Challenges ahead for retailing in the Indian market

Essay by nandita_nn July 2004

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Factors holding back the retail revolution in India:

There are several factors.

1) Raising funds to even set up a retail outlet is very tough. Though things have changed somewhat in the last three years, it is far easier to raise funds to put up a factory than to put up a retail chain. Development banking institutions like the ICICI or the IDBI were not open to funding retail ventures till recently. Obtaining international funds is even more difficult. The reason is, retailing in India is so disorganized that there are no benchmarks to evaluate viability and profitability.

2) Real estate is the second big limiting factor. While the government is the largest landowner in the country, very little has been done by way of real estate reforms. As real estate prices are sky high, most of the development work is taking place in out-of-town locations, like Gurgaon (just outside Delhi).

But the real revolution will take place when the government allows redevelopment of space within the city centre where the consumers traditionally live. A

For example, if we take New Delhi, South Extension (an up market shopping centre in the southern part of the city) seems, in many ways, a shopper's nightmare. There is no access; there is no proper parking area. In short, there has been no standardization in terms of development of that area as a retail option.

3) Retail-friendly laws The third reason is that India still does not have retail-friendly laws. When we look at the movement of goods from one state to another, there are too many restrictions. In case of retailing, it is required to put in a whole lot of products from different parts of the country - at times from outside the country - on the shelf.