cold storages and cold storage based logistic
facilities.
 Fruits and Vegetables: Most organized retailers follow a three-tier system of
operation compromising the farmer, commission agent at the APMC and themselves.
In some states, players such as Reliance, Subhiksha, and Pantaloon directly source the
produce from the farm gate, further shortening the chain. The extent to which they can
shorten the chain also depends on the state legislation for procurement
5.1.4. Level III: Retail Stores

(Please refer to section for details on modern retail store formats in India)

5.2. Supply Chain for Food & Beverage Servicing Retail in India
Imports (including fruits

and vegetables)
Items that are either not Cook – Assemble - Serve
available or in shortage
within India e.g: Lettuce Food Outlet 1
leaf, some sauces etc.
Suppliers of semi finished/ Distribution

semi cooked products Centres/ Food Outlet 2
Warehouses
Suppliers of processed
food ingredients It can be company Food Outlet 3
owned or
outsourced to any
logistic player
Suppliers of Beverages
(Directly to the Outlets)
Level I: Suppliers Level II: Distributors Level III: Restaurant

Chain Outlets
5.2.1. Level I: Suppliers
 Suppliers of semi-cooked/ semi-finished products:

They are the manufacturers of semi-cooked or semi-finished food products. Suppliers
may be different for Non-Vegetarian and Vegetarian products depending upon their
capabilities. All the specifications for raw materials and standards for the products to be
supplied by these suppliers are provided by the concerned restaurant chain management.
Typically a growing restaurant chain has 4 to 5 suppliers for semi cooked and finished

food products located at different places all across India. The concerned restaurant chain
management provides demand projections and negotiates with the vendors/ suppliers for
prices accordingly. Prices may be negotiated yearly or half yearly.
 Few examples of semi cooked food product: Frozen chicken tikka, Frozen veg
patty for burgers, Frozen dimsums
 Few examples of finished food products: Burger buns, Breads, Pastries etc
 A few examples of semi cooked suppliers: Vista foods, Chatta foods, Innovate
foods etc.
 Suppliers of processed food Ingredients and other dry products

These generally include suppliers of Pastes (of spices and flavour), Ketchups, and other
sauces. Some special sauces may also be imported
 Suppliers of imported items (including vegetables & fruits)

They supply imported vegetables. For example: lettuce etc according to the specifications
provided by the parent company. These are generally different for various regions
 Suppliers of beverages
These are generally the big players in the market. In contrast to other suppliers they
supply directly at the outlet level as they have wide distribution network of their own
across India.
5.2.2. Level II: Distribution
Warehouses or distribution centres are put at strategic locations. These are generally
located in cities having considerable number of outlets. These act as nodal hubs or
storage houses and facilitate easy supply to outlets. These may be company owned or
outsourced to a distributor. Generally the distributors are Franchisee‘s with multiple
outlets.

Supply of semi finished food products from manufacturer to the distributor is outsourced
to cold chain service providers. For a big chain these are generally the ones who have a
PAN India network.
Supply from distributor to the outlets is either done by the distributors themselves using
their own vans or outsourced to a logistics/cold chain service provider. Typically a
distributor maintains inventory for 3 to 7 days. This may vary from location to location.
5.2.3. Level III: Outlets
The outlets can either be company owned or owned by the franchisees. Some franchisees
may be having multiple outlets. The outlets have a kitchen or an assembly area from
where the finished food products are served hot to the customers. There is a small
refrigerated store room present at the outlets to store the semi finished/cooked products.
The idea is to minimize the cooking at the outlet level. This reduces the variation in taste
as the human element in cooking is reduced to the extent possible. Some non core things
like seasonal vegetables, salt etc can be procured at the outlet level. Typical inventory at
the outlet level (for frozen products) may vary from 2 to 5 days depending upon the outlet
sales.

5.3. Logistic Facilities for Retail Industry in India
While some of the modern retailers in India have been outsourcing their logistics needs to
specialist service providers, many large players with national footprint – including Bharti,
Birla, Reliance, Future Group, and RPG- have opted to develop in-house logistic systems.
The existing logistics partners of modern retailers are in most of the cases not proper 3
PL players. These logistic partners in many cases are ‗Integrated players with
Warehousing Facilities‘. According to industry sources, level of satisfaction of retailers
with their logistic partners is mostly low and that speaks of the poor level of logistic
services.
The key market players in the Indian logistics industry can be broadly classified into the
following three segments:
- Involved only in the physical movement of goods
- Highly unorganised
Pure Transporters
- Larger transporters serve as freight consolidators and
72%
form part of organised segment
Integrated
Transporters with - Larger transporters with sufficient scale to diversify their
Warehousing operations to include total logistics management
26%
Facilities
- Offer complete value chain of logistics management
3 PLs - Provide value added services
- Typically MNCs with experience in handling
2%
international logistics
Source: DHL Asia Pacific Customer Conference, 20 March 2007

Major reasons for leading modern retailers in India to develop their own logistic services
 Lack of 3 PL players with adequate business understanding
 Poor level of services from most of the existing logistic services suppliers
 High costs involved
5.3.1. Cost of Logistics in Indian Retail

Globally the logistics cost component of the total retail price is 4 -5%, while in India it is
as high as 7-10%. The higher cost for an industry, which operates on wafer thin margins
of 2-3% globally, makes it imperative for retailers to internalize most operations and cut
costs.
3 PL market is still at a nascent stage in India, with most use occurring in automotive, IT
hardware, and electronics. There is relatively low penetration in pharmaceuticals and fast-
moving consumer goods and one of the important reasons for this is ‗strained profit margins‘.
- Frost and Sullivan
―Unlike the mature western markets, retail growth in India is expected to be dominated by
large retailers owning the logistics rather than outsourcing it to third and fourth party logistic
providers, in near future simply due to the highly fragmented nature and lack of national as
well as international logistics providers in the country‖
- Managing Director, Frost and Sullivan

6. RENT STRUCTURE IN RETAIL
During the initial years of modern retail in India (that is during late 1990s and early
2000s), real estate builders were more into the practice of selling out mall spaces to
retailers. However, this practice has become less prevalent now and renting out is the
norm of the day.
6.1. Prevalent Rental Models in India
Two types of rental models are prevalent in India – fixed lease rental model and revenue
sharing model
6.1.1. Fixed Lease Rental Model

The most traditional model in India is the fixed rental model, wherein the retailers pays a
fixed sum of money (as mentioned in the lease agreement) to the mall developer
6.1.2. Revenue Sharing Model

Also known as the ‗turnover model‘, this is a progressive model built on the ‗sharing of
risks and rewards strategy‘. This model requires the retailer to pay either a
 Percentage of revenue or
 Combination of rent and percentage of revenue
 Payment of a minimum guarantee and/or proportion of revenue, whichever is higher
6.2. Major Components of Occupancy Costs in India
 Lease rentals: Lease rentals are the occupancy cost that retailers have to pay to the
mall developer on a monthly basis.
 Common Area Maintenance: In India, mostly mall developers are responsible for
the management of entire mall. Major constituents of CAM charges are the air
conditioning and electricity charges for the main area, elevators and escalators,

cleaning and maintenance charges and parking charges. Till recent time, CAM
charges have been in the range of 20-25 percent of the lease rentals.
 Service Tax: A service tax of 12.36% is levied on renting of immovable property.

Service tax on input costs like lease rentals is allowed to be set off against service tax
on output costs like costs of advertisements, hoardings, etc.. The remainder, that is,
the unabsorbed loss, which was previously allowed to be carried forward indefinitely,
now has to be charges off in the current year itself.
6.3. Anchor Tenants versus Vanilla Retailers
Anchor tenants may be defined as the stores occupying largest space in a mall or
shopping complex. They are termed as ‗anchors‘ because they are the major crowd
pullers in any mall. Anchor tenants, being the crowd puller and also because of
occupying the largest space in any mall, get discounts on lease rental. They also enjoy
other benefits such as special area for promotion and advertisings, etc. Following are the
comparisons between Anchor tenant and Vanilla retailers
Parameters Anchor Tenants Vanilla Retailers

Above 12 per cent (This figure
Rental (% revenue) 6 – 10 per cent
varies depending upon the cities)
Rent differential in 1/3 rd lower than the
Charged as per market value
absolute terms market value
Long term lease Short term lease arrangement (3
Lease tenure
arrangement (9-18 years) – 5 years)
Source: Crisil and Primary Data
6.4. Increase in Lease Rental

The growth in organized retail penetration in India over the past 5 years led to major
expansion plans being announced by existing players and cash-rich conglomerates such
as Reliance, Bharti and Birlas. The immediate fallout of strong demand for retail has been
the increase in rental rates across most large cities, where supply of retail space has been
limited.

The escalation in lease rental cost has led to cost pressure for many retailers. As revenue
growth has not kept pace with this increase in cost, their EBITDA margin has been
negatively impacted.
6.5. Economic Slowdown and Changes in Strategies of Retailers
India‘s economy has also been adversely impacted because of the current meltdown in
global market. With the suddenly disturbed economy, consumers have gone conservative
and are spending with care. Though, the expenditure on daily need items (such as food &
grocery, FMCG etc.) are not found to be impacted till now, the bigger expenses such as
buying of home appliances, furniture etc. are on hold for many. Retailers have started
correcting their future plans in light of this recent economic crisis.
Given the increasing competition in retail industry, issues of high lease rentals and the
sudden economic slowdown, many retailers have changed their business strategies to
mitigate the negative impacts and consolidate their position.
Change in Strategy Retailers Initiatives

Croma
Downsizing Reduction in average store size
Crossword
Levi Strauss Mall exit and movement to smaller towns
Mc Donald‘s, KFC
Re-location Mall exit and movement to hi-street
Nike, Adidas, A O‘s
Indiabulls Retail Moved out from major cities to small towns
Globus Shut two stores in Bangalore
Shut Shop
Etam Shut shops in Ahmedabad, Surat and Delhi
Slowing down expansion in metros and focusing
Cotton by Centuary
on smaller towns
Slowing expansion
Adidas
Slowing down its expansion plans
Raymonds
Slowing down expansion of ‗F&G‘ format
Focus on other
Aditya Birla Retail ‗More‘ and shifting focus on the ‗apparels‘
verticals
vertical

Concentrating more on Big Bazaar and KB‘s Fair
Increased focus on Price Stores
value formats and Pantaloon Retail Also, diversified small convenience store formats
low cost models called Big Bazaar Best Deals, rural retail venture
Aadhar, and home solutions venture Home Town
Increasing revenue Cross sell other brands through existing exclusive
Arvind Brands
from existing stores outlets and widening the product range
Source: Primary Research, Crisil Report, and Business Standard
6.6. Excess Supply of Retail Space in Pipeline

Lease rentals increased due to limited supply of retail space and increase in number of
retailers. However, the change in the regulatory environment, which allows 100 percent
FDI in construction, and rising investments in real estate companies and projects, is
aiding an increase in supply of retail real estate space.
6.7. Changing Rental Models
Till some time back, when real estate was booming, mall owners had been chasing the
retailers for ‗fixed lease rental‘. That time, even for retailers engaging the space with
brands was the top most priority and thus flat rates were being charged. But as the market
has slowed down, retailers are under pressure of making profits and hence are finding it
difficult to sustain the ‗high fixed rental rates‘. Retailers have slowed down their growth
plans and many of the mall spaces that were planned to be occupied are left vacant.
Excess of retail space supply coupled with the recent economic slowdown, have now
become a cause of worry for mall owners as well. They have realized that occupancy
rates have to be made more affordable and are now being forced to either cut down on
rentals considerably or adopt ‗revenue sharing rental model‘ or any other rental
models.

6.8. The Road Ahead
Revenue Sharing Model
 A minimum guarantee on rental

and/or percentage share of the
revenue whichever is higher
 Example: Inorbit mall in Mumbai

‗Select City Walk‘ mall in Delhi
Zero Rent System Franchisee Route
 Retailer exempt from paying  ‗License‘ granted by a company

rental charges during the initial The Road to a person or group allowing
years of operation. them to use/ sell certain products
Ahead…
 Example: Pantaloon is learnt to  Example: Trent in tier II cities
have signed such an agreement
with a developer.
Sub-letting
 Selling of space by retailers to

other brands (mostly happens as
part of Concessionnaire model)
 Example: Shopper‘s Stop sub-lets

some space of its store to brands
like FCUK and CK.
Source: Crisil & Primary Survey
Please refer to Annexure II for rental trends in top Indian cities during the second quarter
of 2008.

7. PROFITABILITY ACROSS VERTICALS
7.1. A comparison between Apparels, Food & Grocery and Home

Appliances
Gross margins across all verticals are determined by the share of private labels and extent
of commoditization of products. Accordingly, apparels enjoy maximum gross margins,
followed by food & grocery and home appliances.
Parameters Apparel Home Appliances Food & Grocery

Apparels is the most At present, almost all In food & grocery, the focus
commoditisable vertical, household appliance retailer has been on increasing the
which means there exists have multi-brand outlets. As share of private labels and to
enormous potential for the average ticket size of have an edge over branded
players to differentiate products is quite high, there is FMCG producers. Private
from others in terms of considerable preference for labels in processed foods and
style, fabric, cut, design, branded goods, especially in staples can be the only
etc. Besides, players can the white and brown goods. differentiator through which
Share of succeed if they are able to Also, lack of expertise limits retailers can attract more
private identify gaps and enter provision of after-sales buyers and increase its
label into areas where national services in case of private conversion rate. Margins on
products brands do not exist. Thus, labels. This restricts the scope fresh produce, such as fruits
apparels offer maximum of increasing the share the and vegetables are typically
scope for private labels. share of private labels for low and wastages are high.
Almost all organized these goods. Organized Private labels, at present,
players have increased the retailers have tried to constitute more than 10% of
proportion of private introduce private labels in the the products in food&
labels in their total product kitchen and small appliances. grocery category for players
mix. While private labels Though kitchen and small such as Pantaloon, Spinach
constitute 75% of appliances constitute only and Subhiksha. There is a

