Changing demographic profiles, increasing income levels, changing lifestyles, urbanisation, technological advancements and liberalisation and globalisation have brought about a dramatic change in consumers aspirations choices, preferences and tastes as well.
In this scenario when the population is ageing that is 50 per cent is less than 50 years old, it encourages production, consumption and innovation, but retailers too have to keep pace with it. As a consequence of the information, communication technologies, the customers in India are demanding international shopping experience. It suggests that future of retailing in India is very bright.
At present, India is one of the top five global destinations for retail investment, which provides employment opportunities to more than 21 million people. It contributes 13 per cent of the nation’s GDR Moving from metro cities to mini-metro cities; the retail sector is penetrating into the smaller towns and cities.
Besides consumer durables, footwear, stationary and electronic goods, fashion goods like textiles and jewellery are some of the key thrust areas of retail business. The latest one to enter the list is the food and grocery retail which has suddenly caught the investor’s imagination.
This is due to the fact that the share of food and grocery currently account for as much as 60 per cent of estimated $ 350 billion Indian retail market. India’s food sector is set to expand largely in coming years.
The future of retailing in India is very attractive. It presents great opportunity for international corporate giants like Wal-Mart or Pesco which can carry on business activities with the help of their wide network of retail stores.
India’s progress in the field of retail sector has been so rapid that it has been ranked for the fourth year in 2008 in the Global Retail Development index (GRDI) as the most attractive market for global retailers to come and start their business.
Retail sector in India is expected to grow at 35 per cent for the next few years because of investments that are pouring into this sector and big corporate giants. It is estimated that the organised retail market will be 20 per cent of the total retailing by 2008.
The growing Indian middle class with its rising consumption is the driving force behind the growth of retail sector in India. The middle class population is around 480 million with monthly household income ranging from $ 150 to $1000.
The consumption pattern of this class of society is likely to change in near future as sixty per cent of the population today is below the age of thirty which means that a young working population will not only drive productivity but is also set to cause significant change in consumption and income generation.
The average household income in urban areas has grown at a five per cent rate over the last decade. This reflects the growth in purchasing power which in a way has a crucial bearing on the growth of retail business in India.
India’s food sector is set to make a boom in an age of retail business. Since India is the world’s third largest producer of food with an annual output of 600 million tonnes, world’s largest milk producer, second largest in rice, wheat and sugar and third largest in cotton, retail sector has the potentiality to ensure profitability of even small farmers. For bulk supply to retailers, aggregation of production from small holdings will help cut a part of these losses which are caused due to inadequate post-harvest facilities.
Besides, demand for food products continues to rise and mall culture is also flourishing, the future of food sector is very shine. Not only in big cities are malls mushrooming even in smaller cities and towns.
Space no longer remains a constraint for the retail business, because real estate business has been flourishing for the last 10 years or so. A couple of years ago, the multi-outlet food and grocery retail chains were confined to only southern parts of the country but today they can be seen everywhere even in smaller towns.
The entry of big corporate giants like Aditya Birla, Tata, Reliance, ITC, Bharti and Godrej into this sector has revolutionised the retail business in India.
A large number of retail stores are being opened in different cities. Initial trend in encouraging. Consumers’ support and response are satisfactory which a good sign for this business is. Experts hold the view that organised food retail may expand to as much as 10 per cent of the total food.
The performance of the retail sector in India has been attributed to several sectors which include better delivery models, selection of proper location, pricing policy, etc.
The size of the organized and modern retailing industry put together is around $29 billion and is predicted to see significant growth in next few years. However, it has to make big efforts to break the dominance of Kirana stores in the neighbourhood.
Government is also formulating policies that may contribute to the growth of retailing in India. Like various sectors of economy, retailing is also being seen as a prospective area for FDI. It is promoting FDI in this sector to facilitate retail growth.
Some global giants like Wal-Mart are making tie-up with the Indian corporate players to set their foot here. India displaced Russia to take the first position in 2006 Global Retail Development Index which is a measure of retail investment attractiveness among 30 emerging markets across the globe. This indicates that India is the most favoured destination in terms of investments into the retail sector.
However, there are certain constraints for the growth of retail sector in India. Storage is the biggest challenge. Keeping the size of the country and farm output, warehousing facilities are totally inadequate.
Transportation is another major challenge which needs proper attention. In addition, inefficient, inexpensive and specific movement including state” of the art equipment for proper handling of the products, cold storages and other such infrastructural facilities are big challenges before the retail sector in India.
In brief, the retail sector in India has immense potentiality which needs to be exploited with efficient strategy, planning and implementation. It has the potential to turn into a win-win situation for all those involved growers, aggregators, processors, retailers and consumers. But it needs to be carried on with social responsibility.