RETAIL INDUSTRY IN WESTERN INDIA - TRULY
A SUCCESS STORY!
Source: ET
Fuelled by changing consumption patterns, a strong economy and favourable demographics, the retail sector in the western parts of the country is witnessing a dramatic transformation. In an industry that is largely driven by consumer demand, organized players are going the extra mile to woo customers…
Pooja N. Punjabi
As per an AT Kearney survey, India is ranked as the second most attractive retail destination globally from among thirty emergent markets. What’s more, according to a Knight Frank survey, India comes in at fifth place from amongst the thirty emerging retail markets in the developing countries considered. The retail sector in the country is evolving at a breakneck speed, with a contribution of 14 per cent to the national GDP! It is no surprise then that we hear of expansion plans by major retailers every so often these days. All major Indian states are witnessing a paradigm shift and have emerged into modern organized retailing hubs, a transformation that is set to accelerate over the coming years. The western region, i.e. the states of Gujarat, Maharashtra and Goa, provide immense growth opportunities in this sector.
Changes in consumer trends - driving the sector
According to a recent study by the McKinsey Global Institute, India is poised to become the fifth largest consumer market by 2025. With the largest population of ‘young people’ in the world - over 890 million people are below 45 years of age, India is indeed a resplendent market. As a result of economic growth, household incomes have risen at a fast pace and a change in consumer mindsets has been rather drastic. Today, even middle class consumers are loosening their purse strings, thriving on loans and credit cards and are on a spending juggernaut.
Western India’s emerging retail hierarchy
A report by Jones Lang LaSalle Meghraj gives a detailed analysis of the socio economic profiles of different cities in India. This profiling along with research into the existing and future plans of major retailers identifies the scope and opportunities for the retail sector in these regions. As per this study, Mumbai clearly is ‘head and shoulders’ above the rest and is classified as a ‘maturing city’.
Supermarkets, hypermarkets and malls score over ‘kirana’ and local shops!
A report by AC Nielson on Retail and Shopper Trends in India shows that an impressive 48 per cent of shoppers ‘love to try new things’. At present, approximately 70 million Indians earn over US $ 18,000 a year. With rising incomes, the propensity to consume is also rising. With growing aspirations, need for a better lifestyle and an insatiable demand for good brands, Indian consumers clearly prefer an enriched shopping experience. Convenience, wider brand choice and aggressive marketing communication are some factors driving the retail scene.
Retail presence in the western region
Retail activity in western India is growing thick and fast. Almost all large retailers - such as the Future Group, Reliance, RPG, Lifestyle, Trent, the Rahejas, Piramyd Retail, etc. have set up shop here and have major expansion plans in place. From small towns to metros, India’s new-found obsession with malls is visible everywhere. Mumbai has a shopping mall stock of 4 million square feet, a figure that can go up to 15 million square feet by 2008-09! Reliance announced that it will invest $3.4 billion to become the country's largest modern retailer by establishing a chain of 1,575 stores by 2007.
Considering the diversity in terms of taste and preferences existing in India, the retailers are going for experimentation to identify the winning format suited to different geographies and segments. For example, the taste in the west is different from that in the north or south and this brings challenges to the retailers. Therefore, many retailers are region-centric at this point in time. The Landmark group, which has its dominance in the western region, operates multiple formats such as hypermarket (Max), departmental store (Lifestyle), Shoemart and Funcity12, etc.
Top notch cities like Mumbai, Pune and Ahmedabad are leading the way but the second tier cities like Nagpur and Surat are catching the eye of all retailers.
Retailers - focusing on customer needs
Retailers such as Pantaloon’s and Shoppers’ Stop, which have a strong presence in these cities constantly strive to meet diverse consumer tastes and preferences. Pantaloon Retail’s subsidiary Future Brands will be developing private labels and turning them into “strong brands”, which will eventually be moved outside the company’s retail stores to standalone stores. Shoppers’ Stop has decided to make purchasing easy for its ‘small ticket’ customers by offering customer credit like its counterparts Reliance and Pantaloon. Retailers are doling out lower priced products, attractive finance options and other marketing schemes to hook more buyers. Hypercity, the hypermarket format of the K Raheja group, which currently operates one hypermarket in the Malad suburb of Mumbai, is getting ready to launch HyperCity- Argos (catalogue) on a pilot basis. The Swiss-made Milleret brand of jewellery watches opened outlets in two P N Gadgil stores in Pune recently, and is set to expand its retail base in India to 35 jewellers’ outlets across the country by the end of the year. Similarly, with a focus on expanding its retail reach across the country, Titan Industries inaugurated its third exclusive ‘World of Titan’ showroom in the city of Surat.
The retail sector has a shining future
At present, retailing in India is estimated to be a US $ 230 billion industry, of which organized retailing is a mere 3 per cent. By 2010, organized retail is expected to touch US $ 30 billion with an expected growth rate of about 400 per cent. A study conducted by Fitch expects the organized retail industry to continue to grow rapidly, especially through increased levels of penetration in larger towns and metros and also as it begins to spread to smaller cities and B class towns providing a huge ‘space’ of opportunity for this sector.
In brief
• All major Indian states are witnessing a paradigm shift and have emerged into modern organized retailing hubs, a transformation that is set to accelerate over the coming years.
• Within these, the western region, i.e. the states of Gujarat, Maharashtra and Goa, provide immense growth opportunities in this sector.
• Almost all large retailers - such as the Future Group, Reliance, RPG, Lifestyle, Trent, the Rahejas, Piramyd Retail, etc. have set up shop in this region and have major expansion plans in place.
• Considering the diversity in terms of taste and preferences existing in India, many retailers are region-centric at this point in time.
• Top notch cities like Mumbai, Pune and Ahmedabad are leading the way but second tier cities like Nagpur and Surat are catching the eye of all retailers too.
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