RETAIL TO TOUCH US$ 600 BILLION BY 2015 – RAJAN BHARTI MITTAL

Indian retail market will touch US$ 600 billion by 2015 riding on the back of increasing consumerism, growing numbers of young population, migration to urban areas and easier access to credit, according to Mr. Rajan Bharti Mittal, Managing Director, Bharti Enterprises.

Speaking at the PHD Chamber CEO Lecture Series in New Delhi on the theme 'Retail : Opportunities & Challenges', Mr. Mittal gave a snapshot of the size and composition of the present retail scenario in India. He said that organised retail constitutes less than 5% of the estimated total retail trade of US$ 284 billion. In the overall retail space, food and groceries occupy 63 per cent, while in organised retail, clothing and accessories account for the largest volume at 39 per cent, with food and grocery, health and beauty, entertainment amongst the fast growing categories added Mr. Mittal.

While retail as a whole is growing at a compound annual growth rate of 8%, and by 2015, the total retail market in India should touch US$ 600 billion, organised sector presently at US$ 13 billion is growing at 27% per annum and by 2015, it should touch US$ 110 billion.

Mr. Mittal mentioned that some pressure groups are opposing the entry of big players, domestic and foreign, but they will realise the benefits once the impact on consumer prices and convenience becomes visible as it eventually will. India is a huge market and there is enough space for at least 8-10 large retailers.

Consolidation trends are visible in the retail sector and the real growth wave will come from tier I & II towns according to Mr. Mittal. The current players in the market are following an aggressive roll out and there is a battle for real estate. Organised retail is aggressively investing to improve infrastructure and remove intermediaries in the supply chain and cold chain investments are on the rise according to him.

The availability of trained manpower is a challenge as the exponential growth of this sector requires more talent than what is currently available, especially with high attrition rates in the industry. This provides tremendous opportunities in training and development of manpower, potential for tie-ups with universities and setting up dedicated retail institutes. The experience of international retailers to train local talent can also be utilised according to Mr. Mittal. There would be tremendous generation of employment with the growth of organised retail, both directly in retail outlets and also indirectly by development of support industries and functions. Two million jobs by 2010 are expected to be created, he added.

Mr. Mittal stated that there will be significant benefits for consumers, farmers, manufacturing and service industries and the general masses if the opportunities being thrown up by organised retail are appropriately tapped, leading to overall positive macroeconomic effect and inclusive economic growth and development. The benefits to consumers will include lower prices, better quality goods, wider assortment and access and improved shopping experience through well organised and clean retail environment and better customer service. The Indian consumer is very discerning and attracting them and maintaining their loyalty is a challenge to modern retailers.

The benefits to farmers will accrue through dis-intermediation, higher productivity, better access to market, predictability of demand, higher realisation and direct investments in agriculture sector by retailers. Worldwide, the big retailers go to the farmers directly and there are direct linkages between the source and retail.

There will also be significant benefits to small scale and ancillary industries as worldwide, 70-90% of all products sold in modern retailing are domestically sourced. The food processing and services industry will benefit through better cold chain, display and marketing with organised retailers. Currently only 4.5% of the food market is processed food, whereas the international benchmark is above 40%.

Contrary to general perception, the mom & pop stores will not lose out, according to Mr. Mittal as efficient supply chain, leading to sourcing of wider assortment of products at one place and at better prices, will result in operational efficiencies for the mom & pop stores. There will also be potential for these stores to become franchisees or partners for larger retailers through investment in merchandising, IT systems and overall upgradation of the stores. The world over the mom & pop stores co-exist with modern retail as their personalised service always attracts customers.

Organised retail will also curb inflation as lower prices will be driven by supply chain efficiencies and higher volumes. The contribution to the exchequer will be enhanced through higher tax collection rates at point of sale in the organised sector and no tax avoidance by organised retailers and also increase in number of tax paying employees.