India Retail Report 2005

Organised retail to cross Rs 1000 billion mark by 2010 - I

Indian organised retail is on the brink of a revolution says the Images-KSA India Retail Report 2005

The retailing industry in India estimated at Rs 9300 billion (2003-04) is expected to grow at 5% p.a. and the organized retailing is well on its way to become a Rs 350 billion market by 2005 according to INDIA RETAIL REPORT 2005 : An IMAGES-KSA Technopak study released at the KSA Retail Summit 2005 by Mr Kishore Biyani, managing director of Pantaloon Retail, India’s largest retailer. “The size of the organized retailing market stood at Rs 280 billion in 2004, thereby, making up a mere 3% of the total retailing market. Moving forward, organized retailing is projected to grow at the rate of 25%-30% p.a. and is estimated to reach an astounding Rs 1000 billion by 2010. Further, its contribution to total retailing sales is likely to rise to 9% by the end of the decade,” said Mr Arvind Singhal, chairman, KSA Technopak.

Briefing on the report Mr R S Roy, editorial director, IMAGES group said that the presentation of India Retail Report 2005 required a yearlong interaction with over 1000 companies representing the entire gamut of manufacturing, retailing and the services sector that had direct or indirect impact on consumer spending. The study required a thorough understanding of the world market, major players, strategies and emerging trends and the evolution of Indian retail across multiple segments.

“Supported with the findings of various research reports of IMAGES and KSA Consumer Outlook study the India Retail Report 2005 presents size, strengths and scope with performance of key players in each segment and explores new emerging segments that have potential for new and existing players,” said Mr Roy.

According to Mr Amitabh Taneja, group head, IMAGES & director, International Council of shopping Centres (ICSC - India) and Indian Retail School, currently the fashion sector in India commands a lion’s share in the country’s organised retail pie. This is in line with the retail evolution in other parts of the world, where fashion led the retail development in the early stages of evolution and was followed by other categories like food & grocery, durables etc. The report covers major sectors like apparel, footwear & sportswear, jewellery, watches, health & beauty (including services), food & grocery, consumer electronics, mobile handsets & peripherals, books, music & gifts, home, entertainment, and oil.

Detailing reasons why Indian organized retail is at the brink of revolution the IMAGES-KSA report says that the last few years have seen rapid transformation in many areas and setting scalable and profitable retail models across categories. Indian consumers are rapidly evolving and accepting modern formats overwhelmingly. Retail space is no more a constraint for growth. India is on the radar of global retailers and suppliers/brands worldwide are willing to partner with retailers here.

Further, large Indian corporate groups like Tata, Reliance, Raheja, ITC, Bombay Dyeing, Murugappa & Piramal groups etc and also foreign investors and private equity players are firming up plans to identify investment opportunities in the Indian retail sector. The quantum of investments is likely to sky-rocket as the inherent attractiveness of the segment lures more and more investors to earn large profits. Investments into the sector are estimated at Rs 20-25 billion in the next 2-3 years, and over Rs 200 billion by end of 2010.

Stocks in the retail sector are also becoming increasingly attractive from an investor’s point of view. Successful development of value based concepts as well as development of retail space in smaller cities and towns shall drive the organized retail into the next levels of cities. Retailers have responded to this phenomenon by introducing contemporary retail formats such as hypermarkets and supermarkets in the new pockets of growth. Prominent ‘tier-II’ cities and towns which are witnessing a pick-up in activity include Surat, Lucknow, Dehradun, Vijaywada, Bhopal, Indore, Vadodara, Coimbatore, Nasik, Bhubaneswar, Varanasi and Ludhiana among others. With consumption in metros already being exploited, manufacturers and retailers of products such as personal computers, mobile phones, automobiles, consumer durables, financial services etc are increasingly targeting consumers in tier II cities and towns. In addition, petro-retailing efforts of petroleum giants scattered through out the country’s landscape have also ensured that smaller towns are also exposed to modern retailing formats. On the supply side, mall development activity in the small towns is also picking up at a rapid pace, thereby, creating quality space for retailers to fulfill their aggressive expansion plans. Thus, the ‘retail boom’, 85% of which has so far been concentrated in the metros is beginning to percolate down to smaller cities and towns. The contribution of these tier-II cities to total organized retailing sales is expected to grow to 20-25%.

Favorable demographic and psychographic changes relating to India’s consumer class, international exposure, availability of increasing quality retail space, wider availability of products and brand communication are some of the factors that are driving the retail in India. Over the last few years, many international retailers have entered the Indian market on the strength of rising affluence levels of the young Indian population along with the heightened awareness of global brands and international shopping experiences and the increased availability of retail real estate space. Development of India as a sourcing hub shall further make India as an attractive retail opportunity for the global retailers. Retailers like Wal-Mart, GAP, Tesco, JC Penney, H&M, Karstadt-Quelle etc stepping up their sourcing requirements from India and moving from third-party buying offices to establishing their own wholly owned/wholly managed sourcing & buying offices shall further make India as n attractive retail opportunity for the global players.

(To be continued)