The Hindu Business Line : Retailers to move beyond metros: E&Y study

Value retailing and tier II cities will have the country's retail cash registers ringing in the coming years. The Great Indian Retail Story, an Ernst & Young report on the retail sector says that with increasing awareness levels in tier II cities, retailers will move beyond metros.

The hypermarket route will emerge as the most preferred format for international retailers stepping into the country. At present, there are 50 hypermarkets operated by four to five large retailers and the country's 67 cities with populations of half-a-million or more have the potential to absorb many more hypermarkets in the next four to five years, says the report.

Highest penetration

The organised retail penetration (ORP) is highest in footwear (22 per cent) and clothing categories (12 per cent). Though food and grocery contributes 41 per cent of private consumption expenditure and about 77 per cent of total retail sales, the ORP here is just about one per cent.

Foreign retailers planning to enter the country are firming up more and more franchisee relationships. The report forecasts a number of strategic partnership opportunities between Indian and international retailers. Mr Ranjan Biswas, Partner, Ernst & Young India, says, "Global retailers are gradually realising the potential of the retail sector and they are now looking to achieve breakthrough growth here."

Though the environment seems to be inviting for MNC retailers gaining an entry into the country, shortage of talent remains a challenge here. The industry is expected to create two million jobs by 2010. Talented professionals will put increased pressure on wage costs, which in turn may impact operating margins for mid-sized retailers, says the report.

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