A PROJECT REPORT ON The Study at Mushirabad with reference Spencer Retail LTD to on Pricing Srategies and Catchment Analysis

A Project Report Submitted in partial fulfillment for the award of

POST GRADUATE DIPLOMA IN MANAGEMENT

Submitted By:

Kumar Gurrampalli
(ESCI-PGDM-GEN-11/102)

Reliance Retail is a subsidiary company of Reliance Industries Founded in 2006 and based in Mumbai it is the second largest retailer in India. Its retail outlets offer foods, groceries, apparel and footwear, lifestyle and home improvement products, electronic goods, and farm implements and inputs. The companys outlets also provide vegetables, fruits, and flowers. It focuses on consumer goods, consumer durables, travel services, energy, entertainment and leisure, and health and well-being products, as well as on educational products and services. Reliance Footprint has a countrywide network of exclusive Footprint showrooms at more than 112 prime locations across 72 plus cities and 17 states in India designed to bring customers, an extensive collection of footwear and accessories and Luggage to suit their every need. What began as a single outlet at Bangalore in November 2007 has today grown into a nationwide chain of exclusive fashion footwear and accessories stores for the entire family. With a vision to generate inclusive growth and prosperity for farmers, vendor partners, small shopkeepers and consumers, Reliance Retail Limited (RRL), a subsidiary of RIL, was set up to lead Reliance Groups foray into organized retail. Since its inception in 2006, Reliance Retail Limited (RRL) has grown into an organisation that caters to millions of customers, thousands of farmers and vendors. Based on its core growth strategy of backward integration, RRL has made rapid progress

towards building an entire value chain starting from the farmers to the end consumers. Reliance Retail continued to expand presence of its value and specialty formats. During the year, Reliance Retail opened 90 new stores spanning across 'value' and 'specialty' segments. Instore initiatives, wider product choice and value merchandising enabled the business to achieve robust growth during this period. Its presence in the optics business is in partnership with Grand Vision. 51 new stores were added during FY-11 taking the total presence to 100 stores across key markets in the country. The retail chain offers single brand optical products including Vision Express frames, lenses, contact lenses, sunglasses, solutions and accessories. For the very first time, consumers in India got the opportunity to experience Hamleys, which is considered to be the world's most wonderful toy shop. The brand was launched in India with opening up of 2 stores during the year. iStore by Reliance Digital is a one-stop-shop for all Apple products and services. There are 17 such stores currently operational. Reliance Brands also announced exclusive licensing arrangement with two leading international brands:

Steve Madden, a leading designer, wholesaler and retailer of fashion-forward footwear and accessories for women, men and children.

Quiksilver, a leading outdoor sports lifestyle company to launch their core brands 'Quiksilver' and 'Roxy'.

Across India, Reliance Retail serves over 2.5 million customers every week. Its loyalty programme, "Reliance One", has the patronage of more than 6.75 million customers.

After launch, in a dramatic shift in its positioning and mainly due to the circumstances prevailing in UP, West Bengal and Orissa, it was mentioned recently in news dailies that Reliance Retail is moving out of stocking fruits and vegetables. Reliance Retail has decided to minimise its exposure in the fruit and vegetable business. The company may not stock fruit and vegetables in some states. Though Reliance Fresh is not exiting the fruit and vegetable business altogether, it has decided not to compete with local vendors partly due to political reasons, and partly due to its inability to create a robust supply chain. This is quite different from what the firm had originally planned. When the first Reliance Fresh store opened in Hyderabad last Octobe], not only did the company say the stores main focus would be fresh produce like fruits and vegetables at a much lower price, but also spoke at length about its farm-to-fork" theory. The idea the company spoke about was to source from farmers and sell directly to the consumer, removing middlemen out of the way. Reliance Fresh, Reliance Mart, Reliance Digital, Reliance Trendz, Reliance Footprint, Reliance Wellness, Reliance Jewels, Reliance Timeout and Reliance Super are various formats that Reliance has rolled out. In addition, Reliance Retail has entered into an alliance with Apple for setting up a chain of Apple Specialty Stores branded as iStore, starting with Bangalore

