Shopper's Stop Limited - Securities and Exchange Board of India

The different phases in growth of organised retail
Growth
Create
awareness
New retail entrants
driving growth
Increase customer Strengthening
expectation back-end management
Consumers demands
organised formats
First gear Second gear Third gear
Fourth gear
1995 2004 2007 2012
41
Retailers
strengthening
backend system
Consolidation
Retailers going
global / M & A
Source: KSA Technopak
India is currently in the second phase of this evolution, with Indian customers becoming more demanding
with their rising standard of living and changing lifestyles. Change in customers’ focus from just buying to
shopping (buying, entertainment and experience) has led to a pick up in momentum in organised formats
of retailing.
As the sector enters the third phase of evolution, supply chain management will attain top priority. Fierce
competition will force retailers to quickly respond to changes in the market –bringing forth the importance
of supply chain management in managing stock availability, supplier relationships, new value added
services and cost cutting. Traditional retailers are expected to enhance their investments in supply chain,
whilst new entrants are likely to look at supply chain first before rolling out their national reach.
Drivers for Retail Transformation in India
Quality real estate
Availability of quality retail space has been one of the main constraints for development of organized
formats in India. In the past, negative yield on leased property, lack of bank funding due to unorganized
property market resulted in a dearth of quality retail space in the country.
The spread between yield on property and its financing cost has turned positive with the fall in interest
rates. Attractive yields on investments have resulted in sharp increase in property development.
From 25 operational malls in 2003, the country is expecting to have over 220 malls by 2006 with a
cumulative estimated space of 40 mn sq. ft. (source: Images Retail) and over 600 malls by 2010 giving a
cumulative estimated retail space of as much as 100 Million sq. ft. (source: KSA Technopak). While there
may be temporary mismatches, we believe that the supply would be comfortably absorbed by the
requirements of organised retail players.
KSA Technopak estimates that the increase in availability of quality, modern retail space is likely to lead
to a reduction in overall occupancy costs for retailers over the next 3-5 years and will also facilitate their
rapid expansion. The malls are also likely to see consumer traffic moving to them from existing high
streets and thereby assist in more customers for the stores operating in these malls.