101 Markets 2008: Re-tale in smaller towns

By , agencyfaqs!, Mumbai | In Marketing | March 20, 2008
With lower set-up and manpower costs, retail can be a high profitable business in the smaller towns of the country. Ernst & Young presented several such insights about small towns

India is & #BANNER1 & # the eighth largest retail market in the world, valued at Rs 12,000 billion, with more than 12 million retail outlets. But Indian retail space per capita is the lowest in the world at two square feet per person and with around 96 per cent of the outlets smaller than 500 square feet each. Though there is immense potential in this market, Chanpreet Arora, manager, media and entertainment, retail, Ernst & Young, said India hasn't done very well in organised retail. Arora was speaking at 101 Markets: India beyond the Metros, a day long seminar organised by agencyfaqs!

However, there is good news. The retail revolution that is taking place in the smaller towns of the country could soon rewrite the story. Organised retail is all set to grow at a rate of 42 per cent in the next three-four years; it is expected to garner 15 per cent of the overall retail space and to be valued at Rs 18,120 billion. This will be possible because of influencers such as low penetration, favourable demographics, steady economic growth, easy availability of credit cards and huge real estate development. Of all the retail segments, food and grocery and apparel are expected to dominate organised retail, with a share of around 28 per cent each.

Chanpreet Arora
Talking about the gradual evolution that is expected to take place in India's retail landscape, Arora highlighted the pattern followed by the US, which moved from city centres to shopping malls, modern air conditioned store formats to regional and mega malls and theme centres to entertainment and food courts to the much evolved lifestyle centres. She compared this to India's retail evolution, which moved from weekly markets/ village fairs to kirana stores to cooperative stores to hypermarkets/ supermarkets and shopping malls. However, organised retail has been limited thus far to Tier 1 and 2 cities, which together account for 52 per cent of the total urban disposable income.

So, what really is coming in the way of organised retail? Arora listed the key reasons that could be obstructing its growth: unavailability of low cost real estate, lengthy procedures due to multiple legislative laws, diverse customer preferences, unorganised manufacturing, and unavailability and high cost of trained manpower. Despite these obstructions, the smaller towns pose a favourable market for organised retail. There is increased ability and willingness to spend, improved connectivity, high reach of local media such as television, radio, print and even new media leading to better awareness, and there is a desire to emulate their metro counterparts. Arora named a few emerging retail hot spots in the country, Indore, Nashik, Amritsar, Goa and Kanpur, from among the 40 markets that will be the next destinations for retailers.

It's a fact that many retail giants such as Big Bazaar, Subhiksha, Reliance Fresh and Vishal Mega Mart have already moved into these markets. Jewellery brands such as D'damas and Kiah are penetrating Tier 2 and3 cities either through the franchise model or through collaborations with local retailers. The mantra for retail format owners to acquire a sizeable market share will be to implement consistency in quality of products and services, customisation of products and services, ambience and consumer experience management, appropriate product pricing, and supply chain management.

The event was sponsored by STAR Majha, UTVi and Dainik Bhaskar.