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EXPLORING RETAIL BUSINESS IN INDIA BY VERONIQUE QUEFFELEC* AND PROF PHIL H. LATIMIER*.

The Indian retail sector is highly fragmented with more than 90 per cent of its business being carried out by traditional family run small stores. This provides immense opportunity for large scale retailers to set-up their operations – a slew of organized retail formats like departmental stores, hypermarkets, supermarkets and specialty stores are swiftly replacing the traditional formats dramatically altering the retailing landscape in India. India is the third-most attractive retail market for global retailers among the 30 largest emerging markets.

  • Retail – Market Size

The total retail sales in India will grow from US$ 395.96 billion in 2011 to US$ 785.12 billion by 2015, according to the BMI India Retail report for the third quarter of 2011. Robust economic growth, high disposable income with the end-consumer and the rapid construction of organised retail infrastructure are key factors behind the forecast growth. Indian retail sector accounts for 22 per cent of the country’s gross domestic product (GDP) and contributes to 8 per cent of the total employment.  

  • Rural Retailing on a High…

Rural retailing enjoys an intense focus from big brands. Future Group and Godrej Agrovet’s joint venture (JV) in rural retailing, ‘Aadhar’, is all set for a revamp. The group promoter Kishore Biyani has revealed that the JV is planning to come up with wholesale distribution centers across different districts and franchisees would be rolled out to local entrepreneurs who would have a better understanding of the concerned area.

The Indian retail market, over the last decade, has been increasingly leaning towards organised retailing formats. The pattern in domestic retailing is altering in the favour of organised modern retailing, a big change from the traditional plethora of unorganised family-owned businesses. Rapid urbanisation, changes in shopping pattern, demographic dividend and pro-active measures by the Government are abetting the growth of the retail sector in India.

  • Organised retail in India

It 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, according to a McKinsey & Company report titled ‘The Great Indian Bazaar: Organised Retail Comes of Age in India’. Furthermore, according to a report titled ‘India Organised Retail Market 2010′, published by Knight Frank India, 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.

  • Retail – Investment Trends

Foreign direct investment (FDI) inflows between April 2000 and December 2010, in single-brand retail trading, stood at US$ 66.69 million, according to the Department of Industrial Policy and Promotion (DIPP). India will announce new rules for foreign investment in retail by April 2012, paving the way for companies such as Wal-Mart Stores and Carrefour to open stores, according to Junior Trade Minister Jyotiraditya Scindia.

India currently allows 51 per cent FDI in single-brand retail and 100 per cent in wholesale cash-and-carry operations. In a landmark decision, the government has eased norms for investments by foreign companies that are present in India through a joint venture (JV) or a technical collaboration. Now, the foreign company will not have to seek a no-objection certificate (NOC) from the Indian partner for investing in the sector where the joint venture operates. The government has also relaxed norms for downstream investments and convertible instruments, giving foreign companies more powers. The changes are part of the third revision of the Consolidated FDI Policy.

  • Retail – Road Ahead

There is a huge untapped opportunity in the retail sector, thus having immense scope for new entrants, driving large investments into the country. A good talent pool, huge markets and availability of raw materials at comparatively cheaper costs are expected to make India lead one of the world’s best retail economies by 2042. The industry is also slated to be a major employment generator in future.

  • Véronique  Queffélec * -« All Indian Association of Industries in Europe » Resident Rep-

 

  • Philippe-Henri Latimier du Clésieux, Ph.D.* -Visiting Professor of Finance at O.P Jindal Gobal University ( New-Delhi ).

 

 

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