Do You See Yourself Fitting In?<\/b><\/p>\n
\n The Indian retail market is set to be worth anything between \n US$ 270-300 bn, as per global consultants AT Kearney. The projected \n growth rate for the organised sector is 35-40% per annum for \n the next five years at least. “Overall retail is growing at \n 8-9% but the organised sector is growing much faster,” says \n Principal, AT Kearney, Debashish Mukerjee. Further, organised \n retailing is growing at 50-55% in small towns compared to 30% \n in large cities. Finance Minister P Chidambaram also recently \n put the figure on the government’s estimated figures for retail \n in the country at a staggering $ 300 bn. <\/p>\n
<\/i> The apparel retail market is about 6 % of the overall \n market – valued at $ 16-17 bn and growing at around 10-12% per \n annum. Also, apparel has among the highest percentage of organised \n retail at nearly 14%, which is second only to footwear, which \n has around 35% of organised retail. The question whether retail \n is a good option for garment exporters at this juncture is not \n as simple as it seems and many would nod in the affirmative, \n but the road is long and tedious, and requires among other things, \n the right product, a good location and more importantly, deep \n pockets, to make even a dent into the retail market. In the \n last issue, some of the exporters we spoke to, shared their \n experiences about the efforts they had made while venturing \n into retail. In this issue, we offer a few key directions from \n retail consultants and sector experts. <\/p>\n
With a huge talent pool and a potentially large domestic market, \n the prospects for retail’s expansion seem buoyant. India has \n a population of 1.2 billion of which over 50% are said to be \n under the age of 25 and constitute 29% of the country’s urban \n populace. “The number of people who are going to have an income \n of Rs 2 lakh + per annum in India may double in the next two \n years, and these are potential apparel buyers. So, it would \n be right to presume that the expenditure on apparel will increase,” \n affirms Mukherjee. <\/p>\n
Ernst & Young estimates that retail’s expansion in India \n is being driven by greater economic growth in the \n country and its changing demographics; the upsurge in urbanisation \n and greater credit availability in terms of retail loans for \n investments in new projects and ventures. “Investor interest \n in the country is on the rise, and that is a sign of things \n to come,” observes Manager, Retail and Consumer Products Sector, \n Ernst & Young, India, Soumya Pal Choudhuri. <\/p>\n
These investments have translated into hectic activity for \n setting up retail outlets and businesses in recent times. “The \n commercial property market has been growing at 30% since 2000 \n and there is a demand for 200 million sq ft of commercial space \n by the year 2010. Retail rentals have gone up by 70% in the \n last one year and the opening up of retail for FDI has further \n pushed up prices,” says an industry watcher. He adds that nearly \n 340 new shopping malls are expected to come into operation by \n 2008 against 105 now, in Mumbai, Delhi, Bangalore and their \n suburbs, and that nearly 725 malls are being planned all over \n India. These figures further accentuate the potential for a \n retail blitzkrieg in the country. <\/p>\n
Existing indigenous retail giants, Pantaloon and Shoppers’ \n Stop are focusing on re-formatting their business. International \n players are also looking to capitalise and leave their imprints \n on the Indian landscape. US-based company Wal-Mart has already \n tied up with the Bharti Group and is establishing its position \n in the country. The Bharti Group is expected to invest $ 2.5 \n bn by the year 2015 to open a chain of hypermarkets, supermarkets \n and convenience stores across the country. And, the Dubai-based \n Landmark Group is revitalizing and expanding its operations \n with its Max Retail Lifestyle stores, which are targeted to \n touch 100 in number by 2011. <\/p>\n
“Activity is high in the top 12-15 \n cities in the country and in some of the mini metros but the \n market is stirring in smaller cities as well,” says Devangshu \n Dutta, CEO, Third Eyesight, a consultancy firm focused on retail \n and the consumer products sectors. Dutta notes that mid-to-high \n level brands are focusing on value and in big cities while smaller \n entrants have experimented with volumes in smaller cities, where \n they have tried to convert the rural buyer to shift from local \n tailored clothing to ready-to-wear. “Demand is growing substantially \n in these small cities and towns for apparel and particularly, \n in the ready-to-wear segment,” he points out. <\/p>\n
