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Retail Retail ...
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Jul. 5th, 2006 | 07:07 pm
A lot of action happening in India's retail market today. Indian retail is one of the most fragmented business markets, run mostly by the unorganized sector. Retail is an interesting industry!
I was just checking out on how the market has evolved in USA. It looks like the US market, in spite of being so mature, is still not as consolidated as I thought it would be. I thought that Wal-Mart has maybe around 30% of the market, but turns out that this biggest operator has just a 8-9% share of the US retail market. Another interesting thing is that, an entry barrier is near-absent in retail - anyone can enter any time - which essentially means that the industry will mostly run on a cost reduction strategy. Barriers to large profits :) are somewhat strong though, since efficient retail market identification seems to be a hard problem.
The data above also means that the US retail market is worth almost $3T (trillion) annually (Wal-Mart sold over $250B this year - $310B including international operations). What is also interesting is that margins are low - Wal-Mart operates at less than 4%, which works to around $10B profits a year. One can predict that other players don't operate at a significantly higher margin either, which means that the overall profits in the US retail market are around $100B.
Wal-Mart has shown how IT can streamline retail operations. Their MIS/automation (IT system) is considered to be one of the key sources of competitive advantage for Wal-Mart, simply since it helps them track and manage inventory better and faster.
Retail today demands a strong, and capital-intensive, brick-and-mortar model, which prevents small players from growing big, and also prevents big companies from investing bigger than they would want to. Retail is also a geography-specific industry - what works in Europe won't work in India - the same operational model can't be replicated in various countries (as opposed to, say, the precision manufacturing industry). Wal-Mart failed in some international markets.
It will be interesting to see what/how India does in this market, especially Reliance Retail with its huge investments.
_____
Btw, LNM is succeeding. Nice! But whether it will finally lead to gradual ever-inflating steel prices (as opposed to seasonal variations) remains to be seen.
I was just checking out on how the market has evolved in USA. It looks like the US market, in spite of being so mature, is still not as consolidated as I thought it would be. I thought that Wal-Mart has maybe around 30% of the market, but turns out that this biggest operator has just a 8-9% share of the US retail market. Another interesting thing is that, an entry barrier is near-absent in retail - anyone can enter any time - which essentially means that the industry will mostly run on a cost reduction strategy. Barriers to large profits :) are somewhat strong though, since efficient retail market identification seems to be a hard problem.
The data above also means that the US retail market is worth almost $3T (trillion) annually (Wal-Mart sold over $250B this year - $310B including international operations). What is also interesting is that margins are low - Wal-Mart operates at less than 4%, which works to around $10B profits a year. One can predict that other players don't operate at a significantly higher margin either, which means that the overall profits in the US retail market are around $100B.
Wal-Mart has shown how IT can streamline retail operations. Their MIS/automation (IT system) is considered to be one of the key sources of competitive advantage for Wal-Mart, simply since it helps them track and manage inventory better and faster.
Retail today demands a strong, and capital-intensive, brick-and-mortar model, which prevents small players from growing big, and also prevents big companies from investing bigger than they would want to. Retail is also a geography-specific industry - what works in Europe won't work in India - the same operational model can't be replicated in various countries (as opposed to, say, the precision manufacturing industry). Wal-Mart failed in some international markets.
It will be interesting to see what/how India does in this market, especially Reliance Retail with its huge investments.
_____
Btw, LNM is succeeding. Nice! But whether it will finally lead to gradual ever-inflating steel prices (as opposed to seasonal variations) remains to be seen.