The Indian Retail Industry
Organized Retailing and Kirana Shops
India's retail sector is going to transform and with a three-year compounded annual growth rate of 46.64 per cent, retail sector is the fastest growing sector in the Indian economy. Traditional markets are transforming themselves in new formats such as departmental stores, hypermarkets, supermarkets and specialty stores. Western-style malls have begun appearing in metros and near metro cities, introducing the Indian consumer to a new shopping experience.
India is witnessing an unprecedented consumption boom. The economy is growing between 8 to 10 percent and the resulting improvements in income dynamics along with factors like favorable demographics and spending patterns are driving the consumption demand. Indian Retail Industry is ranked among the ten largest retail markets in the world. The attitudinal shift of the Indian consumer in terms of "Choice Preference", "Value for Money" and the emergence of organized retail formats have transformed the face of Retailing in India. The Indian retail industry is currently estimated to be a US$ 200 billion industry and organized Retailing comprises of 3 per cent (or) US$6.4 Billion of the retail industry. With a growth over 20 percent per annum over the last 5 years, organized retailing is projected to reach US$ 23 Billion by 2010.
The Indian retail industry though predominantly fragmented through the owner -run " Mom and Pop outlets" has been witnessing the emergence of a few medium sized Indian Retail chains, namely Pantaloon Retail, RPG Retail, Shoppers Stop, Westside (Tata Group) and Lifestyle International. In the last few years, Indians have gone through a dramatic transformation in lifestyle by moving from traditional spending on food, groceries and clothing to lifestyle categories that deliver better quality and taste. Modern retailing satisfies rising demand for such goods and services with many players entering the bandwagon in an attempt to tap greater opportunities.
According to the report of American Management Consulting Firm A. T. Kearney's 2006 Global Retail Development Index (GRDI), India is on the first position , continuing for two years (2005 and 2006), among 30 countries as the world's most attractive market for mass merchant and food retailers seeking overseas growth. On the other hand, China is loosing its attractiveness and making the way to India GRDI helps retailers to prioritize their global development strategies by ranking emerging countries based on a set of 25 variables including economic and political risk, retail market alternatives, retail saturation level, and the difference between gross domestic product growth and retail growth. The study quotes: "The Indian retail market is gradually but surely opening up, while China's market becomes increasingly saturated."
Small is big for Indian retail
It's raining malls in small-town India. Whether it's Kanpur, Ahmedabad, Indore, Agra, Baroda or Surat, the mall and multiplex culture has caught on in the country's smaller cities, powered by the burgeoning purchasing power of India's middle-class. From a handful of malls in the mid '90s, India today has nearly 200 malls spread across large and small cities. And 700 new malls are coming up all over India-40% of them concentrated in the smaller cities.
The small-town retail boom could be considered a show-case of India's free-market prosperity. It is being powered by healthy economic growth that is making more Indians more prosperous. Organized retailers have understood this and are hoping to ride the wave, exploit the first-mover advantage and establish strong brand loyalties in these relatively under-served markets.
The Indian retail market is estimated at $350 billion. But organized retail is estimated at only $8 billion. However, the opportunity is huge—by 2010, organized retail is expected to grow to $22 billion. With the growth of organized retailing estimated at 40% (CAGR) over the next few years, Indian retailing is clearly at a tipping point. India is currently the ninth largest retail market in the world. It is names like Dehradun, Vijayawada, Lucknow and Nasik that will power India up the rankings soon.
Malls: The new face of retail market
Robust GDP growth, stronger currency reserves and ever-improving market and operating environments are propelling the Indian market through a period of stellar growth - and the retail community is responding with newer formats and innovative products. The economy of India has shown a remarkable increase driven by overall political and social stability.
The decade-old economic reforms have engendered a new, shop-till-you-drop breed of middle class Indians who, having tasted the shopping experience of big cities overseas, have fuelled a demand that was inevitable -- the rise of the shopping malls. Centrally air-conditioned malls with piped music, high-speed lifts and escalators, underground parking space, a multiplex movie theater, multi-cuisine restaurants and a host of national and international brands, these malls generates approximately 25,000 footfalls each, per day, with figures doubling on weekends.
After analyzing the retail industry, we can conclude that the organized retail has opportunities to grow in India in spite of the kirana stores because these kirana shops will also get benefit of the growing economy. The argument that the kirana shops will be affected by these malls is only myth. The organized retail is attracting more and more Indian as well as foreign players of the retail industry. As our study shows that a major portion of the organized retail will be developed in small cities and towns, this opportunity has not been encashed by kirana stores and they are unable to meet the requirements of the customers. Therefore both the malls and kirana stores can play simultaneously in India so no need get afraid due to the malls.