The Hindu Business Line : `Share of modern retail will grow to 15-20 pc in 10 yrs'

THE first decade of modern retail in India has been characterised by modern retail driving a shift from traditional channels to new formats, including department stores, hypermarkets, supermarkets and specialty stores across a range of categories.

Modern retail formats have mushroomed in the metros and mini-metros, and over the last few years have also begun to establish a presence in the second-rung cities, exposing the people ofthese cities to shopping options they have never experienced before. It is forecast that the share of modern retail shall grow from about 2 per cent currently, to 15-20 per cent over the next decade."

This was announced by Mr Kishore Biyani, co-Chairman, CII National Committee on Retail and Managing Director, Pantaloon Retail (India) Ltd, and Ms Chanda Kochhar, Executive Director, ICICI Bank Ltd, at a press conference.

"With GDP growth averaging 6-7 per cent predicted for the next few decades, and private consumption comprising about two-thirds of GDP, it is imperative that consumption grows rapidly to support the growth forecast for the economy.

"In the absence of a healthy growth in private consumption, economic growth will not result in substantial improvement in the quality of life. The development of the retail industry is a key factor influencing the promotion of consumption," said the CII in a background paper.

The next 2-3 years shall witness at least two Indian retail businesses attaining the magic figure of Rs 1,000 crore in sales. Several others shall also attain critical mass, beyond which growth shall be driven by the multiplier effect as rapid rollout progresses in tandem with new customer acquisition and increased spend capture.

The rapid rollout shall be enabled by two key developments, which have occurred over the last few years:

First, the availability of quality retail real estate and modern mall management practices shall remove a key obstacle, which has hindered the growth of modern retailers over the past decade. With over 300 mall projects currently under way across the country, retailers will have options to select projects which best support their proposition and India shall witness the emergence of specialty malls e.g. home improvement malls, electronics and technology malls etc., which address specific consumer communities. Consumers shall shop at malls for over 50-60 per cent of their shopping basket, as opposed to the 20-25 per cent of the shopping basket that these malls address today.

Second, the consumer preference for shopping at modern formats, which is already manifest in the larger cities, shall spread to the smaller cities as these formats take root in these cities over the next 2-3 years. With consumers seeking increasing choice, convenience, value for money, and improved shopping experience, these consumers shall adopt modern formats, which provide all of these benefits.

The challenge for the leading retailers shall, therefore, shift from diverting demand from traditional retail, to creating demand. With all that modern stores offer in terms of assortment, ambience, service and innovative products, the paradigm shall shift from competing with the kirana, to growth through demand creation.

In this context, how retailers manage demand growth through introduction of new categories to induce trial and adoption, value-added products, which improve quality of life, and innovative pricing to enhance affordability for the masses, shall be a crucial determinant of success.

Retail India 2004, being organised by the CII on September 29-30 at the Grand Hyatt, Mumbai, will focus on enabling this shift by equipping retailers with insights on the Indian consumer and strategies for demand creation.

Relevant experiences from consumer goods companies, which have successfully crafted an explosion in demand in their sectors, through innovative, consumer driven strategies, will be showcased. Also, retail experts will provide their perspectives to enable a quantum change in the development of Modern retailing in India.

The conference and exposition would have participation from 500 delegates and 50 exhibitors. Several international speakers from the US, Singapore and Malaysia would address the conference.