Retail Mantra To Resound In India

New Delhi, Nov 10; | Updated: Nov 11 2003, 05:30am hrs
In its latest yet to be unveiled report on the Indian retail industry, consulting firm McKinsey & Co has said India has the scale and potential to transform itself into a retail powerhouse.

India has been rated as the fifth most attractive emerging market for retail. Over the course of the next five years, we believe this market will evolve significantly and we shall see growth of 4-5 retailers beyond the Rs 1,000 crore mark, with significant expansion in network size and some merger & acquisition (M&A), McKinsey said in a report prepared for Confederation of Indian Industry (CII).

Citing the example of the US and UK, it said the early retail chain growth in these countries was characterised by significant M&A. In India, these options are now beginning to emerge, as even smaller retailers begin to upgrade.

The firm expects an aggressive retailer to approach even $250-500 million mark in the next five years.

According to its forecast, a continued growth of key lifestyle outlets, specialty convenience stores, jewellery, fast-food and home decoration is expected.

The next five years will witness significant growth in global retailers sourcing products for their global operations from India. The scale of outsourcing is estimated at multi-billion dollar level. This will become one of the largest drivers of growth in categories like apparel, it said.

McKinsey predicts the emergence of select Indian cities as true global retail destinations and emergence of international retailers in India.

Citing success examples of RPG Retail, Pantaloons and Shoppers Stop, it said, these companies have even crossed the $50 million (Rs 250 crore) mark and are continuing to grow rapidly.

Indicating the changing consumer behaviour, it added: India is seeing the emergence and rapid establishment of several new formats in fast-food, casual eating, specialty apparel (Wills Sports, Provogue, Planet Fashion), convenience stores (In&Out), jewellery and furniture (Tanishq, Intergold, Gautier, Living Room), all of which reflect the emerging maturity and spending power of the Indian consumer.

The sector is beginning to capture the attention of leading Indian corporates and investors. A number of venture capital funds are evaluating investments in retail, while leading corporates like Tatas, Reliance and AV Birla are either establishing or expanding their presence in the sector, the report said.

It also pointed out retail developments at petrol pumps as an emerging trend. Leading oil companies are expanding their fuel retail presence to include non-fuel retail options, either on their own, or in alliance with other leading retailers, it said.

It has cited examples of states taking lead in retail development. The governments of West Bengal and Andhra Pradesh are proactively reaching out to retailers and helping them establish presence in their states.

The industry has also been in the news recently in the backdrop of the governments current restrictions in allowing foreign direct investment (FDI) in the sector.

CII is organising a two-day conference on retail sector in the Capital on November 12-13. Main participants in the conference include Department of Industrial Promotion & Policy (DIPP) secretary RR Shah, Trent Ltd managing director Noel Tata, RPG Enterprises vice chairman Sanjiv Goenka and Shoppers Stop managing director & CEO BS Nagesh.