EXAM 2: India
Why is India such an important consumer market?
-300 million people- middle class and expected to grow 5-10% annually -40 million in the upper class -Generation that has entered the workforce in past few years has grown up with choice—and can't get enough -Mostly young working population -Increasing disposable incomes 8.5% per annum till 2016 and steadily climbing per capita income).
What is driving middle class consumption ?
-Increase in income -Economic prosperity -Working women -Changes in lifestyle-- demand for "global" trends -Increased per capita spending -Rapid urbanization -Improved infrastructure -Liberalization of the Indian economy -Flourishing manufacturing and services sectors -Booming real estate industry -Increasing foreign direct investment Income increase: more double income families than ever before - this increases the purchasing power City is becoming more modern ^a lot due to the liberalization of the Indian Economy
Why does India have so many poor?
-unequal distribution of income, high population growth, illiteracy, large families, caste system. -Malnutrition, illiteracy, disease, long-term health issues. -Unhygienic living conditions, lack of proper housing, high infant mortality, injustice to women and social ill-treatment of certain sections of society
Why are some international retailers afraid of entering India at the present time?
1. Fear of reversal of policy decision given the lack of political consensus on this contentious issue. 2. Fear of potentially adverse impact of large format retailers in small local economies.
What are some of the challenges of the retailing industry in India?
1. Tax structure in India favors small retail business 2. Lack of adequate infrastructure (power) roads, power, space 3. Access to finance 4. High cost of real estate population density issue 5. Dissimilarity in consumer groups 6. Geographically dispersed population 7. Small ticket sizes 8. Complex distribution network 9. Middle class psychology of consumers: the bigger and brighter a sales outlet the more expensive—so some aversion to shopping with organized retailers. 10. Low credit card usage: only 4% of Indians own a credit card—largely due to: high interest rates (25%), Hidden charges & high fees (little credit checking system), poor customer service. 11. Restrictions in Foreign Direct Investment (FDI) 12. Shortage of trained manpower and retail study options 13. Inattention to supply chain management 14. Laws & regulations: (store hours & labor laws) 15. Little use of IT systems 16. Limitations of mass media 17. Proliferation of counterfeit goods
Population of India?
1.27 billion growth rate 1.3% projected to pass China in 2030
Global economic rank?
5th largest in the world
Largest religious group?
82% Hindu 12% Muslim 2% Christian
How does poverty affect Indians?
CASTE SYSTEM India is home to several thousand ethnic groups, tribes, castes, and religions. Permanent hierarchical structure, with each caste having its own name, traditional occupation, rank, and distinctive subculture.
What product category in India is the largest and what % of the retail market is it?
Fashion and accessories is the largest category and has 40% of the share
What does FDI stand for?
Foreign Direct Investment
Name of the new economic model put into place in the early 1990s?
Liberalization Privatization , and Globalization (LPG) Designed to make the Indian economy one of the fastest growing economies in the world. 5th largest economy 10th largest importer 19th largest exporter ( Russia, US, Germany, and GB are major importers of Indian products
What is the expected growth rate of organized & traditional retailing and the expected organized growth rate by 2018?
Organized sector expected to grow to $64 billion by end of 2015.
What does the retailing industry look like in India? (retailing space per person, how big of an employer, what % of all jobs, what % of GDP etc.)
Retailing in India is one of the pillars of the economy—accounting for 14-15% of GDP. Estimated (2015) to be US$500 Billion—5th largest economy in the world. Still largely traditional shops manned by owner. 96% of the 5 million-plus outlets are smaller than 500 sq. ft. India per capita retailing space is approx. 2 sq. ft. compared to US = 16 sq. ft. Per capita retailing space one of lowest in world 2nd largest employer (after agriculture), providing over 8-10% of all jobs
How are Single-brand retailers and Multi-brand retailers treated differently under India's current FDI laws?
SINGLE BRAND RETAILERS: single brand 100% ownership for international retailers was approved in 2012 if they source 30% of its goods from India AND the company invests at least US$ 50 million in back end infrastructure (excluding real estate). MULTIBRAND RETAILERS: FDI policy initially denied multi-brand retail stores; but have since allowed 51% in multi-brand IF approved on a state-by-state basis ***easier to go to India as a single brand retailer *** multi-brands where allowed in if the state allows it/approved and they have to follow the two other guidelines from the single brand retailers
What are some of the stats & benefits of being a traditional retailer in India?
Traditional: is low-cost structure, mostly owner-operated, negligible real estate & labor costs and little/no taxes to pay. Organized growth = 35%; traditional = 6% annually
What kind of growth has the retail sector experienced lately and what are retail sales expected to hit by 2018?
development of cold storage facilities and faster logistics, which is imperative to mitigate the current loss of raw agricultural produce every year. Free access and competition in the food sector is expected to benefit local farmers Projected to aid in controlling food related inflation. Economy grew 8-12% since beginning of recession, and predicted to be 25-30% annually after financial crisis is over. Expected to hit US$1.3 trillion by 2018
Basic stats of poverty
largest # of poor in a single country and 1/3 of the worlds poor are in India.
What is the definition of poverty?
those unable to fulfill their basic needs
