The Hindu Business Line : Retail sector sees big bucks, big players in 2006

The year 2006 marked the beginning of the `retail revolution' through the entry of big names such as Reliance with the announcement of huge investments. But what really grabbed attention was Bharti Group's announcement of its tie-up with the world's largest retail chain, Wal-Mart.

Before Reliance opened its first supermarket in Hyderabad in November, with an investment of around $5.5 billion, the only other big player was the Future Group with its retailing arm, Pantaloon Retail India Ltd.

The Rs 4,000-crore Pantaloon Retail also announced an investment of $1 billion to open 1,000 outlets in the near future, an answer to the aggressive growth plans of Reliance. "The year 2006 has assumed great significance in modern retailing as Reliance announced a pan-India network of outlets in multiple formats in the coming years," said Mr Gibson G. Vedamani, CEO, Retailers' Association of India.

"The most recent noteworthy development was the announcement of the Bharti-Wal-Mart joint venture. This deal is likely to reinforce confidence levels and will be viewed as a positive move by foreign retailers. In fact, it is likely to propel retailers to move faster into India. The entry of Wal-Mart could result in more structured deals within a regulatory framework of the Government's policy. International retailers know they cannot afford to not have operations in India. They are viewing the market with much interest and with the current regulatory framework, have put strategies on hold," said Mr N. V. Sivakumar, Leader - Retail and Consumer Practice, PricewaterhouseCoopers.

The year also saw big players such as the Aditya Birla Group announce their entry into retail. Tata and Woolworths entered into a technical collaboration and launched household appliances and home electronics store, Croma. The Raheja Group opened Hypercity, a hypermarket, in Mumbai. Chennai-based discount chain Subhiksha closed the year with nearly 500 outlets across India, making it the largest in the discount format.

As far as formats are concerned, hypermarkets, supermarkets and discount stores gained prominence. In fact, it won't be wrong to say that 2006 was the year for FMCG retailing. And, as analysts predict, FMCG retailing is here not only to stay, but also to lead from the front. However, in the category, it is discount retailing that has gained immense importance, where Subhiksha seems to have beaten others in the race.

Rural retailing

Rural retailing also gained momentum with Godrej growing stronger through its Adhaar initiative. Clearly, with 70 per cent of the 1,095-million-strong population in rural areas, mainly consisting of farmers, retailers have realised that this is the fastest way forward - be it ITC's e-Choupal initiative or DCM Consolidated's Hariyali Stores. Reliance's retail venture too is targeting this segment and has plans to spend a large part of its Rs 550-crore investment here.

As is evident, with Wal-Mart already making its way here and others such as the French Carrefour and the English Tesco waiting in the wings to enter the country's booming $350-billion retail industry, technology is of paramount importance.

Thus, the industry this year was seen in keen discussions with technology providers such as Oracle to not only make the billing process easier but also to use technology to make storage a better proposition by avoiding in-house fraud, which amounts to nearly $1.2 billion every year according to a PricewaterhouseCooper estimate.

With the industry maintaining a 30 per cent year-on-year growth rate, it is estimated that it will cross the $650-billion mark by 2011, with an already estimated investment of around $421 billion slated for the next four years.