Insights into the Growth of New Retail Formats in India

Abstract

Retailing in India is receiving global recognition and attention. It is not just such global players as Wal-Mart, Carrefour, Tesco, and the METRO Group that have plans to expand in this market; even domestic corporate behemoths such as Reliance, TATA, KK Modi, the Aditya Birla group, and the Bharti group are now forging ahead in the development of retail businesses. On 27 June 2007, Reliance announced that it would invest US $ 5.6 billion in retail ventures to become India’s largest modern retailer. The industry is buoyant in terms of growth, and the early entrants are opening new stores at a rapid pace. Considering both the organized and unorganized sectors, retailing in India is currently estimated to be a US $ 350 billion industry, with organized retailing making up only about 3 % of it. By 2010, organized retail is projected to reach US $ 23 billion (KSA Technopak 2005 report) and make up 20-25 % of retailing sector sales (KPMG, 2005). The KPMG report also predicts that retailing will grow faster than GDP in the next 5 years. However, it should be noted that while there is excitement in the organized sector, the traditional format that includes small independent, largely mom-and-pop stores is also expanding rapidly, with almost 1.0 million stores being added every year.

Indian consumer tastes and preferences are changing rapidly, leading to radical alterations in lifestyles and spending patterns, which in turn are giving rise to new business opportunities. Shopping malls are becoming increasingly common in large cities, and at least 150 new shopping malls are expected by the end of 2008. The number of department stores is growing at a healthy rate of 24 % per annum. Supermarkets have come in to garner an increasing share of the general food and grocery trade. Such changes are being witnessed even in rural areas. Many corporations, such as ITC, DCM, TATA, and Godrej, are experimenting with new store formats.