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Retail boom in India poised to touch new heights, predict industry experts

Retail boom in India poised to touch new heights, predict industry experts

Author | exchange4media Mumbai Bureau | Tuesday, Nov 30,2004 8:52 AM

Retail boom in India poised to touch new heights, predict industry experts

‘Wanted: A retail outlet that will breakeven in the shortest possible time’ – that was the general sentiment echoed by the large assembled crowd of CEOs and MDs at the Retail summit held in Mumbai. Titled ‘The Retail Paradigm –growth and opportunities,’ the focus of the summit was on retail solutions across varied fields such as fashion, telecom, financial services and consumer research.

With speakers ranging from Yogesh Samat of Inorbit Mall, Raghu Pillai of RPG Retail, KN Iyer of Pyramids, Harminder Sahni of KSA Technopak, Bhaskar Bhat of Titan, Anirudha Deshmukh of Raymond Retail, Harit Nagpal of Hutchison, TK Banerjee of Haeir and Shravan Shroff of Fame among others, the summit stretched over two days. The topics touched upon on the first day, included areas for retail growth over the next four to five years and sector-specific solutions in retail. The Reid & Taylor Awards for Retail Excellence were also given away. Brand management in retail and the HRD challenge to counter poaching among retail competitors and BPOs formed the agenda for the second day.

According to a KSA Technopak report, the organised retail market in India is pegged at a meagre two per cent currently, compared to other Asian markets like Jakarta, which have figures close to 45 per cent. According to an industry report from the Confederation of Indian Industry, the organised retail sector will grow from it’s current size of Rs 5,000 crore to Rs 30,000 crore by 2005 and has the potential to create two million direct new jobs in the next six years.

The CII report said credit card spends in retail would increase from 45 per cent to 65 per cent in the next three to five years. The urban consumer’s shopping bag is an interesting indicator of what sectors will gain prominence in the retail segment in the coming years. According to a KSA Technopak report, in 2002, food and grocery formed 42.1 per cent of the shopping basket, followed by eating out at 12.2 per cent, which was pegged at eight per cent in 1999.

Spend on movies increased from one per cent in 1999 to 3.8 per cent in 2002, which explains the mushrooming of multiplexes in metros. Also by 2005, the top six Indian cities will comprise 66 per cent of the organised retail market. But what the collective sentiment expressed was that this projected growth in the retail sector would be impossible without some help from the Government in the form of allowing FDI in retail, easing real estate constraints which are prohibitively expensive and delaying the process of breaking even, relaxing the entertainment tax, which forms almost 20 per cent of turnover for mall owners, etc.

The retail boom in India is being witnessed in the major metros right now, but the aspirational values associated with semi urban towns reflect a positive future growth trend for retail outlets. In contrast, the US mall Wal-Mart, followed a reverse model of starting off in B Class cities, and moving on to metros, only after they broke even. Among the trends, which should gain prominence in the future, include speciality malls, coming up of multiple anchors and revenue sharing models gaining favour over rented property between mall owners and retailers, to secure lock-ins.

This was a major worry for mall owners who felt the pressure of losing out mall partners when competing malls opened up in the vicinity. As KN Iyer, Director & CEO, Piramyds put it, referring to the time Phoenix entered the mall business, “This was countered by us going upscale and introducing premium brands like Marks & Spencer and Morgan. To counter the competition, we need to be constantly repositioning ourselves. ”With respect to the trend of multiplexes coming up in major malls, most mall owners felt that cross traffic in this regard, with customers walking in to watch movies was the best way to help increase the time they spent at the mall, which would translate into relevant footfalls.”

Jayant Kochar, MD, Amoretto Retail, summed it up best when he countered jokingly, “Anyone in the business of Retail has to be a really passionate man. We aren’t making any money so we must really love this work, to be working at it still, day in and day out,” referring to the long gestation periods required to break even. Given the number of malls cropping up in the near future (according to industry estimates, from just three malls in 2000, India is set to have 220 in various stages of planning and construction by 2005) that should change soon.

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