New Delhi, India, 26 th February 2005 - The retailing industry in India estimated at INR 930,000 crores (2003-04) is expected to grow at 5% p.a. and the organized retailing is well on its way to become an INR. 350 billion market by 2005 according to INDIA RETAIL REPORT 2005 : An IMAGES-KSA Technopak study released at the KSA Retail Summit 2005 here on Friday by Mr. Kishore Biyani, Manging 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 INR 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.
Share of Organised Retail
|
1999 |
2002 |
2005 |
Total Retail (in billion INR) |
7000 |
8250 |
10000 |
Organized Retail (in billion INR) |
50 |
150 |
350 |
% Share of Organized Retail |
0.70% |
1.80% |
3.5% |
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,
Jwellery, 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 world-wide 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 INR 20 - 25
billion in the next 2-3 years, and over INR 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,
Dehra Dun, 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 pace.
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 an attractive retail opportunity for the global players. Buying
volumes for many of these players are already in the range of INR 10-20
billion per year, with reported plans to step up to INR 100-150 billion within
the next 3-4 years.
Manufacturers
in industries such as FMCG, consumer durables, paints etc are waking up to the
growing clout of the retailers as a shift in bargaining power from the former
to the latter becomes more discernible. Already, a number of manufacturers in
India, in line with trends in developed markets, have set up dedicated units
to service the retail channel. Also, instead of viewing retailers with suspicion,
or as a 'necessary
evil' as was the case earlier, manufacturers are beginning to acknowledge them
as channel members to be partnered with for providing solutions to the end-consumer
more effectively.
Though
lucrative opportunities exist across product categories, food and grocery, never-the-less,
presents the most significant potential in the Indian context as consumer spending
is highest on food. Further, 'wet groceries'
i.e. fresh fruits and vegetables is the most promising segment within food and
grocery as very few organized retailers have tapped this opportunity inspite
of wet groceries being the preferred choice of most Indian households.
The
next level of opportunities in terms product retail expansion lies in categories
such as apparel, jewellery and accessories, consumer durables, catering services
and home improvement. These sectors have already witnessed the emergence of organized
formats though more players are expected to join the bandwagon. Some of the niche
categories like Books, Music and Gifts offer interesting opportunities
for the retail players.
The
IMAGES-KSA projections indicate that by 2015, India will have over 550 million
people under the age of 20 - reflecting the gargantuan
opportunities possible in the kids and teens retailing segment.
Wholesale trading is another area, which has potential for rapid growth. German
giant Metro AG and South African Shoprite Holdings have already made headway
in this segment by setting up stores selling merchandise on a wholesale basis
in Bangalore and Mumbai respectively. These new-format cash-and-carry stores
attract large volumes from a sizeable number of retailers who do not have to
maintain relationships with multiple suppliers for all their needs.
Rural Retailing : Of
late, India's largely rural population has also caught the eye of retailers looking
for new areas of growth. ITC launched the country's first rural mall ' Chaupal Sagar' ,
offering a diverse product range from FMCG to electronics appliance to automobiles,
attempting to provide farmers a one-stop destination for all of their needs.
There has been yet another initiative by the DCM Sriram Group called the ' Hariyali Bazaar' , that
has initially started off by providing farm related inputs and services but plans
to introduce the complete shopping basket in due course. Other corporate bodies
include Escorts, and Tata Chemicals (with Tata Kisan Sansar) setting up agri-stores
to provide products/services targeted at the farmer in order to tap the vast
rural market.
Commenting on the Rural
Retailing chapter in INDIA RETAIL REPORT 2005,
Mr. Adi B. Godrej, Chairman, The Godrej Group (India's one of the leading corporate
majors) said that his group had also launched the concept of agri-stores named
'Adhaar', which served as one-stop shops for farmers selling agricultural
products such as fertilisers & animal feed and also providing farmers
knowledge on how to effectively utilise these products. "There are 8 stores already
operating in Maharashtra and Gujarat and further expansion is very much on the
cards. he added.
FDI could indeed do a lot in this sector as entry of international
retailers would bring in the required expertise to set the supply chain in place
which would result in elimination of wastage, better prices and quality for consumers
and higher income for farmers besides of course farm produce retailing getting
a facelift, said Mr. Godrej.
