Retail Boom in india ..... curse or boon?

Question

Retail Boom in india ..... curse or boon?
I m talking about reliance fresh or Mittal-Walmart colaboration!

The survey, carried out in three sub-regions in Asia (India, greater China and South East Asia) involving nine key markets, revealed that India topped the chart with 45 per cent expanding rapidly followed by Greater China at 27 per cent and other South East Asian capitals at 6 per cent.

Staples Inc, Starbucks, Walmart, Carrefour and the list is growing . . .

What do you have to say here?

Will this FDI will root out Indian market? Will stores like reliance fresh which attracted 8000 people in the very first day will do bad to our local vegetable sellers?

Answer 1

The study of the history of retailing business throws up the fact that in most economies organised retailing passes through four distinct phases in its evolution cycle.

In the first phase, new entrants create awareness of modern formats and raise consumer expectations. During the second phase, consumers demand modern formats as the market develops, leading to strong growth. As the market matures, intense competition forces retailers to invest in back-end operating efficiency.

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4 reasons why retail is booming

In the final phase, retailers explore new markets as well as inorganic opportunities as growth tapers off. Supply chain management (SCM) attains top priority in the third phase of evolution.

Fierce competition forces retailers to respond quickly to changes in the market, bringing forth the importance of SCM in handling availability of stock, supplier relationships, value-added services and cost cutting.

Traditional retailers are expected to enhance their investments in supply chain, whilst new entrants are likely to look at supply chain first broadening their national reach.

What drove the retailing in India?

India is currently in the second phase of the retail evolution, with domestic customers becoming more demanding with their rising standard of living and changing lifestyles.

Change in customers' focus from just buying to broad shopping (buying, entertainment and experience) has led to a pick-up in momentum in organised formats of retailing.

Unavailability of quality retail space has been one of the main constraints for development of organised formats in India. In the past, negative yield on leased property and lack of bank funding due to unorganised property market resulted in a dearth of quality retail space in the country.

The spread between yield on property and its financing cost has turned positive with the fall in interest rates. Attractive yields on investments have resulted in a sharp increase in property development. From 25 operational malls in 2003, the country is expecting to have over 220 malls by 2006 with a cumulative estimated space of 40 million sq ft and over 600 malls by 2010, with as much as 100 million sq ft retail space.

Pro-active steps taken by the government permitting use of land for commercial development in various cities, including Mumbai and Delhi, have also contributed to increased availability of retail space in the country.

Availability of retail space is expected to increase further whenever property funds and investment trusts are permitted, which will help create a secondary market for real estate in the country.

Consumerism and brand proliferation also enhanced organised retailing in the country. Most of the world's leading brands, including like L'Oreal, Espirit, Louis Vuitton, Marks & Spencer, Tommy Hilfiger, Louis Phillipe, Levis, Pepe, Lee, Arrow, Dockers, Red Tape, Clairns, Hugo Boss, Tiffany, Bulgari, Ecco, Chambor, Revlon, Philips, Corelle, Magppie, Nike, Reebok, Parker, Ray Ban, Lego and Mattel, are now present in India.

Another factor that accelerated the growth of organised retailing is media proliferation. Increased advertisements and brand promotions have led to a growing consumer spending across a wide range of product categories.

What will fuel the boom?

Differential sales tax rates exist across states in the country. Besides, there is multiple-point octroi/entry tax collection.

All these add to cost and complexity of distribution as these necessitate multiple warehouses and do not allow for centralisation of certain procurements given the incidence of local levies.

Implementation of Value Added Tax will streamline the complexities in the tax structure and narrow the cost disadvantage between organised and unorganised retailers.

While some leading retailers are still able to get funding from banks, the smaller ones are constrained for funding for growth. Similarly, equity options are also restricted as foreign direct investment is not permitted in the retail trading sector.

FDI restrictions have also stalled entry of international majors to retailing in the country, which could have otherwise helped the industry develop with funding and bring better practices and systems. However, positive changes are expected on the FDI front.

The development of road infrastructure, especially the Golden Quadrilateral project interlinking North-West and East-West corridors, will bring in efficiency in supply chain and reduce wastages.

