Retail In India


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Retail reality
I. Introduction:
The most promising and booming industry of future is retailing. AT Kearney, a well-known international management consultancy, recently identified India as the ‘the most attractive retail destination’ globally from among thirty emergent markets (2007). According to a Knight Frank survey, India ranks fifth amongst the 30 emerging retail markets in the developing countries.
Industry evolution
• Traditionally, retailing in India can be traced to the emergence of the Corner stores (Kirana) catering to the convenience of the consumers
• Era of government support for rural retail: Indigenous franchise model of store chains run by Khadi & Village Industries Commission
• 1980s experienced slow change as India began to open up economy.
• Textile sector with companies like Bombay Dyeing, Raymond's, S Kumar's and Grasim, saw the emergence of retail chains
• Later, Titan successfully created an organized retailing concept and established a series of showrooms for its premium watches
• The latter half of the 1990s saw a fresh wave of entrants with a shift from Manufactures to Pure Retailers. For e.g. Food World, Subhiksha and Nilgiris in food and FMCG; Planet M and Music World in music; Crossword and Fountainhead in books.
• 1995 onwards saw an emergence of shopping centers, mainly in urban areas, with facilities like car parking targeted to provide a complete destination experience for all segments of society
• Emergence of hyper and super markets trying to provide customer with 3 V’s - Value, Variety and Volume
• Expanding target consumer segment: The Sachet revolution - example of reaching to the bottom of the pyramid.
• At year end of 2000 the size of the Indian organized retail industry was estimated at Rs. 13,000 crore

The retail industry is divided into organized and unorganized sectors.
Organized retailing refers to trading activities undertaken by licensed retailers, that is, those who are registered for sales tax, income tax, etc. These include the corporate-backed hypermarkets, retail chains, and also the privately owned large retail businesses. Unorganized retailing, on the other hand, refers to the traditional formats of low-cost retailing, for example, the Corner stores (Kirana shops), owner manned general stores, Cigarette stalls (paan/beedi), convenience stores, hand cart and pavement vendors, etc.
Table 1: India Retail Structure
Retail formats 2002 2003
Total Grocery Outlets 5,170,709 6,037,738
Traditional grocery outlets 4,525,264 5,273,310
Supermarkets 175 2,314
Other grocery outlets 645,270 762,114
Total Drug stores 352,786 405,743
Traditional medical/drugstores 247,582 276,058
Cosmetic stores 105,204 129,685
Source: Business world Marketing White book 2005
Retailing in India is currently estimated to be a US$ 230 billion industry, of which organized retailing makes up 3 percent.