Pantaloon‘s revenues from 30% of their total products and growing trend towards
apparels, it is as low as 20 their ticket size is not very increasing the share.
per cent in case of large.
Shoppers‘ Stop.
Consumers still prefer
In apparels, store sizes are Household appliances entail convenience for their food
in general larger than food the largest store size owing to and grocery requirements.
& grocery but comparable the need for displaying a Competing against local
or smaller as compared to variety of models. In this Kirana stores, modern
Household appliances. segment, retailers generally retailers have come up with
Retailers stock a wide operate multi-brand outlets. stores in the vicinity so as to
Average variety of casual, formal, Items such as home theatre, be accessible and cater to
Store Size traditional and ethnic wear plasma TVs, Laptops, music buyers within a catchment of
for different usages and systems etc. of different 3-5 kms. Store space
occasions. In addition, brands and different models dedicated only to food &
they generally also stock within the same brands are grocery is generally smaller.
accessories such as sock, displayed to offer a wide range Some of the retail stores are
caps, belts, stole, of selection to potential bigger as the floor space is
handbags etc. customers. also occupied by home care
and personal care items.
Customers are well Salesmen play a key role in
informed in case of helping the consumers‘
Customers are well informed
apparels regarding quality, decision in case of household
in case of food & grocery
prices, utility etc. and they appliances. The sales force
Manpower and are sure about their
don‘t need much of needs to be aware of various
Training buying decisions. They don‘t
salesmen‘s guidance to product options, features and
and Wage need much guidance from
make their purchase should be constantly updated
Inflation salesmen.
decisions. with the fast changing
Wage inflations are lowest in
Also, wage inflations are technology in various
this category among the three
lower in this category as products. The costs of
categories.
compared to Household developing and training

appliances. manpower in this vertical are
therefore higher as compared
to other two verticals.
Household appliances industry
also faces relatively higher
manpower attrition as
compared to other two
verticals. As a result, wage
inflation witnessed by this
industry is on a higher scale as
compared to other two
verticals.
Investment in inventory in
Apparels require higher Investment in inventory is
case of household appliances
investment towards lowest and stock turns are
is lower as compared to
inventory as stocks are highest in case of food and
apparels. Due to fast changing
churned out around 5 grocery (among the three
technology, most retailers
Gross times a year. However, verticals). However, because
have an arrangement with
Margins/ high gross margin on of small ticket size, high
brand manufacturers to take
Profitability account of higher share of wastages due to perishable
back unsold inventory.
private labels and other nature of products, lower
Despite this, because of other
factors, more than margins and other factors,
factors, Gross margins in case
compensate the initially gross margins in this vertical
of household appliances are
high overhead costs. are lower than Apparels
mostly lowest among the three
Source: Crisil and Primary Data

8. LEADING RETAIL COMPANIES OF INDIA
Key players operating as part of modern retail in India are:
Please refer to Annexure I for detailed profile of some of these companies. Apart from
the above listed companies, there are many regionally strong players and a few upcoming
players (such as Mahindra Retail, Hero Group, and others) as part of modern retailing in
India.
Annual Turnover of Leading Retail Companies in India

(in $US million; 1 $US = 45 INR)
India Bulls Retail 44

159
Trent (Tata)
182
Spencer's (RPG Group)
2007-08
Vishal Retail 225
250
Lifestyle India (Landmark Group)
Shopper's Stop(Raheja Group) 269

512
Subhiksha
Pantaloon Retail 1202
0 1500
Source: Company Sources

8.1. Strengths and Weaknesses of Key Organized Players
Companies Strengths Weaknesses

Pantaloon  India‘s leading retailer (highest turnover  Pantaloon retail doesn‘t have
Retail among all modern retail players) much to offer in luxury and
 Operates in almost all types of modern premium segments
retail format (Hypermarkets,  Because of market slowdown
Supermarkets, Specialty Stores, Discount and losses incurred, Pantaloon
Stores, Destination Malls, E-tailing & retail had to recently divest from
others) Airport retailing
 Very strong in ‗Value and Lifestyle
segments‘
 Adopting very aggressive marketing
strategy and experiencing high growth in
business (CAGR of around 69% over FY
2006-08)
 Product mix of Pantaloon retail has higher
share of Brands against Private labels.
However, the company is working
towards developing more of private labels
in all product categories with an aim to
enjoy higher margins
 As India‘s largest retail player, the
company holds high bargaining power
with brands (Reputed Chocolate brand –
Cadbury‘s and Snacks brand – Frito-Lay
Lays have been refused space in
Pantaloon Retail Stores because of issues
like pricing, and supply chain)
 One of the biggest advantages with
Pantaloon retail is its in-house logistic

team. Future group has ‗logistics‘ as one
of its separate business line in the name of
‗Future logistics‘. Future logistics
manages logistic for the retail formats of
Pantaloon
Vishal  Strongest player as far as presence in  To save on rentals/ cost of real
Retail different cities is concerned (present in estate, Vishalmart outlets are
104 cities across 24 States & UTs of generally not opened as part of
India) any shopping malls. They are
 It differentiates itself in terms of its low rather present as standalone
cost offerings and its target customers - stores mostly in some ‗not so
focuses on Middle class and below prime locations‘ – requiring the
 Strong in hypermarket format; recently customers to travel extra to reach
ventured into specialty store format with Vishal Stores
‗Fashion Mart‘ as exclusive apparel stores  Except for hypermarkets and
 Vishal retail is innovating with franchise recent venturing into apparel
model for its specialty store ‗Fashion based specialty stores, the
Mart‘ company is not present in any
 Product mix in case of Vishal Stores has other retail formats
very high share of private labels –  Vishal retail doesn‘t have a very
— They already have 400 FMCG products smooth supply chain and vendors
under their label and are in the process management system in place.
of adding more They have to struggle to ensure
— Company has 100% private labels in tighter margins on products and
apparels (Vishal retail manufactures are on constant look out for
15% of its apparels and sources the committed vendors/ supply
balance from other manufacturers and partners.
sell under private labels)
Shopper‘s  Company‘s strength lies in its  Shopper‘s Stop, Home Stop,
Stop departmental store format namely Hypercity and other retail
(Raheja ‗Shopper‘s Stop‘ formats of Raheja Group are

Group  The group operates in other retail formats present mostly in Metros and
Retail) and are aiming at growing big in all these select Tier I cities. Except for a
formats– hypermarket (Hypercity), few cases, they don‘t have
specialty stores (Homestop, Crossword, presence in Tier II cities and
Mother Care, MAC, Brio, Desi Café), below
airport retailing and others  Hypercity, the hypermarket
 The company operates in ‗Premium format of Raheja Group till now
lifestyle and Lifestyle‘ domains and has a has not been able to mark its
strong customer base in 35 years plus presence much against stores like
business and senior executive classes Big Bazaar. Unlike Bigbazaar,
 Shopper‘s Stop and the other retail Hypercity is not positioned as a
formats are present in prime locations of value store for masses
Metros, Tier I and very few Tier II cities.  Company‘s private labels are a
They are generally present as anchors in small percentage of its entire
shopping malls range of merchandize (80-85%
 As per industry sources, Shopper Stop & brands and 15-20% private
its other retail formats have highest ticket labels)
size and conversions rates
 Company‘s strength also lies in its strong
supply chain and logistic management-
they operate on advanced ERP system and
focus on fast and efficient movement of
merchandize
Trent  Trent is very strong in apparels. The  Many of the retail related
(Tata) product mix in case of apparel retailing is initiatives of Trent such as Star
95% private labels and balance as brands Bazaar, Fashion Yatra etc are in
 Trent‘s most popular retail format is initial stages and are still to
‗Westside‘ which is a lifestyle based establish themselves as popular
apparel and accessories store – Westside is stores
very famous for its ethnic collection
 Recent initiatives in form of ‗Fashion

Yatra‘ aims at value for money apparel &
accessories
 Trent owns ‗Landmark‘ which is India‘s
largest books, stationery and music retail
 Croma, a specialty store in consumer
durables and electronic items, is one of its
kind and at present very few other retail
stores on similar concept are present in
India – one of them being ‗Next‘
 Trent has also started its initiatives in
‗Value based retailing‘ through its
hypermarket format namely ‗Star Bazaar‘.
Star Bazaar are targeting at Tier II cities
 For efficient back end operations and
supply chain management, Trent has
recently partnered with UK retailer
‗Tesco‘
Lifestyle  Lifestyle India stores compete closely  The group has limited presence
India against Shopper‘s Stop and other similar with outlets in top 10-12 cities
(Landmark concepts in India. As compared to within India
Group) Shopper‘s Stop, Lifestyle is more focused  They are not present in
on ‗Youth and Fashion‘ supermarket or hypermarket
 ‗Home Centre‘ stores are catching up on format
popularity and are growing big way
 Lifestyle stores are present out of prime
locations in Metros, Tier I and select Tier
II cities and in big malls mostly as anchor
tenants
 Lifestyle stores also work on large ticket
size and higher conversion rates, however,
not as high as Shopper‘s Stop

Spencer‘s  Spencer‘s stores are among the oldest  Product mix of Spencer Stores
(RPG retail chain initiatives in India and over the (even in case of hypermarkets)
Group) years they have earned high trust of its have very high share of food &
customers grocery items and fresh fruits &
 The company has very strong presence in vegetables – all these are low
super and hypermarket formats in India ticket items.
and are established as ‗Good value for  Spencer‘s stores compete very
money outlets‘ closely against neighbourhood
 They are present in more than 65 Indian ‗Kirana stores‘ and therefore they
cities (including tier II cities and below) are forced to run on tight margins
and are available in two mini-supermarket
formats as well (Spencer‘s daily and
Spencer‘s express)
Reliance  The biggest strength of ‗Reliance Retail‘  Reliance retail has slowed down
Retail lies in the fact that it is a part of Reliance on growth plans because of
Industries, India‘s biggest private sector recent economic crisis
company with high capital investment  Reliance Fresh has been facing
potential and huge risk appetite issues related to supply chain
 Reliance retail has forayed into management and merchandizing
supermarket, hypermarket, and specialty  Most of the initiative of Reliance
store formats in various product categories in retail are very new and their
– clothing, Jwellery, healthcare, consumer success or failure depends on
durables, footwear, automotive, time wear, multiple factors
IT products, furniture, food & grocery
including fresh fruits and vegetables. They
have also entered into business to business
format – ‘Ranger Farms’
— As per company sources, the
hypermarket of Reliance namely
‗Mart‘ will be very huge stores (First
Mart store is being opened in a space

of 230,000 sq ft)
 Reliance retail has very aggressive growth
plans and the company has employed huge
number of people to implement these
plans
 Unlike many other retail companies,
Reliance comes with an advantage of
being a textile manufacturing company.
Reliance already has retail outlets of
VIMAL (company‘s flagship brand)
across India
Aditya  Aditya Birla retail has ventured into two  Recent economic slowdown has
Birla Retail formats – Supermarket and Hypermarket impacted the growth plans of the
and at present plans to grow bigger and company
stronger in these two formats only  Aditya Retail will face tough
 Aditya retail also comes with an inherent competition from Reliance and
advantage of being a part of ‗Birla Group Bharti Retail
of Companies‘ and therefore with a
capacity for huge investment and higher
risk appetite
 The company aims at differentiating itself
as a ‗spend friendly store‘ with much
superior shopping experience
 The company has huge growth plans in
retail
Subhiksha  Subhiksha is India's largest supermarket,  Subhiksha being a discount store
pharmacy and telecom retail chain runs on very tight margins and
 Subhiksha is recognized as ‗Discount are profitable only because of
Stores‘ targeting at ‗middle, lower middle ‗economies of scale‘
class and below‘  They often face supply chain and
 It has multi-locational presence with more merchandizing related problems

than 1000 stores in over 90 cities across 9
States
Indiabulls‘  Indiabulls‘ Retail has acquired Piramyd  Indiabulls' entry into retail comes
Retail retail to mark its foray into retail business. after big groups like Reliance,
This acquisition gives Indiabulls‘ an Aditya Birla, RPG and Future
infrastructure and an established system to Group have already got a head
start with. start and are busy consolidating.
 Indiabulls‘ retail targets at opening value The company may face stiff
lifestyle based departmental stores and competition while trying to
convenience stores. Their focus is on establish itself in Indian retail
‗Middle and Lower Middle classes‘. market
— They are differentiating themselves  Entry of Indiabulls into retail has
from Shopper‘s Stop and Lifestyle unfortunately been at a time of
(Landmark Group) by not targeting the economic slowdown and it had to
‗Premium and lifestyle segments‘ of face losses on acquisition of
society ‗Piramyd Retail‘.
 Indiabulls‘ is positioning itself differently  The company is facing some
by also venturing into a chain of wholesale vendor related problems as well
stores
Bharti-  Bharti Wal-Mart Private Limited will bring  Bharti-Walmart has still not
Walmart modern supply chain and back-end started operating any stores till
Retail logistics expertise to India, bringing Wal- now. They still have to capitalize
Mart‘s global best practices in such areas on their strengths and meet out
as just-in-time inventory, retail information the constraints to earn success in
systems, cold chain infrastructure, GPS for their plans.
truck and trailer tracking, and fuel
management systems.
 Entry of Wal-Mart would create new
benchmarks for supply chain management
in India and the benefits would be passed
on to the consumers

 While Wal-Mart brings with it global
expertise in supply chain and logistics,
Bharti has a better understanding of the
local market
 Bharti Enterprises‘ 100% subsidiary Bharti
Retail, has entered into a franchise
agreement with Wal-Mart which will
provide technical support to Bharti Retail.
Thus Bharti retail format will also reap the
benefits out of this business tie-up
 Bharti Wal-Mart in a Public Private
Partnership (PPP) with the Government of
Punjab has recently started a Training
Centre in Amritsar (Punjab), India‘s first
special skills training centre aimed at
bridging the shortage of skilled workers for
cash-and-carry and organized retail
formats. This is a smart move by Bharti-
Walmart to build human capital and would
pay off in long terms significantly. This is
all the more relevant as Bharti-Walmart is
planning to open its first cash and carry
outlet in Punjab during April – June, 2009.

