Emerging Retail Trends in India

Essay by yadavkrishna September 2009

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INTRODUCTIONIndia represents an economic opportunity on a massive scale, both as a global base and as a domestic market. Indian Retail sector consists of small family-owned stores, located in residential areas, with a shop floor of less than 500 square feet. At present the organized sector accounts for only 2 to 4% of the total market although this is expected to rise by 20 to 25% by next 3 years.

Retail growth in the coming five years is expected to be stronger than GDP growth, driven by changing lifestyles and by strong income growth, which in turn will be supported by favorable demographic patterns and the extent to which organized retailers succeed in reaching lower down the income scale to reach potential consumers towards the bottom of the consumer pyramid. Growing consumer credit will also help in boosting consumer demand.

The structure of retailing will also develop rapidly. Shopping malls are becoming increasingly common in large cities, and announced development plans project at least 150 new shopping malls by 2008.

The number of department stores is growing much faster than overall retail, at an annual 24%. Supermarkets have been taking an increasing share of general food and grocery trade over the last two decades.

However, Distribution continues to improve, but it still remains a major inefficiency. Poor quality of infrastructure, coupled with poor quality of the distribution sector, results in logistics costs that are very high as a proportion of GDP, and inventories, which have to be maintained at an unusually high level. Distribution and marketing is a huge cost in Indian consumer markets. It's a lot easier to cut manufacturing costs than it is to cut distribution and marketing costs.

Also, government has relaxed regulatory controls on foreign direct investment (FDI) considerably in recent years, while retailing currently...