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The last few years have seen something akin to a retail revolution in the country. Retailers have started looking at new business formats, business planning and expansion. Shop owners are now more attuned to a chain of stores offering different brands and
The last few years have seen something akin to a retail revolution in the country. Retailers have started looking at new business formats, business planning and expansion. Shop owners are now more attuned to a chain of stores offering different brands and are changing their loyalties to MNC brands, which seem more lucrative than the traditional ones. The coming years would see a number of shopping centres being set up with different trade mix in the country.
The advent of organised retailing in India has seen the emergence of supermarkets, huge department stores and shopping malls. Many Indian corporates have entered the retail industry, opening new stores at vantage points in major and small towns across the country, while upgrading their marketing and selling concepts. Companies are now using the franchise route to expansion and franchisees are not only retailing exclusive products but also displaying accessories to match.
In the last couple of years the retail industry has made a significant shift from its nascent stages. Organised retailing has picked up in south India. Recession has brought property prices down and big business houses have noticed the potential of retailing.
The urban market
The urban population is a major consumer of all goods ranging from FMCG to durables, and of late it is shifting to popular brands, especially to those having Western identity. This demand has led to many Indian companies imitating Western brands to flood the markets. The entry of international players has set the ball rolling for an explosive growth in the industry. The customer is now exposed to shopping as an `experience`. He is now being offered a plethora of international brands at competitive prices. Moreover he is being pampered as never before with visual merchandising and comfort shopping. On his part, the customer has started spending more and demanding more from the retailers.
The rural bazaar
The next big target market is the rural bazaar consisting of a vast potential of consumers who account for 70 per cent of the Indian population. This market is already exposed to the urban consumer baazar through direct access and proximity to major cities and small towns.
Estimates have it that the rural market is growing twice as fast as its urban counterpart, meaning that market accessibility of the rural low income group is rising. As such, the rural market cannot be ignored and must be seen as a strong consumer base.
Key issues concerning the market
Indian retailing market is facing several challenges in the new millennium.
Availability and price of real estate: Real estate rate in India is one of the highest in the world. However, prices are moving downward after the decision to repeal the Urban Land Ceiling Act.
Infrastructure: Infrastructure connecting shopping centres with catchment areas is poor. By international standards a consumer should take 20 minutes to reach the centre.
Supply chain management: Poor supply chain management and logistics have eroded the margins in the business.
Bank loans: Banks till a few years ago did not lend money for retailing and therefore professionals could not venture into this business.
Undertrained staff: Employee turnover in this business has been very high and the shortage of trained professionals only adds to the problem.
Future of the industry
Although it remains fragmented and accounts for less than 5 per cent of India`s total retail sales, organised retailing growth is largely due to the growing demand for better quality, wide range, and convenience in shopping. While the old model provides customers with price negotiation, shop-owner affiliation, and home delivery the new model offers variety, predictability, fixed prices, quality, knowledgeable sales advice, and convenience.
Laws governing retail real estate should be looked into so that it is possible to develop retail estate beyond city limits. Apart from providing entertainment and retail opportunities, this will decongest the city centre and facilitate the development of suburbs.
By 2005, the results will become more visible with a distinct move towards organised retail formats. And, by 2010, there is expected to be rapid acceleration towards consolidation.