9. INDIAN RETAIL INDUSTRY ANALYSIS
9.1. Indian Retail Market Analysis based on Nine Forces Model
Social/ Consumer Shifts Threat of New Entrants (High) International/ Economic

 Opposition from small traders/  Doesn‘t require buying of assets Shifts
shopkeepers  Low technology protection  India fast emerging as a major
 Changing outlook of Indian  Products & services differentiation destination for global retail
consumers possible in many ways giants
 Distribution channels replicable
 Huge untapped market & high
growth rate
Bargaining Power of Suppliers Competitive Rivalry (Medium) Bargaining Power of Buyers

(High)
 Medium to low industry  Many players
 High to Medium for retail spaces concentration ratio  Availability of substitutes
 Medium to Low for products &  Scope for many players to grow  High price sensitivity
services  Low Exit Barriers  Informed buyers
 Concentration in few pockets  Concentration of modern retail in
leading to competition few pockets
Threat of Substitute Products &

Services (High)
Government (Political/ Legal Technological Shifts
Shifts)  Unorganized retail-closest substitute
 Liberalized, need further  Multi-level marketing – another  Many technology related
improvement substitute improvements underway
 Restricted FDI in retail  Cost of substitution is low
 Multi-taxation and licensing
9.1.1. Threat of New Entrants (High)
 Time and Cost of Entry: Can be a constraint as new entrant should be capable
of managing high operating costs. However, exiting this business is not very
difficult
 Entering the modern retail market in India is cost intensive. Opening and
operating the retail stores, maintaining inventory of goods and managing the
supply chain requires moderate initial investment and large operating cost. Large
operating costs are on account of:
 High lease rental for retail space in urban India

 Large work force that requires to be hired to manage and operate a modern
retail business
 However, unlike any manufacturing units, retailing doesn‘t require huge capital
investments into owning machineries and other assets. Retailing can be done in
rented spaces (both for retail stores as well as for warehousing) with outsourced
logistics. Therefore, exiting this business at any point of time is not very
difficult
 For any new retail store, it takes around 3-5 years to breakeven. Therefore, any
new entrant would require having strong finances to wait for these many years
before starting to earn from its retail initiative
 Economies of scale: Important and difficult to attain in initial phases by a new

entrant
 Margins in retail sector in India is reducing because of increasing overhead costs

(high lease rental, high component of wages and salaries, cost of logistics etc.)
and growing competition among organized players, and already existing
competition from huge unorganized retail segment.
 Because of reducing margins, ‗economies of scale‘ has become very important to

become profitable in this business. For new entrants, it is difficult to attain
economies of scale in the initial phases with less number of stores and lower
volume of sales.
 Technology Protection: Not a constraint as the required technology can be obtained

by a new entrant as well
 Moving the right merchandise, at the right time, at the right price – to the right
location, for the right customer, in the right quantity requires real time
optimization of product flow and proper integration of front and back end
operations. An ERP system for logistics and warehousing coupled with front end
IT support (for fast billing, updating store stocks, etc.) are required to be invested

into by any new retail player. However, any retail player can possess the
required technology provided the player is ready to invest in it.
 Specialist Knowledge: Not a constraint; addressable through right recruitment,

training and technology support
 Efficient back end (inventory and supply chain) and front end management (retail
store) requires skill, knowledge and experience. However, hiring right kind of
people and adequate training of workforces aided by technology may
adequately serve this requirement.
 Cost benefits: Manufacturers & Companies with well managed logistic teams can
manage cost benefits
 Existing manufacturers of any products would have an advantage in retailing of

those products. This is because the manufacturers would be in a position to enjoy
higher margins for their in-house manufactured products.
For example: Godrej as a retailer in furniture segment has an advantage in terms

of margins because it is also into manufacturing of furniture.
 Companies with well managed logistic teams are bound to have cost as well as
operational advantages over other retail companies. This is because in India, third
party logistics is in its nascent stage and it‘s difficult to find right logistic partners
with sufficient knowledge of the retailer‘s business.
For example: Pantaloon Retail India Ltd. is a part of Future Group. Future
Group has ‘Future Logistics’ as one of its business verticals. Pantaloon retail
gets an advantage because of this.
 Products & Services Differentiation: New entrants can differentiate themselves in

multiple ways
 Retailing as a concept is not limited to any specific products or services. Retailers

may differentiate themselves in terms of having specialty stores dedicated to any
specific product type or service. They may at the same time operate in

hypermarket, supermarket or departmental store formats. Retailers may
differentiate themselves in terms of their target customers, their business strategy
and their ticket size. From this point of view, any new entrant in retail market has
multiple options.
 At present, in each modern retail formats within India, there operate only a
few players and enough scope exists for new players to enter and operate.
 However, within some specific formats such as hypermarket or supermarket

products and services offerings can be differentiated only to a limited extent.
 Access to Vendors: Developing a set of dedicated vendors can be a challenge for a

new entrant
 For branded products, sourcing points are common for all players. What varies is
the bargaining on margins depending upon the strength of brands and the strength
of retail players.
 In case of unbranded supplies (to be sold under private labels) few of the vendors
may be common for many retailers, however, there may be many retailer specific
vendors (one vendor dedicated to only one retailer). For any new entrant in Indian
retail market, developing a set of dedicated vendors is a slight challenge and may
take some time and efforts.
 Distribution Channel: Largely standardized and replicable by new entrants
 Distribution channels are largely standardized in modern retail formats. For most
of the product categories such as apparels, furniture, consumer durables etc. the
distribution models adopted are standardized and replicable. However, in case of
some specific product types such as fresh food, fruits & vegetables, the
distribution channels are little different (largely on account of perishable nature of
these items) and may vary from one player to another.

 Other Barriers to Entry
 Barriers related to Foreign Direct Investment and government clearances/

licensing have been discussed under ‗Government Shifts‘
 Some Social barriers have also been discussed as part of Social/ Consumer Shifts
9.1.2. Threat of Substitutes (High)

 Neighbourhood mom & pop stores, standalone shops selling readymade garments,
electronic equipments, consumer durables, fruit & vegetable vendors, cluster of shops
and other outlets as part of unorganized retail, all are close substitutes of various
Modern retail formats. With the advent of modern retailing in India, the so called
unorganized retail is also challenged to improve and get more structured. This
increases the threat of substitution even more.
 Multi level marketing (also known as network marketing) is another format of selling
that can act as a substitute to modern retail formats to some extent and in some
specific product categories
 Different modern retail formats can act as substitutes to each other as well (intra-
segment substitution). For example: A hypermarket can substitute a supermarket or a
specialty store and vice-versa.
 Cost of substitution: As most of the modern as well as unorganized retail spaces are
operating on lease only, therefore cost of substitution would not be high. However,
multi-level marketing for any product category would consume lot of time and efforts
to develop and grow.
9.1.3. Bargaining Power of Suppliers

(High to Medium for retail spaces; Medium to Low for products and services)

 Suppliers of Retail Space
Before the recent economic slowdown hit Indian market, real estate was booming and the
modern retail space rentals were touching sky. Availability and affordability of spaces
have stayed as critical issues for modern retailers. Builders have been in a strong position
to bargain for higher lease rental. However, the recent slowdown is now forcing builders/
real estate developers to reduce the lease rentals to some extent. Also, speculating the
high growth potential for modern retail in India, real estate developers started with
multiple projects and now there seems to be excess of retail space supply in pipeline. All
this is gradually giving modern retailers some power to bargain against Real estate
developers for lower rentals or adoption of alternate lease models such as revenue
sharing.
 Suppliers of Products/Services
Bargaining power of vendors varies from product to product and depends hugely upon
whether a product is branded or unbranded and whether the relationship with supplier is
formalized or not.
 For most of the product categories, there exist many suppliers and multiple
sourcing options. From this consideration, bargaining power of suppliers is low
except in cases of very established brands.
 Branded products suppliers are in a better position to bargain as compared to

local/unbranded products suppliers.
 One factor that adds to the bargaining power of suppliers is the option of
supplying to unorganized retail shops, which account for around 94-95% of the
total retail market value in India. Margins enjoyed by suppliers in case of supplies
to unorganized stores are higher as compared to organized ones. However, bigger
size of orders (economies of scale) and long term relationship make supplies to
organized retailers profitable.
 In modern retail, there is a growing trend towards formalizing the relationship

with suppliers in terms of joint venture or partnership. Formalizing of supply

relationship makes it a binding upon suppliers to supply to the undersigned
retailer for a certain period at the decided margins and agreed upon terms and
conditions. This restricts suppliers from lobbying against any modern retailer or
from erratic and unexpected behaviour. Altogether, it can be said that bargaining
power of suppliers remains medium to low for most of the product categories in
case of modern retail.
9.1.4. Bargaining Power of Buyers (High)

Bargaining power of buyers is high in case of modern retail. This is largely on account of
 Many Existing and New Players
Presence of multiple players as part of modern retail, entry of more and more new players
and increasing options among buyers to choose for various product and services
 Availability of Substitutes
Presence of large unorganized retail sector with numerous players offering products at
competitive prices and other benefits such as neighbourhood location of shops are a close
substitute for modern retail and therefore a reason for higher bargaining power of buyers
 Increased Buyer Information
Increased level of awareness among consumers on brands, quality, and prices etc. across
different products is another major reason for their higher bargaining
 Higher Price Sensitivity
Various market surveys suggest that Indian buyers are very particular about ‗Good value
for money‘ and this factor influences volume as well as frequency of purchase from any
retail store.
 Modern Retail Concentrated in Few Pockets
Modern retail at present is largely limited to top cities of India and very few tier II cities.
Also, only the middle class and above are being largely targeted. This has led to higher
competition between players to catch more buyers.

All this is resulting into higher gains of buyers in terms of better prices, regular discounts
and offers, improved shopping experience, better services such as free home delivery etc.
9.1.5. Competitive Rivalry (Medium)
 Medium to Low Industry Concentration Ratio
Modern retail industry is in its initial stages in India. The size of tapped market is a very
small proportion of total market potential. In last few years many players have entered
the market. Future group, Raheja Group, Landmark Group, Reliance retail, Aditya retail,
Vishal retail, Bharti-Wal-Mart and a few others are being seen as big players with huge
potential and aggressive plans in retail sector; however none of them can be said to be
enjoying significant market share at present. In other words, at present the industry
concentration ratio is medium to low and therefore not a situation of high competitive
rivalry. It will take a few more years for the market to mature and for clear cut trends on
market share to emerge.
 Space for Existence and Growth of Large Number of Players
Modern retail in India has just taken off and by value it is only 5-6% of the total retail
market in India at present. In terms of penetration, it is concentrated mostly in metro
cities and select tier I & tier II cities. Though the existing base is small, modern retail has
been growing at a high rate. It is expected to grow at a rate of 25-30% or more annually
even during the prevailing phase of economic slowdown. As far as the size of untapped
market is concerned, there exists enough room for new players to enter and grow. The
present level of competition exists because all the players are operating in few urban
pockets only. Infact, the existing players welcome competition because they feel that
increased competition might help in maturing the buyers and in creating a benchmark for
further improvements in modern retail within India.
 Low Exit Barriers
In modern retail, the prevalent practice is to take retail space on lease. Even the
warehouses are on lease. There are no other huge capital investments as well. All this

results in lower exit barriers. This also helps in reducing the level of competitive rivalry
as a non-performing player might exit the market without much loss.
 Concentration of Players in Metros and Tier I Cities
Modern retail at present is limited to top metros and tier I cities. As they are all trying to
grow and grab business in the same geographies, it is leading to relatively higher
competition among players.
9.1.6. Government (Legal and Political Shifts)

Indian Government has liberalized its policies in many ways over the years to incentivize
growth of Modern Retail in India. However, there is an increasing pressure for further
relaxation.
 FDI in Indian Retail
The government of India allows FDI in retail under the following two categories:
 Up to 100 per cent in cash-and-carry (wholesale) retail by global retail chains

(e.g. Metro AG, Shoprite, and Wal-Mart). The cash-and-carry format is a business
to business model, wherein stores sell large volumes of products to the retailers
and not directly to consumers.
 Up to 51 per cent in single brand retail (e.g. Nike, Lee Cooper, Loius Vuitton and
others). FDI up to 51% has been allowed in retail trade of ‗Single Brand‘
products, with prior government approval and under certain conditions:
 Products to be sold should be of a ‗Single Brand‘ only.
 Products should be sold under the same brand internationally.
 ‗Single Brand‘ product-retailing would cover only products which are branded
during manufacturing.
 The government has taken this stance with the objective to attract investments in
production and marketing, improving the availability of such goods for the
consumers, encouraging increased sourcing of goods from India, and enhancing

competitiveness of Indian enterprises through access to global designs,
technologies and management practices
 Government Regulations on Licensing, Taxation etc. (Need to be simplified

further)
 At present, retailers in India need to obtain licenses and permits such as basic
trading licenses, product specific licenses, pollution clearances etc for every retail
outlet (even if it‘s a chain store). According to retailers, this delays the opening
of stores and increases cost.
 Introduction of VAT is a favourable step from Government of India to remove

double taxation and to bring uniformity in taxes across states. However, many
states have still not implemented VAT fully and therefore differential sales tax
system still continues across different states. Multi-point octroi/entry tax
collection is also leads to differential taxing. All this act as constraints for the
retailers in adopting uniform prices for same products in different states.
9.1.7. Social Shifts

 Opposition from Small Traders and Shopkeepers
Retail is the second-largest employer in the country. Entry of large companies as part of
modern retail in India is feared to cause exit of the smaller stores that account for around
95% of the country‘s estimated 12 million retail outlets in India. Many of the small
traders, shopkeepers, wholesalers and vendors are of the belief that Indian government
should stop large corporations from entering the retail segment until it puts in place a
national policy that is agreeable to all the stakeholders. In recent past, there have been
protests, backed by some of the political parties, in some of the Indian states such as Uttar
Pradesh, West Bengal and Kerela that led to closing down of some modern retail outlets
in these regions. Analysts see an element of political opportunism behind these protests.
However, these protests are slowly dying out because of growing realization basis several
studies that India‘s market is big enough to accommodate modern retail alongside the
small shops and kirana stores that will continue to flourish.

 Changing attitude of Indian consumers
Please refer to section on ‗Growth Drivers for Modern Retail in India‘ for details on this
topic
9.1.8. Technological Shifts

Many technology related improvements underway
Modern retail in India is experiencing higher usage of ERP systems and other IT
infrastructure for efficient material handling at back and front end of retail supply chain.
Material handling equipments usage also has gone higher. Efficient supply chain
management in turn is resulting in smaller inventory and real time flow of goods.
Improved technology for goods storage, especially establishment of chains of cold

storage for storing fruits, vegetables and other highly perishable food items, are also
required and are gradually being established.
All the above mentioned technology related initiatives are in their initial stages and have
been adopted by leading players. There is a need for higher level of adoption of improved
technologies.
9.1.9. Economic/ International Shifts

India is fast emerging as a major destination for global retail giants to meet the needs of a
growing breed of middle-class Indians with more disposable income to spend on
consumer goods. As some major markets globally show signs of saturation, India has
certainly emerged as the preferred market for big retailers. The lack of consolidation and
modern retail concepts in India present great opportunities for global retailers.

9.2. Major Constraints for Modern Retail in India
Multiple
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The major roadblocks or constraints for Modern retail in India have been identified as
follows:
 Supply Chain Bottlenecks: Distribution and logistics are major bottlenecks for the
Indian industry, especially for the food industry.
 Poor infrastructure (road, rail and communication infrastructure), coupled with

lack of third party logistic providers makes operations difficult.
 Absence of cold chains and proper storage, and transportation methods (suitable
vehicles and containers) leads to a high wastage and increased transaction and
product costs.

