Size of the Modern Retail Sector

A retail revolution is sweeping through India. Organized retail, which is 5% of the whole currently, is in turn pegged to grow to Rs. 100,000 Crores by 2015. And one consequence of all those investments will be the fact that India’s present two square-feet per capita retailing space will raise 15-20% by 2010.

The emergence of new formats and the evolution of modern retail in India have attracted attention in recent years. The retail sector, currently, is said to contribute 12 per cent of India’s GDP and is expected to grow at a robust rate of 45 per cent per annum by the end of 2008 (Associated Chambers of Commerce and Industry of India, ASSOCHAM). This growth would expand the size of the market to over Rs 14, 79,000 crore from its current level of Rs 5, 88,000 crore. The Indian retail market is estimated at Rs 9,300 billion and is expected to grow at a compounded rate of 30 per cent over the next five years (Retailers Association of India). Moreover, the retail sector employs over 7 per cent (21 million) of the national workforce, the second only to agriculture. The retail density more than doubled between 1978 and 1996 and the number of outlets per 1000 people at an all India level, increased from 6.5 in 2000 to 20.5 in 2005. For the urban sector alone, the shop density increased from 12.6 per 1000 people in 1999 to 20.3 per 1000 people in 2005. Until now, Indian retailers have very little bargaining power with manufacturers, unlike in the case of retailers in developed countries.

With the growth of malls, multiplexes, and hypermarkets, the consumer is being exposed to a new kind of shopping experience and services which is quietly and surely redefining her expectations from shopping.

A look at the statistics shows that the retail sector in India is worth USD 394 billion and is growing at the rate of 30% annually. Study has found that retailing ($180 billion) contributes to 10 per cent of GDP and employs 7 per cent (21 million) of the workforce. According to AT Kearney, India is given the top ranking as the next foreign investment destination, as markets like China become increasingly saturated. India is the 4^th largest economy as regards GDP (in PPP terms) and is expected to rank 3^rd by 2010 just behind US and China¹. Over the past few years, the retail sales in India are hovering around 33-35% of GDP as compared to around 20% in the US. The table gives the picture of India’s retail trade as compared to the US and China.

The last few years witnessed immense growth by this sector, the key drivers being changing consumer profile and demographics, increase in the number of international brands available in the Indian market, economic implications of the government increasing urbanization, credit availability, and improvement in the infrastructure, increasing investments in technology and real estate building a world class shopping environment for the consumers. In order to keep pace with the increasing demand, there has been a hectic activity in terms of entry of international labels, expansion plans, and focus on technology, operations and processes. This has lead to more complex relationships involving suppliers, third party distributors and retailers, which can be dealt with the help of an efficient supply chain. A proper supply chain will help meet the competition head-on, manage stock availability; supplier relations, new value-added services, cost cutting and most importantly reduce the wastage levels in fresh produce.