Case Study

Retail Industry
India

RETAIL Poised for quantum change

Indian Retail industry : Organised Retail poised for big leap----dynamic and fast paced
and challenging.
Accounts for over 10 per cent of the countrys GDP and around 8% of the
employment in India.
The country is today the fifth largest global destination in the world for retail.
Retail market poised to double from Rs.31 lakh Cr. in 2014 to Rs.62 lakh Cr. in 2020
Organised retail share will grow from 8% to 14% in the same period and Organised etailing will grow from 1% to 3% -- may be 5% ( same period)
Tier-II and Tier-III cities such as Jaipur, Nagpur, Ludhiana, Vadodara, Aurangabad, Kochi,
etc., are emerging as the new hot spots of consumption
RIL has 1700 stores in different categories with revenue of Rs.14500 Crores ( 2013-14)
Reliance Market has innovated with Wholesale Cash & Carry segment --- 32 operational
stores --- enjoys patronage of more than 1.2 million registered members.

RETAIL - Introduction

RETAIL - Introduction

RETAIL Advantage India

Retail formats in India

Key Players in Retail

Competitive landscape in India

Retail Formats
Speciality Retail

Convenience
Stores (Food
and Packaged
HH products)

Electronics

Hypermarts

Apparel

Restaurants

Titan

Nilgiris

E-Zone

Big Bazar

Arrow

Saravana Bhavan

Tahnisq

Food World

Croma

Hypercity

Zodiac

Pizza hut

Landmark

Birla MORE

Vijay

Spencers

Globus

Dominos

Crossword

Varkeys

Vasanth

Reliance

Footwear

Caf coffee day

Mobile Store

Mobile Store

Vivek

Trent

Bata

Barista

Universal

Universal

Reliance Digital Tata Star

Reliance Vision Reliance Fresh

Apollo

Reliance super

I-Store

Footprints
Liberty

Revenue Breakup (2012)

In 2012, Food and Grocery accounted for

60% of total revenue in the retail sector
followed by apparel at 8%.
48% of total household income was spent on
food and groceries in 2011
Demand for western outfits and ready made
garments has been growing at 40-45%
annually. Apparel penetration is expected to
increase to 30-35% by 2015.

Organised Retail

Organised Retail Penetration (ORP) in India is low (8%) compared to other countries
such as US (85%)
There are over 15 million mom-and-pop stores
The organised retail is expected to account for 14% of overall retail market by 2020.

Growth drivers for Retail in India

FDI policy for Retail growth

Benefits of FDI

FDI Policy details Single/Multi brand

Characteristics of Retailing

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Organised v/s Unorganised retailing

Conventional retailing
Small neighborhood shops (mom and pop stores)

Organised retailing
Spacious, hygienic stores --- areas ranging from
3,000 sq. ft. to > 1,50,000 sq. ft.

Shoppers stand outside the shop, ask for the things

Air-conditioned. Self service. Touch, feel and
they want --- have no access to entry in shop and
explore
examine things themselves
The shoppers themselves can pick up the products
The shopkeeper picks up / packs the product asked
of their choice on their own from the array of
for from the shop
displayed products.
There are many in each neighbourhood. Easy
access--- particularly for FMCG products. They
come in all shapes and sizes

In hot spots, high street and not necessarily in each

neighbourhood. Large size desired for better
viability

The products are available in packed form properly

Grocery and other commodities are not packed and
labeled with all details for a shopper to make a
labeled in the shop.
buying decision.

Characteristics of successful retailing

Build scale
Huge upfront investment in Store capex
Integrate
Supply chain management. Own brand development
For mass penetration pricing/value is critical

Evolve over a period

Successful retailers evolve over a period of time
Continuous experimentation across categories / locations to discover a promising
concept.
Excel in execution
Excellence in execution is a result of right investment in resources --- people,
systems and processes
Vision
Clarity around the offering, the identity of the target group, and the value
proposition.

