12-11-2012, 01:04 PM
Comparative Study on Profitability Drivers of Indian Retail Industry and their formats” and “challenges to unorganized retails in the current scenario
Comparative Study on Profitability.doc (Size: 4.05 MB / Downloads: 43)
Executive Summary
Retailing is emerging as a sunrise industry in India and its presently the largest employer after agriculture. In the year 2004, the size of Indian organized retail industry was Rs 28,000 Crores, which was only 3% of the total retailing market.
The sunrise of the organised retailers in India creates a major turn in the retail industry. Top major organised retail players are increasing their market share day by day. Their main focus is based on FMCG and consumer durables. With modernization, Indian culture is aping the western dressing sense and lifestyle and these techniques is promoting by the Retailers and by this they are generating a remarkable revenue from the Indian consumers.
Today’s Retail in India
Comprised of organized and traditional retail formats, Indian Retail market is estimated to be worth US$ 511 billion, and is poised to grow to US$ 833 billion by 2013. The organised retail that currently accounts for less than 5 per cent of the total retail market is expected to register a compound annual growth rate (CAGR) of 40 per cent and swell to US$ 107 billion by 2013.
A report by global consultancy firm, AT Kearney said "The consumer spending in India has increased by an impressive 75 per cent in the last four years and will quadruple in the next 20 years." Moreover, India recently topped the Nielsen Global Consumer Confidence study, conducted by Nielsen, a market research company. The biannual report revealed that Indians are "the most optimistic lot globally who think that their country will be out of the economic recession in the next twelve months."
However the size of Organised Retail in India will exceed US$22bn mark from current level of about US$4bn with its space requirement touching over 220mn sq. ft., by 2010, according to The Associated Chambers of Commerce and Industry of India (ASSOCHAM). In a Paper brought out by ASSOCHAM on `Retail Scenario in India and Its Related Issues’, it has been stated that approx. 40mn sq. ft. is currently generating a business of about US$4bn in organized retail.
India’s vast middle-class and its almost untapped retail industry are key attractions for global retail giants wanting to enter newer markets and India provides for the ideal locations. Since, Delhi and its suburbs have so far seen the growth of 100 bigger and smaller malls, roughly 600 new malls are coming up in other metropolis and large townships in which less than 35% of retail business is going to be transacted.
It is seen that over 1000 malls are in the pipelines for smaller townships in which the retail sector is projected to grow at over 60% because of ample availability of land and increased purchasing power of the folks living in those areas because of increased economic activities. Naturally, the large players will prefer to go there and put up their shops by sourcing their supplies from the places convenient to them.
Formats in Indian Organized Retail Sector
1. Supermarkets: A supermarket, also called a grocery store is a self-service store offering a wide variety of food and household merchandise, organized into departments. It is larger in size and has a wider selection than a traditional grocery store and it is smaller than a hypermarket or superstore.
2. Hypermarkets: A hypermarket is a superstore which combines a supermarket and a department store. The result is a very large retail facility which carries an enormous range of products under one roof, including full lines of groceries and general merchandise. In theory, hypermarkets allow customers to satisfy all their routine weekly shopping needs in one trip.
3. Department Stores: A department store is a retail establishment which specializes in satisfying a wide range of the consumer's personal and residential durable goods product needs; and at the same time offering the consumer a choice multiple merchandise lines, at variable price points, in all product categories. Department stores usually sell products including apparel, furniture, appliances, electronics, and additionally select other lines of products such as paint, hardware, toiletries, cosmetics, photographic equipment, jewelery, toys, and sporting goods. Certain department stores are further classified as discount department stores. Discount department stores commonly have central customer checkout areas, generally in the front area of the store. Department stores are usually part of a retail chain of many stores situated around a country or several countries.
4. Shopping malls: A shopping mall or shopping centre is a building or set of buildings which contain retail units, with interconnecting walkways enabling visitors to easily walk from unit to unit.
5. Specialty Chains: A Specialty Chains is numbers stores which are specialized in a specific range of merchandise and related items. Most stores have an extensive width and depth of stock in the item that they specify in and provide high levels of service and expertise. They differ from department stores and supermarkets which carry a wide range of merchandise.
SCOPE OF THE STUDY
The scope of my study restricts itself to analyze the organised retailer’s profitability drivers on the basis of Garments, Gifts, Cards and Music Department where as in the recent trend its seen that the key players in this Industry are more emphasizing on the Garments, Personal Grooming, Home furnishings, Life style and Footwear Departments in their Stores.
RESEARCH METHODOLOGY
This chapter describes the methodology of the study. This project is based on information collected from primary sources. After the detailed study, an attempt has been made to present comprehensive analysis of four major organised retailers. The data had been used to cover various aspects like inter-departmental customer flows, revenue per customer and value of the stock in the various departments. In collecting requisite data and information regarding the topic selected, we went to the Vishal Mega Mart, Life Style, and Big Bazaar of New Delhi and Noida and collected the data.
LIMITATIONS OF THE STUDY
In attempt to make this project authentic and reliable, every possible aspect of the topic was kept in mind. Nevertheless, despite of fact constraints were at play during the formulation of this project. The main limitations are as follows:
Due to limitation of time only few retail stores are taken into consideration of this study. So the sample of retailers was not enough to generalize the findings of the study.
The main source of data for the study was primary data with the help of self-administered questionnaires. Hence, the chances of unbiased information are less.
Concern person from the organised retail stores were hesitant to disclose the true facts as the data related to strategic secrets.
The chance of biased response can’t be eliminated though all necessary steps were taken to avoid the same.
VISHAL MEGA MART
What started as a humble one store enterprise in 1986 in Kolkata is today a conglomerate encompassing 183 showrooms in 110 cities / 24 states. India’s first hyper-market has also been opened for the Indian consumer by Vishal. Situated in the national capital Delhi this store boasts of the singe largest collection of goods and commodities sold under one roof in India.
The group’s philosophy is integration and towards this end has initiated backward integration in the field of high fashion by setting up a state of the art manufacturing facility to support its retail endeavors.
Vishal is one of fastest growing retailing groups in India. Its outlets cater to almost all price ranges. The showrooms have over 70,000 products range which fulfills all your household needs, and can be catered to under one roof. It is covering about 29, 90, 146 sq. ft. in 24 states across India. Each store gives you international quality goods and prices hard to match. The cost benefits that is derived from the large central purchase of goods and services is passed on to the consumer.
There are three classes of consumers the lower class is restricted only to unorganized retail, upper class consumers are limited and scattered. According to the Vishal Retailing Strategy, they are targeting middle class as it is the largest consumer base in India and can be sold off then in large volumes because with the increasing purchasing power the middle class is shifting towards organized retail.
The group had a turnover of Rs. 1463.12 million for fiscal 2005, under the dynamic leadership of Mr.Ram Chandra Agarwal . The group had a turnover of Rs 2884.43 million for fiscal 2006 and Rs. 6026.53 million for fiscal 2007.