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STRATEGIC MANAGEMENT RETAIL INDUSTRY

Group 8
Name Zoeb Eisa Lourdes Soares Aswathy Sreekumar Tanvi Shakeel Sunaina Bhatia Nikhil Chitalia Anand Bhate PNR NO 12020841054 12020841023 12020841009 12020841048 12020841055 12020841032 12020841005

INTRODUCTION
Pantaloon Retail Ltd. is a large Indian retailer and the flagship company of the Future group Headquartered in Mumbai, it has over 1000 stores across 93 cities and 60 rural areas in India and employees over 35,000 people Countrys largest retailer as per market capitalization and revenue as of 2010 17 million square feet of retail space

COMPANY VISION AND MISSION

Vision Future Group shall deliver Everything, Everywhere, Every time for every Indian Consumer in the most profitable manner. Mission We share the vision and belief that our customers and stakeholders shall be served only by creating and executing future scenarios in the consumption space leading to economic development. We will be the trendsetters in evolving delivery formats, creating retail realty, making consumption affordable for all customer segments for classes and for masses. We shall infuse Indian brands with confidence and renewed ambition. We shall be efficient, cost- conscious and committed to quality in whatever we do. We shall ensure that our positive attitude, sincerity, humility and united determination shall be the driving force to make us successful.

MANIFESTO
Rewrite Rules. Retain Values. Our manifesto encourages us to explore unexplored areas and write new rules to create new opportunities and successes. Our focus in striving for a glorious future gives us strength and the ability to learn, unlearn and re-learn our ability to evolve. At Pantaloon Retail we do not wait for the future to unfold itself but create future scenarios in the consumer space and facilitate consumption because consumption means socio-economic development for our customers, employees, shareholders, associates and partners. Our customers will not just get what they need, but also get them where, how and when they need any product or service. We will not just post satisfactory results, we will write success stories. We will not just operate efficiently in the Indian economy, we will evolve it. We will not just spot trends, we will set trends by marrying our understanding of the Indian consumer to their needs of tomorrow.

CORE VALUES OF THE COMPANY


Indianness confidence in ourselves. Leadership to be a leader, both in thought and business. Respect & Humility to respect every individual and be humble in our conduct. Valuing and Nurturing Relationships to build long term relationships. Flow

Openness Introspection leading to purposeful thinking. to be open and receptive to new ideas, knowledge and information. Adaptability to be flexible and adaptable, to meet challenges.

Simplicity & Positivity: Simplicity and positivity in our thought, business and action.

to respect and understand the universal laws of nature.

COMPANY TIMELINE
1987 Company incorporated as Manz Wear Private Limited, launch of Pantaloons trouser, Indias first formal trouser brand

1992 An initial public offer (IPO) was made in the month of May.

1997 Pantaloons, Indias family store, launched in Kolkata.

2001 Big Bazaar, Indias first hypermarket chain, launched.

2002 Food Bazaar, the supermarket chain, is launched.

2004 Central mall was launched


2005 group moves beyond retailing starts diversification by acquiring galaxy entrainment, Indus League clothing and Planet retail.

2007 Future Group crosses the $1 billion turnover mark.

MAIN LINES OF BUSINESS


1.

Fashion - Pantaloons, Central, aLL, Brand Factory, Blue Sky, Top 10, Fashion Station, Big Bazaar, Lee Cooper (JV)
General Merchandise - Big Bazaar, Shoe Factory, Navras, Electronics Bazaar, Furniture Bazaar, KB'S FAIR PRICE, Food Rite Electronics - eZone, Electronic Bazzaar, Koryo , Sensei, STAPLES (JV)

2.

3. 4. 5. 6. 7. 8.

Home Improvement - Home Town


Furniture - Collection i, Furniture Bazaar, Home Bazaar E-tailing (online shopping) - www.futurebazaar.com- www.ezoneonline.in Books and music - Depot Leisure and entertainment - Bowling Co., F123, TGIF (Thank God it's Friday!)

9.
10.

Wellness - Star & Sitara, Tulsi


Telecom and IT - Gen M, M Bazaar, M-Port, ConvergeM, Future Axiom, T 24, One Mobile (in alliance with TATA Teleservices) Consumer durables - Koryo, Sensei, IPAQ Service - E Care, H Care, Design & Service Malls - Central (Bangalore, Hyderabad, Pune, Mumbai,Kochi, Vadodara, Gurgaon, Indore, Ahmedabad, Thane, Surat) Investment and savings - Insurance: ULIP, Pension, Endowment, etc.

11. 12. 13.

14.