Key aspects
Location: Frontage , Flow of traffic, parking space, Hot Spot or Neighbourhood
Format/Size:
Dimensioning format size key to break-even/ future growth
Area and format of operations
Identification of geography state / district / town or city
Thorough pre-work for identification of an area/s within the town or city
based on the demographics of target consumer group / catchment
Expansion
Clarity on further expansion
o ONLY metros
o ONLY state or a particular region
o ONLY category B/C towns

Key aspects
Supply chain for profitability:
Robust supply chain to ensure timely deliveries / re-filling and managing stock
pipeline
Ensure better margins by exploring direct sourcing
eg. Fruits and vegetables from farmers
Managing inventory turns
Customer service
Build a very strong customer service management module
Acquire new as well as retain existing subs through loyalty programs
Build a strong brand
Umbrella brand eg. Reliance
Product specific brand eg. Reliance Fresh, Reliance Foot Print, Reliance Digital

Key aspects
Innovation :
Launching new formats eg. Shop-in-shop / small neighborhood stores, etc.
Loyalty programs
Creating private labels
Investing in IT systems for better operational efficiencies
Creating new distribution channels
Managing the work force
Create talent pool
Ensure growth of employees
Retention; Reward and recognition

Big Bazaar
Positioning :

High Service

High Price

Low Price

Low Service

Big Bazaar
Strengths :
High Brand equity
State-of-the-art infrastructure of outlets
Point of purchase promotions
Variety of products

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Weakness :
Falling revenue per square feet
unable to meet store opening targets
Opportunities :
Organised retail has a small pie of Indian
retail market
Evolving customer preferences for
organised retail
Threats :
Competition from other organised retail
players , entry of global players.
Online

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Big Bazaar
Product mix:

Big Bazaar
Product mix contd:

Big Bazaar
Pricing mix:
Value pricing
Promise of Is se sasta aur accha kahin nahi!

Promotional pricing
Low interest financing
Psychological discounting (Rs 49, Rs 99, Rs 299, etc.)
Special event pricing (Diwali , Gudi Padwa, Republic day, etc.)
Differentiated pricing
Time based pricing (Peak / off-peak hours, Happy Wednesdays, etc.)
Bundling
Combo offers

Big Bazaar
Promotional mix:
Below the Line promotions
Coupons / discounts
Get more at regular price
Bulk purchase discounts
Exchange offers (Juna do, naya lo)
Special occasion promotions
Tie Ups :
o Star Parivaar range of products in associaiton with Star India
o Bang-Bang range of garments
Above the Line promotions :
Advertised through TV / radio / print
Republic day promotion (Saal ke sabse saste 4 din)

Big Bazaar

Big Bazaar
Big Bazaar brand extension :

Key aspects
Food and grocery retailing, which forms the largest chunk of organised retail, is a tough
business to be in.

Food and grocery typically has a gross margin of 10-15%, compared to 40-50% for
apparels.
Supermarket chains are struggling to create a profitable model.

On the store level, it generally takes 12-18 months to break-even but the period is taking
much longer now

What Should Biyani do

What has he done

Amazon India and Future Group have announced a strategic alliance under
which the e-tailer will sell the retail chain's products online.
Big Bazaar aims for 10,000 virtual franchisees in two years. agents who will
take orders from customers and send them to Big Bazaar which in turn will
deliver the goods at the doorsteps.
Biyani acquires Nilgiris for Rs.300 Crores.
Chasing profits, Kishore Biyanis Future Group shut 40% of Food Bazaar
stores in 2013

What Should Biyani do

Expand at a fast pace --- Yes
Look at smaller formats of 3000 sft to 5000 sft for convenience store ( Food and
monthly HH consumables )and aim to cover as many ZONES as possible in selected cities

Look at franchisee model for the small convenience store format.

Explore opportunity to take over stand alone/ Local outlet which is very strong in a
neighbourhood.
Achieve 70% plus geographical coverage in select cities before going into the next tier
Be flexible and ready to close down some stores if they are a drag
Move ahead of Sabse sasta aur achha. Deliver experience and value
Look at long term play and hence launch formats/stores with a definite break-even

mandate---- Eschew the temptation to build valuation by reckless roll out.

Each product category to operate independently as profit center

Thank You

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