Retail Rally

Modern retail is touted to be the next big thing in India. It is expected to multiply ten-fold in the next few years. Major Indian players like Reliance and Aditya Birla Group have also jumped into the fray. International bigwigs like Walmart are also likely to make an entry through joint ventures into the Indian retail market. Organized retail stores have succeeded in sidelining the local ‘kirana’ stores by offering heavy discounts and quality services. In such a scenario, retailers are looking forward to a tremendous boom in the industry in the nearby future.

Organized retail is expected to become a $450-billion industry by 2015, according to a McKinsey study, entitled ’The Great Indian Bazaar: Organized Retail Comes of Age in India’. With the expected retail boom, it is important to analyze what upcoming trends in the retail market would be; McKinsey predicts that fresh food, ethnic apparel and mobile electronics would be the biggest crowd-pullers in the future. In contrast to Western countries where shopping is a chore, in India, shopping is often used as a leisure-time activity or for family outings. Therefore, international brands need to evolve a different strategy for the Indian scenario.

Retail is currently India’s largest industry, accounting for over 10% of the country’s GDP and nearly 8% of the country’s employment. However, it is also the least evolved industry in India; as a result, the sector holds tremendous potential. Nevertheless, there are some potential roadblocks that the industry has to contend with. For instance, there is a portion of the consumer segment in India which is prejudiced against large malls and prefers to purchase goods from the old and established kirana stores. It will be interesting to see how retailers manage to influence and win over this segment. Also, retailers have faced opposition from small-scale shops as well as the displaced farmers. This translates into negative public opinion for them.

Other issues plaguing the retail industry include high rentals and lack of manpower. McKinsey predicts that the organized retail sector will require around 1,600,000 employees by 2015. Organizations will also have to find ways to lower attrition rates and attract skilled workers. It is also important to create an effective supply-chain that does not involve too many intermediaries, so that the retail price is easy to regulate. Discounts are also likely to become major consumer attractions as the competition increases.

What is important to note is that experimentation in this sector should be done with extreme caution, because consumer opinion can be very fickle. A few years ago, Crossroads came out with a plan to allow entry only to people carrying cell phones or credit cards in a bid to encourage only serious shoppers. This resulted in a large dip in its popularity since consumers took an offence to the idea of proving their economic status. Therefore, retailers have to be careful if they have to create a large following of dedicated shoppers. As of now, the retail rally is here to stay.

Namrata Singh

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