Indian retail Industry: An Insight

Retail Industry: Insight

                       

The BMI India Retail Report for the first-quarter of 2011 forecasts that total retail sales will grow from US$ 392.63 billion in 2011 to US$ 674.37 billion by 2014. Strong underlying economic growth, population expansion, the increasing wealth of individuals and the rapid construction of organised retail infrastructure are key factors behind the forecast growth. With the expanding middle and upper class consumer base, there will also be opportunities in India's tier II and III cities.

Mass grocery retail (MGR) sales in India are expected to undergo enormous growth over the forecast period. BMI predicts that sales through MGR outlets will increase by 145 per cent to reach US$ 21.35 billion by 2014.

BMI forecasts consumer electronic sales at US$ 29.09 billion in 2011, with over-the-counter (OTC) pharmaceutical sales at US$ 2.69 billion. The former sub-sector is expected to show growth of 55.6 per cent between 2011 and 2014, reaching US$ 45.27 billion, with projected double-digit growth of key products such as notebooks, mobile handsets and TVs. OTC pharmaceuticals, meanwhile, should increase slightly more, by 56.5 per cent throughout the forecast period, to reach US$ 4.21 billion.

China and India are predicted to account for more than 91 per cent of regional retail sales in 2011, and by 2014 their share of the regional market is expected to be more than 92 per cent. Growth in regional retail sales for 2011-2014 is forecast by BMI at 48.1 per cent, an annual average 15 per cent.

According to a McKinsey & Company report titled 'The Great Indian Bazaar: Organised Retail Comes of Age in India', organised retail in India is expected to increase from 5 per cent of the total market in 2008 to 14 - 18 per cent of the total retail market and reach US$ 450 billion by 2015.

Furthermore, according to a report titled 'India Organised Retail Market 2010', published by Knight Frank India in May 2010 during 2010-12, around 55 million square feet (sq ft) of retail space will be ready in Mumbai, national capital region (NCR), Bengaluru, Kolkata, Chennai, Hyderabad and Pune. Besides, between 2010 and 2012, the organised retail real estate stock will grow from the existing 41 million sq ft to 95 million sq ft.

Driven by the growth of organised retail coupled with changing consumer habits, food retail sector in India is set to be more than double to US$ 150 billion by 2025, according to a report by KPMG.

India's retail market is expected to be worth about US$ 410 billion, with 5 per cent of sales through organised retail, meaning that the opportunity in India remains immense. Retail should continue to grow rapidly—up to US$ 535 billion in 2013, with 10 per cent coming from organised retail, reflecting a fast-growing middle class, demanding higher quality shopping environments and stronger brands, according to the report ‘Expanding Opportunities for Global Retailers’, released by A T Kearney.

India has been ranked as the third most attractive nation for retail investment among 30 emerging markets by the US-based global management consulting firm, A T Kearney in its 9th annual Global Retail Development Index (GRDI) 2010.

Foreign direct investment (FDI) inflows between April 2000 and October 2010, in single-brand retail trading, stood at US$ 197.04 million, according to the Department of Industrial Policy and Promotion (DIPP).

• Carrefour, the world’s second-largest retailer, has opened its first cash-and-carry store in India in New Delhi. Germany-based wholesale company Metro Cash & Carry (MCC) opened its second wholesale centre at Uppal in Hyderabad, taking to its number to six in the country.
• Electronic retail chain major, Next Retail India, plans to open 400 showrooms across the country during January-March 2011 increasing the total number of retail stores to 1,000 by the end of the fiscal year 2010-11.
• Jewellery retail store chain Tanishq plans to open 15 new retail stores in various parts of the country in the 2011-12 fiscal.
• V Mart Retail Ltd, a medium-sized hypermarket format retail chain, is set to open 40 outlets over the next three years, starting with 13 stores in 2011, in Tier-II and Tier-III cities.
• Reliance Retail, the wholly owned subsidiary of Mukesh Ambani's Reliance Industries, is set to open 150 stores by the end of March 2011 and double the number of stores across the country in all formats within five years.
• Future Value Retail, a Future Group venture, will take its hypermarket chain Big Bazaar to smaller cities of Andhra Pradesh, with an investment of around US$ 1.54 million to US$ 4.41 million depending on the size and format.
• RPG-owned Spencer's Retail plans to set up 15-20 new stores in the country in 2011-12.
• Spar Hypermarkets, the global food retailing chain of the Dubai-based Landmark Group, expects to start funding its India expansion beyond 2013 out of its local cash flow in the country. So far, the Landmark Group has invested US$ 51.31 million in setting up five hypermarkets and plans to pump in another US$ 51.31 million into the next phase of expansion.
• Leading watchmaker Titan Industries Limited plans to invest about US$ 21.83 million for opening 50 premium watch outlets Helios in next five years to attain a sales target of US$ 87.31 million.
• British high street retailer, Marks and Spencer (M&S) plans to significantly increase its retail presence in India, targetting 50 stores in the next three years.
• Spain's Inditex, Europe's largest clothing retailer opened the first store of its flagship Zara brand in India in June 2010. It further plans to open a total of five Zara outlets in India.
• Bharti Retail, owner of Easy Day store—supermarkets and hypermarts—plans to invest about US$ 2.5 billion over the next five years to add about 10 million sq ft of retail space in the country by then, according to a company spokesperson.

Policy Initiatives

100 per cent FDI is permitted under the automatic route for trading companies for cash & carry trading wholesale trading/ wholesale trading.