Revenues

REVENUES

Retail is Indias largest industry. The sector has witnessed an immense growth in the last few years.

The key factors responsible for the retail boom have been the change in consumer profile and demographics, increase in the number of international brands available in the Indian market, economic implications of the government, increasing urbanization, credit availability, improvement in the infrastructure, increasing investments in technology and real estate building a world class shopping environment for the consumers.
Kishore Biyani of Pantaloon Retail India Limited (PRIL) laid foundations for organized retailing India. Following Pantaloons successful venture many Indian business giants such as Reliance, Bharti, Birla and others entered into this sector, which are operating all across the major cities of India. Organized retailing faces both challenges as well as opportunities not only from the traditional format but also from the Indian mentality and international world in generating revenues.

Consolidated Revenues of Pantaloons Retail

14000 12000

10000
8000 6000

4000
2000 0

2008

2009

2010

2011

2012

SALES & EPS TREND


The profitability of the company is expected to improve, going forward, due to higher share of the lifestyle segment and private labels, cost reduction measures, economies of scale and implementation of better technology systems. The operating profit margin and net profit margin is expected to increase to 11% and 3%in FY12E from 10.5% and 2.2% in FY09, respectively.

IMPRESSIVE SALES GROWTH

The total revenue of the company has shown impressive CAGR of 50.3%over FY06-FY09 to reach Rs 6341.7 crore in FY09 from Rs 1052.8 crore inFY05.
This is on account of aggressive expansion in space from 2.03 million sq. ft. in FY05 to 9.65 million sq. ft. in FY09, 47.7% CAGR. This growth was driven by aggressive expansion of the Big Bazaar format.

We expect the total revenue of the company to double to reach Rs 12473.6 crore in FY12E from Rs 6341.7 crore in FY09 backed by 22.6% CAGR in retail space from9.65 million sq. ft. in FY09 to 17.8 million sq. ft. in FY12E. We also expect an improvement of 1.9% CAGR in revenue on account of higher share of lifestyle segment.

We believe Big Bazaar will maintain its dominance in total revenue even post FY12E due to the high share of space in total space within the company.

Sales turnover and net profit of Pantaloons Retail & its competitors
Name Sales Turnover Net Profit

Pantaloons' Ret
Trent Shoppers Stop Kewal Kiran Prozone Capital Provogue Brandhouse REI Six Ten

5,702.19
821.79 1,930.04 301.9 7.9 565.39 783.48 614.05

293.65
47.27 64.26 52.14 -2.03 33.41 8.5 0.32

Cantabil Retail
Koutons Retail

164.54
164.65

-25.47
-193.81

Growth

Pantaloons success and continuous growth in the Indian organized Retail market can be attributed to a number of factors, some of which have been derived from the strategies of large retailers in the west, while others are completely tailor-made for the Indian market.

REASONS FOR THE GROWTH OF PANTALOON


The Retail Experiment Multiple Formats, Multiple Brands Versatile Retailing Strengthening Back End Operations: Supply-Chain

GROWTH (IN TERMS OF SALES)


2009-2010 22% 2010-2011 27% 2011-2012 32% (Q5)

FACTORS DRIVING GROWTH


Falling real estate prices E-tailing Increase in disposable income Customer aspiration Increase in expenditure for luxury items Low share of organized retailing Growing liberalization of the FDI policy in the past decade

GROWTH STRATEGY

1.

2. 3.

4.

5.

Pantaloon adopts following strategies in order to consolidate its position as one of the leading operators in the value retail segment. Increasing penetration in the country by leveraging Pantaloon supply chain, distribution and logistics network. Emphasis on backward integration. Procurement from low-cost production centres outside India. Increasing customer satisfaction and Pantaloon base of loyal customers. Continue to upgrade information technology systems and processes.

Business Model

BUSINESS MODEL FOR PANTALOONS


Supplier: Suppliers are involved in carrying out the following functions: Vendor management Cost and deal management Purchase order management Collaborative management

Purchase process: Supply chain visibility Warehouse management Transportation management

Store/shelf management: Store planning Inventory management Replenishment management Fresh item management Item publishing Order management

Sales/point of sales: Point-of-sales management E-payment Content management Online retailing Kiosks Self checkout

Customer: Customer loyalty management Voucher gift management Customer ordering management

Track and analyse: General ledger and account management Sales audit and invoice matching Workforce management Payroll processing Sales analysis and loss prevention

Planning: Sales planning Pricing management Promotion management Customer profiling Assortment management Category management

Central hub: Process improvement Six sigma implementation Radio Frequency Identification (RFID) implementation Enterprise security

Market Capitalization

WHAT IS MARKET CAPITALIZATION?


