Indian retail industry witnesses steady growth
Recently in July 2009, Minister of State for Commerce and Industry in India, Mr Jyotiraditya Scindia, informed the Parliament that India’s retail trade, the second largest employer after agriculture, is estimated to touch US$ 590 billion in the next two years. He also informed the esteemed Lower House that retail trade in India is estimated to grow at 13 per cent per annum from US$ 322 billion in 2006-07 to US$ 590 billion in 2011-12.
According to industry research the growth in Indian retail business has shown positive effects owing to the evolving consumer behaviour, changing market dynamics as well as to easier access to capital by both the retailers and consumers. Market research information reveals that Indian consumers are becoming more aspirational and looking forward to adopting a western lifestyle. This trend will drive retail and logistics to have sustained growth and new brands from overseas to cater to an expanding middle class customer base.
As per consulting firm KPMG’s findings in a March 2009 report, the organised retail market in India was worth US$ 25 billion and has witnessed steady growth at 15 per cent in fiscal 2009. Modern organised retail will grow much faster, at the rate of 30-35 per cent annually, than the traditional one in the coming years and will be at the size of US$ 54 billion in the next three years, feel industry retail specialists. Fast moving consumer goods (FMCG) and apparel sectors are likely to drive this growth.
With an eye on the growing consumer base, Wipro is looking aggressively at the bottom of the pyramid to push its volumes and is in the meanwhile, also considering the idea of bringing in premium products from Unza. The emergence of modern retail in India is a route that the company is looking to tap for these products.
Foreign direct investment is not permitted in Indian retail trade except for single-brand product retailers with a 51 per cent cap. This has prompted firms such as Nike, Sony and Marks & Spencer to open stores in India for selling their own products.
In India, ‘multi-brand’ retailers such as Woolworths from Australia are banned from direct investment although they are allowed to operate in wholesale. Woolworths has quietly tapped this opportunity in India through an innovative tie-up with Infiniti Retail, owned by Indian industrial conglomerate Tata Sons and its growing chain of Croma stores, which specialise in consumer electronics. Walmart too has had a successful entry with its wholesale cash-n-carry stores with the launch of its store at Ludhiana.
Fung Capital, a Hong Kong-based business group which recently invested US$ 30 million in Future Group’s logistics arm – Future Supply Chain Solutions Pvt Ltd, is now planning to bring some of its UK-based high-end menswear brands to India and is looking to partner with Future Retail for this.
Alok Industries Ltd, which operates in domestic retail under the brand ‘H&A’, expects its export turnover in fiscal 2010 to go up 30 per cent from US$ 218.1 million in fiscal 2009. The firm has set up nearly 90 stores since its domestic launch in 2007.
‘Indian Terrain’, the apparel brand of Chennai-based export firm Celebrity Fashions Ltd, is focussing on expanding its menswear portfolio driven by a surge in demand. The brand, which has 35 stores and an annual turnover of US$ 15.78 million from retail, is now looking at a franchise model.
All in all, the favourable investment and economic climate in India is now conducive to both domestic and international players gaining ground in retail trade.
About the Author
Smith is a business journalist, who covers the world economies and industries extensively. His writes columns and articles for various websites and internet journals. In the domain of economy and businesses, he is widely recognized.
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