The Rise of Retail in Indiaby Udit Jain on June 15, 2007
The Rise of Retail in India
Professor N. Viswanadham
The time has come for Indian retailing. The signals are there all over. The newspapers, business press, the governments, the Chief Executive Officers of large corporations, all talk about it day in day out. The Indian economy is likely to continue its steady growth with enhanced share in global trade and steady agricultural outputs. Booming employment opportunities, rising urban disposable income and credit card ownerships, changing lifestyles and demographic profiles all are showing a favorable skew towards a rising consumerism culture, boding well for retailing growth. Consumer spending is clearly set to accelerate its pace.
Demographics continued to show a positive skew to spur retailing growth. Consumers groups aged between 20-45 years are emerging as the fastest growing consumer group and the mean age of Indians is now pegged at 27, a mean age that reinforces spending across all the retailing channels of grocery, non-grocery and non-store. India’s burgeoning middle class will drive up nominal retail sales through 2010 by 10 percent per annum. At the same time, organised retail is becoming more important. At present organized retail accounts for a mere 3 percent of the total; by 2010 this share will already have reached 10 percent. Thus most of India’s growth in retail is in the future, not the past.
No day passes without the announcement by one of the corporate houses such as Reliance regarding investment of millions of dollars in retail. Reliance has announced investments in farm to plate infrastructure in the Indian States of Punjab, Gujarat and West Bengal. Reliance is also acquiring shopping cooperatives, super bazaar, etc. Retail giants such as Pantaloons, Food world and Trinetra have all announced big expansion plans.
The structure of retailing is also developing rapidly. Shopping malls are becoming increasingly common in large cities. The number of department stores is growing much faster than overall retail, at an annual rate of 24 percent. Supermarkets have been taking an increasing share of general food and grocery. Several builders have announced plans for development of 150 new shopping malls by 2008. National real estate developers such as Rahejas, Omaxe, Ansals, Uni-Tech, Parasnath, Vatika, Vipul Infrastructure and DLF are also undertaking key retail developments.
The country’s middle class has been expanding due to rapid urbanization, increasing per capita income, increased participation of women in the urban work force and globalization. Although decreasing with rapid urbanization, food is still a major spend in the Indian households. Rural retailing is witnessing explorations by both corporations and entrepreneurs – ITC’s Choupal Sagar, HLL’s project Shakthi and Mahamaza are some of the models being tried out. While conclusive evidence to identify the winning rural retailing model is not yet available, such experiments are steps in the right direction. Grocery retailers continued to be the staple of retailing in 2005, accounting for three-quarters of overall retailing value sales. India witnessed a breathtaking rise in grocery retailer outlet numbers fuelled by the rapid expansion of modern retail formats, such as supermarkets, hypermarkets and convenience stores.