The Indian retail industry is ready to go to the next level. According to the report prepared by the global consultancy Northbridge Capital, the retail market, which is currently worth $400 billion, registers an annual growth rate of 30%. “The market is expected to grow to $700 billion by the end of 2010. Of the total retail market, the share of organized retail in 2008 is 7.5%, valued at $300 million.” Although most of the Indian retail industry is still characterized by a disorganized market, but recent years have seen tremendous growth in organized retailing in India. With the great Indian giants like RPG, Pantaloons, Reliance, ITC etc. and foreign players like Adidas, Reebok, McDonalds, Indian organized retail has been growing at a rapid rate. Noting that the organized retail market is growing at a rate of 40%, Northbridge Capital said a faster growth rate would be sustained over the next three years, especially with the entry of major global players and Indian corporate houses.
Drivers of the Indian Organized Retail Industry
Changing consumption patterns – Convenience is the need of the hour. The one-stop-shop concept is “IN” and with rising incomes, consumers are even willing to spend more to save time. According to a report by AT Kearney, “Consumer spending in India has risen an impressive 75 percent in the last four years and is set to quadruple in the next 20 years.” Today, consumers are seeking more luxury items and spending more on health care and beauty products, in addition to clothing, food and grocery items.
Emphasis on rural markets: Indian retail companies have realized that rural markets are an important source of income, most of which is untapped. Following the arrival of ITC’s Chaupal Sagar, DCM Sriram’s Hariyali Bazaar and Tata’s kisan sansar, other retail players are also looking to expand into rural markets.
The impact of technology: The increase in the use of the Internet has given a new direction to the retail industry and has led to the growth of the so-called “electronic age” in India. Today, a large number of organizations share their information with a large number of audiences through the Internet. Technologies like universal product code or barcode, RFID chips, electronic data interchange, database management, etc. have given a new life to retail in India.
Retail reforms: The government has allowed 100 per cent of FDI in the cash and carry format and 51 per cent in single-brand retail. International players can also take the franchise and joint venture routes to enter Indian retail. In recent years, several companies have entered the country through these routes. Some of the international players that have already entered India include McDonald’s, Pizza Hut, Dominos, Levis, Lee, Nike, Adidas, Benetton, etc.
the road ahead
According to the Retailing Annual Review published by CRIS INFAC, in the next five years, 73.78 million m2. foot of floor space and Rs 369,000 crore of real estate investment will be needed to sustain the growing organized retail market. With Wal-Mart and many other international brands eyeing Indian markets, the Indian retail game IS ON.