Market capitalization (or market cap) is the total value of the issued shares of a publicly traded company; it is equal to the share price times the number of shares outstanding.

As outstanding stock is bought and sold in public markets, capitalization could be used as a proxy for the public opinion of a company's net worth and is a determining factor in some forms of stock valuation. Preferred shares are included in the calculation.

CATEGORIZATION

Traditionally, companies were divided into large-cap, mid-cap, and small-cap. The terms mega-cap and microcap have also since come into common use, and nanocap is sometimes heard.
Different numbers are used by different indexes;[there is no official definition of, or full consensus agreement about, the exact cutoff values. The cutoffs may be defined as percentiles rather than in nominal dollars.

CATEGORIES
Mega-cap : Over $200 billion Large-cap : Over $10 billion Mid-cap : $2 billion$10 billion Small-cap : $250 million$2 billion Micro-cap : Below $250 million Nano-cap : Below $50 million

PANTALOONS & MARKET CAPITALIZATION


As of 2010, it was the country's largest listed retailer by market capitalization and revenue.

LAST YEARS SHARE PRICES

MARKET CAP (Rs Cr) 5,694.62

AS ON JANUARY 24, 2013

HISTORIC PRICES OF PANTALOON RETAIL

SIMPLE MOVING AVERAGES

PRICE QUOTE

PROFIT & LOSS

COMPETITORS (AS ON 24/JAN/2013)

Industry Analysis

OVERVIEW

The Indian retail market is currently estimated at around $450 billion The sector is the second largest employer after agriculture, employing more than 35 million people with wholesale trade generating an additional employment to an additional 5.5 million people The sector has evolved dramatically from traditional village fairs, street hawkers to resplendent malls and plush outlets, growing from strength to strength The Indian retail market has witnessed consistent growth over the last few years, maintaining its share of around 30% of the GDP at current prices

According to the Indian Council for Research on International Economic Relations (ICRIER), India is the seventh-largest retail market in the world

India's retail market is expected to grow at 7% over the next 10 years

EVOLUTION OF RETAIL IN INDIA


Consolidation Expansion

Conceptualization

2005-10

Initiation Pre 1990s


Manufacturers opened their own outlets

Substantial investment 1990-05 commitments by large Indian Pure play retailers corporate realised the Entry in food potential of the and general market merchandise Most of them in category apparel segment Pan-India expansion to top 100 cities Repositioning by existing players

Large scale consolidation Movement to smaller cities and rural areas More than 56 players with revenues more than USD700 million Large scale entry of international brands FDI in single-brand retail up to 100 per cent from 51 per cent Plans afoot to

2010 onwards

RETAIL INDUSTRY : KEY FACTS

Market Size : USD 450 billion India is the 5th largest retail market in the world

Data as of Dec

GROWTH RATE

The retail sector in India is emerging as one of the largest sectors in the economy

By 2012, total market size is likely to touch USD450 billion, thereby marking a CAGR of 5.9 per cent since 1998

ORGANISED RETAIL

Organised Retail Penetration (ORP) in India is low (5 per cent) compared to other countries such as the US (85 per cent)

This indicates strong growth potential for organised retail in India

Indian retail market is in its nascent stage; unorganised players control the market with 95 per cent market share during 2011-12

There are over 12 million mom-and-pop stores

Organised retail in India is expected to be 9 per cent of total retail market by 2015 and 20 per cent by 2020

FOOD AND GROCERIES


Food and groceries account for the largest share in revenues in India

In 2011, Food and Grocery accounted for nearly 59.5 per cent of total revenues in the retail sector in India; Clothing and Fashion followed with a share of 9.9 per cent

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

Demand for western outfits and readymade garments has been growing at 40-45 percent annually; apparel penetration is expected to increase to 30-35 per cent by 2015

EXPECTED GROWTH ACROSS PRODUCT CATEGORIES AND


FORMATS

Indias Grocery retail segment is the most attractive in the world

Hypermarkets would be the largest retail segment, accounting for 21 per cent of total retail space by 201314

Strength Weakness Opportunity

Major contributor to GDP High Growth Rate Indian consumers have high disposable incomes, which translates into high consumption level

Highly unorganized Shortage of talented professionals Low productivity compared to international players

Increasing awareness of consumers about products and services Innovation for new product development Retail sector in rural India is almost untouched, presenting tremendous opportunity Global retail giants see India as a key market

Threat

Rigid government policies and regulations restrict the entry of new players Price competition among retailers puts downward pressure on margins Economic slowdown is having an adverse effect on consumer spending

