Retail__Road_Ahead

The BMI India Retail Report for the third-quarter of 2010, released in May 2010 forecasts that the total retail sales will grow from US$ 353.0 billion in 2010 to US$ 543.2 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. As well as an expanding middle and upper class consumer base, there will also be opportunities in India's second and third-tier cities. The greater availability of personal credit and a growing vehicle population to improve mobility also contribute to a trend towards annual retail sales growth of 11.4 per cent. The growth in the overall retail market will be driven largely by the explosion in the organised retail market. Domestic retailers continue to invest heavily in increasing their store networks and improving in-store offerings, and the impact they have on growth will be boosted by the arrival of expansion-orientated multinationals. Mass grocery retail (MGR) sales in India are forecast to undergo enormous growth over the forecast period. BMI predicts that sales through MGR outlets will increase by 154 per cent to reach US$ 15.29 billion by 2014. This is a consequence of India's dramatic, rapid shift from small independent retailers to large, modern outlets. BMI forecasts consumer electronic sales at US$ 29.86 billion in 2010, with over the counter (OTC) pharmaceutical sales at US$ 3.28 billion. The latter is predicted to be the fastest growing retail sub-sector over the forecast period. BMI forecasts that sales will reach US$ 6.18 billion by 2014, an increase of 88.5 per cent. Retail sales for the BMI universe of Asian countries in 2010 are a forecast US$ 2.66 trillion. China and India are predicted to account for almost 91 per cent of regional retail sales in 2010 and by 2014 their share of the regional market is expected to be more than 92 per cent. Growth in regional retail sales for 2010-2014 is forecast by BMI at 72.2 per cent, an annual average of 14 per cent. India should experience the most rapid rate of growth in the region, followed by China. For India, its forecast market share of 13.9 per cent in 2010 is expected to increase to 14.3 per cent by 2014. Moreover, for the fourth time in five years, India has been ranked as the most attractive nation for retail investment among 30 emerging markets by the US-based global management consulting firm A T Kearney in its eighth annual Global Retail Development Index (GRDI) 2009 published in June 2009. Further, according to a study by the McKinsey Global Institute (MGI), released in May 2007, India's middle class will swell by more than ten times—from 50 million in 2007 to 583 million people by 2025. By 2025, India will also become the 5th largest consumer market, moving up from the 12th position it occupied in 2007. According to a McKinsey report published in September 2008, called '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. Commercial real estate services company, CB Richard Ellis' findings published in April 2009, states that India's retail market has moved up to the 39th most preferred retail destination in the world in 2009, up from 44 in 2008. India continues to be among the most attractive countries for global retailers. Foreign direct investment (FDI) inflows between April 2000 and March 2010, in single-brand retail trading, stood at US$ 194.69 million, according to the Department of Industrial Policy and Promotion (DIPP). • Carrefour, the second-largest retail chain in the world after Walmart, plans to open its first wholesale cash-and-carry store in the country at Seelampur in Delhi in the next two to three months. With the store sprawling over 55,000-square feet of area, the store will source 90 per cent of its products within the country. • Aditya Birla Retail will invest up to US$ 44.3 million in 2010-11 to expand its 'More' brand. The group will open 100 new supermarkets of 'More', and 8-10 new hypermarkets under the 'More Megastore' brand. • Wal-Mart Stores Inc, the world's biggest retailer, will accelerate its roll-out of wholesale stores in India. Raj Jain, chief of Indian operations for Arkansas-based Wal-Mart, said the firm now expects to open 10-12 wholesale centres in India over two-to-three years, from an earlier target of five years, as real estate prices have become more attractive. • K Raheja Group promoted Shopper's Stop has lined-up a capital expenditure of nearly US$ 27.6 million to open about 12 stores in 2010-11. The new stores will come up in Bangalore, Delhi, Pune, Bhopal, Aurangabad, Vijaywada and Durgapur. • British retail giant Tesco, expects to open its first cash-and-carry store in India by the end of 2010. • Middle East retail chain Max is expanding its footprints across India. Max has 16 outlets operating in the metros while the rest are located in the tier II towns. It plans to take its total store count to 53 by March 2011, targetting a turnover of US$ 96.8 million. • Diamond retail chain ORRA Diamonds plans capital expenditure of US$ 16.9 million for opening 16 new stores over the next three years. Policy Initiatives • 100 per cent FDI is allowed in cash-and-carry wholesale formats • FDI up to 51 per cent under the Government route is allowed in retail trade of 'Single Brand' products 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. • 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.