Nov 21, 2007

Retailing Revolution in Mumbai

At present, retailing in India is estimated to be a US $ 230 billion industry, of which organized retailing is a mere 3 per cent. By 2010, organized retail is expected to touch US $ 30 billion with an expected growth rate of about 400 per cent. A study conducted by Fitch expects the organized retail industry to continue to grow rapidly, especially through increased levels of penetration in larger towns and metros and also as it begins to spread to smaller cities and B class towns providing a huge ‘space’ of opportunity for this sector.

Top notch cities like Mumbai, Pune and Ahmedabad are leading the way but the second tier cities like Nagpur and Surat are catching the eye of all retailers. Fuelled by changing consumption patterns, a strong economy and favourable demographics, the retail sector in the western parts of the country is witnessing a dramatic transformation. In an industry that is largely driven by consumer demand, organized players are going the extra mile to woo customers.

According to a recent study by the McKinsey Global Institute, India is poised to become the fifth largest consumer market by 2025. With the largest population of ‘young people’ in the world - over 890 million people are below 45 years of age, India is indeed a resplendent market. As a result of economic growth, household incomes have risen at a fast pace and a change in consumer mindsets has been rather drastic. Today, even middle class consumers are loosening their purse strings, thriving on loans and credit cards and are on a spending juggernaut.

Retail activity in western India is growing thick and fast. Almost all large retailers - such as the Future Group, Reliance, RPG, Lifestyle, Trent, the Rahejas, Piramyd Retail, etc. have set up shop here and have major expansion plans in place. From small towns to metros, India’s new-found obsession with malls is visible everywhere. Mumbai has a shopping mall stock of 4 million square feet, a figure that can go up to 15 million square feet by 2008-09! Reliance announced that it will invest $3.4 billion to become the country's largest modern retailer by establishing a chain of 1,575 stores by 2007.

Considering the diversity in terms of taste and preferences existing in India, the retailers are going for experimentation to identify the winning format suited to different geographies and segments. For example, the taste in the west is different from that in the north or south and this brings challenges to the retailers. Therefore, many retailers are region-centric at this point in time. The Landmark group, which has its dominance in the western region, operates multiple formats such as hypermarket (Max), departmental store (Lifestyle), Shoemart and Funcity12, etc.