RETAIL FORMAT IN INDIA


Mono/exclusive branded retail shops
Exclusive showrooms either owned or franchised out by a manufacturer Complete range available for a given brand, certified product quality

Multi-branded retail shops

Focus on particular product categories and carry most of the brands available Display most of convergence as well as consumer/electroni c products, including communication and IT group It is an online shopping facility for buying and selling products and services; the facility is widely used for electronics, health

Customers have more choices as many brands are on display

Convergence retail outlets

One-stop shop for customers; many product lines of different brands on display Highly convenient as it provides 24X7 access, saves time, and ensures secure transaction

e-Trailers

TOP 10 PLAYERS
Company Name
Annual Marke Company Revenue t Name (Crores INR) Share 41% 18% 11% 7% 7% 6% 5% 2% 2% 1%

Market Cap (Crores INR)


40 % 26 % 21 % 7% 2% 2% 1% 1% 0% 0%

Pantaloon Ret 4325 Shoppers Stop 1929 Koutons Retail 1204 Brandhouse 737 REI Six Ten 717 Trent 686 Provogue 562 Kewal Kiran 234 Cantabil Retail 186 Arunjyoti Enter 79 TOTAL 10659

Pantaloon Ret 4701 Shoppers Stop 3022 Trent 2463

Kewal Kiran 875 Provogue 284 REI Six Ten 249 Brandhouse 72 Koutons Retail 63 Arunjyoti Enter 57 Cantabil Retail 26 TOTAL 11812

COMPETITIVE LANDSCAPE IN THE INDIAN RETAIL SECTOR


Retail

Departmenta l Stores

Hypermarket s
Pantaloon Retail is the leader in this format with 160 Big Bazaar stores

Supermarket s/Convenien ce Stores


Aditya Birla Retail (More., 640 stores) Spencers (Daily, 220 stores) Reliance Fresh (453 stores) REI 6Ten (350 stores) are the major players in this format

Specialty Stores

Cash & Carry Store


Metro started the cash-andcarry model in India; the company operates five stores across Mumbai, Kolkata, Hyderabad and Bangalore Bharti Walmart started cashand-carry outlets, with the

Pantaloon has 65 stores Trent operates 59 stores Shoppers Stop has 51 stores Reliance Retail has launched Trends in this format

Titan Industries is a large player, with 320 World of Titan, 130 Tanishq and 177 Titan Eye+ shops Vijay Sales, Croma, E-Zone and Viveks are into consumer electronics Landmark, Crossword and Odyssey focus on books, gifts and entertainment

HyperCITY, Trent (Star Bazaar), Spencers (Spencer Hyper), Aditya Birla Retail (More.) and Reliance are other players

KEY STRATEGIES BY INDIAN RETAILERS

KEY POINTERS

Supply: Players are now moving to Tier II and Tier III cities to increase penetration and explore untapped markets as Tier I cities have been explored enough and have reached a saturation level.

Demand: Healthy economic growth, changing demographic profile, increasing disposable incomes, changing consumer tastes and preferences are some of the key factors that are driving and will continue to drive growth in the organised retail market in India.

Barriers to entry: Reforms by India in opening up its economy have greatly improved trade prospects, but major barriers still exist such as regulatory issues, supply chain complexities, inefficient infrastructure, and automatic approval not being allowed for foreign investment in retail. But, some of these are set to change with FDI in multi-brand retail set for approval. Bargaining power of suppliers: The bargaining power of suppliers varies depending upon the target segment, the format followed, and products on offer. The unorganized sector has a dominant position, still contributing 95% of the total retail market. There are few players who have a slight edge over others on account of being established players and enjoying brand distinction. Since it is a capital intensive industry, access to capital also plays an important part for expansion in the space.

Bargaining power of customers : High due to wide availability of choice. With FDI coming in, this will increase further. Competition: High Competition is characterized by many factors, including assortment, products, price, quality, service, location, reputation, credit and availability of retail space etc. New entrants (business houses and international players) are expected to further intensify the competition and so would the foreign players' entry.

