RETAIL IN INDIA

Anand Sat Aug 16, 2008 4:02 pm

India tops the AT Kearney's annual Global Retail Development Index (GRDI) for the third consecutive year, maintaining its position as the most attractive market for retail investment. Furthermore a report by PricewaterhouseCoopers foresees India and China to continue as the top sourcing hubs in retail and consumer sector in the coming years.
The Indian retail market, which is the fifth largest retail destination globally, according to industry estimates is estimated to grow from the US$ 330 billion in 2007 to US$ 427 billion by 2010 and US$ 637 billion by 2015. Simultaneously, modern retail is likely to increase its share in the total retail market to 22 per cent by 2010.
Continuing the robust growth of the organised retail in India, according to the Credit Rating and Information Services of India, the industry raked in US$ 25.44 billion turnover in 2007-08 as against US$ 16.99 billion in 2006-07, a whopping growth rate of 49.73 per cent.
India has one of the largest number of retail outlets in the world. Of the 12 million retail outlets present in the country, nearly 5 million sell food and related products. Thought the market has been dominated by unorganised players, the entry of domestic and international organised players is set to change the scenario.
Organised retail segment has been growing at a blistering pace, exceeding all previous estimates. According to a study by Deloitte Haskins and Sells, organised retail has increased its share from 5 per cent of total retail sales in 2006 to 8 per cent in 2007. The fastest growing segments have been the wholesale cash and carry stores (150 per cent) followed by supermarkets (100 per cent) and hypermarkets (75-80 per cent). Further, it estimates the organised segment to account for 25 per cent of the total sales by 2011.
Retail space
Driven by changing lifestyles, strong income growth and favourable demographic patterns, Indian retail is expanding at a rapid pace. Mall space, from a meagre one million square feet in 2002, is expected to touch 40 million square feet by end-2007 and an estimated 60 million square feet by end-2008, says Jones Lang LaSalle's third annual Retailer Sentiment Survey-Asia.
Alongside, Indian cities are witnessing a paradigm shift from traditional forms of retailing into a modern organized sector. A report by Images Retail estimates the number of operational malls to more than double to over 412 with 205 million square feet by 2010 and further 715 malls by 2015, on the back of major retail developments even in tier II and tier III cities in India.

Luxury retail
With consumers for luxury goods more in numbers than adult population of several countries, the Indian luxury retail market is estimated to leap-frog from around US$ 3.5 billion to US$ 30 billion by 2015, according to a survey done by AT Kearney. India's luxury market, estimated to be the 12th largest in the world, has been growing at the rate of 25 per cent per annum.
Already Indians splurge US$ 2.9 billion on luxury assets, spend another US$ 953 million on luxury services and top it by buying luxury goods worth US$ 377 million. And with a rapidly expanding population of high net worth individuals, India could emerge as the next hub for luxury goods consumption.
Consequently, a number of foreign brands including French Connection, Sanrio of Hello Kitty fame, Jimmy Choo, La Pearla and Calvin Klein among others have already lined up for permission to infuse foreign direct investment through the single-brand retail window.
Kids' retail
When it comes to Indian children, retailers are busy bonding -- and branding:

The UK based retail chain, Marks & Spencer, is launching its kids' wear categories in India.

Leading the kids' retail revolution is the apparel business, which accounts for almost 80 per cent of the revenue, with kids' clothing in India following international fashion trends. According to research firm KSA Technopak, the branded segment comprises US$ 701.7 million of the total kids' apparel market-size of over US$ 3 billion. Industry experts say kids' retailing will touch annual growth of 30-35 per cent.

Discount Malls
Even as the organized retail market is starting to take off, there has been a concomitant surge in branded discount outlets in India. Top realtors and local retail chains are developing malls in regional boroughs, specifically to sell premium branded goods. At least 50 such malls are to come up in the next two years across the country positioned in the middle-to-the-premium end of the market.
For example, Royal Palms is developing Orchard Road Mall in the western suburbs of Mumbai. Similarly, Akruti Nirman, which is planning to brand its discount malls in Kanjurmag, Ghatkopar, Mumbai and Thane as 'Cityworld', has decided to develop similar malls in Tier II and Tier III cities. Some of the other prominent discount retailers include Pantaloon Retail (India) Ltd's Brand Factory, Arvind Mills Ltd's Megamart andand Provogue (India) Ltd's Promart among others.
E-tailing
The increase in the PC and internet penetration along with the growing preference of Indian consumers to shop online has given a tremendous boost to e-tailing-the online version of retail shopping. An estimated 10 per cent of the total e-commerce market is accounted by e-tailing.
With today's, net-savvy Indians making online purchases like never before, both the number and variety of products sold online has grown exponentially. According to the Indian Marketing Research Bureau (IMRB) and Internet and Mobile Association of India (IAMAI), the e-tail market is estimated to grow by 30 per cent to US$ 273.02 million in 2007-08, from US$ 210.01 million in 2006-07.
In fact, there has been a continuous rise in the number of people accessing the internet. According to online research and advisory firm JuxtConsult's 'India Online 2008', there are over 49 million internet users in India. Significantly, internet penetration (as a percentage of population) has grown to 12 per cent, up 3 per cent from last year's 9 per cent.
Retail Franchising
Along with e-tailing another perceptible trend in the growth of organized retail market has been the concept of retail franchising. According to industry estimates, retail franchising has been growing at the rate of 60 per cent in the last three years and is set to grow two-fold in the next five years.
A number of companies have been taking this route driven mainly by the need to meet the increasing consumer expectations of quality, ambience and brand experience. In addition, this route also helps the big retailer players to rapidly foray into the tier II and III towns and rural areas.
In fact, according to Mr Rod Young, Executive Director, DC Strategy, franchised outlets of leading brands in India are estimated to sell 20 per cent more than the company-owned ones. And with immense potential seen in this segment, the US$ 4 billion franchising industry is likely to see almost two-fold rise in the number of franchisees (from 0.2 million) by 2010.

Rural retail
Led by the rising purchasing power, changing consumption patterns, increased access to information and communication technology and improving infrastructure, rural retail market is estimated to cross US$ 45.32 billion mark by 2010 and US$ 60.43 billion by 2015, says a study by CII and YES BANK.
Consequently, Corporate India is already firming up concrete plans to tap the rural retail market, which is growing at double the rate of urban markets, with innovative schemes and human resource policies. And with 87 per cent of rural markets not having access to any sort of organised marketing and distribution, this segment has tremendous potential for growth.
International Retailers
With international brands like Tommy Hilfiger, Esprit and Puma (that have entered the country) growing well over 100 per cent, many others are also planning to foray into the Indian retail market. India's vast middle class with its expanding purchasing power and its almost untapped retail industry are key attractions for global retail giants wanting to enter newer markets.

German sportswear and Apparel Company, Adidas is going in for a major expansion across India, and plans to have a total of about 450 franchisee outlets in the country.

Some of the international players that have already entered India include McDonald's, Pizza Hut, Dominos, Levis, Lee, Nike, Adidas, TGIF, Benetton, Swarovski, Sony, Sharp, Kodak, Medicine Shoppe among others.
Retail Reform
The Government allows 100 per cent foreign direct investment (FDI) in cash and carry through the automatic route and 51 per cent in single brand. Besides, the franchise route is available for big operators. To further attract global retailers, the economic survey 2007-08 has suggested a share for foreign equity in all retail trade and 100 per cent in respect of luxury brands and other specialised retail chains.