Dutta believes that the many segments \n of apparel retail are growing at different rates altogether. \n “Some segments are growing at 25-30%. Yet others like ladies \n western wear could be growing at 50-70% per annum and innerwear \n could be growing at 4-5%,” he says. “But if we \n take the size of the apparel retail market at $ 25 bn today \n and say that it is growing at 10-15%, I see it touching $ 28 \n bn by 2008,” he adds. <\/p>\n
To him, the growth of retail is \n very organic – adding one customer and one store at a time. \n “Retail is not only driven by financial power; the venture has \n to be continuously relevant to the customer. There really is \n no one template that you can follow as a retail business model \n or strategy,” he asserts. <\/p>\n
Dutta is quick to point out that \n to enter the retail hemisphere, exporters must maintain a holistic \n approach to the venture. “They must take operational lessons \n to make a successful foray into retail rather than go for strategic \n ones,” he says. “I may even compare retail to the hospitality \n sector where the quality of service and the product offered \n is the discerning factor for success,” he adds. This could \n mean taking a close look at product segments, zeroing-in \n on the targeted clientele, selecting a network of perfect locations \n and deciding their marketing techniques. <\/p>\n
The idea, therefore, is to find your niche and then make a \n well-heeled entry into that area. “There are primarily 3-4 core \n layers where you can fit in,” says Choudhuri. The super premium \n segment is limited to stores in the top 3-4 metros. It has a \n select loyal clientele and Choudhuri believes that there is \n tremendous growth in this segment as it has a skilled work force, \n and high-level brand recognition and protection. And, with luxury \n malls coming up, one will see players having ‘top class’ products \n roll out some really high-end offerings. <\/p>\n
Then, there is the premium segment, which currently has international \n brands like Levi’s and Tommy Hilfiger. “This segment will grow \n as it is already witnessing a growth in organised retail with \n the number of malls growing by the day and the ever-increasing \n footfalls, which are healthy indicators. Players in this segment \n will partner aggressively with their Indian collaborators as \n a part of their strategies,” he adds. <\/p>\n
“The trends as I see them,” says Mukherjee, “are large retailers \n launching private labels and their own brands and selling high-end \n stuff.” For example, Shopper’s Stop selling an Arrow shirt \n where its margin could be 10% vis-à-vis selling its own \n shirt at a margin of 25%. Therefore, a good retail strategy \n would be for a player to launch a private label of good quality, \n offering a value-for-money proposition in terms of the product. \n “A private label being sold instead of a branded shirt for a \n little less may do even better,” he suggests. Garment \n exporters could see retail growth in this segment, as large \n retailers will be looking out for quality manufacturers. \n <\/p>\n
Consultants also have some suggestions for the sector and \n a note of caution to new entrants. “The Indian textile and apparel \n industry is the cornerstone of the Indian economy,” says Choudhuri. \n “But it has to re-organise itself, achieve the desired levels \n of scale, become competitive on cost, reach higher production \n levels, become technology savvy, create big companies \n and become exclusive suppliers to its clients. Apparel players \n should anticipate the pressures and challenges and prepare measures. \n Production and design systems, and integration and \n corporate governance are also needed to attract big investments. \n It is only when all these factors converge will the results \n start showing,” he concludes. <\/p>\n","protected":false},"excerpt":{"rendered":"
Do You See Yourself Fitting In? The Indian retail market is set to be worth anything between US$ 270-300 bn, as per global consultants AT Kearney. The projected growth rate for the organised sector is 35-40% per annum for the next five years at least. “Overall retail is growing at 8-9% but the organised sector […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"content-type":"","footnotes":""},"categories":[3,1],"tags":[],"class_list":["post-2303","post","type-post","status-publish","format-standard","hentry","category-press-quotes","category-uncategorized"],"yoast_head":"\n