Indian Footwear Industry The footwear sector is a very significant segment of the leather industry in India; rather it is the engine of growth for the entire Indian leather industry. India is the second largest global producer of footwear after China, accounting for 13% of global footwear production of 16 billion pairs. India produces 2065 million pairs of different categories of footwear (leather footwear - 909 million pairs, leather shoe uppers - 100 million pairs and non-leather footwear - 1056 million pairs). India exports about 115 million pairs. Thus, nearly 95% of its production goes to meet its own domestic demand. The major production centers in India are Chennai, Ranipet, Ambur in Tamil Nadu, Mumbai in Maharastra, Kanpur in U.P., Jalandhar in Punjab, Agra, Delhi, Karnal, Ludhiana, Sonepat, Faridabad, Pune, Kolkata, Calicut and Ernakulam. About 1.10 million are engaged in the footwear manufacturing industry. . Footwear exported from India are Dress Shoes, Casuals, Moccasins, Sport Shoes, Horrachies, Sandals, Ballerinas, Boots, Sandals and Chappals made of rubber, plastic, P.V.C. and other materials. Brands sourced from India: Footwear Acme, Ann Taylor, Bally, Charter Club, Clarks, Coach, Colehann, Daniel Hector, Deichmann, DKNY,

Double H, Ecco, Elefanten, Etienneaigner, Florsheim, Gabor, Geoffrey Beene, Guess, Harrods, Hasley, Hush Puppies, Kenneth Cole, Liz Claiborne, Marks & Spencer, Nautica, Next, Nike, Cole Haan, Nunn Bush, Pierre Cardin, Reebok, Rockport, Salamander, Stacy Adams, Tommy Hilfiger, Tony Lama, Versace, Yves St. Laurent, Zara, Johnston & Murphy, Docksteps, Timberland, Armani, Geox, Diesel, Ted Baker, Lacoste, Kickers, Calvin Klein, Sioux, Brasher, Zegna, MassimuDutti, Buggatti, Lloyd, Christian Dier, Salamander, Camper, Bata, Espirit, French Connection, Legero, Mercedez, H & M and many more famous brands Besides, major brands are sourced from India, MNC brands are sold in India and Indian brands sold in India. MNC Brands Sold in India Aldo, Bally, Clarks, Ecco, Florshiem, Ferragammo, Hush Puppies, Lee cooper, Indian Brands sold in India Red Tape, Bata, Liberty, Khadims,

Lloyd, Marks & Lakhani, Metro, Spencer, Nike, Nine Action West, New Balance, Reebok, Rockport, Stacy Adams, Tods, Geox , Louis Vuitton US Retail giant Wal-Mart has also begun sourcing footwear from India since the last two years. The Footwear sector is now de-licensed and de-reserved, paving the way for expansion of capacities on modern lines with stateof-the-art machinery. To further assist this process, the Government has permitted 100% Foreign Direct Investment through the automatic route for the footwear sector. Conducive Investment climate towards attracting overseas investments and increasing cost competitiveness. The Government of India is setting up dedicated Footwear Complex and Footwear Components Part where footwear clusters are located. There has been active interest in collaborating with Indian Footwear companies from European countries like Italy, Spain and Portugal.

Footwear Imports Global Trend: Major Importing Countries of Footwear (Leather and NonLeather) (Value in Million US$) Country 2006 2007 2008 2009 2010 USA 19835.93 20039.13 20104.41 17904.13 21530.97 Germany 5591.77 5966.99 6529.33 6037.73 6814.89 France 4778.07 5473.04 5714.00 5379.78 5802.18 UK 4950.49 5281.55 5213.00 4772.59 5529.01 Italy 4047.37 4529.77 4810.25 4484.10 4928.22 Hong Kong 4984.59 4881.67 4944.40 3974.30 4676.06 Japan 3509.83 3750.04 4112.99 4077.58 4468.16 Russia 1121.68 2067.82 2843.81 2149.42 3768.80 Spain 2036.21 2388.74 2917.97 2464.34 2816.83 Netherlands 1978.33 2297.95 2570.86 2481.35 2752.38 Belgium 2057.39 2543.04 2892.62 2554.50 2554.59 Canada 1507.21 1677.05 1748.04 1645.09 1869.25 Source: ITC, Geneva

