By: Sunaina Kundapur
The country is witnessing an explosion in retail trade. Almost every month one or two new malls are being added to our major cities and one tries to be better than the other. The average Indian buyer today has more options than his father or grandfather. Swanky malls, Air-conditioned shopping complexes, wide choice of goods, a variety of things to do under one roof (Shopping, Gaming, Food, Entertainment) have all made Indians the most active shoppers in the world.
The Indian retail industry is the fifth largest in the world. Comprising of organized and unorganized sectors; retail industry is one of the fastest growing industries in India, especially over the last few years.
Though initially, the retail industry was mostly unorganized, with the change of tastes and preferences of the consumers, the industry is getting more popular these days and is getting organized as well. With growing market demand, the industry is expected to grow at a pace of 25-30% annually. The Indian retail industry is expected to grow from `.35,000 crore in 2004-05 to ` 109,000 crore by the year 2010.
According to the 8th Annual Global Retail Development Index (GRDI) of AT Kearney, India retail industry is the most promising emerging market for investment. In 2007, the retail trade in India had a share of 8-10% in the GDP (Gross Domestic Product) of the country. In 2009, it rose to 12%. It is also expected to reach 22% by 2010.
According to a report by Northbride Capita, the India retail industry is expected to grow to US$ 700 billion by 2010. By the same time, the organized sector will be 20% of the total market share. It can be mentioned here that, the share of organized sector in 2007 was 7.5% of the total retail market.
Major Retailers in India
Pantaloon is one of the biggest retailers in India with more than 450 stores across the country. Headquartered in Mumbai, it has more than 5 million sq. ft retail space located across the country. It is growing at an enviable pace and is expected to reach 30 million sq. ft by the end of 2010. In 2001, Pantaloon launched country's first hypermarket ‘Big Bazaar’.
It has the following retail segments:
- Food & Grocery: Big Bazaar, Food Bazaar
- Home Solutions: Hometown, Furniture Bazaar, Collection
- Consumer Electronics: e-zone
- Shoes: Shoe Factory
- Books, Music & Gifts: Depot
- Health & Beauty Care: Star, Sitara
- E-tailing: Futurebazaar.com
- Entertainment: Bowling Co.
AV Birla Group has a strong presence in Indian apparel retailing. The brands like Louis Phillipe, Allen Solly, Van Heusen, Peter England are quite popular. It's also investing in other segments of retail. It will invest `. 8000-9000 crore by 2010.
RPG Group
RPG Group is one of the earlier entrants in the Indian retail market, when it came into food & grocery retailing in 1996 with its retail Foodworld stores. Later it also opened the pharmacy and beauty care outlets ‘Health & Glow’.
Reliance
Reliance is one of the biggest players in Indian retail industry. More than 300 Reliance Fresh stores and Reliance Mart are quite popular in the Indian retail market. It's expecting its sales to reach ` 90,000 crores by 2010.
Tata Group
Tata group is another major player in Indian retail industry with its subsidiary Trent, which operates Westside and Star India Bazaar. Established in 1998, it also acquired the largest book and music retailer in India ‘Landmark’ in 2005. Trent owns over 4 lakh sq. ft retail space across the country.
The Golden Heights
The Trent Group will be launching their latest Venture here on Dr Rajkumar Road – Golden Heights by the Sumangala Builders. Trent have acquired 1 Lakh sqft Space of which 55,000 Sft would be dedicated to Retail, Comprising of the Organised and the Unorganized retailers.
On the first floor, the other 55,000 Sft would be dedicated to their Hypermarket format – Star Bazaar. This would be the new Shopping and Entertainment destination for people in and around Rajajinagar.
Unorganized Retail
The retail industry in India is predominately occupied by unorganized players, accounting for nearly 98% of the total worth of the Indian retail market.
These unorganized retailers generally consists of mom and pop stores, kiranas, sabzi mandis, hole-in-the-wall shops, counter stores, street markets, roadside peddlers etc. Most of these traditional retail outlets are family run stores characterized by lack of quality in inventory and retail chain management, low standards, and essentially operated by anyone who has something to sell.
The major retail players in the unorganized sector, commonly referred to as ‘Baniyas’ among the local popular, generally have no exposure, or education of an organized retail experience resulting in low productivity of this sector as compared to other developed markets.