DEMAND SIDE GROWTH DRIVERS

Rise in Incomes and Purchasing Power Emergence of the Consumer Class Change in Consumer Mindsets Indian Demography(Young and Middle Aged)

Easy Consumer Credit Attitude to "Splurge rather than Save A perpetual hunger towards possessing quality/branded merchandise Influence of the West on Indian Consumers

SUPPLY SIDE GROWTH DRIVERS


Govt. Support towards FDI FII Flows Surplus Supply of Land across Indian Cities Increased Profit Margins Short Supply Chain

GOVERNMENT INITIATIVES AND POLICIES

100% FDI is permitted under the automatic route for trading companies for cash & carry trading and wholesale trading The Cabinet also gave the nod for raising the FDI limit in single-brand retail ventures to 100% Reduction in incidence of the excise duty on branded apparels from 4.5% to 3.6% is likely to boost the demand for branded apparels, and benefit companies like Provogue and Raymonds The Government is planning to remove the old tax systems to simplify the tax calculation and avoid double taxation in Indian retail. New Goods and Service Tax (GST) will simplify the tax structure

The government is in talks to allow foreign direct investment up to 51% in multibrand retailing,US Secretary of State Hillary Clinton on her recent visit to India, pitched for the opening up of the Indian retail market for foreign direct investment (FDI). The FDI in retail would allow US multi-brand retail chains like Wal-Mart to open stores in India

SEGMENTAL ANALYSIS

The structure of Indian retail is developing rapidly with shopping malls becoming increasingly common in the large cities however the traditional formats like hawkers, grocers etc. continue to co-exist with the modern formats of retailing

MAJOR SEGMENT ANALYSIS- FOOD AND GROCERY

Business Monitor International (BMI) forecast that sales through Mass Grocery Retail outlets to reach to USD 27.67 billion by 2015 According to industry estimates, lack of supply chain infrastructure results in 40% loss of farm produce; investment in back-end infrastructure should help reduce this Sourcing of processed food from SMEs could result in higher margins Political support for FDI in food and grocery may face challenges and many states may not allow FDI or else allow with more restriction Hypermarkets and supermarkets are the best suited retail structure for this segment

MAJOR SEGMENT ANALYSIS- APPAREL

Readymade and western outfits sales are growing at 4045% annually Opening of multi-brand apparel retail for FDI is not expected to face major political deliberations For apparel retail, investment in back-end infrastructure lies in creation of warehouses Manufacturing facilities (for private label brands) and logistics is most likely to be outsourced International retailers could have private label brands sourced from the SME segment Departmental stores is the best suited retail structure for this segment

MAJOR SEGMENT ANALYSIS- FURNITURE AND FURNISHINGS

This category faces stiff competition from small time traditional retailers as well as individual carpenters (India highly customization focused) For furniture retail, options for investment in back-end infrastructure lies in creation of manufacturing facilities/warehouses Some of the furniture products could be sourced from the SME segment FDI in furniture retail is not expected to face major political deliberations Specialty retail outlet is best suited structure for this segment

MAJOR SEGMENT ANALYSIS- BEAUTY AND WELLNESS

Penetration level of modern retail is just 4% and there is a huge untapped potential in this segment Private label brands in some of the product categories can be sourced from the SME segment From Dhoni announcing 200 gyms to staggering sales of Shehnaz Hussain/Biotique type local brands to foreign brands like MAC, Clinique etc.,this segment is all set to explode for the health & beauty conscious Indian youth

GROWTH VALUE PROPOSITION

EMERGING RETAIL FORMATS - LUXURY RETAILING A decade ago luxury retail in India was only meant for the consumption of elites. The

spending habits of a consumer have redefined the meaning of luxury - luxurious goods have become necessities, not just for the rich but also for the middle class population. For a common buyer, the outlook for luxury has changed from an aspirer to an acquirer

The Indian luxury market stood at around USD 5.8 billion and expected to grow to make India the twelfth largest luxury retail market in the world by 2015 The Indian luxury Industry is growing at a rapid pace with a CAGR ~20% and shall grow to nearly double of its current size over the next 5 years

An increase in the young working population especially women and growing opportunities in the service sector Growing incomes coupled with optimism about the future Easier consumer credit & loans Increase in credit card spending Real estate development in the country On-going liberalization of retail sector

Over the last few years, Indias luxury industry has witnessed significant transformation and advancement. A short visit to Delhis Emporio mall or Mumbai Palladiums will be proof enough for this as you see people queuing up to go inside in the middle of an afternoon and thousands of people walking out with red, green, yellow bags with Gucci, Ferragamo, Tods, Harry Winston, Hermes all over them. India used to be a production outsourcing destination for a long time, but now due to a steadily growing economy and globalized business environment, India has rapidly transformed into a large market for Luxury goods In view of the growing importance of the country in the global luxury industry, Mint, Indias leading business daily every year conducts a conference which brings together the stakeholders to a common platform The following are the views of the Industry Experts from the recent Indian Luxury conference organized by Mint:

KEY CHALLENGES