a quarterly report by - Technopak

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7 perspective a quar terly repor t <strong>by</strong> Volume 02 / 2009 | Volume 02 Focus on Same Store Sales Growth Till 2008 Indian retailers were rapidly increasing their same store sales due to increasing consumption, product price inflation and relatively low maturity of the stores. We saw a lot of pressure on same store sales growth in the recent months which can be attributed to slowdown in consumption and cannibalization from the new stores. Since the growth can’t always be in double digits, it becomes important for the retailer to keep improving its value proposition and continuously work on increasing the same store sales growth as the operating costs are bound to increase year after year. Also, as most of the retailers are in expansion mode, lower growth in same store sales may lead to increase in debt requirement to support expansion plans. An analysis of the same store sales growth in some of the other markets shows that in food & grocery, the same store sales growth mirrors ‘Consumer Price Inflation’ in food. In other categories like apparel, the same store sales growth is more dependent on how various retailers differentiate on merchandise, design and product development. As the retail sector in India matures, the high same stores sales growth is expected to come down and retailers would need to devise strategies to increase consumer ticket value and entice more consumers to the stores. <strong>Technopak</strong> expects that the ability to achieve high same store sales growth would be the key driver for success in future. Conclusion The modern retail in India is a bit unique since in most of the categories players see competition coming not from the other modern retailer but from the unorganized sector that works on low price, very high service standards and convenience proposition. Retailers in India experienced high growth during the period 2004-07. However, as the slowdown hit the Indian economy in 2008, modern retail in India too felt its impact to a large extent. Slowdown in consumer spending and difficulty in finance availability created tremendous difficulties for Indian retailers. At the same time, the slowdown also made retailers realize the importance of profitable growth rather than top-line growth. Modern retail will experience significant growth in all categories in the next few years but retailers would need to focus on improving operations to achieve sustainable growth. With worries on external factors like low consumer spending and high occupancy cost subsiding to a certain extent, retailers would need to focus on international issues. While better inventory management is expected to improve the working capital management, other initiatives like private label development, merchandise improvement are expected to encourage customers to spend more and increase top-line revenues. Authors Raghav Gupta, President I raghav.gupta@technopak.com Purnendu Kumar, Associate Vice President I purnendu.kumar@technopak.com Rohit Bhatiani, Principal Consultant | rohit.bhatiani@technopak.com | A Financial Deep Dive into India’s Retail Sector
Retail Real-estate Trends Introduction 09 Collaborative Efforts Between Retailers and Developers 10 Increasing Role of Entertainment Formats in Mall Development 11 Rising Importance for Brand Building in Malls 13 Rightsizing of the Mall Becoming Crucial 14 Renovation and Re-invention of High-streets 15 Opportunity for Professional Mall Management Operators on the Rise 16 Convergence of Leisure, Hospitality, Office and Retail Space 17 Increasing Prominence of Community Markets 18 Need for Greater Transparency in Occupancy Charges 19 Emerging Opportunities in Retail Real-estate 20 Conclusion 21
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