India’s vast middle class and its almost untapped retail industry are key attractions for global retail giants wanting to enter newer markets.

The organised retail sector is expected to grow stronger than GDP growth in the next five years driven by changing lifestyles, strong income growth and favourable demographic patterns, a KPMG report titled ‘Consumer Markets in India: the next big thing?’ said.

The structure of retailing is developing rapidly with shopping malls becoming increasingly common in large cities, and development plans being projected at 150 new shopping malls by 2008.

According to the report, the annual growth of department stores has been estimated at 24 per cent, which is faster than overall retail; and supermarkets have taken an increased share of general food and grocery trade over the last two decades.

Disposable incomes remain concentrated in urban areas, “well-off” and affluent classes and the growing number of double-income households. However, the report reveals that the sheer size and potential of the rural segment has been underestimated.

Rated the fifth most attractive emerging retail market, India is being seen as a potential goldmine. It has been ranked second in a Global Retail Development Index of 30 developing countries drawn up by AT Kearney. The list was developed as a response to requests from retail chains facing saturated demand in most western markets.

 

• AT Kearney has estimated India’s total retail market at US$ 202.6 billion which is expected to grow at a compounded 30 per cent over the next five years.
   
• With the organised retail segment growing at the rate of 25-30 per cent per annum, revenues from the sector are expected to triple from the current US$ 7.7 billion to US$ 24 billion by 2010.
   
• The share of modern retail is likely to grow from its current 2 per cent to 15-20 percent over the next decade, analysts feel. No wonder a heavyweight like the Reliance group is planning to do a Wal-Mart in India.

In the next couple of years, India will see at least two Indian retail businesses attaining the magic figure of US$ 218 million in sales. Several others are expected to attain a critical mass as growth in the industry picks up momentum. This will be driven by two key factors:
 

• Availability of quality real estate and mall management practices
   
• Consumer preference for shopping in new environs
   

A whiff of things to come:
 

• The world's largest retailer Wal-Mart has huge plans for India. It is moving a senior official from its headquarters in Bentonville, Arkansas, to head its market research and business development functions pertaining to its retail plans in India.
   
• New York-based high-end fashion retailer Saks Fifth Avenue has tied up with realty major DLF Properties to set up shop in a mall in New Delhi.
   
• Tommy Hilfiger, retailer of apparels, expects to open one store each in Delhi, Ahmedabad, Lucknow and Bangalore in the next four months.