Where are the road-blocks?

Non-availability of trained manpower, especially at the management level, poses a key risk for the retail sector. Besides, as organised retail grows rapidly, there will be pressure on existing players as new entrants look for trained manpower at various levels.

Opening up of FDI in retail could see the entry of international majors which will put further pressure on the manpower of existing retailers.

SCM efficiencies are essential to retailers to maintain and improve margins. SCM includes vendor and logistics management which is underdeveloped in India. However, with growing size of operations, SCM efficiencies will become a key differentiator of profitability in retail.

The road ahead

Notwithstanding some stumbling blocks, no one can mistake the immense potential of the boom in the domestic retail sector.

Given the size and the purchasing power of the Indian consumer, the road ahead can only get smoother and it is only a matter of time before the domestic retail industry is on par with its western counterparts.

FDI can give the extra thrust

S. D. Naik

Fears expressed in certain quarters that FDI in the retail sector will short-change the local kirana stores and smaller players are exaggerated. On the contrary, it will to lead new economic opportunities and generate more employment. The policy-makers would do well not to dither any more over opening the retail sector to FDI, says S. D. Naik


With retail trade expected to grow at a robust pace in the coming years, opening it up to FDI could result in several benefits for the consumer.

THE organised retail business in the country is witnessing a boom and studies by McKinsey and Fitch point out that it is set to grow exponentially in the coming years.

Market liberalisation, a growing middle-class, and increasingly assertive consumers are sowing the seeds for a retail transformation that will bring more Indian and multinational players on the scene.

The big Indian retail players looking to expand their operations include Shopper's Stop, Pantaloon, Lifestyle, Subhiksha, Food World, Vivek's, Nilgiris, Ebony, Crosswords, Globus, Barista, Qwiky's, Café Coffee Day, Wills Lifestyle, Raymond, Titan, Bata and Westside.

Well-established business houses such as Wadia, Godrej, Tata, Hero, Malhotras, etc., are drawing up plans to enter the fast-growing organised retail market in India.

Taking advantage of the retail boom, Himatsingka Seide, India's largest manufacturer of silk and silk-blended fabrics and a 100 per cent export oriented unit, has floated a subsidiary, Himatsingka Seide Wovens, to foray into the retail business with a series of fine furnishings stores, called Atmosphere, across the country.

Similarly, Welspun, a leading manufacturer of terry towels, has entered the domestic retail business with a home textile brand, Spaces, which will offer a range of bed, bath, kitchen and table linen, specifically for the Indian market. The company currently exports to 32 countries.

According to reports, Reliance Industries Ltd plans to enter the retail business in a big way and has identified 18 cities, starting with Ahmedabad, to set up malls. It will spend Rs 30-50 crore on each mall, that are to be modelled after those in Dubai and East Asia.

The international players currently in India include McDonald's, Pizza Hut, Dominos, Levis, Lee, Nike, Adidas, TGIF, Benetton, Swarovski, Sony, Sharp, Kodak, and the Medicine Shoppe. Global players are entering India indirectly, via the licensee/franchisee route, since Foreign Direct Investment (FDI) is not allowed in the sector.

Despite all these developments, the organised retail business still comprises a small proportion of the total size of the Rs 9,00,00-crore ($200 billion) retail sector. Retail business s growing at 5-6 per cent per annum. The size of organised retailing was estimated around Rs 26,000 crore in 2004, about three per cent of the total. However, it is now set to grow at 25-30 per cent per annum.

In developed countries, organised retailing makes for over 70 per cent of the total business. In China this segment accounts for 20 per cent of the overall business.

Answer 2

Retail boom, as such, is good, because it encourages competition, which in-turn can, bring the prices to realistic levels.
But in India, our economy has developed, on cottage industries. If big players get into those trades, they will eat away, all small players.
First you encourage the cottage & small industries, to grow and then kill them by allowing, big players. That is bad planning and depriving millions small traders.

Answer 3

no not at all infact now the farmers can sell in bulk and that too at a good price which is even seen in case of reliance

Answer 4

Retail business is good for everyone. No vegetable vendor will be out of business.

Answer 5

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Answer 6

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