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Retail Business Environment

Notes And this trend, although it started in the metros, is fast fanning out to the ‘hinterlands’! Large
format stores have been springing up in smaller towns like Amritsar, Bhubaneshwar, and
Chandigarh. ‘Small towners’ are increasingly savvy and flock to these organized retail outlets
wanting an enhanced buying experience.
While today’s consumers are well-read, well-travelled, and exposed to international trends, the
retailers themselves face a dearth of knowledge of international retail trends and styles. Much as
they might want to match (or even surpass) international standards, they simply do not have
access to retail fixtures of international quality.
India retail industry is the largest industry in India, with an employment of around 8% and
contributing to over 10% of the country’s GDP. Retail industry in India is expected to rise 25%
yearly being driven by strong income growth, changing lifestyles, and favorable demographic
patterns.
It is expected that by 2016 modern retail industry in India will be worth US$ 175-200 billion.
India retail industry is one of the fastest growing industries with revenue expected in 2007 to
amount US$ 320 billion and is increasing at a rate of 5% yearly. A further increase of 7-8% is
expected in the industry of retail in India by growth in consumerism in urban areas, rising
incomes, and a steep rise in rural consumption. It has further been predicted that the retailing
industry in India will amount to US$ 21.5 billion by 2010 from the current size of US$ 7.5 billion.

Shopping in India has witnessed a revolution with the change in the consumer buying behavior
and the whole format of shopping also altering. Industry of retail in India which have become
modern can be seen from the fact that there are multi-stored malls, huge shopping centers, and
sprawling complexes which offer food, shopping, and entertainment all under the same roof.
India retail industry is expanding itself most aggressively, as a result a great demand for real
estate is being created. Indian retailers preferred means of expansion is to expand to other
regions and to increase the number of their outlets in a city. It is expected that by 2010, India may
have 600 new shopping centers.
In the Indian retailing industry, food is the most dominating sector and is growing at a rate of
9% annually. The branded food industry is trying to enter the India retail industry and convert
Indian consumers to branded food. Since at present 60% of the Indian grocery basket consists of
non-branded items.
Indian retail industry is progressing well and for this to continue retailers as well as the Indian
government will have to make a combined effort.

While the Indian real estate markets boom with organized retailing, the segment ensures a
fluffy growth pad for itself. According to the estimations of KSA-Technopark, a retail consulting
and research firm, organized retailing in India will grow three-fold in the next 3-years, achieving
the size of USD 21.5 billion from the current one of USD 7.5 billion.
Given the favourable growth patterns, expanding middle class and easing economic policies,
India is ranked as the most attractive emerging markets for retail investment, even above
Russia and China.

The growth story of Indian retail sector is based primarily on its huge middle class. According
to a study undertaken by the National Council for Applied Economic Research (NCAER) “The
Growing Indian Middle Class”, the upper middle and high-income urban households in India
will touch 3.8 crore by 2007 (from 1.46 crore in 2000).
The sheer size of its upbeat middle class market makes India a happening market place for retail
players. Besides the number advantage, the purchasing power of Indian middle class is also
growing substantially with a year-on-year growth rate of 5 percent in its household income.

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