 Limited physical infrastructure. India has one of the largest road networks in the
world, yet less than half of the roads are paved and less than 2,000 kilometers are
express highways. These national highways account for less than 2 percent of the total
road network, but carry 40 percent of the traffic. This is one reason the average speed
in India is 20 miles per hour, compared to the West‘s 60 miles per hour. The poor
condition of roads translates directly to shorter vehicle lifespan, which increases
operating costs and reduces efficiency. Off the highways, firms can only run trucks
smaller than 20 feet. As of now, India invests less than 4 percent of its GDP in
infrastructure, compared to China‘s 9 percent.
 Over-burdened ports. India has a long coastline, but its port system isn‘t well
utilized. Seventy percent of the seaborne trade is handled by 2 of its 12 major ports,
while 180 minor ports go virtually unutilized. As a result, turnaround time far lags
other global ports with vessels taking up to 3½ days to debark. Many of the secondary
ports have infrastructure problems that aren‘t a quick fix. Even within its large ports,
India can‘t support 6,000 TEU containerships, which make up 25 percent of today‘s
shipping volume. In addition to constraining India‘s growth in offshore production,
this makes it difficult for manufacturers hoping to import, rather than produce
products for Indian consumers.
 Real Estate: Availability and Affordability
 The availability of real estate is a critical issue that would influence the rate of
growth and profit margins of retailers. Unavailability of government land, zoning
restrictions and lack of clear ownership titles further add to the problems
 Delays in delivery of malls are the other constraints that retailers are facing. Many
projects are running 6-12 months behind schedule, with properties not being
delivered on time.

 Pressure on Margins: Rising Costs: Already prevailing thin margins of retailers are
facing further pressure from the following:
 Lease rentals: On an average, lease rentals have been accounting for 7-8% of
revenues of retailers. Rental values at prime locations are very high. Imposition of
service tax @ 12.36% with effect from 2007-08 is another cost component for
retailers
 Employee costs: Training costs constitute a huge component of total employee

costs of retailers. Manpower expenses have been accounting for 6-7% of total
revenues of retailers
 Multiple Legislative Laws
Multiple licenses and clearances required for setting up and operating a retail store add to
the impediments faced by the organized retail industry. They reduce the flexibility of
operations, hinder fast expansion and increase the overall cost. There is a need for
government to reduce the licenses requirements from the current 37-45 licenses to
moderate levels, besides reducing contact points.
 Multiple Taxation Complicates Uniform Pricing
The retail industry attracts a variety of taxes from both Central and State governments.
They include the CST, sales tax (state), entry taxes for inter-state sales and octroi,
depending upon the area of operation and procurement, and the type of goods sold. While
most states have abolished octroi, it still exists for some large city markets in Karnataka,
Maharashtra and Gujarat. Multiple taxation makes it difficult for retailers to maintain
similar prices across geographies. The introduction and implementation of value added
tax has resolved this problem for retailers to some extent.
 Inadequate Human Resources
Growing concern about paucity of trained personnel, both at store and managerial levels,
is evident in the sector. With the advent of foreign players, the problem is likely to
worsen.

Retailers are increasing salary levels and offering employee stock options to contain the
high attrition rates. Seeing this as an opportunity, various institutes have begun to offer
courses specializing in retail segment
 APMC Act: Reforms Still Required in Few States
APMC act in its original form restricted any organized retailer from sourcing directly
from farmers. However, growing need for change in the mode of operation of the current
system by inviting investments and competition from the private sector, has led to
drafting of new Model APMC Act, 2003. Based on new recommended model, some
states now are amending their individual state APMC acts and are allowing direct
procurement by retailers from farm gates. Recommended amendments, however, have
not been introduced in all states and also the reforms in some ways are not adequate for
direct and hassle free sourcing from farmers.

9.3. Emerging Trends in the Indian Retail Industry
Focus on Tier
II & Lower
Cities
I
Go ncr
od eas -
s ed
un S ying
La de ha sT l
be r P re ant loba
tr G
ls riv of
at En ith ers
w w y
e Ne up Pla
Emerging
Trends in the
Indian Retail
Industry
ail In
R et or
g
ice Ma anic
e rv ets rk Ro
S l
lf- Out et u
Se En te f
try or
Aggressive
Growth Plans
with Due
Corrections
on Account
of Economic
Slowdown
 Aggressive Future Plans with Due Corrections on Account of Economic

Slowdown
Most of the modern retailers in India have aggressive growth plans. In light of present
economic slowdown, these retailers have corrected down their targets, reduced their pace
and have started investing carefully; however, they continue to be ambitious, optimistic
and are planning big.

Future Plans of Some of the Leading Retailers
By 2011, Future Group (Pantaloon Retail) plans to have 300 stores expecting revenues of
Rs 13,000 crore. It plans to reach 24 million sq feet of retail space by June 2011, up from
8.6 million sq feet right now. The Group has maintained its pace while expanding its reach
despite the sluggish growth in the economy presently.
Shopper's Stop plans to invest Rs 1,000 crore for expanding its existing store space of 1.3
million square feet to 2.7 million square feet and move from 25 stores at present to 50 stores
over the next 3-4 years (by 2012-13).
Tata Group's retail arm Trent, which operates Westside, plans to add 8-10 stores every year.
Currently, it has 31 stores in India
Spencer's Retail, which closed down and relocated 56 of its unviable stores recently, will set
up 300 more stores till 2010 for an investment of Rs 500 crore. Currently, Spencer's has 700
stores, commanding a retail space of 2.5 million, which will see addition of another 1.3
million sq ft by 2010.
Apart from the measures discussed in section, few other strategies adopted by retailers to
beat Economic slowdown:
 Cost cutting by focusing on improving employee productivity, cutting down on

raises of senior employees, reducing spends on advertising and communication,
recruitments, etc.
 Focusing on value and discount retail formats
 Planning to add to their number of stores by capitalizing on the prevailing lower

lease rentals on account of slowdown in real estate sector
 Increased focus on consolidation of already existing stores and targeting to earn

higher profits through them

 Inorganic Route for Market Entry
Lucrative opportunities in Indian retail sector have encouraged many companies with
different backgrounds to enter the sector. Because of lack of any retail related experience,
many of these companies have marked their foray in retail sector through acquisition of
some already existing smaller retail companies.
 Aditya Birla forayed into retail by acquiring Trinethra, the South India based chain of
stores
 Indiabulls entered the retail market by acquiring piramyd retail
 Reliance retail started its first acquisition by buying out the retail wing of Adani.
Adani group had forayed into retail by acquiring a leading supermarket store V Ravjis
in 2000.
 New Entrants Tying-up with Global Retailers
As many Indian companies with no prior experience in retail are entering the sector, there
is a growing trend towards tying up with global retailers to share their knowledge,
experience and expertise.
 Two-wheeler manufacturer, Hero Group has entered the Indian retail industry
through lifestyle and home décor stores called OMA. Towards this, the company
has entered into supply arrangements with Danish firm, Villa Collection, Thailand
government‘s Royale Porceliel and UK‘s DK Living
 For efficient back end operations and supply chain management, Tata Trent has
partnered with UK retailer ‗Tesco‘
 Focus on Tier II & Lower Cities/ Towns
Though the top metro and tier I cities would continue to be the centres for retail business
during the next few years, retailers have started focusing on tier II and lower cities and
towns to make an early mover advantage and acquire big gains in long term. Also, with

increasing focus on ‗Value retailing‘, tier II and lower towns and cities become potential
market for modern retailers.
 Increased Share of Goods under Private Labels
Retailers enjoy far lesser margin in branded products as compared to private label
products. As the competition is increasing and profit margins are getting smaller, there is
a growing effort by retailers to have more and more products of various quality and
grades under private labels. Share of private label goods are generally very high in case
of apparels and FMCG. Supermarket and Hypermarket Retailers are to some extent
competing against FMCG brands.
Our competition is with the Levers and the P & Gs of the world. Their strength has been
through the Kirana Stores that are selling these products. 60% of retail market is FMCG
(food and non-food) and that business has been in hand of 7-8 players. We aim at
increasing our private label products in our stores.
-- As stated by one of the senior officials of Vishal Retail
 Self-Service Retail Outlets
The global economic downturn has opened up opportunities for self-service cash
transaction and check-out kiosks at retail stores in India. Retail majors like Reliance
Retail, Pantaloon Retail, Tata‘s Trent, and others have showed significant interest in
installing self-service billing counters and check-out kiosks within their hypermarkets
and other retail formats. Deploying self-service cash transaction kiosks might be a good
cost-cutting exercise for retailers, as it will enable pruning of employees and cashiers
might be then shifted on the shop floor. Also, this will solve the issue of long customer
queues at billing counters.

9.4. Critical Success Factors in Retail
For modern retail industry in India, various critical success factors have evolved over a
period of time
 Location
Well placed stores with high visibility and easy access, have potential to attract higher
footfall. Location is a key factor in India for
yet another reason. Poor infrastructure EVOLUTION OF CRITICAL SUCCESS FACTORS
(particularly, roads and ports) leads to

Knowledge &
inefficiency in the supply chain, which Information
impacts profitability. The retailer has to

ensure proximity to his/her source as well as Merchandize
customers. In deciding the location of a retail

store, it is important to consider the following
Geography
parameters
(location)
 Types of customers
 Visualizing the building,
 Merchandise expected to be sold Source: David Oliver, Partner,
Kurt Salmon AssociatesUK
 Expected image/brand
 Retail space and storage area
Superstores need to be Specialty goods are more Furniture, Consumer

located near residential areas unique than most products Durables & Upscale
rather than in a shopping and customers generally clothing are examples of
mall or in commercial areas won't mind traveling out of higher prices items and for
to allow easy access to the way to purchase these these items customers will
customers for their daily types of products. Specialty want to compare prices
need items. stores may also do well near before making a purchase.
other shopping stores. Therefore, retailers will do
well to locate their store near
similar stores.

With the arrival of improved technology and betterment in infrastructure, location of
store has started becoming less of a constraint in India. In addition to a good location,
now Merchandize has also evolved as a key success factor.
 Merchandize
Merchandize panning is critical to meet the sales target and achieve higher margins by
ensuring optimal inventory levels.
Review of past Strategic Channel Sales Category Level Range Space

performance Planning Budgeting Margin Planning Planning
Planning
 Knowledge and Information
 Knowledge about Customer Tastes and Preferences
India is a country of people belonging to different cultures and lifestyles. It is very

important for retailers to understand the variations in tastes and preferences across
geography, gender, age groups and various economic classes within India.
 Real Time Inventory Management through Proper Information System
Efficient inventory management is key to successful retailing and it can be achieved

through proper Information system in place backed by technology such ERP system, and
other IT infrastructure. Proper inventory management becomes all the more critical in
India because of poor physical infrastructure conditions in most of the regions.
Apart from the above three factors, other critical success factors for successful retailing in
India are:

 Customer Satisfaction and Retention
Loyalty Programmes in Retail
By making available to the customers the Pantaloons Green Card Program
Shoppers‘ Stop First Citizens Club
desired products, investing in CRM, and Globus Globus Privilege Club
running loyalty programmes. Westside Club Westside
Crossword Book Rewards Program
Planet M M-xtasy World
 Proper Product Display/ Placement
With an idea to achieve high visibility of shelves. Three important aspects considered for
product placements in retail stores are ‗Eye Level Shopping‘, ‗Timing of Shopping‘ and
‗Spontaneous Purchase‘.
 Building Traffic: By working on the concept of ‗More of the Right People for More
Time‘.
 Physical Layout: It is an important component in creating a vibrant retail experience

for customers. Proper store layout is important
 To guide the customer around the store and entice increased purchases
 To create balance between sales and shopping space
 To create effective merchandise presentation
 Keeping Pace with Technology
One key differentiator between the successful and not-so-successful retailers is primarily
technology. Customer knowledge management through CRM software, and supply chain
management (both back and front end) through ERP system, RFID based tracking, web
technologies, and other supporting IT infrastructure, are very critical for successful
retailing.

10. RETAILERS’ PERCEPTION ABOUT THAI IMPORTS
Some of the leading retailers in India are, at present, already sourcing or planning to
source apparels, plastic goods including kids‘ toys, home décor items & electric goods,
furniture, footwears, processed food, personal care items and some other items, in limited
quantities, from Thailand.
10.1. Apparels
According to Indian retailers, Thailand is very strong in readymade denim garments
(Jeans, T-shirts, and Shirts etc.) and other fashion apparels in men‘s, ladies‘ as well as in
kids categories.
―Thailand is famous for washed denim. Thailand manufacturers have very good
understanding of denim wash and they are good at stitching and packaging as well. The
quality of Thai denim is better than that of brands like Lee & Levi‘s‖
- Head Merchandiser for Apparels in One of the leading Departmental Stores in India
Many of the leading retailers such as Shopper‘s Stop (Raheja group), Pantaloon retail
(Future group), Vishal Retail, and Lifestyle (Landmark Group) are already sourcing
denims and other fashion apparels from Thailand. However, quantities of imports are
very low at present. For example: In 2007-08, Shopper’s Stop sourced two containers of
men’s and ladies’ readymade denim garments from Thailand.
10.2. Plastic Goods
Plastic containers, water bottles, plastic utensils, kid‘s toys, and other plastic based
general merchandize items are also being imported from Thailand in limited quantities by
some of the leading retail players. According to industry sources, plastic goods of
Thailand are high on quality and relatively cheaper. Example: Big bazaar (part of
Pantaloon group) at present imports around 1/3 rd of its plastic ware, plastic containers
and other plastic based products from Thailand.

10.3. Home Décor Items & Electric Goods
Thailand home décor items are very popular in India. They are perceived as good in style,
quality and reasonably priced as well. Artificial flowers, flower vases, display paintings,
electric lamps and lamp shades are some of the products already being imported by a few
modern retailers in India. However, these product categories don‘t contribute much to the
value based retailing in India (hypermarket and supermarkets) at present. Example:
Vishalmart, which targets at lower middle buyers in India, has discontinued keeping
artificial flowers in its stores as they didn‘t sell much.
10.4. Furniture
Rubber wood, also known as parawood, based furniture of Thailand are in demand in
India. Thailand furniture are perceived as high end stuff with good quality and finish.
According to some of the leading retailers dealing in furniture, Chiangmai and Bangkok
Break up of Supplies to Pantaloon Retail in Furniture Segment (2007-08)
Indonesia (Synthetic
Malaysia (Rubber Wood
Ratan, Cane, Particel
Furniture), 15%
Board, MDF Furniture),
5%
China(Glass Furniture &

Sofa), 25% Thailand (Rubber/
Parawood Furniture),
3.5%
Indian Manufacturers, Denmark & Italy, 1.5%

50%
are the two major sourcing hubs for furniture in Thailand. However, at present only a
select retailers procure from Thailand and that too in lower volumes. Value and volume
of imports from China and Malaysia are higher in furniture segment than Thailand.

