Exciting times ahead for modern retail!

shopperClustered opening of eleven “Reliance Fresh” stores in Hyderabad on 3rd November, 2006, has injected a fresh dose of excitement in the Indian retail industry. Every one, who is some one, in the Indian industry is busy finalising retail plans. One is reminded of the situation the nineties, when almost every one in the industry wanted to own either a Bank or an NBFC.

While, likes of Tatas (Infiniti Retail and Trent), Ambanis (Fresh and Fresh Plus), Goenkas (Spencer’s), ITC (Chaupal Sagar), Biyanis (Pantaloon and Big Bazaar), Rahejas (Shoppers’ Stop), Piramals (Pyramid) and not to forget old warriors like Bata, Raymond, Arvind and Titan, have already come on the modern retail scene, likes of Birlas (Aditya), Bharatis (Sunil Mittal), Essar (Ruias), and Ambanis (Anil) are busy sharpening their strategies to enter this booming sector with a massive dose of men, money, materials and marketing.

Global majors like Wal-Mart, Carrefour and Tesco are also waiting in the wings to unvail their plans. Depending on the policy guidelines, which are likely to be revised soon, they will set shop either alone or in alliance with local partners. Bharati may any time announce its alliance with Wal-Mart or Tesco. Besides, deep pockets, these MNC players will bring knowledge and experience of logistics, systems and supply chain, with them.

The excitement associated with the retail industry has already set real estate prices on the fire. Just to cite an example, Khan Market in Delhi, has earned the distinction of not only being the most expensive retail space in the country but has also become the 24th most expensive retail destination in the world. It commands an average monthly rental of Rs. 700 per sq. ft. Even, old premium shopping areas of Connaught Place and South Extension in Delhi have notched up retail rental growths of more than 100%, in a single year. The story is same across the country.

This, no wonder has led to rise in the construction activity as never before. According to expert estimates, over 110 million square feet of space will become available across the country by 2008. Next two years will see more than 200 malls operating across the country, against about 40 malls in operation today. To cite an example of the quantum and scale, the biggest of the upcoming malls “Citi Center” in Noida will have 5 million square feet of space, while eastern suburbs of Mumbai will have three malls, with more than 1 million square feet of space each.

What is interesting, however, is the fact that tier II and tier III cities have started participating in this boom. Towns like Kanpur, Nashik, Vadodara, Indore, Nagpur, Kochi, Mysore, Vizag and Madurai have also become part of the growth story. As reported earlier, about 134 projects are under implementation in smaller cities.

What is baffling everyone, however, is the pace at which the new retail projects are being rolled out. Subhiksha, plans to double its tally of 350 odd stores to 700 in four months flat. If the reports are to be believed, Essar, will launch 2,500 mobile outlets in just two years. Reliance Retail took exactly 9 months and 10 day to roll out its first cluster of 11 “Reliance Fresh” stores from the date of announcing its decision to foray in the retail business. The second cluster of 27 stores is likely to be rolled out in less than a month.

Retail consultancy, KSA Technopak estimates that top ten players in the next five years will inject US$18-20 billion of capital in the sector. Although, top 150 citiesare likely to benefit from this investment, impact of the same would be felt by by 500 or more cities across the country.

Although, modern retail currently accounts for only around 3% of the US$ 300 billion retail industry, according to Morgan Stanley it would increase to US$ 60 billion by 2015. Modern retail is growing at an annual growth rate of around 30%.

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