The move was supposed to bring a rush of funds into the burgeoning retail sector.
But almost a year after the Government allowed foreign retailers to own and operate stores in India, the retail sector is yet to see any major investment. The reasons: General economic condition, an impending change in government following general elections, and concerns around FDI in sourcing, ownership and investments.
Analysts say retailers may currently be in a wait-and-watch mode, but they can hardly afford to ignore India.
The reason: Only 7 per cent of the entire retail market in India is organised. Compare this with other nations like Brazil (35 per cent), China (25 per cent) and Japan (66 per cent), where retail is a multi-billion-dollar business. Retailers know that sooner or later changing demographics will alter the retail canvas.
To be fair, several global retailers, such as Ikea and Tesco, have already made investment pitches in the country; others like Walmart did their best to negotiate a favourable policy. It was also a year that saw e-commerce grow, both in scale and reach.
Glamour quotient Convenience, coupled with variety and reach of online players, added to the glamour quotient. Shopping online became cool, as both Internet penetration and use of smartphones grew.
Domestic retailers also started consolidating their presence by “right sizing” and tweaking their stores to suit the location. Space optimisation became the buzzword to profitability.
Rachna Nath, Leader-Retail & Consumer, PwC India, noted: “We saw the retailers in 2013 go beyond just customer loyalty to creating customer experience. To be able to do this they invested in digital marketing, new technologies and analytics. This trend will continue through 2014 and retailers will invest both in the front-end and back-end to try to create a seamless experience.”
For 10 retailers listed on the BSE, net profit for the first two quarters of this fiscal reflected weakness.
Ashutosh Chakradeo, Chief Merchandiser, HyperCity Retail, said: “Post-Diwali, there was a bit of a slowdown but now we expect it to pick up again with the holiday season. Next year should be better as the elections will determine the sentiment and mood of the nation. The bigger industries will pick up and thereby fuel consumption demand, which will impact retail sales in a positive way.”
Malls and walls There was an increase of 39 per cent in fresh mall space supply in 2013 over 2012, despite the deferment of 18 malls during the period. According to a Cushman and Wakefield report, the total fresh supply of retail mall space was 4.5 million sq ft across the top eight cities. Malls launched in 2013 have witnessed an average occupancy of over 94 per cent.
Sanjay Dutt, Executive Managing Director, South Asia, Cushman & Wakefield, said: “Retail markets have started to show signs of maturity, with developers taking interest in creating value out of their projects for all stakeholders.”