Organised retail sales grow 20%

Written by Mona Mehta | Mumbai | Updated: Oct 3 2009, 06:28am hrs
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The Rs 1-lakh-crore organised retail industry, among the largest job creators in the services sector, is showing early signs of revival, after seeing its worst slowdown in the second and the third quarters of 2008-09. Estimates by the Retailers Association of India (RAI), the apex body of organised, modern retailers, show the segment has grown 20% in the September quarter of this financial year. This is a leap from the 5% growth it clocked in the first quarter. Just before the meltdown last year, the retail segment was growing at a pace of 35%.

Indian retail growth had slowed to 12% in the third quarter of FY09, the quarter that followed the Lehman Brothers collapse, and less than 5% during the fourth quarter of FY09. Prompted by the rising demand and the coming festive season, retailers are in the process of building up stocks at their branded retail stores by an additional 20% to 25%.

The revival in organised retail sales points to an increase in urban consumer spendingsomething that could lift up the overall business environment.

Besides stocking up more, retailers are also on the way to renewed hiring and expansion. Says Kumar Rajagopalan, CEO, Retailers Association of India (RAI) : Now hiring will take off at the front-end level of the branded retail stores by 15% to 20%, since many retailers have chalked out plans to expand their stores.

Big players like the Future Group, Aditya Birla Retail, Reliance Retail, Trent and Spencers Retail are in the process of adding new stores on the back of lower rentals and buoyant consumer demand.

Explaining the reasons for the retail growth, Rajagopalan told FE, There has been a spurt in consumer confidence among the salaried class; the markets are looking better; there is also a certain amount of impulse purchase by consumers amidst fear of price hikes during Diwali.

CB Richard Ellis estimates that Indias retail market, organised and unorganised together, is valued at $511 billion (around Rs 24,52,800 crore) and is poised to grow to $833 billion (Rs 39,98,400 crore) by 2013. It believes the organised retail, now making up less than 5% of the total retail market, would have a CAGR of 40% and would swell to $107 billion by 2013.

Shubhranshu Pani, managing director-retail, Jones Lang LaSalle Meghraj (JLLM), adds, While improvement in sales has not been as dramatic as the first two quarters of last year, it is definitely true that there has been significant improvement in buyer sentiments in the second quarter. A number of factors are at play here, including positive sentiments brought about by a strong political regime, a marked upsurge in the economy, stabilisation of inflationary pressures and increased job security. Retailers are leveraging the current market dynamics by concentrating their presence in established metropolitan catchments, curtailing exuberant expansion plans and focusing on offering greater value to the shopper community.

In order to meet the growing demand during the third and the fourth quarters of this financial year, retail majors like the Future Group, Star Bazaar, Hypercity, Croma, @home, among others, are hiking their stocks build-up.

Kishore Biyani, chief executive officer, Future group, said, Of all categories in the retail sector, garments, fashion accessories, cosmetics and white goods are witnessing an uptrend in terms of offtake, whereas the demand for luxury products is yet to pick up.

Hypercity Retail India Ltd, part of the K Raheja group, is also in the process of stocking a wide array of products in various categories at its Hypercity stores, BS Nagesh, vice chairman, Hypercity Retail said.

When it comes to retailing of consumer durables, industry experts feel that this is the right time to provide consumers with various options in white goods and electronics models in addition to offering promotions and expanding stores. According to Ajit Joshi, managing director, Croma, the large-format electronics chain from the House of Tata, The overall white goods market has witnessed a growth of 8% and colour televisions market has witnessed a growth of around 10%. Hence, we are adding a wide range of white goods and electronics, thus hiking the products display by an additional 25% to 30% at our existing and upcoming Croma store. We expect a growth of 30%.

Manish Parekh, managing director @home from Nilkamal Group said, There is a growing demand for imported lifestyle products from the last quarter. Hence, we are looking at adding more products, say, 15 to 20% of more lifestyle products from the global market.