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Retail

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Retail

September, 2011

The Indian retail industry has scaled impeccable growth over the last decade with an amiable acceptance to organised retailing formats. The industry is maturing towards modern concept of retailing, cornering the conventional unorganised family-owned businesses.

India has been ranked as the fourth most attractive nation for retail investment among 30 emerging markets by the US-based global management consulting firm, A T Kearney, in its Global Retail Development Index (GRDI) 2011.

AT Kearney has also conducted a different study which says that organised retailers should follow hypermarket concept to penetrate through India’s US$ 435 billion industry. According to the report, given the gigantic size of the Indian retail market, it is no surprise that many Middle East retailers, most recently Lulu, have announced their interests to extend their retail operations to India.

Retail in India: Market Dynamics

The Rs 18,673 billion (US$ 401 billion) Indian retail market entails only 6 per cent of itself as organised retail segment as of 2010, according to Booz and Co (India) Pvt Ltd. Hence, there is a great potential to be explored by domestic and international players.

The Business Monitor International (BMI) India Retail Report for the fourth-quarter of 2011 forecasts that the total retail sales will grow from US$ 411.28 billion in 2011 to US$ 804.06 billion by 2015. The report has underlined factors like economic growth, population expansion, increasing wealth of individuals and rapid construction of organised retail infrastructure as major drivers for the optimistic forecast figures.

According to a research report named ‘Retail Sector in India’ by Research and Markets, Indian retail sector accounts for 22 per cent of the country's gross domestic product (GDP) and contributes to 8 per cent of the total employment. The report further highlighted that hypermarkets (currently accounting for 14 per cent of mall space) will witness immense progress in the Indian landscape.

Retail: Key Developments & Major Investments

According to a report by research firm CB Richard Ellis India, over 6 million square feet of retail mall space was added across India in the first six months of 2011; primarily due to aggressive expansion by organised retailers.

For instance, Kishore Biyani-controlled Pantaloon Retail added 2.26 million square feet (sq. ft.) of retail space during the fiscal 2011 and booked over 9 million sq. ft of retail space to fructify its expansion plans in future.

Cumulative foreign direct investment (FDI) inflows in single-brand retail trading during April 2000 to June 2011 stood at US$ 69.26 million, according to the Department of Industrial Policy and Promotion (DIPP).

Driven by changing consumption patterns, favourable demographics, expanding middle class and greater government support, retailers are eagerly foraying into untapped avenues of Indian markets by making huge investment plans. For instance-

  • Jubilant FoodWorks Ltd, which operates fast food chain of Dominos Pizza in India, will invest over Rs 70 crore (US$ 15.03 million) in the FY12 on new stores and commissaries.
  • Reliance Industries’ Reliance Retail (that runs supermarket and hypermarket chains) is planning massive expansion across the country by doubling the number of stores in several specialty formats in 2011.
  • The brand ‘More’, operated by Aditya Birla Retail, will open 12 hypermarkets and 150 supermarkets in fiscal 2012. After the expansion, its supermarket stores tally will reach 715.
  • Shoppers Stop Ltd, which has 43 departmental stores and 10 hypermarkets under the brand Hypercity, plans to open four more hypermarkets and 10 departmental stores in 2011.

Along with the metros, the retailers are betting big on tier-II and tier-III cities as well.

  • The Aditya Birla group firm, Madura Fashion & Lifestyle, is aiming at a turnover of Rs 1,100 crore (US$ 236 million) for FY13, on the back of its pan-India expansion spree, including small cities and towns.
  • In a bid to triple its turnover from retail segment, Shree Ganesh Jewellery has formed an alliance with Bharti Retail's 'Easy Day' market format to promote its Gaja Lites range of jewelleries. The company plans to launch 250 outlets in tier II and tier III cities under its flagship brand ‘Gaja’.
  • Japanese imaging technology major Nikon Corporation’s subsidiary Nikon India is focusing on tier-II and tier-III cities to fuel its growth. The company is planning to extend its presence to 2,400 channel partners by March 2012 from the current 2,000 of them.