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Indian Retail, an outlook with perspective 2009

Posted in business by Venkata on the October 9th, 2009

The India Retail Report 2009 compiled by research group Images F&R Research is projecting that by 2010, Organized Retail is expected to constitute 10-13% of retail in India. Major corporate house are part of this emerging and high growth market. Not to mention Birlas, Ambanis and Mittals. Bharti Group that has the renowned Airtel brand in India, entered into the retail foray into 2007. Bharti retail is estimated to generate 60,000 jobs by 2015. This would count just a drop in the ocean of jobs that could get created. While there have been signs of organized retailers entering into the market since 2000, it is now an attractive option to many players with the growth prospects being demonstrated in the upper 20-30s%. Sourcing & supply chain giant Walmart is also under the radar as it is backing Bharti group with a backend only operations, with Bharti EasyDay format being the visual face. Big competitors like Reliance and Birlas retail formats are trying to collaborate to unite & leverage an allied supply chain operations. Reliance seems to have major strides in South & Western cities like Hyderabad. People are perceiving that organized retail will hit mom & pop format hard, but modernizing retail will generate employment for 15 million people in different activities. It may also lead to software investments in I/T. More optimizations that are in the pipelines maybe huge RFID initiatives for inventory management; that are now breeding from few 3-5 years of investments in the West & US.

The F & R report estimates an economic growth rate of 8-9 per cent and a hike in average salaries by about 15 per cent which may trigger the rate of consumption. But the global downturn has seen this number trickle down. Food and grocery dominated the retail segment with 59.5 per cent, followed by clothing and accessories with a 9.9 per cent share.

Visit any retail outlets in the big cities and you will see an array of retail formats from easy convenience stores located just around the corner for any consumer, to high profile elaborate and upscale malls specifically for the rich & upper middle class, along with super markets being planned by all major players. Niche retail formats like pharmacy, auto etc are trying steal a notch. The value delivered is quite different with each format, and it seems that the Customer relationship management is much better than typically in the western worlds. For example, self-service is the norm in the West to decode the value of a product; you may see an army of service agents around the corner to help out with the correct information in India. However, what is debatable is the quality of help you get; as you need to understand the huge scale of training such a big force of service agents to accommodate quality service. Also, you need to understand that India like many developing countries likes to portray an image of differentiation in quality using mainly the humongous manual work force. But one needs to dig deeper beyond just looks to find out the real quality and perceived quality. Ask any service agent and you may get different answers to a product question.

Known information on India retail as estimated in 2009[1]

Quick Stats (Indian Retail)

Markets

  1. o Market size (total) 2006: US$ 300 bn/annum
  2. o Market size (total) 2010: US$ 427 bn/annum
  3. o Market size (total) 2015: US$ 637 bn/annum
  4. o Market size (modern retail) 2006: US$ 9-12 bn/annum
  5. o Market size (modern retail) 2011: US$ 60 bn/annum
  6. o Annual rate of growth (modern retail): 35%
  7. o Penetration (modern retail) 2006: 3 to 4%
  8. o Penetration (modern retail) 2010: 10%
  9. o 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 millionares 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%

1http://www.indiaretailbiz.com/blog/category/indian-retailers