Industry overview

Retailing is the combination of activities involved in selling or renting

consumer goods and services directly to ultimate consumers for their
personal or household use. In addition to selling, retailing includes such
diverse activities as, buying, advertising, data processing, and
maintaining inventory. This article explains the meaning of retail and its
etymology. Understand the meaning and constituents of the retail
industry and the role it plays in the economy of any nation.

What do we mean by Retail?

According to Phillip Kotler, "Retailing includes all the activities

involved in selling goods or services to the final consumers for personal
and non-business use." A retailer or a retail store is any business
enterprise whose sales volume comes primarily from retailing. A retailer
may primarily sell goods such as a grocery store or a bookstore, or a
retailer may primarily sell services such as a beauty parlor or a theatre.
Retailers are business firms engaged in offering goods and services
directly to consumers. In most—but not all— cases, retail outlets are
primarily concerned with selling merchandise. Typically, such
businesses sell individual units or small groupings of products to large
numbers of customers.

A minority of retailers, however, also garner income through rentals

rather than outright sales of goods (as in the case of enterprises that offer
furniture or gardening tools for rent) or through a combination of
products and services (as in the case of a clothing store that might offer
free alterations with the purchase of a suit). Retailing is thus a
combination of activities involved in selling or renting consumer goods
or services directly to the ultimate customers for their personal or
household use. In addition to selling, retailing includes such diverse
activities as buying, advertising, data processing, manpower
management, and maintenance of inventory.
The Etymology of "Retail":

Retail comes from the Old French word tailer (compare modern French
retailler), which means "to cut off, clip, pare, divide" in terms of
tailoring (1365). It was first recorded as a noun with the meaning of a
"sale in small quantities" in 1433 (from the Middle French retail, "piece
cut off, shred, scrap, paring"). Some of the "cut" functions retailers
perform include sorting and storing, packing, and selling in small
quantities to the final consumers thus adding value.

Difference between Shopping & Retailing:

Shopping:  

Shopping refers to the act of buying products. Sometimes this is done to

obtain necessities such as food and clothing; sometimes it is done as a
recreational activity. Recreational shopping often involves window
shopping (just looking, not buying) and browsing and does not always
result in a purchase.

Retailing: 

Retail is the sale of goods and services from individuals or businesses to

the end-user. Retailers perform specific activities such as anticipating
customer wants, procuring material as per the anticipated demand,
acquiring market information, and financing.

The Retail Industry:

Globe: Retailing is the largest private sector in the world and the prime
mover of the economy. It accounts for almost 10% of the GDP of most
developed nations. Retailing globally is huge-$6.6bn and much of it is
organized. The retail industry is predominant in developed countries like
the USA, UK, etc. The industry is also a major employer in most of the
economies- up to 16% in the US, 15% in Brazil, 12% in Poland, and 7%
in China. Typically, the top 250 global retailers have combined sales of
approximately $4 trillion USD. The top ten retailers account for $1.2
trillion, or about 30% of those sales.

United States of America: In the USA, the retail industry employs about
22 million people and generates more than three trillion dollars in sales
annually. The United States retail sector features the largest number of
large, lucrative retailers in the world. A 2012 Deloitte report published
in STORES magazine indicated that of the world's top 250 largest
retailers by retail sales revenue in the fiscal year 2010, 32% of those
retailers were based in the United States and that 32% accounted for
41% of the total retail sales revenue of the top 250. The retail industry is
a massive part of the overall U.S. economy and in 2005, retail
establishments accounted for 18 percent of all nonfarm private-sector
jobs and had sales of $3.2 trillion. Many retail niches are characterized
by a healthy population of smaller enterprises and the vast majority of
retail employees in the United States work at establishments with fewer
than 20 employees. There is also a huge concentration of large retail
firms in the USA - 10 % of food and general merchandise firms account
for over 40% of all retail sales. Some of these large retail chains
eliminate the whole sellers and buy direct from the manufacturers
making the supply chain very efficient.

Japan: In Japan, on the other hand, small firms and stores govern the
retail sector. The wholesale channel is relatively much larger.
Merchandise has to pass through three to four-channel members before
reaching the store. This results in reduced efficiency and higher
manpower and distribution costs. In Japan, 20% of the workforce is
employed in retail as against 10% in the USA.