10.5. Footwear
Major sourcing for footwear retailing is happening from within India. Imports are
happening largely from China and in small volumes from Italy and Brazil. At present,
hardly 1-2 retailers in India are importing Thailand footwears and that too in very small
volumes. However, retailers in India appear to be interested in procuring more of
footwears from Thailand. According to some of the leading retailers, Thailand can be a
preferred sourcing hub for ladies‘ footwears. According to these retailers, Thailand
manufactured ladies‘ footwears have a typical style and look and stiletto sandals happen
to be one of Thailand‘s specialties with huge potential to sell in Indian markets. Apart
from ladies' footwears, some of the Indian retailers also appear to be interested in
sourcing Q & Q sole sheets and some other footwear accessories. However, Thailand
footwears are rated low on quality and this is one factor that discourages imports from
Thailand.
―We have visited Thailand and explored the footwear market there. We checked all kinds
of footwear over there- high end, mid as well as low end. Men‘s footwears are okay in
quality, however, appearance-wise not very appealing for Indian buyers. On the other
hand, female footwears carry great style, excellent finish and potentially high appeal for
Indian buyers, however, not upto mark on our quality parameters. We would need to get a
lot of things changed, such as shoe sole, in case we get into sourcing from Thailand.‖
- As stated by the Merchandiser of one of the leading footwear retailers in India
-
10.6. Processed Food
According to some of the modern retailers, Thai cuisines are picking up fast in India.
However, at present the base is very very small and that is why even high growth rate is
not adding much volume till now. Thai cuisines are tangy and spicy and therefore hold
fair chances to be accepted by Indians at large. Most of the Chinese cuisines have been
Indianized and that is one big reason for their wide level acceptance among Indians. Thai
food would also require to be tuned to Indian taste. This process will be gradual and take
sometime.

As identified during the study, some important factors that may influence the
acceptability and popularity of processed or ‗ready to cook‘ Thai cuisines in India are:
 Packaging: Thai food packets mostly have lot of shrimps drawn on them (even in
case of vegetarian items), largely because of high popularity of seafood in Thailand.
Also, Thai fonts are very different and not very clear for Indians. Product labels and
other relevant information and instructions on the food packets, even if printed in
English language are not very clear because of the typical Thai font type used. All
this alienate Indian buyers.
 Green, White and Red Dots: Around 70% of world‘s vegetarians are Indians. Even
the non-vegetarian Indians are very selective about what they may consume. Indian
buyers are very particular about green, white and red labels on the food packets
standing for vegetarian, eggetarian and non-vegetarian food types respectively. This
is another critical factor for selling of packaged food in India.
 Cooking Instructions: Most of the Indian consumers are not very experimenting and
many refrain from retrying any dish in case it doesn‘t appeal to them in first trial.
Clearly mentioned cooking instructions become very critical for less known food
items. In case of some Thailand based packaged food, the specific instructions on
quantities of various add-ons are missing and that discourages buyers from buying
them.
 Thailand pastes and sauces are growing in popularity among Indians. However, Thai
noodles are different and Indians don‘t have a taste for that.
―Indians straightaway compare any noodles with Nestle‘s Maggi. And now with an
evolved Indian taste for Indianized version of Chinese noodles, Thai noodles will have a
tougher challenge in establishing itself in Indian market.‖
- As stated by Senior Research Manager, Food Bazaar

10.7. Personal Care Items
Many of the leading brands in personal care category have emerged from Thailand.
Thailand is known to have high quality products in items such as soap, packs, face and
body cream, aroma oil, massage cream etc. Some of the leading retailers (such as
Pantaloon Retail) in India are of late focusing on increasing their share of business under
this category and are planning to import these items from Thailand in considerable
volume. However, except for the brands that are already popular in India, what type of
response does the other personal care products from Thailand get from Indian buyers is
still to be seen.
10.8. Other factors related to Thailand
 Importing from Thailand is more convenient as compared to countries like China

because they speak in English and communication is smooth
 Both Thai and Indian Currency fluctuate a lot against US dollar. This creates
uncertainty about the actual payments to be made for import of various products.

11. POSSIBLE WAYS FOR ENTRY OF FOREIGN
RETAILERS IN INDIA
International players can enter India through multiple routes:
11.1. Manufacturing and sourcing
Foreign players are allowed to enter India if they manufacture or source products locally.
International companies such as Levi‘s and Tommy Hilfiger source their products from
domestic manufacturers like Arvind Mills, whereas Benetton, Sony and Samsung have
manufacturing units in the country. We feel the impact of opening up FDI on this route
would be minimal, as cost advantages as against high import costs would compel
international players to source or manufacture their products in India.
11.2. Cash-and-carry operation

Players are allowed to sell goods only for business purposes like hoteliers, commercial
organizations and retailers, and not for personal consumption. Since 100 per cent FDI is
not allowed in India, foreign players have entered India through this route. (Please refer
to section for details on foreign players that have entered or planning to enter India
through this route)
11.3. Franchising
This is the most preferred mode through which foreign players have entered the Indian
market. Franchising entails granting of rights by one party, the franchiser, to another, the
franchisee, in return for a sum of money. The franchiser invests his/her assets in a system
to utilize the brand name, operating system and ongoing support of the franchisee.
Lacoste, Pizza Hut, Mango, Nike and Marks & Spencer have entered India through this
route. With the opening of FDI, many franchisees may lose their franchising rights as
franchisers may chose to change their mode of operation. On the contrary, many existing
franchisees may also enter into JVs with the franchisers with the opening up of FDI.

11.4. Test Marketing
This route allows foreign players to test the demand for their products in India for 2 years
before undertaking investment through setting up of manufacturing facilities in India.
Players such as Amway, Oriflame and Nokia have entered India through this route.
Players may continue to enter India through this route even if FDI in retail is allowed,
because they can test demand for their products before undertaking any major
investment.

12. CONCLUSIONS AND RECOMMENDATIONS
Organized retailing in India is at present in its initial stages and experiencing high
growth. High growth rate is on account of existing lower penetration of organized retail
and presence of huge untapped market. The market is expected to grow at more or less
the same pace till it reaches the stage of maturity. Almost all modern retail formats in
various product verticals are poised to grow fast during the next few years.
Under the wake of present global slowdown, organized retail market in India has seen
some corrections in entry and growth plans by the prospective and existing players.
However, most of them continue to be aggressive and plan huge investments with an
intention to make early mover advantage and increase their presence pan India.
As far as Thai entrepreneurs are concerned, they can plan to enter organized retail in
India under many product verticals.
12.1. Level of Attractiveness versus Suitability for Thai Investors

Low High
Level of Attractiveness
High Apparel
Personal Care
Stores
Footwear,
Home Plastic ware/
Décor Furniture &
Kitchenware Furnishing
Items
Cash &
Carry Stores
Restaurant
Chains (fast
Suitability to Thai Investors/ Suppliers
food outlets,
Fashion and coffee
Accessories chains)
Food &
Grocery
Theme Malls/ Consumer

Specialty Malls Durables/ Home
Appliances
Low

 In terms of attractiveness, Value Retailing scores over Lifestyle Retailing and
Premium Lifestyle Retailing. Apart from metro and tier I cities, value retailing has
higher potential to grow in tier II and lower cities. Also, value retailing is the least
impacted segment under the present situation of economic slowdown and all retailers
have aggressive growth plans in supermarket and hypermarket formats. However, due
to FDI restriction, it is not possible for foreign players to enter any multibrand outlet
formats (such as hypermarket, supermarket, departmental stores, specialty stores etc.)
and therefore these options can‘t be considered by Thai Investors at present.
 Apparel as a category is among the highest on profitability and highly suitable for
Thailand as well. There exists very high potential for Thailand in this category.
 Thailand ranks high on personal care products. Modern Retailers in India are of late
focusing on growing their business in personal care category. There is a growing
opportunity for Thailand in this category.
 Though Thailand has many things to offer under home décor category (artificial
flowers, flower vases, lamp shades, electric lamps, paintings and wall hangings etc.),
the share of these items as part of modern retail in India is comparatively lower.
However, the category provides reasonable opportunity for Thailand to explore
further.
 Restaurant chains (especially the Fast food outlets and Coffee chains) are one the
fastest growing categories of modern retail in India. They are spreading fast into tier
II cities as well. There exists high opportunity for Thailand based fast food outlets
and coffee chains to foray into Indian market. However, for successful entry and
expansion, they need to ensure that their offers are Indianized and suitable to Indian
platter.
 Food & grocery stores are very high on attractiveness as far as modern retailing in
India is concerned. However, except for some sauces and pastes, there are not many
processed and packed food items where exists high potential for Thai offerings at
present. Most of the sourcing in Food & grocery category happens from within India

and the study suggests that it would continue to happen the same way atleast for next
few years.
 Modern retailing in India is still not mature enough for wide acceptance of Theme
malls or specialty malls. There have been big plans on part of real estate developers
as well as leading retailers to come up with such malls in India. However, many of
these plans have been stalled in wake of global slowdown. Also, there has been a
realization that it will take sometime before Indian buyers develop an orientation to
shop from specialty malls.
12.2. Proposed Entry Strategy
Thai Entrepreneurs should plan to invest in Indian Retail Market in three phases as
depicted below:
Select Product Categories

(under formal agreement)
Theme or Specialty Malls

through JVs/ Franchisees
JV Partners/ Franchisees/
Based on Thai Products

Manufacturing Base in
Cash and Carry Stores
Single Brand Outlets
Logistic Parties
Look Out for
As Suppliers
Thailand’s Entry Strategy
Time Horizon: 1st Year 2 nd & 3rd Year 4 th Year Onwards

Test Marketing in Select
Phase I Phase II Phase III

Product Categories

12.3. Phase I
During the first year, it is being proposed that Thai investors explore the business
opportunities as suppliers to Indian retailers. In the meantime they should be at constant
look out for suitable business partners in India for opening of single brand outlets in
various product categories.
12.3.1. As Suppliers
Product Categories Apparel & Fashion Accessories, Footwear, Personal Care (especially skin
care items), Furniture and Furnishing, Plasticware/ Kitchenware, Home
Décor Items, Processed and Fresh Food Items
Concerns/ Constraints  One of the factors that discourage retailers in India from importing is
(if any) that most of the sourcing happens on ‗Outright basis‘. Unless and until
the retailers are very sure of sale or get reasonably high margins, they
don‘t import goods in large volumes.
 Frequent currency value fluctuation is another factor that discourages
retailers in India from importing from Thailand
Recommendations
 Thai manufacturers/ suppliers should work on establishing formalized (through JVs, partnership
etc.) and long term supply relationship with the existing retailers in India in the mentioned product
categories.
 To ensure supplies in large volumes, Thai manufacturers should be ready to adopt consignment
model of supply for select non-branded as well as branded goods and concessionaire model of
supply for high end branded goods.
 Supply of ‗made to order‘ goods is likely to happen under ‗Outright‘ model only. To establish long
term supply relationship for this type of supplies, Thai manufacturers should focus on delivering as
per the required specifications, implementing strict quality check norms and on time delivery.
 Thai manufacturers require taking retailers in India under confidence through proper mutual
planning coupled with clarity on currency exchange value at which the supplies may take place
even at any later point of time in future.

12.3.2. Look Out for Joint Ventures/ Franchisees/ 3 PL
Product Categories Apparel, Footwear, Personal Care (especially skin care items), Furniture,
Plasticware/ Kitchenware, Home Décor Items, Food Outlets
Concerns/Constraints  Selecting the right JV partners or Franchisees in each of the product
(if any) categories
 Awareness about various laws of the land
 Proper formalization of relationship on mutual agreement
 Selecting the appropriate 3PL logistic party
Recommendations
Selecting the Right JV  In each of the product verticals, Thai investors should select such
Partners companies for partnership/ JVs within India that complement their
strengths. Selected partners should
 be knowledgeable about Indian customers
 preferably have experience in retailing in the given product

categories
 preferably have presence in all the zones – South, North, West and
East within India
 Under the present situation of lack of proper 3PL logistic players in
India, it is preferable if the JV partners have their own well
developed in-house logistic arrangements.
Preferring ‘Master  It is recommended that in place of direct franchising, Thai Investors

franchisee & Sub should first get into JVs with Indian partners in each of the product
franchising’ over categories (including food outlets). After finalizing the JVs, company
‘Direct Franchising’ owned single brand outlets should be opened. It is only after a
considerable number of company owned outlets are established that
franchising option should be exercised. This mode of operating is also
known as to ‗Master franchisee and Sub-franchising model‘. This

approach will aid Thai investors in exercising better control over its
outlets in initial phases and manage them in the desired manner.
 Once a few ‗joint venture company‘ owned outlets get established,
further expansion may be planned through franchisee route.
Formal Agreements  All the agreements should preferably be formalized or legalized with
and Clarity on Terms clear understanding of terms and conditions.
& Conditions  To ensure good deals, Thai investors must be well aware of various
laws of the land including the property laws (such as Transfer of
Property Act, 1882, The Indian Contract act, 1872, The Registration
act, 1908).
Building in-house  In case the JV partners do not have well developed in-house logistics
Logistic Facilities or team, then the Thai investors alongwith their JV partners should look
Selecting Appropriate out for proper 3 PL Players with required business knowledge in each
3 PL Party of the product categories. The logistic party may be common for more
than one product category.
 For food and beverage outlets, there is a need for cold chain based
logistic and warehousing arrangements
 Also, for food and beverage outlets, suppliers of various semi-
processed/ semi-cooked food items, and processed food items need to
be identified and tied-up with. In this case also, it is recommended to
have formalized agreements.
12.4. Phase II
Acting as suppliers would provide good insights about the type of demand that exists in
India, variations in choice and preferences that prevail across different zones/regions, and
specific Thai goods (in various product categories) that have potential to sell within India.

Also, it will make the Thai suppliers more knowledgeable about the existing retailers in
India.
Once the partner companies have been identified in different product categories, and the
formal agreements have happened, the branded products manufacturers of Thailand
should then immediately focus on opening of single brand outlets.
While some of the branded products manufacturers of Thailand shall be busy opening
Single brand outlets in Joint venture with Indian companies, a few leading Thai retailers
may plan to start Cash and Carry business in India.
In case of a few brands within select product categories, such as Personal Care Items,
Consumer Durables and Home Appliances, and Processed food, Thai Manufacturers may
plan to enter India through the route of Test Marketing.
12.4.1. Single Brand Outlets

 Single Brand Outlets in Non-food Categories
Product Categories Apparel, Footwear, Personal Care (especially skin care items), Furniture
Plasticware/ Kitchenware, Home Décor Items
Concerns/Constraints  As specified by Govt. of India, ‗Single Brand‘ outlets can be opened
(if any) only for products which are branded during manufacturing and are
sold under the same brand name internationally. This condition
would require to be strictly followed.
 Target customers, store locations and type of lease agreement for
opening of stores are some of the critical factors
 Poor physical infrastructure coupled with lack of proper logistic and
warehousing facilities are the other major concerns.
Recommendations
Identifying Target  Target customer base within India should be clearly identified for
Customers each of the selected brands in each of the product categories before
opening of single brand outlets.

