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Monday, July 21, 2008

Retail Boom or Bomb?

Lets start with some very important stats that make us say “ Retail in India is the sunshine sector” “its booming ….”

Current Indian Retail Market size: $ 332.8 Bn (Rs. 1,330,000 Cr.)

Growth Rate: 10.8% p.a.

Share of Organized Retail : $ 19.6 Bn (Rs. 78,300 Cr.)

Growth Rate: 42.40% p.a.

Organized Retail Market Share: just 5.90%

Organized Retail 2010: $ 57.5 Bn (Rs. 23,0000 Cr.)

Market Share by 2010: 13%

Wow the above stats are really wonderful & positive about the Indian retail sector.

But I always felt as to how true will these be say in 2010? The figures are based on the current pattern of consumer profile or are the changing Indian demographics taken into account?

Read many articles in newspapers and found some more stats for the consumer profile, here we go:

Total number of retailers: 15 Mn

Urban-Rural Spending: 9:11 ratio

Rural India consumption of private retailers: 55%

Rural India Consumers: 720 Mn

Villages: 627,000

17% of these villages constitute 50 % of rural population & 60 % rural wealth

Population < style=""> 890 Mn.

Middle Class: 300 Mn

Salary > $ 19,500: 70 Mn

Salary > $ 19,500 by 2011: 140 Mn

Effective Consumers by 2011: 600 Mn

Well it’s very satisfactory to see the change in the Indian population which again reinstates the fact of it being booming.

We all are witness to the retail boom here, the malls are cropping up at every nook and corner, the city is slowly becoming “city of malls”! But will the malls actually survive, especially in this low margin driven industry?

Countries whose names come to the mind when it comes to successful retail history are USA & Japan.

They are successful because they have developed their own way of retailing formats. US is accustomed to having malls that are the size of a few football fields on the other hand Japan has retail formats which have the optimum utilization of space. Japan has shops which are "help your self types" (Konbini). Now isn’t that innovation?

India is still using the technique of following the leaders; we have companies whose business development teams explore various countries, see their formats, and set it up exactly the same way here.

Irony is that they are setting up stores for the customers here but looking at the outside world for assistance. US & Japan have developed their own formats based on their customer profile, then why are we not looking at our own customers to set up or evolve formats of our own.

This where the true opportunity lies! We have our huge customer base, all the money needed in the world at our disposal, but no unique retailing method of our own.

It is in a very nascent stage is Indian retailing, and to mature we have to soon inculcate what we call “innovative techniques” .

Might be sounding too critical in the article about the current Indian retail sector, but on the contrary I am very optimistic about it as it’s the perfect time to start truly exploring and innovating!

Dn't just wait, start to Innovate!


stats: NCAER (National Council of Applied Economic Research)