Tapping the fresh farm
produce sector, the group plans to take its recently launched retail concept - Nature's Basket - to newer cities steadily.
Godrej Group's Agro and Food division, Godrej Agrovet Ltd. (GAVL) operates the
format, selling a variety of vegetables, fruits and herbs - both local and exotic
thereby introducing the concept of 'farm-to-plate' to urbanites. Godrej plans
to open four more Nature's Basket stores in Mumbai before taking them national.
Setting up cost of a store is about INR 5-10 million and per stores sales
are expected in the range of INR 30- Rs 50 million a year.
Interestingly, the world's
largest corporation, Wal-mart, also had its roots in rural America. Unlike many
other retailers who started from urban centres and then trickled down to rural
areas, Wal-mart had started from rural areas and then came closer to cities over
a period of time. Many more such concepts are likely to be tested in the future
as marketers and retailers begin to acknowledge that the rural consumer is more
than a 'poor cousin' of the urban
counterpart. The IMAGES KSA Report avers that these concepts are likely to go
a long way in bringing a huge untapped population within the purview of organized
retailing, thereby, increasing the size of the total market.
Potential for all Formats to Thrive :
Most of the global powerhouses in the retailing sector such as Wal-Mart, Carrefour,
Tesco etc have adopted multi-format and multi-product strategies in order to
customize their product offering for distinct target segments. Similar trends
are likely to be exhibited in India as all formats present prospects for growth,
the Report says.
Further, with the emergence of larger store formats like superstores and hypermarkets
in countries like UK, France, Germany, Spain since the 1980s and Eastern Europe
more recently, traditional food retailers have been able to stock more extensive
non-food ranges. In fact, Tesco, UK's leading grocer, has become the number one
apparel retailer in the Czech Republic and also a major player in Hungary apart
from being one of the fastest growing clothing retailers in the UK. Together
with its rival, Wal-Mart-owned ASDA, Tesco is one of the food sector's most successful
exponents of clothing in Europe.
The Report goes on to detail
a wide variety of roadblocks that hamper the growth of otherwise upbeat scenario.
A few of them are regulatory barriers, fragmented suppliers, lack of skilled
personnel, differential taxation system, labour legislation and lack of 'industry'
status. Recounting some critical success factors in retail the IMAGES-KSA report
emphasises that all and any solutions aught to be India-centric even as strategic
and operational attributes like value proposition, service, experience, efficiency,
hygiene etc. must be benchmarked with global standards. It also favours adopting
an effective private label strategy and the necessity to pass on operational
gains achieved to end-consumers in order to offer a superior price-value equation,
thereby, competing effectively with the unorganized segment.
On the vexed issue of Foreign
Direct Investment (FDI) it notes that most players are cautious and have preferred
to adopt a wait-and-watch attitude even as the government is expected to announce
its stand on FDI in the retail sector soon.
The IMAGES-KSA report concludes highlighting
key opportunities in various segments in the organized retail sector in India,
which is poised for an emphatic phase of growth.
Quote from Mr. Arvind Singhal, Chairman, KSA Technopak
Retailing is well past
the stage of infancy where only a handful of players like the German retailer
Nanz bought international formats to virgin Indian territory, and that too, with
limited scale and operations. During the late 1990s, Indian retailers underwent
an experimentation phase when new formats (department stores like Shoppers' Stop & Pantaloon)
and product categories (like consumer durables retailing, music retailing etc)
were introduced. As the country marched into the new millennium, the organized
retailing scenario began to stabilize, especially over the last 3 - 4 years when
players like Big Bazaar, Barista, Pizza Hut, Shoppers' Stop etc became successful
in establishing a national footprint. This was also the stage when international
retailers like McDonald's, Subway etc adopted a mix of global and India-specific
strategies in order to entice the local population.
Quote from Mr.
Amitabh Taneja, Chief, IMAGES & Director, International
Council of shopping Centres (ICSC-India) & Indian Retail School
India is now ready to
leapfrog into the next stage of evolution where a large number of Indian and
international retailers would build scalable models
with a pan-India appeal with a view to be sustainable in the long term. Already,
players are becoming profitable after having gone through their respective learning
curves indicating the viability of organized retailing across formats.