Store Location  Store location should largely be decided based on target customers.
 In case any brand aims at premium/ high end customers, the

brand outlets may be opened as standalone stores in the vicinity
of posh residential areas or as part of high end shopping malls.
 If the brands target at lifestyle category customers, it is
preferable to open them as part of shopping malls with potential
to attract high footfall or as standalone stores in High streets
 For brands targeting at extremely value conscious customers
(middle or lower middle income groups), the first priority should
be to have low rentals. The outlets may be stand alone stores
located at not so prime streets or shopping malls in not so prime
areas.
 Store location related recommendations, specific to some of the

product categories have also been discussed in the later part of this
section
Recommended Rental  It is recommended that Thai investors should bargain with builders
Model for lease agreement under ‗Revenue sharing model‘. They should
also bargain for lower fixed rental component under revenue sharing
model.
Focus on Building  Efficient supply chain management needs to be ensured through

Efficient Supply Chain proper use of technology both at front and back end and through
strong logistics and warehousing arrangements (either company
owned or outsourced)
 Thai investors should, if required, be willing to invest in developing
their in-house logistics and warehousing facilities.

 Single Brand Food & Beverage Outlets
Product Category Restaurant Chains & Coffee Shops
Concerns/Constraints  Type of cuisines offered and their acceptance by Indians residing in

(if any) different parts of the country is the first concern. Study findings
suggest that at present Thai cuisines in their present form are not
widely accepted in India.
 Lack of cold chain based proper logistics and warehousing facilities
and the chances of high wastages are the other major concerns
Recommendations
Type of Food Outlets,  It is recommended that during the initial phases, Thai investors, in
their Location and JV with identified Indian players, open fast food joints and coffee
Geographical Spread chains.
 These fast food outlets and coffee chains may be opened first in
Metro and tier I cities. Later on they should be taken to lower tier
cities as well. Preferred locations for these outlets would be near
office complexes, shopping malls, institutional areas, townships, and
high streets.
 Thai specialty restaurant chains may be started only at very select
locations of the top metropolitan cities of India. Initially, a higher
focus should be at serving Thai specialties through counters as part
of food courts in shopping malls.
Indianization of Thai  Also, for Thai cuisines to be a hit in India, it is required to Indianize
Cuisines them by adding flavours and spices that suits Indian taste buds. This
should be on similar lines of Indianization of Chinese Cuisines
which resulted in wide acceptance and huge popularity of these
cuisines in India

Minimizing Wastages  Thai investors need to focus at minimizing the wastages during
through Efficient supply and in inventory of the various semi processed/ semi-cooked,
Supply Chain processed and fresh food items that would be sourced for various
Management types of preparations. This can be done through proper use of
technology both at front and back end of supply chain, having
extensive arrangements for cold storages and temperature controlled
fleet, and by maintaining optimal level of inventory. Thai investors
should, if required, be willing to invest in developing in-house
logistic and cold storage chain facilities.
12.4.2. Cash and Carry Stores

Product Categories All products that typically go into a Hypermarket (as sourcing of goods
from within India is allowed under this format)
Concerns/Constraints No major concerns
(if any)
Recommendations
Experience in Cash &  Thai investors, preferably with similar experience, should plan to
Carry Format enter India through Cash and Carry b2b sales format.
(preferable) Opening of 'Cash and Carry' stores throughout the country shall
provide a golden opportunity to Thai investors to understand the
market and to make in-roads into India. Also, when the restrictions
on retail industry are lifted within India, Thai investors will be in a
strong position to easily convert their 'Cash and Carry' stores into
highly profitable supermarkets and hypermarkets.

Tying-up with Local  Thai investors would require to source goods in bulk directly from
Indian Players manufacturers across various product categories from within as well
Recommended as from outside India including Thailand. Sourcing decisions need to
be well informed. Also, the business requires good local market
understandings. To facilitate all this, it is recommended that Thai
investors enter Cash and Carry business in tie-up with any local
Indian retailers or manufacturers.
Geographical Spread of  To start with, it is recommended that cash and carry stores are
Stores opened in some prime market locations of all the four metropolitan
cities. Further the presence should be expanded to tier I and tier II
cities.
Logistics &  It is recommended that central warehousing (distribution centre)

Warehousing system is adopted for most of the product categories except for
perishable food items.
 Thai investors may plan to outsource the logistics and warehousing
activities by identifying the right 3PL or 4PL parties. However, if
required they should be ready to develop in-house logistics and
inventory management capabilities.
12.4.3. Test Marketing

Product Categories Personal Care Items, Consumer Durables (including Home Appliances),
and Processed food
Concerns/ Constraint A major decision of whether to invest in manufacturing facility or not
(if any) needs to be taken based on Test Marketing. Test marketing is allowed for
a maximum period of 2 years within India. Hence, there is pressure to best
utilize this time span to understand the market response and to estimate
the actual demand for any given product.

Recommendations
 It is recommended that Thai investors conduct test marketing for some of their innovative and
new products in Personal care category and consumer durables (including Home appliances).
Some of the processed food items could also be test marketed for their popularity in India
 It is recommended that a few wholly owned subsidiaries are established that will import items
in the mentioned categories from Thailand for test marketing.
 Test marketing should be carried out in a way that it encompasses all the zones within India-
South, North, East, West and Central. It is very critical to understand the variations (if any) in
demand across geographies.
12.5. Phase III

With the passage of time, competition would grow in modern retail market within India.
To stay profitable in long term, it is important to cut down on cost of shipment and
transportation. Establishing local manufacturing base, rather than continuing to import, is
therefore a much desired step for select product categories. Also, this would be the time
to decide about putting up manufacturing facilities for the products that were Test
Marketed during Phase II. Manufacturing decision would remain non-impacted and
advantageous even if the FDI route is cleared by Government of India in future.
Theme or specialty malls had started catching up in India when the recent real estate
slowdown hit it negatively. However, by the time phase III is entered, Theme malls
would have grown big on popularity. Thai Investors may plan to develop Thai Specialty
Malls.

12.5.1. Establishing Manufacturing Base in Select Product Categories
Product Categories Denim based Apparels, Personal Care Items, Consumer Durables,
Processed Food (Sauces, pastes etc.), Home Décor Items
Concerns/ Constraints  Establishing manufacturing base requires huge capital investment
(if any)  Also establishing manufacturing base depends upon multiple factors
such as allotment of land, government clearances, availability of
finances, various government incentives etc.
Recommendations
 It is recommended that Thai manufacturers plan to invest in setting up of manufacturing base
in India only for those Thai products that generate huge demand in India such as Denim based
Apparels.
 Manufacturing bases also need to be established for products with positive response during test
marketing phase
 It is recommended that Thai investors foray into manufacturing in partnership/ JV with any
existing local manufacturers within India.
12.5.2. Entering Theme / Specialty Malls

Product Categories Apparel, Footwear, Personal Care (especially skin care items), Furniture,
Plasticware/ Kitchenware, Home Décor Items, Food Outlets
Recommendations
 It is recommended that Thai investors collectively take entire mall space on lease at select
locations (preferably in main market areas) of the top metropolitan cities. Each of the shop
spaces within these malls should then be occupied by single brand outlets across various
product categories. Some of the identified Food and beverage outlets of Thailand would also be
allowed space in these malls. Altogether, these would be malls dedicated to Thai products and
Thai specialties.
 Once this concept gets popular in metro cities, there can be step by step expansion plans to tier I
and lower cities.

12.6. Recommendations on Focus within Each Identified Product
Category
Product Categories Category-wise Focus

Apparel and Fashion  All types of denim based apparels for men, women and kids
Accessories  Other fashion and casual apparels for men, women and kids
 Female footwear (specially the stiletto heel sandals)
Footwear  There is a need for Thai manufacturers to keep higher quality standards
for female footwears
 Various available range of products (skin care and cosmetic items, and
Personal Care
health care products)
Plasticware/
 All types of plastic wares (including plastic containers)
Kitchenware
Furniture  Rubber-wood/ Parawood based furniture
 Artificial flowers, flower vases, lamp shades, electric lamps, paintings,
Home Décor
wall hangings etc.
 Sauces, Ketch-ups, and Spices based pastes, and few ready to cook
items (preferably vegetarian); Supply of fresh items such as lettuce leaf
 Thai manufacturers need to change the product packaging in following
ways:
Processed and Fresh  no shrimps or fishes should be drawn on the packets
Food  cooking instructions and other details should be in clear font
 Green, white and red labels standing for vegetarian, eggetarian and
non-vegetarian items respectively should be clearly put on the
packets

1. ANNEXURE 1
1.1. Company Profiles in Retail
1.1.1 Pantaloon Retail (India) Limited (The future Group)
Year of Incorporation 1987

Ownership Public Limited Company
Retail Sector Activity
Department stores, hypermarkets, supermarkets, malls, specialty retail
Principal Fascia Pantaloon, Big Bazaar, Central, Food Bazaar
 Corporate Structure
Pantaloon Retail
Retail Operations Joint Ventures Subsidiaries and other

ancillary business
Future Capital
Big Bazaar Home Town Future Media
Liberty (51%) Futute Brands
Pantaloon Electronic Bazaar Alpha (50%)
Food Bazaar Ezone Future Logistics
Galaxy Entertainment (16%) Future Knowledge
Central Furniture Bazaar Staples (50%)
aLL Collection I Future Bazaar
Blue Foods (50%)
Talwalkars (50%)
AxiomTelecom(50%)
Generali (74%)
Etam (50%)
Lee Cooper (50%)
Manipal Heath Services (50%)
Aero Term Logistics (50%)
The future group operates through six group companies: Future Retail; Future Capital; Future Brands;
Future Space; Future Logistics; Future Media
 Future Retail – Formats
The Company‘s principal formats are Pantaloon, Big Bazaar, Food Bazaar, and the mall concept ‗Central‘.
It is targeting a higher share of the customer‘s wallet by expanding its formats. For most formats, it has
adopted a dual strategy of opening smaller versions in its flagship stores of Food Bazaar, or Big Bazaar,
and opening larger independent stores. It plans to have Pantaloon, Central, Big Bazaar and Food Bazaar
operate as separate companies under the holding company, Future Retail.

Table 2: Future Group – Formats
Big Bazaar Super
Pantaloon Central Big Bazaar Food Bazaar BB Wholesale Club
Centre
Business Lifestyle Lifestyle A hypermarket A format larger than A supermarket aimed A store managed by Food
Description store seamless mall, targeted at the the Big Bazaar at replicating a local Bazaar catering to the needs of
targeting housing 300 middle and lower stocking a larger market price sensitive consumers as
middle and brands across income groups, number of SKUs simultaneously well as small retailers by
upper different retailing products providing superior selling multi packs and bulk
middle class categories at discounted ambience and storing packs of a select range of
prices. over 50,000 stock FMCG goods at wholesale
keeping units (SKUs) prices
Line of Business Lifestyle Lifestyle Value Value Value Value
Product Garments, Apparel, Food and Food and Beverage, Food and Beverage, Food and Beverage, FMCG
Offering Accessories Footwear, Beverage, apparel, apparel, accessories, FMCG
accessories, accessories, consumer durables,
entertainment consumer durables, home care and
and recreation home care and personal products
facilities personal products
Avg Store Area
(sq ft) 20,000 125,000-250,000 30,000-1,00,000 1,00,000 and above 8,000 and above 10,000 and above
No of Stores
(Dec 2007) 40 5 68 5 102 6
Source: Company and Media reports

 Other Formats
Table 3: Future Group - Other Formats

Brand Factory Depot Fashion aLL Blue Sky Top 10 Ethnic City
station
Business A chain of stores A store that Stores that A store Stores offering Stores catering Stores catering to the
Description offering branded apparel retails books, offer apparel catering to branded to youngsters. working women
at discounted prices music, and other plus-size accessories like population.
ranging between 15- multimedia, accessories. men and sunglasses and
25%. toys, stationery women watches
and gifts.
Line of Value Lifestyle Value Lifestyle Lifestyle Lifestyle Lifestyle
business
Product Apparel, accessories, Books, toys, Apparel and Apparel Sunglasses and Apparel and Apparel and accessories
Offering footwear stationery and accessories and watches accessories
music accessories
Labels Diesel, Espirit, Levi's, None n.a. n.a. n.a. n.a. n.a.
Offered Wrangler, Pepe, Lee,
Louis Philippe,
Bossinni, Arrow, Van
Heusen
Avg Store 60,000-100,000 300-12,000 7,000-10,000 500-2,000 500-1,000 700-1,000 n.a.
Area (sq ft)
No of 6 78 2 30 34 2 n.a.
Stores (Dec
2007)

 Home Solutions Retail Limited
With an investment of Rs 300 million, PRIL set up its 100 percent subsidiary, Home Solutions Retail (India) Ltd. The company
operates formats such as e-zone, Electronic Bazaar, Collection I, Furniture Bazaar and Home Town under this venture.
Table 4: Home Solutions Retail Limited

e-zone Electronics Bazaar Collection i Furniture Bazaar Home Town
Business A format selling branded A format selling Store selling Stores selling furniture Stores selling home décor,
Description electronic goods and appliances branded electronic home décor furnishings and providing
targeted at the middle and goods and appliances and services such as electrical,
upper middle class targeted at middle furnishings plumbing, painting and
class and low income interior decoration
groups
Line of Lifestyle Value Lifestyle Value Lifestyle
business
Avgas 15,000-30,000 3,000-10,000 10,000 2,000-10,000 1,25,000-2,50,000
Store Area
(sq ft)
Source: Company and Media Reports

1.1.2 Shopper’s Stop
 Profile
Shopper‘s Stop Limited was established in 1991 by K Rhea group of companies. The group entered the retail
business with the opening of its first department store at Adhere in Mumbai in 1991. The K Raheja group is a
reputed player in the residential real estate business
Table 5: Shopper's Stop Ltd

Retail Sector Activity Department stores, specialty - books, home products, cosmetics, F&B, baby
care, accessories
Principal Fascia Shopper's Stop, Crossword, Home Stop, Mother Care, MAC, Brio's Arcelia
 Shopper’s Stop Limited- Formats
Shopper‘s Stop Limited primarily caters to Sec A and B classes of society through its departmental stores. It has
gained a foothold in the market with a gamut of offerings such as apparel, accessories, footwear, furnishings and
leather products which are retailed through Shopper‘s Stop, cosmetics through MAC stores, music and books by
Crossword and infant wear by Mother Care.

