Warc Blog

Organised retail expands in India

12 February 2014
NEW DELHI: The overall retail market in India is increasing at 15% a year with organised retail growing even faster and expected to take a 10% share within the next couple of years, a new report has said.

A study from the Associated Chambers of Commerce and Industry of India (ASSOCHAM) and Yes Bank said that the retail market would double in value between 2011-12 and 2016-17, by when it would be worth Rs 47 lakh crore.

Over the same period the share of organised retail was expected to grow from 7% to 10.2%.

"Both organised and unorganised retail are bound not only to coexist but also achieve rapid and sustained growth in the coming years," said D.S. Rawat, secretary general of ASSOCHAM, adding that rising incomes would be the primary driver of this progress.

The study predicted that store-based retailing would achieve a compound annual growth rate (CAGR) of 7.6% over the 2011-16 period, with grocery retailers moving ahead faster than non-grocery (8.9% vs 6%).

Among traditional grocery retailers, kirana stores – small neighbourhood shops – would continue to be the major outlet in sales terms, accounting for 61% of the value share. But these were set to grow at just 8.2% CAGR over 2011-16.

By contrast, and of more interest to international brands, modern grocery retailers were predicted to grow at 11.7% CAGR, while hypermarkets came in at 13.4% CAGR.

As well as rising incomes, Rawat pointed to other factors on the demand side, including favourable demographics, increasing urbanisation, the "nuclearisation" of families and a growing preference for branded products, that would drive retail consumption.

On the supply side, the study observed the expansion plans of existing players and the entry of new ones. UK supermarket Tesco, for example, recently became the first international retailer to apply to open multi-brand stores in India.

But Rawat highlighted some of the difficulties of ensuring supply on a nationwide basis, including the absence of skilled manpower, the numerous clearances required to set up a retail outlet, a lack of basic infrastructure like roads, power and water, all of which could hamper the growth of the retail sector.

He also wanted to see a uniform licence regime nationwide that did away with the numerous permits currently required for the establishment of retail outlets.

Data sourced from ASSOCHAM; additional content by Warc staff

 
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