Opportunities are abundant, across formats and categories, as the new Indian
consumer has clearly demonstrated a readiness for all organized retailing segments.
Moreover, as has been the case in retail markets across the globe, the influx
of foreign brands into India shall transform the retail landscape as domestic
players grow bigger and become more innovative in the face of enhanced competitive
pressures.
All this can only spell
good news for the Indian consumers who will be inundated with a flurry of state-of-the-art
products and services at reasonable prices - a
state they have long craved for.
Note
for media, industry & Govt. agencies The above info/ figures and tables can be used by giving due credit to INDIA
RETAIL REPORT 2005 by IMAGES - KSA Technopak quoting Mr. Arvind Singhal,
Chairman, KSA Technopak and Mr. Amitabh Taneja, Chief, IMAGES & Director,
International Council of shopping Centres (ICSC-India) and Indian Retail School.
Highlights
INDIA RETAIL REPORT 2005
An IMAGES - KSA Technopak
Study
INDIA - A Vibrant Economy & Resplendent
Market
· 4 th Largest economy in PPP terms after USA, China & Japan
· To be the 3 rd
largest economy in terms of GDP in next 5 years.
· 2 nd fastest growing
economy in the world.
· The US $ 580 billion
economy grew 8.2 percent in the year 03-04
· Among top 10 FDI
destinations
· Stable Government
with 2 nd stage reforms in place
· Growing Corporate
Ethics (Labour laws, Child Labour regulations, environmental protection lobby,
intellectual and property rights, social responsibility).
· Major tax reforms
including implementation of VAT.
· US $ 130 billion investment plans in infrastructure in next
5 years
· 2 nd Second most
attractive developing market, ahead of China
· 5th among the
30 emerging markets for new retailers to enter
A country with the largest young population in the world- over 867 million
people below 45 years of age!
More English speaking people in India than of in the whole of Europe
300 million odd middle class - the Real consumers - is catching the attention
of the world
With over 600 million effective consumers by 2010 India to emerge as one of
the largest consumer markets of the world by 2010.
Retailing in India
Total Consumer Spend in
the Year 03-04 - INR 9300 billion
( USD 375 billion) growing over 5% annually
Retail sales - 55% at INR 280 billion
(USD 205 billion)
Organised Retail - Only
3% but growing at 30%
Organised retail to cross INR
1000 billion mark by 2010
INR 200 billion investment
in the pipeline
Top 6 cities account for 66% of total organized retailing.
Overwhelming acceptance of modern retail formats.
Fashion drives organized retail.
2004 figures :
Organised retail : Rs. 280 billion
Clothing, Textiles & Fashion
accessories: 39%
Footwear 9%
Jwellery & watches
7%
Mobile hand sets & accessories
3%
Health & Beauty (including
services) 2%
Food & Grocery 18%
Durables 13%
Books, Music & Gifts
3%
Home 3%
Pharma 2%
Entertainment 1%
2005 Projection for Organised
Retail - Rs. 350 billion
Indian Retail - Where
it stands
Five Reasons why Indian Organized Retail is at the brink of Revolution :
> Scalable
and Profitable Retail Models are well established for most of the categories
> Rapid Evolution
of New-age Young Indian Consumers
> Retail Space
is no more a constraint for growth
> Partnering among
Brands, retailers, franchisees, investors and malls
> India is on
the radar of Global Retailers Suppliers
Looking Ahead
Many
strong regional and national players emerging across formats and product categories Most
of these players are now geared to expand far more rapidly than the initial years
of starting up Most have regained / improved profitability after going through
their respective learning curves
Malls in India
· A decade ago - not a single mall
· A year ago - less than half a dozen
· Today - 40 malls
· 2 years from now - 300 malls
INDIA RETAIL BY 2006-07
50 million sq ft of quality space under development
7 major cities to account for 41 million sq ft development
300 malls, shopping centres and multiplexes under construction
To open 35 hypermarkets, 325 large department stores, 1500 supermarkets and
over 10,000 new outlets
To add US $ 10 billion of business to organised retail. 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.
R S Roy
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