Table 6: Shopper's Stop Limited - Formats
Shopper's Stop Mother Care Arcelia Home Stop MAC Crossword Desi café Brio
Business These are Specialty stores Exclusive Premium home The company has tied These are the A fast food These are Café
Description departmental operating under the store for concept stores up with Estee Lauder company's concept Bistro's
store with strong franchisee of Mother accessories and operates stores books and within its operated by
focus on lifestyle Care Plc, UK to under the brand music retail stores the company
retailing retail infant wear and name, MAC, in stores named 'Desi within its
apparel to expectant Mumbai. It was Café' outlets
mothers launched in 2005
Vertical Departmental Baby care Specialty Home Furniture Cosmetics Books and Catering Catering
store accessories and Furnishings Music
Product Apparel, Home Mother's to be Cosmetics, Furniture, Cosmetics(Clinique Books, Indian food Coffee and
Offering Furnishings, apparel, infant wear, jeweler, furnishings, and Estee Lauder) magazines, Pastries
accessories, accessories, sunglasses, home CD-ROMs,
footwear footwear, toys footwear, accessories, music
watches, Crockery and stationery and
bags home appliances toys
Avg Store 50,000-80,000 3,000-6,000 8,000- 30,000 n.a. 3,000-8,000 n.a. n.a.
Area (sq ft) 10,000
No of Stores 23 13 2 2 3 43 5 18
(Dec 2007)

 Hypercity Retail (India ) Ltd
The Raheja group made a foray into the food and grocery business through HyperCity Retail (India) Ltd in March
2007. Shopper‘s Stop has an option to buy 51 per cent stake in HyperCity Retail by 2009. Spread over 120,000 sq ft,
HyperCity stocks a wide range of products such as groceries, fresh foods,. Home needs, garments and other
consumer durables.
Table 7: Hypercity
Business Description Hypermarkets catering to middle and upper class markets
Line of Business Hypermarket

Avg store area (sq ft) 120,000
HyperCity – Argos
SSL and HyperCity Retail India Ltd have jointly signed a memorandum of understanding (MOU) with UK based
Home retail group to develop the Argos format (catalogue retailing format) in India. The venture will be called
HyperCITY – Argos. Home retail Group will franchise the Argos concept to the joint venture company. The Argos
format will provide the joint venture its brand catalogue, multi channel experience and IT support, along with
expertise in developing sales through the Internet. SSL has subscribed to a 51% stake in Gateway Multi Channel, a
home and general merchandising retailer, in June 2007, to support this venture. In India, the business model would
involve display centres, online, and call and collect counters that would cater to customers in a particular area.
 Large catalogue stores: Spanning across 5,000-10,000 sq ft, these stores enable customers to view products by
browsing through catalogues. There is also a special section in the store, where customers can see products and
enjoy a demonstration.
 Call and collect stores: These stores span across 300-500 sq ft. They enable customers to make purchase
decisions by browsing through catalogues. Products will be home delivered from these stores.

1.1.3 Reliance Retail Ltd
 Profile
Reliance Retail Ltd(RRl) is the wholly-owned subsidiary of Reliance Industries Limited, pioneered by Mukesh
Ambani. The launch of ‗Reliance Fresh‘ at Hyderabad in October 2006 marked its direct entry in the retail sector.
Prior to this it experimented by operating Mumbai-based Sahakari Bhandar in 2006. The company operates formats
such as hypermarkets, supermarkets and convenience stores, along with specialty stores in apparels, consumer
durables, wellness and healthcare, footwear and Jwellery.
Table 8: Reliance Retail Limited

Ownership Private Limited Company
Retail Sector Activity Hypermarkets, supermarkets, convenience stores, specialty retail
Principal fascia Reliance Fresh, Reliance Mart, Reliance Digital, Reliance Trendz,
Reliance Footprint, Reliance Jwellery

 Reliance Retail Formats
Table 9: Reliance Retail Formats

Reliance Fresh Reliance Digital Reliance Mart Reliance Mini Reliance Reliance Reliance Reliance Reliance
Mart Trendz Wellness Home Footprint Jewels
Vertical Food & Specialty- Hypermarket Supermarket Specialty- Specialty- Specialty - Specialty- Specialty-
Grocery Consumer Apparel Wellness Home Footwear Jewels
durables Products
Line of Value Lifestyle Value Value Lifestyle Value Lifestyle Value Lifestyle
Business
Area 3,000-5,000 15,000-30,000 50,000-2,50,000 10,000-50,000 30,000 1,500-3,500 40,000-60,000 8,000- 2,000-
10,000 20,000
Product Fresh fruits, Electronic goods Apparel, consumer Apparel, Food & Pharmaceutica Furniture and Footwear Jwellery
Offering vegetables and and household durables, footwear footwear Grocery, ls and medical furnishings
dairy products appliances Apparel services
Private Reliance Street none Reliance Select, Reliance Spirit, Contra, n.a. n.a. Viviana, None
Labels Reliance Dairy, Select, Hero, Cyber Tosca,
First Class, Spirit, Reliance Dairy Gear, Buz, Mancini,
Contra, Hero, Pure Sparsh, Monza,Hi
DNM-X, Cyber Networks, -Attitude
Gear, Buzz, Sparsh, Netplay, Panda
Networks, Netplay,
Panda

 Supply Chain
 RRL is launching captive cargo services by entering into a sales and buyback agreement of a ‘50
cargo aircraft‘ order with Boeing. This will facilitate transportation of fruits, flowers, and
perishables to the company warehouses.
 State agri-distribution hubs: These hubs will act as collection centres in their respective states,
routing the bulk produce to the central distribution hub in its SEZs, from where it can be exported
as well as dispatched to various retail outlets across the country.
 Farm Supply Hubs: The Company is setting up 1,600 farm supply hubs across the country.
These UBS will facilitate the purchase of farm produce and sale and provision of farm supplies
such as fertilizers, seeds, fuel and credit to farmers. Farmers can also avail of the benefit of selling
their produce in these hubs. Hubs will benefit the company by connecting farms and the
unorganized retail through a distribution system.
 Creation of Retail Space

RRL is following a twin model of expansion, which includes both owning and leasing retail space. It has
acquired 1,260 properties for Reliance Fresh stores and Reliance Mart across the country. It is planning to
lease out 100,000 acres of farmland at a fixed price in Pune to grow vegetables, flowers and produce. That
apart, it is also acquiring properties across the country to set up captive vegetable and fruit mandis.
 Private Labels
RRL is entering into exclusive agreements with textile companies such as Arvind Mills, Celebrity Fashions
Ltd and Indus League Clothing Ltd to develop exclusive brands for its retail outlets.
Table 10: Exclusive Brands

Name Manufacturer
Spirit Indian Terrain
Contra Indigo Nation
Hero Arvind Mills- Wrangler
Cyber Gear Vibe Private Ltd
Buzz Blackberry
Source : Media Reports
The company has other private labels which it currently retails through its hypermarkets as well as
specialty store, Reliance Trendz. It plans to maintain the share of private labels at 35-40 percent.

1.1.4 RPG Enterprises
 Profile
One of India‘s large conglomerates, RPG Enterprises has business interests in retail, technology,
entertainment, power and transmission, tyres and life sciences. It entered the retail sector in 1996 by setting
up Food World Supermarkets inn a joint venture with Dairy Farm International prior to FDI restrictions
were levied in India.
The joint venture with Dairy Farm International (DFI) was called off in 2005. After the split:
 RPG retained 48 out of the 93 Food World (FW) stores under the brand, Spencer‘s. It set up additional
formats such as Spencer‘s-Express, Fresh, Daily, Super and Hyper. Music World (MW) was also
retained under the group.
 The healthy and beauty chain, Health and Glow (HG), and remaining stores of FW were retained by
Dairy Farm International.
 The Company‘s shifted its headquarters from Chennai to Kolkata.
The Company‘s retail business currently operates through the following three formats: Spencer‘s Retail,
Music World and Books & Beyond.
Table 12: RPG Enterprises- RPG Retail

Ownership Private
Retail Sector Activity Convenience Stores, supermarkets, hypermarkets, specialty stores
Principal fascia Spencer's - (Express, Fresh, daily, Supermarket, Hypermarket):

Music World; Books & Beyond

1.1.5 Spencer’s Retail
Part of RPG group, Spencer‘s retail operates a chain of supermarkets across the country. It has a network of
320 stores across 45 cities, spanning 1 million sq ft. Spencer‘s Retail runs food and grocery outlets across
the country under the following formats:
Table 13: Spencer's Retail Formats

Spencer's Express Spencer's Daily Spencer's Super Spencer's Hyper
Business A convenience A format larger than the A supermarket A hypermarket format offering
Description store format, Express store with format with a larger products at low costs
stocking fresh similar product offerings basket of product
produce at discounted prices offerings
Vertical Value Value Value Value
Product Fresh Produce, Fresh produce, dairy- Fresh produce, dairy- Fresh produce, dairy-bakery
Offering dairy and bakery bakery products bakery products, products, FMCG, home care and
products FMCG, home care personal products and frozen
and personal products foods
and frozen foods
Avg Store 1,000 4,000-7,000 8,000-15,000 25,000
Area (sq ft)
No of Stores 66 231 11 12
(Dec 2007)
Centralized Purchase: Spencer‘s Retail runs a consolidated centre near Bangalore for the bulk purchase of
fruits and vegetables directly from farmers. This enables the Company to maintain low prices and offer
discounts.
 Specialty Stores
 Music world
Music World started its operations in November 1997 by taking over Saregama. Its main competitor is
Planet M, belonging to the Videocon Group. Its retail business operates under the following formats:
 Destination Stores- These stores, admeasuring more than 4,000 sq ft, stock different types of
music.
 Express/Franchisee Stores- These are 300-600 sq ft stores located independently in malls or as
shop in shops within large departmental stores.

 Unplugged- These are small gondolas, which are run as concessionaires in other departmental
and large stores.
 Books & Beyond
It is a new format conceptualized by the Company during the year, offering books, toys, gifts and
stationery, along with music and home videos. It also has a dedicated section for music and home videos
from Music World. The first store was launched in 2007 at the Megacity Mall in Gurgaon.

1.1.6 The Tata Group
 Profile: Established in 1998, Trent is part of the Tata Group, one of India‘s large business
conglomerates. It started its retail operations by acquiring the UK-based Littlewoods department store
in Bangalore in 1998. Its chain of stores is called ‗Westside,‘ which operates 28 stores in major Indian
cities. It also runs a hypermarket, Star India Bazaar, and a specialty store retailing books and music
called Landmark. The group also runs a chain of electronic and appliance store, Croma, under the
group company, Infiniti Retail.
Table 14: Tata Trent Ltd

Retail Sector Activity Apparel stores, specialty-Books,Music, Hypermarket
Principal fascia Westside, Landmark, Star India Bazaar
 Corporate Structure of Tata Trent
Tata Ltd
Trent Ltd Infiniti Retail Ltd
Westside Star India Bazaar Landmark Croma
 Tata Trent – Formats

Table 15: Trent Ltd-Formats
Westside Star India Bazaar Landmark
Business A departmental store format Hypermarket format of the company aimed at Specialty store retailing
Description primarily retailing apparel offering products at discounted prices books, music, etc
Line of Lifestyle Value Lifestyle
Business
Product Apparel, home accessories, Fresh fruit and vegetables, staples, FMCG, Books, stationery, greeting
Offering artifacts, furnishings health and beauty products, home products, cards, gift items, toys, music
footwear, jeweler, consumer durables
Avg Store 15,000-30,000 50,000 12,000-45,000
Area (sq ft)
No of Stores 60 25 29
(Dec 2007)

Trent acquired Landmark, a Chennai based books and music retail chain, in 2006 for Rs 1, 085 million. The
bookstore, which commenced operations with a single store in 1987, now has 10 stores across the country.
 Private Labels
Private labels contribute to most of the revenue, with their share being over 80 per cent. The store caters to
the middle class through quality and mid-price segments, providing value for money along with fashion
Table 16: Private Label

Men's Wear Indian Wear Kids Wear
Edward Navya Tammy
France Giovanni
Spike
Fashion Street
Source: Company Reports
 Infiniti Retail
Croma
The Company has initiated a new venture called ‗Infiniti Retail Ltd‘(a wholly-owned subsidiary of Tata
Sons) by entering into a technical-cum-sourcing agreement with Woolworths, an Australian retailer. Under
this venture, the company retails multi-brand consumer electronics and consumer durable store, Croma.

1.1.7 Subhiksha Trading Services
 Profile
Chennai based Subhiksha Trading Servcoces, a private limited company, operates a chain of supermarkets-
cum-pharmacies called ‗Subhiksha‘. It was established in March 1997 as a chain of 10 stores in Chennai by
banker turned businessman, R Subramaniam. Initially its main operations were confined to South India,
particularly Tamilnadu. This chain primarily targets the middle and lower income population.
Table 17: Subhiksha Trading Services

Ownership Private
Retail Sector Activity Supermarkets, Pharmacies, Mobile Stores
Principal Fascia Subhiksha, Subhiksha Pharmacy, Subhiksha Mobile
Source: Media reports
Subhiksha is a food chain offering discounts in the range of 8-10 percent. It follows a bulk sourcing
strategy, coupled with low operating costs, to make discounts possible. On an average, Subhiksha stores
span across 1,500-2,000 sq ft and offer a discount of 8-10 per cent. The company operates in four areas:
fruits and vegetables, pharmacy, FMCG and telecom through three formats- Subhiksha, Subhiksha
Pharmacy and the newly introduced Subhiksha Mobile.
 New Format
 Subhiksha Mandi: This new format offers only fruits and vegetables. Its average size is around
600 sq ft. Currently, the company operates 12 store in Delhi and plans the concept in Pune.
 Subhiksha Mobile: Subhiksha has started retailing mobiles through stores titled ‗Subhiksha
Mobile‘. These stores offer low prices on branded mobile phones.
 Strategy
 In order to facilitate a strong supply chain, the company has tied up with farmers to purchase their
produce at current price levels under a preferred buying arrangement
 The company has set up a Centralised Processing Unit(CPU) at Nashik, as it sources 50 per cent
of fruits and vegetables under Contract farming to meet the requirements of all its stores.
 At Ahmedabad, apart from retailing fruits and vegetables, the company operates two new
verticals, pharmacy and telecom, which involve retailing handsets and phone connections.

1.1.8 Aditya Birla Retail
 Profile
The Aditya Birla Group, one of the largest Indian conglomerates, is valued at $24 billion. The group has
interests in varied sectors such as metals, cement, fertilizers, textiles and insurance. It has a presence in
over 20 countries. It made a foray into the retail industry by acquiring south-based retail chain, Trinethra.
Currently, it operates around 300 outlets across the country.
 Strategy
 Aditya Birla Retail acquired 170 stores of the south-based retail chain, ‗Trinethra,‘ for Rs 1.5
billion in 2006 which is being rebranded to ‗More‘ by the Company.
 The company has launched two ‗More‘ hypermarkets in Baroda and Mysore, with a floor space of
70,000 sq ft each.
 The acquisition of Trinethra has provided the company wit an employee base of 4,000 people. It
plans to hire between 10,000 and 15,000 employees by 2012.
 It would maintain a mix of hypermarkets (avwerage75,000 sq ft) and supermarkets (average
10,000 sq ft) in its portfolio.
 As part of its sourcing strategy, the company has set up a sourcing centre for fresh farm products
such as fruits and vegetables, and has established direct linkages with farmers and suppliers.
 The chain is also covering categories such as groceries, processed foods, bakery products and
personal care products through its private labels, More and Select.
 It has tied up wit Apollo hospitals to set up pharmacies within its supermarkets.

