Retail industry in India is gradually edging its way towards becoming the next boom industry, with a three-year compounded annual growth rate of 46.64 % and providing around 8% employment. Several Indian and global players are developing strategies to enter such a fast paced and growing market. Meanwhile, the whole retail industry is taking new shape, the traditional market giving way for the more organized market in the form of departmental stores, hypermarkets, supermarkets and specialty stores. Organised retail business in just 2% ($8 billion) of the $300 billion Indian retail industry which is expected to grow to $21.5 billion by 2010 !
So what really makes Indian retail industry a most growing business?
Answer is growing middle class, double income households, and large working young population. All these have significantly increased the country’s total disposable income. Changing demographics and life styles also favor this new found shopping tendency.
Entering in to retail chain on a national level requires huge amount of initial investment and management too. The large gestation period has been the major reason for failures of some of the retail companies. But with major retailing firms of the world entering into this industry, the future of retailing business in India is bright. Reliance, the most valuable Indian company, is all set to enter into the Indian retail industry with about 1500 outlets spread approximately a third of towns and cities across India by March 2007 with its new company, Reliance Retail Ltd. (RRL) having 100 per cent stake in the company. The Reliance group will invest about $5.6 billion in the retail venture and will definitely shake the existing market.
In the beginning of 2006, the government of India announced that it would allow foreign companies to own up to 51% of a single-brand retail company, such as Nike. As a result, companies including Zara, Gap, Timex and United Colors of Benetton have announced plans to enter the market. As such, the Wal-Mart group which sells a variety of brands has signed up a deal with the Bharti family-owned unlisted firm, Bharti Enterprises, lending a dramatic twist to India’s multi billion retail story. The Bharti-Wal-Mart venture will initially invest $100 million, which will go up to $1.46 billion. The other key players in the industry being Shopper’s Stop, Pantaloons.
As a result of Indian retailers gearing up for competition from overseas and local rivals by acquiring retail space in India’s capital New Delhi, financial center Mumbai and technology city Bangalore, and the next set of big cities Kolkata, Chennai, Pune, Ahmedabad and Chandigarh, rents are being pushed up, getting almost doubled. Intensifying competition is also likely to affect staff costs.
Though Reliance being the top name talked in Indian retail Industry, it is not the only player. Other Indian business groups likes Bharti Group and Aditya Birla group are planning to start retail chains soon. Tata Group, which already runs the Westside chain of lifestyle stores, is stepping in to electronics retailing. RPG Enterprises which already has a total of 80 stores, plans to add a store every two days in October.
As all these groups expand their retail network, they will have to offer more choices to differentiate themselves and need to workout in various areas such as the best resources for product procurement; sales variation across different regions in the country; seasonal sales variation; the credit policies that retailers normally get from their suppliers; the average gross margin on each product category and brand preferences of consumers.
The strategies and magnitudes of retail forays by the Indian retailers assure of attaining far reaching economic implications by directly affecting the lifestyle of millions of consumers, besides indirectly influencing livelihood of other millions.
Quite clearly, Indian retail players are now all set and ready to get triumph over the organized retail sectors. The Indian retail industry is now on a verge to experience rocket speed actions and competitions, allowing the consumers to get the best deals out of it.