Table of Contents
OVERVIEW
Summary
KEY FINDINGS
India's retail market is booming due to increased consumer purchasing power
The changing face of Indian consumers is shaping the future of retailing in India
Traditional retailers dominate Indian retail, although modern retail outlets are proliferating
India's untapped potential has put it on the radar of global retailers
Increased demand for luxury products is hampered by poor infrastructure
Retailers are moving to tier II and III cities following saturation in metropolitan cities
Retailers look to secure revenue-sharing deals with real estate developers, due to the high price of rental space
Confusion reigns over government FDI policy
Reassuring consumers about security is key to the growth of e-commerce
ACTION POINTS
Clothing
Adopt a fast-fashion strategy to keep pace with the emerging fashion-conscious youth
Introduce fashion which is suited to a diverse base of Indian consumers
Look to create new occasions and deliver relevant products
Capitalize on the increase in affluent consumers
Execute a multi-channel strategy to target a wider audience
Electricals
Capitalize on the lower penetration of consumer electronics and appliances in rural areas
Explore the option of getting into smaller cities through joint ventures and franchises
Introduce private label products for price sensitive consumers
Partner with financial institutions to facilitate the availability of consumer finance
Grocery
Develop online services to attract urban professionals
Retailers need to be more attentive towards product categories that are more vulnerable to reduced customer spending
Also introduce more variety of international products
Use promotional schemes like everyday low pricing and buy one get one free offers
Look at opening more outlets in commercial areas or office complexes
Homewares
International retailers should take into account the climate and seasonal behavior
Target young professionals
Leverage the growing demand for contemporary yet affordable furniture
Health and beauty
Pay close attention to consumers' changing usage patterns of personal care products
Represent actual user opinion, which is emerging as a powerful marketing tool
While focusing on driving sales volumes from middle income groups, retailers should encourage existing consumers to trade up
Consider "masstige" positioning to cater for middle-class consumers
Capitalize on the growing demand for male grooming products in India
Launch smaller stock keeping units to induce greater consumption
MARKET CONTEXT AND OUTLOOK
India's retail market is forecast to grow by 8.7% to 2015
Food and grocery makes up 65% of the retail sector in India
India's expanding middle class is the key driver of economic growth
Rapid urbanization is spreading to lower tier cities
Accelerated investment is required for infrastructure development in India
Highlights of India's 11th Five Year Plan for the development of infrastructure
Inflation remains a key macroeconomic concern for India
Monetary and liquidity conditions
The Indian retail sector is dominated by local "mom-and-pop" stores
Organized retail represents only 5–7% of the total retail market in India
The evolution of organized retailing in India
KEY STRATEGIC ISSUES
Changing mindsets and increased wealth have opened opportunities for modern retail
India's middle class are embracing new retail formats
Large-scale urban migration is ushering in a new wave of consumerism
The growing middle class has raised standards of living and increased consumption
Education and demographics are leading to an acceptance of modernity
A young, brand-conscious population offers major retail opportunities
The adoption of Western lifestyles is leading consumers to modern retail outlets
Access to modern media is influencing consumers
Indian women are becoming more involved in purchasing decisions
Increased use of credit and debit cards and the availability of credit is fueling consumer spending
Foreign direct investment is the key legislative issue affecting the growth of organized retail
The role of foreign direct investment in the Indian retail market
Approval of FDI in multi-brand retailing would result in major changes to the retail landscape
The Indian government is struggling to further relax FDI rules
Due to restricted FDI policy, franchising and joint ventures are key routes for entrants
Tier II and III cities are emerging as new growth centers
Online retail is expanding, but many consumers are still skeptical
Demand for luxury products is increasing
The rising number of wealthy individuals is driving demand for luxury products
Retailers are facing difficulties in India due to weak infrastructure and high import duties
Airport retailing is growing in importance
Loyalty cards are popular with consumersLoyalty cards are the most commonly used loyalty program in India and have been adopted by almost all major retailers in the country. By having loyalty cards, customers feel associated with the brand and in addition get some preference over other customers in the form of discounts and reward points. Over 75% of Shoppers Stop's sales are recorded through its First Citizen loyalty program, while Pantaloons' Green Cards are presented by customers in 55% of the retailer's total sales.