Europe: In Europe, there is a high concentration of retail sales in some

countries like the UK and Germany. In the UK, over 80% of retail sales
in food are accounted for by 5 large chains. In Southern Europe, the
market is more fragmented and we find traditional small family-owned
stores dominating the markets.

Brand Overview

Walmart is an unstoppable retail force that has yet to meet any

immovable object. It is the world's #1 retailer, as well as the world's
largest company by revenue and largest employer with 2.2 million
associates. Walmart sells groceries and general merchandise, operating
some 5,400 stores in the US, including about 4,800 Walmart stores and
600 Sam's Club membership-only warehouse clubs. Walmart's
international division numbers about 6,000 locations; operating through
regional subsidiaries, it's the #1 retailer in Canada and Mexico and has
operations in Asia, Africa, Europe, and Latin America. Some 265
million customers visit Walmart's stores and websites each week.
Operations
Walmart operates through three segments: Walmart US, Walmart
International, and Sam's Club.
Walmart US is the largest segment with about 65% of sales and includes
multiple store formats operating under the Walmart name across the US
and Puerto Rico. It also includes Walmart.com and other e-commerce
sites and mobile apps. Walmart sells merchandise in three main
categories of grocery, health and wellness, and general merchandise,
with grocery representing about 55% of segment sales.
The International division, which accounts for about a quarter of sales,
operates retail, wholesale, and drug and convenience store formats under
Walmart/Sam's Club brands and various other banners in more than two
dozen countries. Mexico is the largest international market; others
include the UK -- where it owns "big four" supermarket Asda -- as well
as China, Canada, and South Africa, through majority-owned Massmart.
International customers have access to online shopping in about ten
countries.
The Sam's Club segment, accounting for more than 10% of sales,
includes US operations of the membership-only warehouse club and
samsclub.com. Sam's Club's largest merchandise categories are grocery
and fuel, representing 60% and about 20%, respectively.
Geographic Reach
Walmart rings up more than 75% of its sales in the US. In the 20-plus
years since the Arkansas-based retailer entered Mexico, its first and
largest foreign market, Walmart has become an international retail
powerhouse with operations in more than 25 countries. Of its
approximately 11,500 stores, more than half are located outside the US.
Mexico, with more than 2,400 locations, represents more than 40% of
total international units. Other major foreign markets include Canada,
the UK, Argentina, Brazil, Chile, China, India, Japan, Africa, and
Central America.
Sales and Marketing
Walmart spent $3.7 billion in fiscal 2020, $3.5 billion on advertising in
fiscal 2019 (ended January), and $3.1 billion in fiscal 2018. Its
advertising consists primarily of print, television, and digital advertising.
The Walmart US segment operates about 160 distribution facilities,
including return facilities, and 30-plus e-commerce fulfillment centers;
the Sam's Club segment operates about two dozen distribution facilities.
The company also has more than 220 international distribution facilities.
Financial Performance
For the past five years, total revenue for Walmart showed a steady
increase. However, income for the same period fluctuated.
Walmart's total revenues, which includes net sales and membership and
other income, increased $9.6 billion or 2% for fiscal 2020. These
increases in revenues were due to increase in net sales, which increased
$9.6 billion for fiscal 2020.
Walmart reported $14.9 billion of consolidated net income for fiscal
2020, which represents an increase of $8.2 billion for fiscal 2020.
Cash held by the company in 2020 increased by $1.8 billion to $9.5
billion compared to $7.8 billion in the prior year. Cash provided by
operations was $25.3 billion while cash used for investing and financing
activities were $9.1 billion and $14.3 billion, respectively.
Strategy
Walmart's strategy is to make every day easier for busy families, operate
with discipline, sharpen their culture and become digital, and make trust
a competitive advantage. Making life easier for busy families includes
their commitment to price leadership, which has been and will remain a
cornerstone of the company's business, as well as increasing
convenience to save their customers time. By leading on price, WalMart
earn the trust of their customers every day by providing a broad
assortment of quality merchandise and services at everyday low prices
("EDLP"). EDLP is the company's pricing philosophy under which they
price items at a low price every day so their customers trust that their
prices will not change under frequent promotional activity. Everyday
low cost ("EDLC") is Wal-Mart's commitment to control expenses so
their cost savings can be passed along to their customers.
Walmart International's strategy is to create strong local businesses
powered by Walmart which means being locally relevant and customer-
focused in each of the markets it operates. They are being deliberate
about where and how they choose to operate and continue to re-shape
the portfolio to best enable long-term, sustainable and profitable growth.
Mergers and Acquisitions
In early 2019, Walmart has acquired Aspectiva, an Israeli-based start-up,
for an undisclosed sum. Aspectiva's Natural Language Processing
capabilities will help Walmart further enhance the end-to-end shopping
experience.