Major Exporting Countries of Footwear (Leather and NonLeather) (Value in Million US$) Country 2006 2007 2008 2009 2010 China 21014.63 24181.69 28115.96 26571.20 33665.11 Italy 8246.51 9712.94 10218.75 8189.14 8754.52 Hong Kong 5692.82 5639.64 5666.05 4502.49 5243.74 Vietnam Belgium 2960.28 3375.63 3680.80 3464.10 3716.77 Germany 2607.89 2999.19 3611.90 3194.69 3443.61 Spain 2147.74 2440.47 2670.35 2487.12 2449.73 Indonesia 1514.63 1567.05 1828.44 1688.35 2428.72 Netherlands 1577.03 1811.96 2240.70 2235.80 2412.14 France 1535.21 1840.51 2015.13 1800.70 1969.58 Portugal 1465.11 1695.88 1797.00 1552.74 1719.67 Brazil 1863.07 1911.74 1881.30 1359.98 1472.42 India 1236.91 1489.35 1534.32 1507.59 1732.04 Source: ITC, Geneva

Footwear Global Scenario and Indias share The global import of Footwear (both leather footwear as well as non-leather footwear) has increased from US$ 73.79 billion in 2006 to US$ 91.37 billion in 2010, growing at a CAGR of 5.48%. During 2010, the Indias share in the global import is 1.95%. (In Million US$) 2006 2007 2008 2009 2010 Global import of 73795.9 81574.2 88731.0 78249.6 91373.8 Footwear 6 5 8 6 2 India's export of 1236.91 1489.35 1534.32 1507.59 1758.67 Footwear & Uppers % Share of India 1.67% 1.82% 1.72% 1.92% 1.92% Source: ITC, Geneva & DGCI &S, Kolkata Global Footwear import includes leather & non-leather Indias Footwear includes Leather, non-leather and uppers Footwear is the engine of growth of the leather industry in India. Indias export of Footwear touched US$ 2077.27 million in 2011-12, accounting for a share of 42.67% in Indias total export from the leather sector of US$ 4868.71 mn Indias Footwear export (leather, uppers & non-leather) is growing at a CAGR of 8.67% in the last five years ending 201112

Indias export of leather footwear had increased from US$ 1174.03 million in 2007-08 to US$ 1715.17 million in 2011-12

Indias export of footwear components had increased from US$ 269.30 million in 2007-08 to US$ 281.83 million in 2011-12 Indias export of non-leather footwear has increased from US$ 46.02 million in 2007-08 to US$ 80.27 million in 2011-12

Indias Footwear Export Growth over the last Four Decades Export of footwear from India increased manifold over the last four decades. During 2011-12, Indias footwear export is valued at US$ 2077.27, constituting 42.67% share in total export of leather & leather products.

Footwear exports has increased from US$ 119.72 million in 1981-82 to US$ 2077.27 million in 2011-02 Major Markets: During 2010-11, the main markets for Indian Footwear are UK with a share of 19.16%, Germany 16.15%, Italy 12.46%, USA

8.04%, France 8.93%, Spain 6.45%, Netherlands 4.51%, Portugal 1.41%, U.A.E 2.45% and Denmark 0.97.%. These 10 countries together accounts for 80.53% share in Indias total footwear export. Nearly 90% of Indias export of footwear goes to European Countries and the USA. Future growth of Indian footwear in India will continue to be market driven. The European countries and the US are major consumers for the Indian footwear.

