The year 2006 marked the beginning of the ‘retail revolution’ through the entry of big names like Reliance with the announcement of huge investments. But what really caught the eye was Bharti Group’s announcement of its alliance with the world’s largest retail chain, Wal-Mart. Local companies and local-foreign joint ventures are expected to position themselves more advantageously than purely foreign ones in India’s nascent organized retail industry.
India has topped AT Kearney’s annual Global Retail Development Index (GRDI) for the third consecutive year, maintaining its position as the most attractive market for retail investment. The Indian retail market, one of the fastest growing industries in India, is expected to grow from US$350 billion to US$427 billion by 2010. According to Euromonitor International, the Indian retail market will grow in value terms by a total of 39.6 percent between 2006 and 2011, with an average growth of almost 7 percent per year.
India’s first true shopping mall, complete with food courts, recreational facilities and a large car parking space, opened in 1999 in Mumbai. (this mall is called “Crossroads”). The clues are very encouraging. The first steps towards sophisticated retail are being taken, and “Crossroads” is the best example of this awakening. More such malls are planned in the other big cities of India. According to an FDI Confidence Index survey by AT Kearney, the retail industry is one of the most attractive sectors for FDI (Foreign Direct Investment) in India and foreign retail chains would make a big impact.
Food Retail and Mobile Retail is growing at a high rate. Reliance Retail, a subsidiary of Mumbai-based Reliance Industries, has opened around 100 fruit and vegetable stores under the “Reliance Fresh” brand in less than a year, already investing around Rs: 2.5 billion rupees (US$ 0.637 billion!) and plans to invest around Rs: 90,000 crore ($22.99 billion) in setting up retail stores in various formats: hypermarkets, supermarkets, specialty stores, discount stores, etc. Bharti Wal-Mart is also preparing to enter this sector soon. So be on the lookout for more multi-billion dollar investments in this sector in the coming year of 2008.
Rural retail has also gained momentum with Godrej becoming stronger through his Adhaar initiative. Clearly, with 70 per cent of the population of 1.095 million people in rural areas, made up primarily of farmers, retailers have realized that this is the fastest way forward, be it ITC’s e-Choupal initiative or the Hariyali stores of DCM Consolidated. Reliance’s retail business is also targeting this segment and plans to spend a lot of money creating the market. India will continue to be the most attractive retail market for global investors.