FDI up to 51 per cent under the Government route is allowed in retail trade of Single Brand products, according to the Consolidated FDI Policy document.

The Consumer Affairs Ministry has given the green signal to allow 49 per cent FDI in multi-brand retail. It has written a letter to this effect to the Commerce Ministry. "Multi-brand retail should be permitted with a cap of 49 per cent… A significant chunk of investments should be spent on back-end infrastructure, besides logistics and agro-processing," the Consumer Affairs Ministry had said in response to the discussion paper floated by the Department of Industrial Policy and Promotion in June 2010 on allowing 100 per cent FDI in multi-brand retail.

The Securities and Exchange Board of India (SEBI) has notified the increase in the retail investment limit to US$ 4,391.19 in initial public offers (IPOs). The new norms will be applicable to issues that have yet not opened for subscription.

Road Ahead

According to industry experts, the next phase of growth is expected to come from rural markets.

According to a market research report published in June 2008 by RNCOS titled, 'Booming Retail Sector in India', organised retail market in India is expected to reach US$ 50 billion by 2011. The key findings of the report are:

• Number of shopping malls is expected to increase at a CAGR of more than 18.9 per cent from 2007 to 2015
• Rural market is projected to dominate the retail industry landscape in India by 2012 with total market share of above 50 per cent
• Driven by the expanding retail market, the third party logistics market is forecasted to reach US$ 20 billion by 2011
• Apparel, along with food and grocery, will lead organised retailing in India

Further, the luxury brand in the country is estimated to be worth about US$ 4.06 billion-US$ 4.51 billion and is expanding rapidly driven by the growing aspirations of youth and income levels in the country. Most people constantly scale up spends as aspirations grow.

Thus, major international brands are in the process of expanding their retail presence. For instance, Paul & Shark now has two stores with Hyderabad and will have few more by this year, Zegna, another Italian brand, known for its formal wear and quality suits, is also expanding and Diesel will have seven stores in the country.

Meanwhile, European football clubs, including Manchester United, Chelsea and Liverpool, are increasingly scouting for partnerships in India to sell their merchandise and also set up chain of coffee clubs and theme shops.

The stationery retailing market in India is also witnessing steady growth due to the arrival of organised players in the business. It is estimated that the Indian office products industry is in the range of US$ 2.22 billion with stationery comprising US$ 666.89 million-US$ 889.19 million and growing at 30 per cent per annum.

Future Group and Reliance Retail are some of the players who are already tapping into the sector and have launched brands such as Staples and Office Depot.

Instant Updates: .tel

Instant updates:

Let's assume you run a company. For people to contact you, there is the company Web site, but is the information in the site current? One fine day you realise that the details are outdated (Oh! That explains the drop in business). You frantically call your tech department and discover the only guy who is available now knows nothing about how to change contact information. He, in turn, contacts a more ‘knowledgeable' guy who is unfortunately caught in a traffic jam. By the time the details are updated, you would have lost more business.

The same goes for personal information too. If you are a professional, you may find it difficult to inform your clients every time your phone numbers or addresses change. Or if you switch jobs it is impossible to inform all your contacts, including friends and relatives.

The Telnic service changes all that. Once you register for your .tel name, you can update your contact information from any computer or even your mobile. The details are updated instantly. Anyone can go to [yourname].tel and get the latest information. Just as you can update it from any computer or mobile, the [yourname].tel will also be accessible from any device. Your [yourname].tel will also be listed in the .tel directory. 

And “unlike a traditional directory service listing, you can publish as much information as you wish and update it at any time by simply logging into a user-friendly interface and changing your contact data or keywords,” says Telnic. Visitors can search for your page by keywords text or your location, it says.

If your company has several departments, having [yourname].tel allows multiple levels of navigation so that the client or whoever is trying to find your company can get the details of the exact department, instead of hunting about.  Through telnic, you can “publish all your means of communication, including phone numbers, fax numbers, premium numbers, VoIP and IM handles, email addresses, links to your Web sites and Google Maps, keywords that describe your business, and private information only visible to VIP customers or friends and family”. You can even integrate the [yourname].tel to  your site's contact section.

Domestic airlines

Domestic airlines carry record 50 lakh passengers in Dec:

For the first time in the history of Indian aviation, domestic airlines carried more than 50 lakh passengers in a month.

The latest data released by the Directorate General of Civil Aviation (DGCA) show that airlines carried 52.13 lakh in December, up from 44.87 lakh passengers in the same period of the previous year, reporting a growth of almost 16 per cent.

During January-December, domestic airlines carried 520.21 lakhs as compared to 438.40 lakhs in 2009.

Inclement weather

During the period under review, the industry paid close to Rs 1.26 crore as compensation to passengers of which almost Rs 1.10 crore was on account of providing facilities and compensation to those affected by delays and cancellation of flights.

In December alone more than 1.5 lakh passengers were affected by flight delays while 31,000 passengers had to put up with flight cancellations. In December, inclement weather conditions including dense fog affected operations of airlines.

The compensation amount paid could be more as the information provided by the State-owned Air India was incomplete, the official statement added.

Analysts predict that the industry is expected to see robust growth in the next three to five years. From the demand side, the Indian market is well positioned for growth for the next three to five years. The air traffic demand is likely to remain strong on the back of growth in the Indian economy, high disposable incomes and rising middle-class aspirations.

A majority of the air traffic still comes from the top six to eight metro destinations and has not extended to the tier-2 and tier-3 cities. However, with privatisation of 35 non-metro airports that scenario should change.