India is fast becoming the retail destination of the world. According to the international management consultant AT Kearney, India has emerged as the leader in terms of retail opportunities. The retail market in India is anticipated to grow to 427 billion USD by the year 2010.
However, the face of the Indian retail industry is changing. India is passing through a retail boom today. A number of changes have taken place on the Indian retail front such as increasing availability of international brands, increasing number of malls and hypermarkets and easy availability of retail space. With the Indian government having opened up the doors for FDI, the entry of foreign retailers into the country has become easier. India has come a long way from the traditional Kirana stores and is on its way to becoming a ‘mall country’. The emphasis has shifted from reasonable pricing to convenience, efficiency and ambience.
The major factors fuelling this change are the increase in disposable income of the people, improving lifestyles, increasing international exposure and increasing awareness among the customers. India has a large middle class as well as youth population, which has contributed greatly to the retail phenomenon. The middle class is considered to be a major potential customer group. The youth are perceived as trend setters and decision makers. Tourist spending in India is increasing, which has also prompted the retail boom.
Food and grocery are the two categories in the Indian retail sector which offer the most promising opportunities. Apart from this, the other areas where there are vast possibilities for Indian retailers are jewellery, apparel and consumer durables. Indian retailers are also trying to create a niche for themselves in areas such as books, gifts and music.
The Indian retail industry is going through a period of golden sunshine.
Fibre2fashion discusses on certain issues concerning the Indian retail industry with Mr. Andreas Gellner, Managing Director, Adidas India:
Mr. Gellner, expressing his view on the present scenario in the Indian retail sector, states that by now, it is fair to assess that the outlook is very bright, but currently, the potential and dynamics are somehow overhyped. Undersupply of suitable spaces and manpower have driven both critical cost components to levels where it is very difficult for many retailers to make profits (not to talk about generating funds for further expansion). The service tax on rentals, of course, was the final blow to many profitability models.
He went on to further state that the long-term future is very promising, but the next few years will remain extremely challenging. While speaking about the current mall culture in India, he believed that the malls as places to congregate and spend time for shopping and other activities have been well accepted. This concept will certainly even grow stronger once new generations of malls are offering consumers/visitors an atmosphere of international standards (including trouble-free parking!).
He also strongly supports the liberalisation of FDI norms in any form of retail, because they won’t hurt traditional business at all, or at least not more than the other Indian business houses who are rolling out their various category killer formats.
What they bring to the table is additional funds, cutting edge supply chain solutions and process know how. The latter is dearly needed to professionalise the retail sector, thereby creating efficiencies (retailer profits) as well as best services and best prices for the Indian consumer.
There are changes in the buyer behaviour of late with the mall culture. The Indian consumer has always been very discerning. Mr. Gellner is of the view that he does not see that changing. Of course, the shopping behavior is changing with malls coming into play, as conversion rates in malls are dramatically lower than in high street. The Indian consumer has more options than ever before, and he/she exerts their power of knowledge very well.
Lastly, he discussed about the plans for meeting the changing trends. He is concentrating on creating a retail-focused organization that recognizes trends and has the ability to adapt swiftly.