The unorganized sector consistently scores over organized retail in a number of important areas when it comes to customer relationship and the Indian market mantra of convenience. Moreover, the very unorganized nature of the segment has enabled it to survive the onslaught of organized retail as they can cut-cost in the absence of supply management, inventory control and bulk purchasing.
Organized Retail
With over 12 million retail outlets, India has one of the highest densities of retail outlets in the world with one retail outlet for nearly 90 people. This makes India the ninth largest retail market in the world with an annual retail sales of US $ 215 Bn in 2005
Retailing formats in India
ö Malls: The largest form of organized retailing today. Located mainly in metro cities, in proximity to urban outskirts. Ranges from 60,000 sq ft to 13,00,000 sq ft and above. They lend an ideal shopping experience with an amalgamation of product, service and entertainment, all under a common roof. Examples include The Express Avenue , Mantri Square , Forum.
ö Specialty Stores: Chains such as the Bangalore based Kids Kemp, the Mumbai books retailer Crossword, RPG's Music World and the Times Group's music chain Planet M, are focusing on specific market segments and have established themselves strongly in their sectors.
ö Department Stores: Departmental Stores are expected to take over the apparel business from exclusive brand showrooms. Among these, the biggest success is K Raheja's Shoppers Stop, which started in Mumbai and now has more than seven large stores (over 30,000 sq. ft) across India and even has its own in store brand for clothes called Stop!.
ö Hypermarts/Supermarkets: Large self service outlets, catering to varied shopper needs are termed as Supermarkets with an area of more than 20,000 sft. These are located in or near residential high streets. These stores today contribute to 30% of all food & grocery organized retail sales. Super Markets can further be classified in to mini supermarkets typically 1,000 sq ft to 2,000 sq ft and large supermarkets ranging from of 3,500 sq ft to 5,000 sq ft. having a strong focus on food & grocery and personal sales.
ö Discount Stores: As the name suggests, discount stores or factory outlets, offer discounts on the MRP through selling in bulk reaching economies of scale or excess stock left over at the season. The product category can range from a variety of perishable/ non perishable goods
ö Convenience Stores: These are relatively small stores 400-2,000 sq. feet located near residential areas. They stock a limited range of high-turnover convenience products and are usually open for extended periods during the day, seven days a week. Prices are slightly higher due to the convenience premium.
ö MBO’s: Multi Brand outlets, also known as Category Killers, offer several brands across a single product category. These usually do well in busy market places and Metros.
ö High Streets: Most retailers prefer being on high streets for it’s a guaranteed walk – ins 365 days of the year. High Streets are the examples of the perfect balance between the Organized Brands and the local brands. Ex Commercial Street in Bangalore.
ö The tax structure in India favours small retail business
ö Lack of adequate infrastructure facilities
ö High cost of real estate
ö Dissimilarity in consumer groups
ö Restrictions in Foreign Direct Investment
ö Shortage of retail study options
ö Shortage of trained manpower
ö Low retail management skill
The Future
The retail industry in India is currently growing at a great pace and is expected to go up to US$ 833 billion by the year 2013. It is further expected to reach US$ 1.3 trillion by the year 2018 at a CAGR of 10%. As the country has got high growth rates, the consumer spending has also gone up and is also expected to go up further in the future. In the last four years, the consumer spending in India climbed up to 75%. As a result, the India retail industry is expected to grow further in the future years. By the year 2013, the organized sector is also expected to grow at a CAGR of 40%.
(Source: http://business.mapsofindia.com/india-retail-industry/)
Accordng to Jones Land LaSalle Meghraj, Mumbai, Delhi, Bangalore, Chennai and Pune will see maximum volume due to strong demand and spending power. Vacancy in shopping centres increased during 2008-09. This was primarily on account of higher real estate costs and lower consumption, because of which many retailers started shifting from rapid expansion to consolidation mode.
In fact, a not-insignificant number of these centres failed entirely to kick off and create customers for the retailers. In many cases, retailers were disadvantageously placed, causing them to exit after the initial lock-in periods.
Vacancy continues to be highest in the North India primarily because of unrealistic clustering of centres in single locations.
In the rest of India, where supply is not as high as in North India, vacancy levels rose because retailers and developers failed to reach an amenable consensus on rentals. Some centres failed to attract tenants to a degree leading to complete vacancy of these malls across the country, primarily in the North. However, since retail is a highly location-specific business, these do not represent the overall scenario.
Very informative Su. Do keep updating - will surely help many of us!
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