Insight                                                  

The total concept and idea of shopping has undergone an attention drawing change in terms of format and consumer buying behavior, ushering in a revolution in shopping in India. Modern retailing has entered into the Retail market in India as is observed in the form of bustling shopping centers, multi-storied malls and the huge complexes that offer shopping, entertainment and food all under one roof.

A large young working population with median age of 24 years, nuclear families in urban areas, along with increasing workingwomen population and emerging opportunities in the services sector are going to be the key factors in the growth of the organized Retail sector in India. Indian retail is expected to grow 25 per cent annually. Modern retail in India could be worth US$ 175-200 billion by 2016². The future of the India Retail Industry looks promising with the growing of the market, with the government policies becoming more favorable and the emerging technologies facilitating operations.

Indian Economy and Organized Retail

India's retail sector, which accounts for about 9-10% of the country's GDP, remains one of the least developed sectors in India. India's vast middle class and its almost untapped retail industry are key attractions for global retail giants wanting to enter newer markets. Driven by changing lifestyles, strong income growth and favorable demographic patterns, Indian retail is expected to grow 25 per cent annually.

With the economy booming, competition in the marketplace is fierce. According to 'Retail in India Getting Organized to Drive Growth', a report by AT Kearney and the Confederation of Indian Industry, retail is one of India's fastest growing industries with a 5 per cent compounded annual growth rate and expected revenues of US$ 320 billion in 2007. Rising incomes, increasing consumerism in urban areas and an upswing in rural consumption will fuel this growth to around 7-8 per cent.

Organized retail is a win-win for everybody - for customers (low prices), for government (high tax collection), for labor (better work environment), for farmers/industrialists (less wastage and deeper markets). The country as a whole will benefit with greater productivity and better supply-chain infrastructure along with spill-over effects in Finance, Transportation, etc. If the development in organized retail that would help 600 million farmers, 200 million industrial workers and 1 billion consumers has to come over the loss of few thousand kiranas, so be it. But, my guess is that some of them who are enterprising enough can join big chains as franchisees and develop their business with greater agility.

In light of the recent protests against Reliance retail stores, the agitators were mostly street vendors who felt that reliance retail’s low price will destroy their market. The misconceptions stem from the fact that the vendors (who control about 95 per cent of the country’s overall retail business) feel cheated by the government which is in a hurry to promote large retail businesses.

They also assume retail chains’ low prices are because of their ability to take losses over years leading losses to out-price competitors. Once the small players are gone, they control the market and dictate prices. India has an estimated 12 million street vendors in its cities the 2004 National Policy for Urban Street Vendors pegs it at 10 million and roughly 2.5 per cent of each city’s population is engaged in vending on streets. There is no government recognition, credit availability or institutional support for street vendors. They have to wage daily battles with the police, municipal authorities and local goons, and bribe them on a weekly basis.