Though Pantaloons is the flagship of the Future Groups's Pantaloon Retail, the overwhelming presence of Big Bazaar compels us to have a 'dekho' there first.
Big Bazaar : The Fundamentals
Out of India's GDP of $1 Trillion, retail consumption accounts for 30% or $ 300 Billion. With organised retail getting a conservative 4.8% of this pie, the current market size is $1.5 Billion or Rs 6000 Cr.In China, organised retail is 20% of the total market. To reach that figure in 10 years and assuming an 8% growth rate of GDP, indian organised retail would have to grow at 15 % per annum. This does not seem out of reach, considering the current rates of growth of over 30 %, low penetration and favourable demographics.
Big Bazaar, the largest constituent of Pantaloon Retail has been able to capture nearly 40 % of this total pie. So if you want to bet on organised retail, its single largest player may be of interest.
An oft repeated refrain against organised retail is the close and personalised relationship enjoyed by the customers and their neighbouring mom-and-pop stores. While these small stores outclass the Big-Berthas of retail in customer service, attention and proximity, they would be unable to compete on a sustained basis with the huge structural strength and sheer endurance of organised retail. Pockets of resistance may survive in all neighbourhoods but the day will be carried by the competitive pricing, range and depth of inventory and the promise of a family shopping experiance offered by organised retail. It would only be a matter of time before consumer preferences shift to organised retail. Another intersting statistic reveals the weakness of small retail shops. Pantaloon Retail as a group, averages sales of over Rs 8000 per square foot per annum. Big Bazaar does an estimated Rs 14000 per sq ft Per Annum implying that a 300 sq ft shop would have to manage sales of over Rs 42 Lakh per annum to compete. I dont see how my neighbourhood grocer can do that.
(To be continued)