2. ANNEXURE II
2.1. City-wise Rental Trends

Following is the rental trend for top Indian cities during the second quarter of August-November, 2008
(Source: India Retail Report, 2009)
2.1.1 Delhi
Prime Main Street Rents-2008

Rent % Growth Short
Location
/sq.ft/mth Measurement Term
Trend
INR US$ EURO 3 Month 1 Year
Khan Market 1,335 31.26 20.05 0% 12% 

Connaught Place (Inner Circle) 800 18.74 12.02 0% 3% 
South Extension 1 & II 1,055 24.71 15.85 5% 23% 
Karol Bagh 550 12.88 8.26 24% 24% 
Basant Lok 806 18.88 12.11 0% 0% 
Greater Kailash I, M Block 1,075 25.18 16.15 2% 17% 
Prime Mall Rents-2008

Rent % Growth Short
Location
Trend
South Delhi 662 15.5 9.94 0% 6% 

West Delhi 410 9.6 6.16 0% -4% 
Noida 478 11.19 7.18 0% 0% 
Gurgaon 385 9.02 5.78 0% 16% 
Exchange rate: USDI = INR 42.70, EURU I = INR 66.58

LEGEND:
Market Rising  Market Falling  Market Stagnant likely to Strengthen 
Market Stagnant Likely to Weaken  Market Stagnant 

2.1.2 Mumbai

Rent % Growth Short
Location
INR US$ EURO 3 Month 1 Year Trend
Linking Road 1,350 31.62 20.28 0% 123% 

Kemps Corner/Breach Candy 950 22.25 14.27 0% 84% 
Colaba Causeway 960 22.48 14.42 0% 195% 
Lokhandwala Andheri 390 9.13 5.86 0% 37% 
Fort Fountain 450 10.54 6.76 0% 91% 

Rent % Growth Short
Location
Lower Parel 700 16.39 10.51 0% 36% 

Malad 525 12.3 7.89 0% 35% 
Link Road Andheri (W) 415 9.72 6.23 0% 19% 
Mulund 360 8.43 5.41 0% 18% 
Goregaon 600 14.05 9.01 58% 107% 
Vashi 300 7.02 4.51 0% 4% 
Ghatkopar 350 8.2 5.26 5% NA 
Exchange rate : USDI = INR 42.70, EURU I = INR 66.58

LEGEND:

2.1.3 Pune

Rent % Growth Short
Location
Trend
MG Road 400 9.36 6.01 0% 33% 

JM Road 400 9.36 6.01 5% 135% 
FC Road 240 5.62 3.6 0% 55% 
Koregaon Road 250 5.85 3.75 11% 100% 
Aundh 200 4.68 3 0% 54% 
Bund Garden 240 5.62 3.6 0% NA 

Location Rent % Growth Short
MG Road 380 8.9 5.71 9% 27% 

Bund Garden 350 8.2 5.26 0% 75% 
Kalyani Nagar 225 5.27 3.38 0% NA 
Ganesh Khind Road 220 5.15 3.3 0% 19% 
Nagar Road 180 4.22 2.7 0% NA 
LEGEND:

2.1.4 Ahmedabad

Rent % Growth Short
Location
Trend
CG Road 190 4.45 2.85 0% 21% 

Law Garden 130 3.04 1.95 0% 13% 
Satellite Road 105 2.46 1.58 0% 14% 
SG Highway 90 2.11 1.35 0% 20% 

Rent % Growth Short
Location
Trend
Vastrapur 200 4.68 3 0% 14% 

SG Highway 153 3.58 2.3 0% 20% 
Drive-in Road 105 2.46 1.58 0% 7% 
Kankaria Lake 100 2.34 1.5 0% 18% 
LEGEND:

2.1.5 Bengaluru

Rent % Growth Short
Location
Trend
MG Road 240 5.62 3.6 0% 5.50% 

Brigade Road 375 8.78 5.63 7% 14% 
Commercial Street 250 5.85 3.75 10% 10% 
100 Feet Road, Indiranagar 250 5.85 3.75 -6% 5.30% 
th th
Jaya Nagar 4 Block, 11 Main 260 6.08 3.91 -1% 13% 
Sampige Road, Malleswaram 135 3.16 2.03 2% 6% 
Koramangala 80 Feet Road 185 4.33 2.78 1% NA 
Vittal Mallya Road 300 7.02 4.51 -6% NA 
New BEL Road 140 3.27 2.1 2% NA 

Rent % Growth Short
Location
Koramangala 485 11.35 7.28 0% 0% 

Magrath Road 368 8.6 5.53 0% 0% 
Cunningham Road 225 5.26 3.38 0% 0% 
Mysore Road 165 3.86 2.48 0% 10% 
Exchange Rate : USDI = INR 42.70, EURU I = INR 66.58
LEGEND:

2.1.6 Hyderabad

NTR Gardens 110 2.58 1.65 0% 5% 
Himayathnagar 140 3.28 2.1 12% 14% 
Banjara Hills Road No.1 225 5.27 3.38 0% 34% 
2.1.7 Chennai

Rent % Growth Short
Location
Nungambakkam High Road 160 3.75 2.41 0% 60% 
Khadar Nawaz Khan Road 200 4.68 3 0% 33% 
Cathedral Road – RK Salai 150 3.51 2.25 0% 33% 
Usman Road – South 140 3.28 2.1 4% NA 
Usman Road – North 100 2.11 1.35 11% NA 
Adyar Main Road 150 3.51 2.25 0% 50% 
Anna Nagar 2nd Avenue 150 3.51 2.25 0% 41% 
Purasavakkam High Road 90 2.11 1.35 0% 13% 

CBD 250 5.85 3.75 -2% 33% 
Suburbs 188 4.1 2.82 0% 25% 
Exchange Rate: USDI = INR 42.70, EURU I = INR 66.58

LEGEND:

2.1.9 Kolkatta

Park Street 268 6.3 4.02 0% 15% 
Camac Street 268 6.3 4.02 0% 15% 
Elgin Road 233 5.5 3.5 0% 27% 
Theatre Road 233 5.5 3.5 0% 27% 

South Kolkata 395 9.3 5.94 6% 39% 
Salt Lake 500 11.71 7.51 0% 24% 
Rajarhat 190 4.45 2.85 57% 111% 
Elgin Road 404 9.5 6.07 0% 24% 
Exchange Rate: USDI = INR 42.70, EURU I = INR 66.58
LEGEND:

3. References
Primary Research – Expert Interviews
List of Companies with whom Depth Interviews were conducted as part of Primary
Research on this Study:
Metro Shoes Ltd., Mumbai

General Merchandize, Pantaloon Retail India Ltd., Mumbai
Big Bazaar, Pantaloon Retail (India) Ltd., Mumbai
Food Bazaar, Pantaloon Retail (India) Ltd., Mumbai
Staples – Buying & Merchandizing, Aditya Birla Retail Ltd., Mumbai
Processed Food – Buying & Merchandizing, Aditya Birla Retail Ltd., Mumbai
Shoppers‘ Stop Ltd. (Raheja Group), Mumbai
Home Stop (Raheja Group), Mumbai
Vishal Retail Ltd., New Delhi
Mc Donald‘s India, Connaught Plaza Restaurants Pvt. Ltd., New Delhi
Café Coffee Day, Bangalore
Furniture - Home Solutions – Pantaloon Retail (India) Ltd., Mumbai
Durian, Mumbai
Style Spa, Mumbai
Godrej Interio, Mumbai
Odyssey India Ltd., Chennai
Landmark (Tata Group), Chennai
Ansal properties & Infrastructure Ltd., Gurgaon
Mohann‘s Estate Consultant – Retail, Mumbai
Franchising Association of India, Mumbai
One or more than one interviews were conducted with each of the above mentioned
companies to capture the required details.

Secondary Research Sources
The India Retail Story, India Retail Report 2009, Images F & R Research
Hiscock Geoff, India‘s Store War, Retail Revolution and the Battle for the Next 500
Million Shoppers, August 2008
Industry Monitor, Retail, Cygnus – Business Consulting & Research Pvt. Ltd., 2008
Investment in India - Overview, Paras Kuhad and Associates, Advocates, 2008
Reports on Modern Retail in India, CRISIL Research Pro, 2008
Joseph Mathew, Soundararajan Nirupama, Gupta Manisha and Sahu Sanghamitra, May
2008, Impact of Organized Retailing on the Unorganized Sector, ICRIER
Economic Survey of India and Technopak analysis, March 2008
The Logistic Challenges of Doing Business in India, Logistics Management, Feb 2008
Indian Food Retailing, Cygnus – Business Consulting & Research Pvt. Ltd., 2007
Industry Insight- Apparel Retailing, Cygnus Business Retailing & Research, July 2007
Global Retail Development Index 2007, AT Kearney, June 2007
The C Factor, Solving the Supply Chain Puzzle in India, March 2007, DHL
Retail in India – Getting organized to drive growth, AT Kearney, 2007
IMAGES Malls in India Study, 2007
India Retail Report 2007 (www.indiaretailing.com), January 2007
Press Release of India Retail Report 2007, Ministry of Commerce & Industry,
Department of Commerce, Government of India, January 2007
The Great Indian Retail Story, Ernst & Young India, 2006-07
F&B (Servicing) Retail India in India, Food Forum India, 2006-07

Government of India, Census and Projections, 2001
Retail Marketing Research – India, Research Wikis
Retail FAQ, Propagent
Lease Terminology, REALTECH Real Estate Services
Articles from India Real Estate Monitor
Various News Updates and Study Articles on Retail Sector from The Hindu, The
Economic Times, The Times of India & Others

Report Investment Potential in Retail Sector of India

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INVESTMENT POTENTIAL IN RETAIL

INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 2

The following report ‘Investment Opportunities in Retail Sector of India’ is based on

INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 3

2. RETAIL SECTOR IN INDIA ...........................................................................................................16

2.1. EMERGENCE OF MODERN (ORGANIZED) RETAIL IN INDIA ..........................................................16

2.2. INDIA: A PREFERRED RETAIL DESTINATION ...............................................................................17

2.3. KEY GROWTH DRIVERS FOR MODERN RETAIL IN INDIA .............................................................18

2.4. SIZE AND GROWTH OF RETAIL IN INDIA ......................................................................................21

2.4.1. Product Category-wise Break-up of Retail Market ...............................................................21

3. MODERN RETAIL STORE FORMATS ........................................................................................26

3.1. PREMIUM LIFESTYLE RETAILING ................................................................................................27

3.2. LIFESTYLE RETAILING ................................................................................................................28

3.2.1. Departmental Stores ..............................................................................................................28

3.3. VALUE RETAILING .......................................................................................................................29

3.3.1. Supermarkets .........................................................................................................................29

3.4. OTHER RETAIL FORMATS ............................................................................................................32

3.4.1. Specialty Stores......................................................................................................................32

4. CASH AND CARRY STORES .........................................................................................................38

4.2. DOMESTIC PLAYERS NOT FAR BEHIND .......................................................................................39

INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 4

5.1. SUPPLY CHAIN MODEL FOR MODERN RETAIL OUTLETS .............................................................40

5.1.1. Level 1: Product Sourcing .....................................................................................................41

5.2.1. Level I: Suppliers ...................................................................................................................48

5.3. LOGISTIC FACILITIES FOR RETAIL INDUSTRY IN INDIA ................................................................51

5.3.1. Cost of Logistics in Indian Retail ..........................................................................................52

6. RENT STRUCTURE IN RETAIL ...................................................................................................53

6.1. PREVALENT RENTAL MODELS IN INDIA ......................................................................................53

6.1.1. Fixed Lease Rental Model .....................................................................................................53

6.2. MAJOR COMPONENTS OF OCCUPANCY COSTS IN INDIA ..............................................................53

6.3. ANCHOR TENANTS VERSUS VANILLA RETAILERS ........................................................................54

6.4. INCREASE IN LEASE RENTAL .......................................................................................................54

6.5. ECONOMIC SLOWDOWN AND CHANGES IN STRATEGIES OF RETAILERS.......................................55

6.6. EXCESS SUPPLY OF RETAIL SPACE IN PIPELINE ...........................................................................56

6.7. CHANGING RENTAL MODELS ......................................................................................................56

6.8. THE ROAD AHEAD ......................................................................................................................57

7. PROFITABILITY ACROSS VERTICALS ....................................................................................58

8. LEADING RETAIL COMPANIES OF INDIA ..............................................................................61

8.1. STRENGTHS AND WEAKNESSES OF KEY ORGANIZED PLAYERS ...................................................62

9. INDIAN RETAIL INDUSTRY ANALYSIS ....................................................................................70

INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 5

9.2. MAJOR CONSTRAINTS FOR MODERN RETAIL IN INDIA ................................................................81

9.3. EMERGING TRENDS IN THE INDIAN RETAIL INDUSTRY ................................................................85

9.4. CRITICAL SUCCESS FACTORS IN RETAIL .....................................................................................89

10. RETAILERS’ PERCEPTION ABOUT THAI IMPORTS........................................................92

10.1. APPARELS ...................................................................................................................................92

10.2. PLASTIC GOODS ..........................................................................................................................92

10.3. HOME DÉCOR ITEMS & ELECTRIC GOODS ..................................................................................93

10.5. FOOTWEAR ..................................................................................................................................94

10.6. PROCESSED FOOD .......................................................................................................................94

10.7. PERSONAL CARE ITEMS...............................................................................................................96

10.8. OTHER FACTORS RELATED TO THAILAND....................................................................................96

11. POSSIBLE WAYS FOR ENTRY OF FOREIGN RETAILERS IN INDIA ............................97

11.1. MANUFACTURING AND SOURCING...............................................................................................97

11.2. CASH-AND-CARRY OPERATION....................................................................................................97

11.3. FRANCHISING ..............................................................................................................................97

11.4. TEST MARKETING .......................................................................................................................98

12. CONCLUSIONS AND RECOMMENDATIONS ......................................................................99

12.1. LEVEL OF ATTRACTIVENESS VERSUS SUITABILITY FOR THAI INVESTORS ....................................99

12.2. PROPOSED ENTRY STRATEGY ...................................................................................................101

12.3. PHASE I .....................................................................................................................................102

INVESTMENT OPPORTUNITY IN RETAIL SECTOR OF INDIA 6