Indian Market Overview

Introduction

Indian retail industry has emerged as one of the most dynamic and fast-
paced industries due to the entry of several new players. Total
consumption expenditure is expected to reach nearly US$ 3,600 billion
by 2020 from US$ 1,824 billion in 2017. It accounts for over 10% of the
country’s gross domestic product (GDP) and around eight% of the
employment. India is the world’s fifth-largest global destination in the
retail space.

India ranked 73 in the United Nations Conference on Trade and

Development's Business-to-Consumer (B2C) E-commerce Index 2019.
India is the world’s fifth largest global destination in the retail space and
ranked 63 in World Bank’s Doing Business 2020.
India is the world’s fifth largest global destination in the retail space. In
FDI Confidence Index, India ranked 16 (after US, Canada, Germany,
United Kingdom, China, Japan, France, Australia, Switzerland, and
Italy).

Market Size

Retail industry reached US$ 950 billion in 2018 at CAGR of 13% and is
expected to reach US$ 1.1 trillion by 2020. Online retail sales were
forecast to grow 31% y-o-y to reach US$ 32.70 billion in 2018. Revenue
generated from online retail is projected to reach US$ 60 billion by
2020.
Revenue of India’s offline retailers, also known as brick and mortar
(B&M) retailers, is expected to increase by Rs. 10,000-12,000 crore
(US$ 1.39-2.77 billion) in FY20.

According to the Ground Zero Series findings of the consulting firm

RedSeer, the retail sector is expected to recover ~80% of pre-Covid
revenue (amounting to US$ 780 billion) by end-2020.

India is expected to become the world’s fastest growing E-commerce

market, driven by robust investment in the sector and rapid increase in
the number of internet users. Various agencies have high expectations
about growth of India’s E-commerce market.

After an unprecedented decline of 19% in the January-March 2020

quarter, the FMCG industry displayed signs of recovery in the July-
September 2020 quarter with a y-o-y growth of 1.6%. The growth
witnessed in the fast-moving consumer goods (FMCG) sector was also a
reflection of positivity recorded in the overall macroeconomic scenario
amid opening of the economy and easing of lockdown restrictions.

Investment Scenario

The Indian retail trading has received Foreign Direct Investment (FDI)
equity inflow totalling US$ 3.35 billion during April 2000-September
2020, according to Department for Promotion of Industry and Internal
Trade (DPIIT).

With the rising need for consumer goods in different sectors including
consumer electronics and home appliances, many companies have
invested in the Indian retail space in the past few months.

India’s retail sector attracted US$ 970 million from various private
equity funds in 2019.
In September 2020, US private equity firm Silver Lake announced plan
to invest Rs. 7,500 crore (US$ 1.00 billion) in Reliance Retail, which
marks the second billion-dollar investment by Silver Lake in a Reliance
Industries subsidiary after the US$ 1.35 billion investment in Jio
Platforms earlier in 2020.

Walmart Investments Cooperative U.A invested Rs. 2.75 billion (US$

37.68 million) in Wal-Mart India Pvt Ltd. Walmart Inc. plans to increase
exports from India by 3x to US$ 10 billion by 2027, up from US$ 3
billion at present.

Retail investors boosted their shareholdings in Indian companies to an

11-year high in September 2020, with first-time investors continuing to
add more money into equities. According to Prime Database,
shareholding of retail investors in 1,605 listed companies hit an 11-year
high of 7.01% and witnessed ~3.4 million new ‘Demat’ accounts from
July 2020 to September 2020.

In November 2020, OnePlus, the Chinese smartphone maker, launched

‘OnePlus Nizam Palace’ in Hyderabad, touted as its largest experience
store worldwide that is spread across 16,000 sq. ft.. The company also
announced plans to invest Rs. 100 crore (US$ 13.51 million) towards
market penetration across the omnichannel retail business, including
extension of offline experience beyond metro cities with new retail
partnerships.