The Hindu Business Line : The retail rush

Growing income levels, meanwhile, have caught the attention of luxury retailers with players such as Hugo Boss, Louis Vuitton and Chanel already present in the country. Others waiting to enter India include Gucci and Giorgio Armani, which will open four stores in Mumbai and Delhi by 2008.

Indian consumers today are unapologetic about lavishing luxuries on themselves.

The Indian retail scenario is poised for a quantum leap. Not only are newer names set to dot the retail landscape but new and emerging retail formats will drive the diversity of the fast-changing retail backdrop.

According to estimates, a staggering $412 billion will flow in as investment into the Indian retail sector by 2011 as rapid economic growth, increasing disposable incomes and lavish lifestyle habits would see the format expand exponentially, a study by PricewaterhouseCoopers (PwC) finds. PwC states that a growing population, a youthful workforce and soaring consumer confidence are "solid arguments for long-term growth in India."

The majority of the investment in retail will be directed toward the two most popular retail formats: hypermarkets and supermarkets, PwC says in the fifth edition of its annual study `From Sao Paulo to Shanghai - New Consumer Dynamics: The Impact on Modern Retailing.'

Half of the investment could be directed to food-related retail and the remaining would be allocated to non-food retail, the study said.

Although independently-owned local grocery stores are still the most prevalent format, larger supermarkets and convenience chains are emerging in organised food retailing, the study finds. Organised food retailing in India is worth $666 million and will increase to $33,333 million by 2015. The sector is estimated to grow at 30 per cent annually.

Among the retail formats, hypermarkets are expected to fuel retail growth as food and grocery stores account for 76 per cent of consumer expenditure. Examples include Pantaloon's Big Bazaar, which is planning to triple total retail area by financial year 2008 to 6.5 million sq. ft., as wll as Spencer and Trent's Star India Bazaar which will have 17 stores by then. Further, new entrants such as Reliance, Bharti Enterprises and the AV Birla Group will compete against the well-established retailers.

Another popular format is supermarkets which are frequented by consumers who prefer convenience, quality and hygienic surroundings. Pantaloon Retail's Food Bazaar is the largest supermarket operator in India in terms of value.

An emerging retail concept is discount stores providing 8-10 per cent on MRP (maximum retail price). Subhiksha is the largest discount store operator at present with 160 stores and a turnover of about $64 million in 2005.

Interestingly, with an initial investment of $750 million, Reliance is planning to be present in almost all the retail segments and will launch a nationwide chain of hypermarkets, supermarkets, discount stores, department stores, convenience stores and speciality stores. These 5,500 stores will be located in 800 cities and towns in India.

Where retail is set to see a fair amount of action is rural India. Estimated at $28.6 billion, India's rural retail market is an attractive one for retailers.

Companies such as Godrej and DCM Shriram Consolidated are launching `one-stop shops' for farmers and their communities. Godrej Agrovet, for instance, is planning to set up 1,000 Aadhar stores across rural India by 2010. DCM Shriram plans to set up 35 rural/semi-urban utility marts over 2006-07.

Positioned as a one-stop shop, the Hariyali Kisaan Bazaar Chain will cater to a variety of farmers' needs by providing access to retail banking, LPG outlets and even a motorcycle showroom.

Speciality retailers are also coming up fast, offering niche products in alternative medicine, books, clothing, home furnishing, music, jewellery, alcohol and watches.

Tata Sons most recently tied up with Australian retail giant Woolworths to open a chain of consumer electronics stores across the country. Other players present in the speciality retail segment are Home Stores, Vivek's, Orra and Crossword.

Emerging players include Home Town, the flagship delivery format of Home Solutions Retail India (a subsidiary of Pantaloon), which is planning to open six outlets by 2007. International players entering the home furnishing sector include Index Living Mall Company which has signed an agreement to open a franchise in India next year.

According to the study, with the growth of middle-class families, home textiles and electronics/consumer durables are increasingly becoming a means to demonstrate prosperity while at the same time creating a comfortable home environment. Finally, credit friendliness, drop in interest rates and easy availability of finance have changed mindsets in this segment. Capital expenditure such as jewellery, houses and cars is now being redefined as consumer revenue expenditure. The number of credit cards issued has grown at a compounded annual growth rate (CAGR) of 26 per cent in the last five years to touch 15.5 million by March 2005, the study finds. Department stores are also on an expansion spree with almost all major brands including Shoppers' Stop, Westside and Globus drawing up aggressive plans to open more outlets.

According to the study, Indian consumer lifestyles and shopping habits are evolving rapidly. Discretionary spending witnessed a 16 per cent increase for the urban upper and middle classes. There is an easier acceptance of luxury and an increased willingness to experiment with mainstream fashion. Expenditure on personal care items and clothing has increased since there is greater emphasis on `looking and feeling good.'

Lifestyle habits are shifting from austerity to complete self-indulgence and Indians are now unapologetic about spending lavishly on non-essential goods such as luxury watches, cars, and hi-tech products.

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