A Statement showing Indias Export of Footwear to different countries: (Value in Million $)

2005- 2006- 2007- 2008- 2009- 2010- 2011- % Country 06 07 08 09 10 11 12 Share Germany 170.97 217.23 246.84 229.65 224.3 286.7 353.77 17.03% UK 195.78 208.2 241.37 247.06 296.45 339.65 360.48 17.35% Italy 134.35 186.11 229.81 221.09 210 219.72 219.79 10.58% USA 131.07 127.15 136.92 163.03 123.6 143.02 183.1 8.81% France 74.48 99.81 116.03 119.2 144.56 154.95 159.27 7.67% Spain 63.7 64.57 76.69 91.86 95.94 112.05 113.85 5.48% Netherlands 32.96 48.57 72.91 76.2 65.13 6.19 101.72 4.90% Portugal 22.15 35.03 37.34 28.21 22.63 25.69 28.77 1.38% UAE 25.78 34.64 39.23 39.4 39.45 41.82 62.06 2.99% Denmark 18.37 14.65 17.48 14.78 17.01 16.55 24.3 1.17% Australia 11.58 10.11 12.52 13.34 15.5 12.82 15.59 0.75% Sweden 6.77 7.99 12.04 12.64 12.2 12.07 14.08 0.68% Canada 11.95 10.91 10.41 8.96 9.3 10.56 15.01 0.72% South 11.33 14.75 Africa 8.26 12.11 8.52 8.49 9.87 0.71%

Japan Others Total

3.17 3.07 4.63 8.23 5.45 7.51 14.63 0.70% 133.9 156.76 226.61 252.18 216.2 358.04 396.10 19.07% 1045.2 1236.9 1489.3 1534.3 1507.5 1758.6 2077.2 100.00 4 1 5 2 9 7 7 %

Future Trends: - Keeping in view its past performance, current trends in global trade, the industrys inherent strengths and growth prospects, the footwear industry aims to augment production, thereby enhancing its exports from the current level of US$ 2.07 billion. Indian footwear industry poised for growth India has state-of-the-art manufacturing plants. The footwear sector has matured from the level of the manual footwear manufacturing method to the automated footwear manufacturing systems. Footwear production units are installed with world class machines. Manned by skilled technicians, these machines help to turn any new innovative idea into reality. Support systems created for the sector have indeed served the footwear industry well. India has a well developed footwear component manufacturing industry. The future growth of the footwear industry in India will continue to be market-driven, and oriented towards EU and US markets. With technology and quality of the footwear improving year after year, Indian Footwear industry is stamping its class and expertise in the global footwear trade.

Competitors Profile: 1. Pantaloon Retail:

It is headquartered in Mumbai with 450 stores across the country employing more than 18,000 people. It can boast of launching the first hypermarket Big Bazaar in India in 2001. An all-India retail space of 5 million sq. ft. which is expected to reach 30 mn by 2010. It is not only the largest retailer in India with a turnover of over Rs. 20 billion but is present across most retail segments Food & grocery (Big bazaar, Food bazaar), Home solutions (Hometown, furniture bazaar, collection-i), consumer electronics (e-zone), shoes (shoe factory), Books: music & gifts (Depot), Health & Beauty care services (Star, Sitara and Health village in the pipeline), e-tailing (Futurbazaar.com), entertainment (Bowling co.) One of their recent innovations include e-commerce hybrid format of small shops, the area for these stores will be 150 sq. ft. fitted with 40 digital screens. Customers will be encouraged to browse through the entire range of products on digital screen. They will be able to place the order, the delivery of which will be arranged by the shop to their homes within a few hours 2. K Raheja Group They forayed into retail with Shoppers Stop, Indias first departmental store in 2001. It is the only retailer from India to become a member of the prestigious Intercontinental Group of Departmental Stores (IGDS). They have signed a 50:50 joint venture with the Nuance Group for Airport Retailing. Shoppers Stop has 7, 52, 00 sqft of retail space with a turnover of Rs 6.75 billion. The first Hypercity opened in Mumbai in 2006 with an area of 1, 20,000 sq. ft. clocking gross sales of Rs. 1 bn in its first year.