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By 2010, organized retail is projected to reach US$ 30 billion with an expected growth rate of about 400%.
A study conducted by Fitch, expects the organized retail industry to continue to grow rapidly, especially through increased levels of penetration in larger towns and metros and also as it begins to spread to smaller cities and B class towns. Fuelling this growth is the growth in development of the retail-specific properties and malls. According to the estimates available with Fitch, close to 25mn sq. ft. of retail space is being developed and will be available for occupation over the next 36-48 months. Fitch expects organized retail to capture 15%-20% market share by 2010.
While organized retail makes up for over 70-80 per cent of the total business in developed countries, the Indian organized retail segment pales in comparison with other Asian countries such as China, South Korea and Thailand. Retailing is the largest private sector industry in the world economy, with the global industry size exceeding $6.6 trillion, according to Euromonitor. In China, the organized retail segment accounts for about 20 per cent of the overall business; in Thailand, it is around 40 per cent, while in Malaysia it makes up for nearly 50 per cent of the total business, according to the data.
The retail sector in India is highly fragmented and organized retail in the country is at a very nascent stage. Of the 12 million retail outlets, more than 80 per cent are run by small family business, which use only household labour. China and Brazil, took 10-15 years to raise the share of their organized retail sectors from 5 per cent to 20 per cent and 38 per cent respectively. India too is moving towards growth and maturity in the retail sector at faster pace, according to Ernst and Young India.
According to the E&Y India Retail Report:
• Hypermarkets to be the preferred format for the international retailers entering India
• Malls to move beyond the metros, increase presence in tier II cities
• Organized retail penetration highest across footwear, clothing segment.
• Franchising gaining steam with retailers.
Retail sales in India amounted to be about Rs.7400 billion in 2002, expanded at an average annual rate of 7% during 1999-2002. With the upsurge in economic growth during 2003, retail sales are also expected to expand at a higher pace of nearly 10%. Across the country, retail sales in real terms are predicted to rise more rapidly than consumer expenditure during 2003-08. The forecast growth in real retail sales during 2003- 2008 is 8.3% per year, compared with 7.1% for consumer expenditure.
Modernization of the Indian retail sector will be reflected in rapid growth in sales of supermarkets, departmental stores and hypermarts. Sales from these large-format stores are set to expand at growth rates ranging from 24% to 49% per year during 2003-2008, according to a report by Euromonitor International, a leading provider of global consumer-market intelligence.
Table 2:
Retail Trade 2005 2006 2007 2008 2009 2010
Retail Sales (Rs Bn) 15,409 17,360 19,465 21,715 24,215 27,107
Retail sales (Us $bn) 349.4 385.8 421.3 467.0 516.3 564.7
Retail Sales volume growth (%) 6.0 7.5 7.7 6.9 6.8 7.3
Retail sales US$ Value growth (%) 13.6 10.4 9.2 10.8 10.6 9.4
Source: EIU
The trends that are driving the growth of retail sector in India are:
• Low share of organized retailing
• Falling real estate prices
• Increase in disposable income and customer aspiration
• Increase in expenditure for luxury items
Table 3: INDIA RETAIL: 2006 (at current prices)
Retail Segments India Retail Value (Rs.Crore) Organised Retail (Rs.Crore) % Organised in 2006
Clothing, Textiles & Fashion Accessories 113,500 21,400 18.9
Jewellery 60,200 1,680 2.8
Watches 3,950 1,800 45.6
Footwear 13,750 5,200 37.8
Health & Beauty care services 3,800 400 10.6
Pharmaceuticals 42,200 1,100 2.6
Consumer Durables, Home Appliances/equipments 48,100 5,000 10.4
Mobile handsets. Accessories & Services 21,650 1,740 8.0
Furnishings, Utensils, Furniture-Home & Office 40,650 3,700 9.1
Food & Grocery 743,900 5,800 0.8
Catering Services (F & B) 57,000 3,940 6.9
Books, Music & Gifts 13,300 1,680 12.6
Entertainment 38,000 1,560 4.1
US$ 270 Billion US$ 12.4 Billion
Source: IMAGES F&R Research
Quick Stats of Indian Retail
Markets
• Market size (total) 2006: US$ 300 bn/annum
• Market size (total) 2010: US$ 427 bn/annum
• Market size (total) 2015: US$ 637 bn/annum
• Market size (modern retail) 2006: US$ 9-12 bn/annum
• Market size (modern retail) 2011: US$ 60 bn/annum
• Annual rate of growth (modern retail): 35%
• Penetration (modern retail) 2006: 3 to 4%
• Penetration (modern retail) 2010: 10%
• Number of retail outlets (total): 12 million
Investment
• New Investment by 2011: US$ 30 bn
Employment
• No. of persons employed (total): 21 mn
• No. of new jobs in next two years: 2 mn.
Wealth
• No. of dollar designated millionaires in India(2006) 100,015
Retail Space
• Typical space per outlet: 100 to 500 sq.ft.
• Space occupied (modern retail): 35 mn sq.ft.
• Operating Malls 2007: 114 (35 mn sq.ft.)
• New Malls under construction: 361 (117 mn sq.ft.)
• New space distribution: 65% (top 7 cities), 35% (tier II & III cities)
• New space distribution (among top 7 cities): NCR 34%, Mumbai 23%, Rest 43%


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