India still most attractive destination for global retailers

Thursday, April 16, 2009

Organised retail market in India is expected to reach $50 billion mark by 2011. Number of shopping malls is expected to increase at a CAGR of more than 18.9% from 2007 to 2015. Rural market is projected to dominate the retail industry landscape in India by 2012 with total market share of above 50%. Organised retailing of mobile handset and accessories is expected to reach close to Rs 5000 crore by 2010. Driven by the expanding retail market, third party logistic market is forecast to reach $ 20 billion by 2011. Apparel, along with food and grocery, will lead the organised retailing in India, the report pointed out.

There may be a slowdown in urban retail, but India is still shining for retailers. The next phase of growth is expected to come from rural markets with rural India accounting for almost half of the domestic retail market, valued over $300 billion, retail industry sources said.

Sources also said that rural India is set to witness an economic boom, with per capita income having grown by 50% over the last 10 years, mainly on account of rising commodity prices and improved productivity. Development of basic infrastructure, generation of employment guarantee schemes, better information services and access to funding are also bringing prosperity to rural households.

“Overall there is a huge market which is waiting to be served, ready to splurge, willing to explore new products and services, and retailers can tap on their wallets,” said Ramesh Srinivas, national industry director (consumer markets), KPMG India.

In rural markets, consumers are practical and price sensitive. Even though consumers at the bottom of the pyramid do not seem to have predictable income (affects purchasing dynamics), the rural market proved to be surprisingly loyal. So if companies get it right they could really reap the rewards, experts added. This is particularly true as changes in the rural economy such as people moving from agriculture into manufacturing, which pays better, are likely to lead to an economic boom.

Source: Food and Beverage News (link opens in a new window)