Crossword brand of book stores, Homes stop a store for home solutions, Mothercare a concept stocking merchandise related to childcare are also owned by them. Recently, Rahejas have signed anMoU with the Home Retail Group of UK to enter into a franchise arrangement for the Argos formats of catalogue & internet retailing. The group has announced plans to establish a network of 55 hypermarkets across India with sales expected to cross the US$100 million mark by 2010. 3. Tata group: Established in 1998, Trent - one of the subsidiaries of Tata Group - operates Westside, a lifestyle retail chain and Star India Bazaar - a hypermarket with a large assortment of products at the lowest prices. In 2005, it acquired Landmark, India's largest book and music retailer. Trent has more than 4 lakh sq. ft. space across the country. Westside registered a turnover of Rs 3.58 mn in 2006. Tatas has also formed a subsidiary named Infiniti retail which consists of Croma, a consumer electronics chain. It is a 1500017000 sq. ft. format with 8 stores as of September 2007. Another subsidiary, Titan Industries, owns brands like Titan, the watch of India has 200 exclusive outlets the country and Tanishq, the jewellery brand, has 87 exclusive outlets. Their combined turnover is Rs 6.55 billion. Trent plans to open 27 more stores across its retail formats adding 1.5 mnsqft of space in the next 12 DLF malls.

4. RPG group: One of the first entrants into organised food & grocery retail with Foodworld stores in 1996 and then formed an alliance with Dairy farm International and launched health & glow (pharmacy & beauty care) outlets. Now the alliance has dissolved and RPG has Spencers Hyper, Super, Daily and Express formats and Music World stores across the country. RPG has 6 lakh sq. ft. of retail space and has registered a turnover of Rs 4.5 billion in 2006. It is planning to venture into books retail, with the launch of its own bookstores Books and Beyond by the end of 2007. An IPO is also in the offering, with expansion to 450+ MusicWorld, 50+ Spencer's hyper outlets covering 4 million sq. ft. by 2010. 5. Landmark group: Were launched in 1998 in India. Lifestyle is spread across six cities, covering 4.6 lakh sq. ft. with a turnover of Rs 3.5 billion in 2005. A new division named Lifestyle International has emerged for their international brands business comprising Bossino, Kappa and Springfield in their portfolio. Their retail mix includes Home solutions (Home centre), fashion (lifestyle, landmark International), value retailing (max retail), hypermarkets & supermarkets (Max), kids entertainment (Funcity). They plan to invest Rs. 300 crores in the next two years to expand on Max chain, and Rs 100 crores on Citymax 3 star hotel

chain. They have already instituted a separate company christened Citymax Hotels (India). 6. Piramal Group In September 1999, Piramal Enterprises announced their arrival into retail with the launch of three retail concepts: India's first true shopping mall of international standards, called Crossroads; a lifestyle department store named Piramyd Megastore; and a family entertainment centre known as Jammin. Piramyd Megastore and Jammin were anchor tenants for Crossroads (recently sold to Pantaloon for Rs 4 billion). In 2001, the group entered the business of food & grocery retail with the launch of TruMart supermarkets in Pune. They have around 18 TruMart stores covering 1.90 lakh sq. ft. registering a turnover of Rs 37.6 mn in 2005. PiraymdMegatsores contributes more than 70 % to their retail mix with a turnover of Rs 112.8 mn. They plan to open 150 stores covering 75 mnsqft of retail space in the next 5 years. 7. Subhiksha Subhiksha is a Chennai-based, decade old, no frills, food, grocery, pharma and telecom, discount retail chain. ICICI Venture Capital holds 24% in the equity capital of Subhiksha. It has more than 500 stores across the country covering a retail space of more than 1 million sqft with a registered turnover of Rs 3.34 bn in 2006. It has a planned investment of Rs.300 crores to ramp up its operations to 1200 stores by 2008. New but potential BIG players

8. Bharti-Walmart Their plans include US$ 7 bn investment in creating retail network in the country including 100 hypermarkets and several hundred small stores. They have signed a 50:50 percent joint venture
agreement with Walmart. Wal-Mart will do the cash & carry while Bharti will do the front-end. 9. AV Birla Group They have a strong presence in apparel retailing through Madura garments which is subsidiary of Aditya Birla Nuvo Ltd. They own brands like Louis Phillipe, Van Heusen, Allen Solly, Peter England, Trouser town. In other segments of retail, AV Birla Group has announced investment plans of Rs 8000 - 9000 crores in the first 3 years till 2010. The acquisition of Trinethra (food & grocery) chain in the south has moved their tally to 400 stores in the country. Their More range of 15 supermarkets are slated to open at Nashik, Pune and other tier II cities in Western India in 2007.