Retail News India
By Suresh Bhatia, chief executive officer, Emaar Retail
A metaphor close enough to describe the dynamism of the Indian retail sector would be that of the Big Bang theory. Triggered by giant collision courses involving several thousand unorganised retailers occasionally rubbing shoulders against smart supermarkets, the Indian retail sector, following the years of heating and cooling, has evolved into a strong all-encompassing mass.
Today, topping the Global Retail Development Index for the third consecutive year as the most attractive market for retail investment, India has one of the most vibrant retail sectors in the world, where huge malls and supermarket chains co-exist with below-the-line traders.
Currently, there are 12 million retail outlets in India, which is estimated to triple by 2015. The 25 per cent projected increase in retail growth illustrates the strong fundamentals of the sector, which is expected to contribute to 22 per cent of India's GDP by 2010. The fastest growing segments in retail are, not surprisingly, wholesale cash-and-carry stores, supermarkets, and hypermarkets. Shopping malls are another growth segment, with over 100 malls in the country now and over 600 malls under construction - mostly in Mumbai, Delhi and other A1-class cities.
One of the key challenges of the Indian market is to build organised retail. Concepts like franchising are only now gaining currency, and I recall the tremendous effort that had to be put in even in the late '90s to build a fashion retail chain through international franchises.
The mindset of the typical Indian customer, however, has shifted over the years. Today, global brands have high visibility and awareness among urban customers, who drive the organised retail sector.
This change was relatively slow and has only hastened now with the economy gaining momentum. Reports show that the retail sector grew from US$198 billion in 2001 to US$226 billion in 2005 - a modest 14 per cent growth. However, the organised retail sector grew by 93 per cent from US$3.96 billion to US$7.68 billion in the same period, though its share of the total grew modestly from 2 per cent to 3.4 per cent.
A paradigm shift is projected for the organised retail sector, which is one of the areas where Emaar's retail expertise will make a difference. Emaar's approach to retailing is not limited to developing big malls - as has been proven with The Dubai Mall, one of the world's largest shopping and entertainment destinations.
Emaar's approach to retailing, centred on its communities, will gain more currency in India with the numbers in the consuming class increasing. The high disposable income, gained from economic growth, has pushed the total number of households in the consuming class from 26.5 million in 2001-02 to 40.8 million in 2006-07. These are the consumers, who are also the end-users of the master-planned communities and residential colonies in India.
It is estimated that in the next three years, over US$560 million will be invested in retail sector expansion in the country - resulting in 50 hypermarkets, 305 large department stores, 1,500 supermarkets and 10,000 exclusive retail showrooms. At least one-third of the multi-brand outlets are projected to be converted to exclusive outlets.