India Infoline News Service / Mumbai Jan 16, 2009 12:17
The total retailing size in India is currently estimated at US$16bn of which organised sector accounts for only 25% market share and remaining 75% is in the unorganised sector
Sajjan Jindal ,President of ASSOCHAM
The size of Organised Retail in India will exceed US$22bn mark from current level of about US$4bn with its space requirement touching over 220mn sq. ft., by 2010, according to The Associated Chambers of Commerce and Industry of India (ASSOCHAM). In a Paper brought out by ASSOCHAM on `Retail Scenario in India and Its Related Issues’, it has been stated that approx. 40mn sq. ft. is currently generating a business of about US$4bn in organised retail.
According to the Paper, the total retailing size in India is currently estimated at US$16bn of which organised sector accounts for only 25% market share and remaining 75% is in the unorganised sector. Slowly and gradually, with boom in retailing continuing, the organised retail sector in small towns beyond metros will grow at a staggering level of 50-60% as compared to less than 35% in the large cities purely on account of scarcity of space which is in plenty beyond metros with reasonable land prices and without cumbersome procedure for land acquisitions, says the Paper.
Commenting on the Paper, ASSOCHAM President, Sajjan Jindal said that, “India’s vast middle-class and its almost untapped retail industry are key attractions for global retail giants wanting to enter newer markets and India provides for the ideal locations”. Since, Delhi and its suburbs have so far seen the growth of 100 bigger and smaller malls, roughly 600 new malls are coming up in other metropolis and large townships in which less than 35% of retail business is going to be transacted.
The Paper reveals that over 1000 malls are in the pipelines for smaller townships in which the retail sector is projected to grow at over 60% because of ample availability of land and increased purchasing power of the folks living in those areas because of increased economic activities. Naturally, the large players will prefer to go there and put up their shops by sourcing their supplies from the places convenient to them, further states the Paper.
Some of the key areas in which retail boom will prevail in towns beyond metros and even large cities will include food items, FMCG products, grocery, sportswear, outerwear, tailored clothing, eyewear, watches, footwear and accessories and the like. The retail business that will pre-dominantly stay with malls put up in metros and large cities will include apparel, pharmaceuticals, luxury goods and consumer durables, says the Paper.
The Paper has suggested that changes should be brought about in Agricultural Produce Marketing Committee (APMC) Act (a key contributor to the large number of intermediaries) such as the introduction of contract farming and allowing direct procurement from farmers by retail owners so that a direct chain is established between the user and farmers for their equal benefits. It also highlights, pointing out that even in the case of non-agricultural products such as apparel, FMCG and general merchandise, the situation is far from ideal.
The key cause for inefficiency is the poor integration between the retailer and supplier. None of the retailers, in view of ASSOCHAM has so far an automated system for information exchange with their suppliers. In developed countries, retailers practice Vendor Management Inventory (VMI) systems, where the supplier has access to the point of sales data of the retailer and plans automatic replenishments responding to the stocks available at the retailer.
On the other hand, best practice retailers globally have implemented techniques like milk runs – having continuous orders to suppliers as the inventory depletes and doing multiple small lot shipments from the supplier to stores. Such efficient replenishment practices are today practiced in the Indian auto and auto component industry. So retailers in India can leverage such expertise available to implement a better retail supply chain.