The lack of professionally trained skilled labor remains a key challenge for retailers
RETAIL GROUPS
Reliance Retail
Reliance Retail operates franchise stores through partnerships with international retailers
Turnover from the Reliance Fresh subsidiary account for almost two thirds of sales from all retail divisions
Reliance Retail's store network is continuing to grow
Tata Group – Trent & Infiniti Retail
Trent has partnered with leading global players, such as Tesco and Inditex
Westside is Trent's largest chain with 57 outlets
Infiniti Retail focuses on the electronics retailing sector
Croma's private label range generates about 7% of total sales
Future Group
Future Group has created numerous joint ventures to distribute international brands in India
The group is present in over 73 major areas and now aims to extend its reach to smaller locations
Pantaloon Retail's loyalty program has over 3 million members
Pantaloon Retail's turnover growth slowed in FY2011
Grocery stores make up the bulk of Pantaloon Retail's store portfolio
Aditya Birla Retail
The company launched its retail business through the acquisition of 167 Trinethra stores
The group missed its sales target for the year ending March 2011
The group had to severely downscale its More store network in 2009
CLOTHING
Expenditure
Distribution/channels
Changing circumstances are creating new consumer trends
With changes in lifestyles, consumers clothing needs are broadening
The entry of international apparel brands is intensifying competition
Retailers are capitalizing on the trend towards value fashion by introducing their own brands
Growing importance of branded lingerie in Indian female wardrobes
Key national players
Shoppers Stop is one of the oldest players in the modern apparel retailing market in India
Pantaloons' strength lies in its young and trendy image portrayed through private label brands
Westside is a lifestyle chain owned and managed by Trent
Madura Garments is Aditya Birla's lifestyle retail venture
Lifestyle International is positioned as a stylish and vibrant brand targeted at younger consumers
Reliance Trends is the apparel and accessories division of Reliance Retail
Vishal Mega Mart has a widespread presence in 110 cities across the country
Koutons Retail India has downsized considerably since 2008
Globus Stores is the retailing company of Rajan Raheja Group
New market entrants
Global clothing leader Inditex entered the market in 2010, with the launch of its flagship brand Zara
Marks & Spencer collaborates with Reliance Retail
German fashion brand s.Oliver entered the Indian market through a joint venture with Orient Craft
Burberry is set to expand its presence in India by introducing more stores
Yishion ventured into the Indian market by partnering with local distribution firm Upmarket Group
Debenhams has collaborated with Planet Retail to expand its Indian operations
DKNY is partnered with DLF Brands, which will help the retailer to penetrate the Indian market
GROCERY
Distribution/channels
Consumer trends
The surge in demand for convenience products is directing consumers to modern retail outlets
Consumers prefer a hassle-free and pleasant shopping environment
Retailers are attracting customers by offering appealing deals and promotional offers
Consumers' changing lifestyle are prompting retailers to widen their product portfolios
Key national players
Reliance Retail operates grocery stores across multiple formats
Future Value Retail operates Big Bazaar and Food Bazaar, part of the Future Group
Spencer's is a mid-market grocery player in India
More is the only retail format of Aditya Birla Retail Group
Hypercity is an upmarket hypermarket player in India
Childrenswear will form a stronger part of Hypercity's private label offering in the future
New market entrants
Carrefour, the world's second largest retailer, only operates one store in India
Tesco has partnered with Trent and is currently supplying the Star Bazaar hypermarkets
Metro operates independently and continues to make headway in India
Walmart's partnership with Bharti Retail has helped it to expand its Easyday format
DIY AND HOMEWARES
Expenditure
Distribution/channels
Consumer trends
DIY has future potential in specific target markets
Young professionals live in rented flats which are different to traditional Indian houses
Key domestic players
Future Group runs multiple homewares and electricals specialty retailers through its Pantaloon Retail arm
Godrej Interio has ambitious plans to further develop its home furniture business
Bombay Dyeing & Manufacturing
International players
Ikea has expressed interest in entering India
ELECTRICALS
Expenditure
Channels
Consumer trends
Despite the increased proliferation of modern electronics outlets, traditional retailers continue to dominate the market
The growing desire to own branded products is driving consumers towards private label brands
Indian consumer purchases are often occasion linked
Although consumer choice is evolving, demand for high-end products remains low
Key domestic players
Next is the largest consumer electronics retailer in India
Consumer electronics chain Croma is owned by Tata Group
Ezone currently belongs to Pantaloon Retail but may be spun off as a separate business
Another Indian conglomerate is expanding into the consumer electronics sector
International players
LG Electronics is the largest international consumer electronics player in India
Samsung is an established retailer and wholesaler of consumer products in India
Sony will have benefited from TV sales during the Cricket World Cup
Panasonic
Jumbo Electronics has eight stores in India and is poised for further expansion
Metro is to open 50 wholesale outlets by 2015
HEALTH AND BEAUTY
Expenditure
