With the gradual transformation in the Indian retail market, coupled with increase in consumer spending, domestic retailers are optimistic of scaling greater heights in the coming days
However, the financial crisis affected the global retailing sector including India, which witnessed demand slump leading to drop in sales, high rate of inflation and high production costs.
With expected economic growth rate of 7.2% for 2010-11 and the market being on a recovery mode, the Indian retail sector seems to be promising. AT Kearney, a global management consulting firm, has estimated that the country’s total retail market is expected to grow at a 30% CAGR over the next 5 years. It is expected that the share of modern retail segment is likely to rise from 2% to 15-20% over the next decade. It indicates that in future, the retail sector will become more organised, thereby leading to a boom in the industry.
According to industry estimates, the current size of the Indian retail industry is US$300 billion, while organised retailing segment is expected to touch US$23 billion this year. The reasons for these optimistic prospects are consistent economic growth and strong fundamentals of the Indian economy, both of which have resulted in a decent rise in the income levels of those belonging to the middle-income group and thereby elevated their purchasing power. It is this swelling pocket of middle class consumers that has revolutionised the retail industry. This phenomenon is reflected in the rising mall culture, increasing number of cineplexes and shopping chains, among others across the country.
Transformation in Indian retail industry
Today, Indian customers earn more and they are also willing to spend more. This urban middle class resides in cities, looks for value but are ready to experiment as well. Young consumers love to buy branded stuff and try new entrants in the market. That is why malls and markets are flooded with expensive and high-end brands and products.
But this is just the beginning of a boom. The Indian retail sector is still at an evolutionary stage. Although it is a big industry in India, it is highly unorganised. Despite being a vast market, it is not easy for retailing firms to survive in the Indian market. The main reasons for this being highly fragmented market, price sensitivity of Indian consumers, high initial investments as well as high land and rental costs.
In this environment, retailers need to perform their part of duties. The biggest challenge for them is to attract customers to their outlets. To lure customers they need to launch exciting offers, provide excellent customer service and ensure impressive store designing. With favourable government policies, emerging technologies and upgradation of infrastructure, the future of the Indian retail sector seems to be promising.
Monisha Gupta, president of Craft House, a premium retail brand and organisation in New Delhi |