Distribution/channels
Consumer trends
There is a growing emphasis on health and beauty in India
Personal care product adoption among Indians follows a tiered structure, with society starting to accept the male grooming trend
Manufacturers are using micro-segmentation to target consumers' evolving usage patterns
Demand for personal care products with natural ingredients is surging, owing to growing health and wellness concerns
The growth of modern media has helped to negate the taboo associated with male grooming
Indians across all age groups attach importance to a product's tangible benefits
There is growing acceptance of direct selling in personal care products
Key national players
New U, a domestic player, launched in 2008 has introduced franchised stores
Bare Body Essentials is positioned as a luxury retailer which exclusively stocks international brands
Reliance Wellness is owned by Reliance Retail, which is looking to expand the format
Forest Essentials aims to increase revenues from retail operations by increasing store numbers
New market entrants
Health & Glow is a southern Indian chain with just one retail format
The Body Shop adapted its pricing structure to appeal to Indian consumers
L'Occitane has diversified into the Indian market to open spa resorts
Kiehl's is a small player in the Indian health and beauty market
Lush operates primarily in malls in India, with 13 stores in total
Sephora has been looking to enter the Indian market since 2007
Boots left the Indian market in 2005 but is looking to re-enter
India's foreign direct investment policy has dissuaded A.S. Watson from entering the market
SHOPPING MALLS
Shopping malls have had a huge impact on the Indian retail market
The number of malls has increased dramatically in the past 10 years and continues to grow
DLF has a portfolio of 11 malls covering northern India
The Phoenix Mills operates four mall formats in India
Inorbit Malls plans to build new malls and increase the size of existing malls
Ambuja Realty owns City Centre Malls and currently has three shopping centers
Prestige Group operates in Bangalore and has partnered with CapitaLand
DEPARTMENT STORES
(Untitled section)
Department stores have changed the way Indian consumers shop
Shoppers Stop was an early entrant to India's modern retailing sector
Lifestyle operates 25 department stores in India along with 12 standalone homewares stores
Westside predominantly offers private label brands, but is introducing designer brands to drive sales
Debenhams entered India in partnership with Planet Retail Holdings
Marks & Spencer has aggressive expansion plans for the Indian market
APPENDIX
Further reading
Ask the analyst
Global Retail FreeView
Verdict consulting
Disclaimer
TABLES
Table: Retailing market size ($bn), 2006–15f
Table: International retail partnerships in India
Table: Reliance Fresh: trading record ($m), 2009–11
Table: Reliance Hypermart: trading record ($m), 2009–11
Table: Reliance Digital: trading record ($m), 2009–11
Table: Reliance Footprint: trading record ($m), 2009–11
Table: Reliance Trends: trading record ($m), 2009–11
Table: Reliance Retail store portfolio, 2007–11
Table: Trent: trading record ($m) 2006–11
Table: Trent: estimated store portfolio by fascia, 2006–11
Table: Pantaloon Retail: trading record ($m), 2006–11
Table: Pantaloon Retail: core store portfolio, 2010 and 2011
Table: Aditya Birla Retail: estimated trading record ($m), 2008–11
Table: Aditya Birla Retail: estimated store portfolio by fascia, 2008–11
Table: Clothing market size ($bn), 2010–15f
Table: Food and grocery market ($bn), 2010–15f
Table: DIY and homewares market size ($bn), 2010e–15f
Table: Electricals and electronics market size ($bn), 2010e–15f
Table: Health and beauty market size ($bn), 2010–15f
FIGURES
Figure: Retailing market contribution to overall organized retail
Figure: Percentage of households in different annual income brackets ($), 2009
Figure: Indian households' net disposable income (INRm), 1999–2013f
Figure: Average infrastructure investment as a percentage of GDP, 2002–17
Figure: Organized retail evolution in India
Figure: Factors contributing to the growth of organized retail in India
Figure: Attributes influencing retail format choice
Figure: Population in India (millions), by age group and median age, 2004–14e
Figure: Average size of Indian household 1991-2015
Figure: CentralPlaza, an upcoming shopping mall in Surat Thani
Figure: Retail brands present at Indian airports
Figure: Volkswagen display at Delhi Duty Free, Indira Gandhi International Airport
Figure: Loyalty cards, gift vouchers, and other promotional offers by various retailers
Figure: Private label sales as a percentage of total sales, by retailer
Figure: Clothing market size ($bn), 2010–15f
Figure: The clothing retail market in Hyderabad comprises a range of retail formats
Figure: Examples of multi-brand outlets in Hyderabad
Figure: Unorganized apparel retailing at Kukatpalli Main Market, Hyderabad
Figure: Shoppers Stop store in Andheri, Mumbai
Figure: Store display at The Collective
Figure: Globus store at Inorbit Mall, Hyderabad
Figure: M&S store at Inorbit Mall, Hyderabad
Figure: Food and grocery market ($bn), 2010–15f
Figure: Unorganized and organized fresh produce retailing
Figure: ITC Choupal Fresh retailing counter at Malaysian Township, Hyderabad
Figure: Grocery chains operated by Reliance Retail
Figure: Grocery chains operated by Future Value Retail
Figure: Spencer's convenience stores and hypermarkets
Figure: A More Megastore in India
Figure: DIY and homewares market size ($bn), 2010e–15f
Figure: Electricals and electronics market size ($bn), 2010e–15f
Figure: Health and beauty market size ($bn), 2010–15f
Figure: Health & Glow store at Inorbit Mall, Hyderabad
