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issue: September 2006 APPLIANCE Magazine

New Delhi Report
Retail is on a Roll in India


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by Adite Chatterjee, India Correspondent

While organized retail in India is a tiny 2 percent of the total Rs 10 trillion (approx. U.S. $215 billion) retail industry, it is expected to grow 25 percent annually.

By 2010, KSA-Technopak, a retail consulting and research agency, predicts that organized retailing in India will cross the Rs 1 trillion (approx. $21.5 billion) mark from the current size of Rs 350 billion (approx. $7.5 billion). Large Indian corporate groups like ITC, Reliance, Tata, Raheja, and others are pumping billions of rupees into the organized retail sector.
Foreign investors too are eyeing the sector. A decade ago, there was not one shopping mall in India. Today there are about 100 malls, most of them in Delhi and its suburbs and in Mumbai, and 300 malls, multiplexes and shopping centers are under construction across India. By 2007, an estimated 50 million square feet of quality retail space will be available. KSA-Technopak’s 2005 retail study estimates the retail sector will grab investments of Rs 20 to Rs 25 billion (approx. $430 million to $537 million) within the next 2 years to 3 years and more than Rs 200 billion (approx. $4.3 billion) by the end of 2010.
Take the example of India’s biggest corporate group, Reliance Industries Limited, which is making a strong foray into retail with its new Reliance Retail Limited company. The company plans to invest $5.6 billion to set up retail outlets in 1,500 cities across India in the coming years, encompassing consumer products such as footwear, electronics, lifestyle products and services, home appliances, farm equipment, energy products and services distribution, entertainment and travel services, and health and well being products.
The growth of organized retail holds immense potential for manufacturers of consumer durables, particularly appliances. Moreover, it would imply a shift in retailing trends. Traditionally, the southern part of India has been at the forefront of organized retailing. Chennai and Bangalore, both in the South, and Mumbai in the West account for nearly 5 percent share of all organized retail in the Rs 200 billion (approx. $4.3 billion) consumer durables industry.
There are an estimated 40,000 dealers across the country, a majority of them operating a single outlet each. The top nine retailers in India, who account for 148 outlets, are set to expand their retail outlets to more than 500 by 2007. As a result, their sales revenues are expected to grow from Rs 8.5 billion (approx. $182 million) to more than Rs 26,000 million (approx. $558 million) by 2007.
New players like PlugIn Sales (operating mostly in the western state of Maharashtra) have begun to set the trend. The company only started operations in June 2003, but has opened 23 multi-brand durables outlets in the state.
For OEMs like LG, the emergence of large-format retail chains means a shift in the sales mix. For instance, while LG earlier sold 80 percent of its products through single-outlet and small dealers, today the proportion is down to 60 percent, with nearly 40 percent of sales coming from large dealers.
Until now, retail players have mostly had regional presence. For instance Vijay Sales earns its revenues of Rs 1.5 billion (approx.$32 million) from just nine showrooms in Mumbai. But this too will change in the near future with the emergence of big players like Reliance Retail, which has pan-India ambitions and the muscle of big time investment to see its plans through.
Another large player with plans to open up retail outlets across India is Home Solutions Retail India Ltd. It recently launched E-zone, its first electronics store, in Bangalore, with nearly 8,500 square feet of retail space. The outlet has three zones: Liberation Zone for personal products like computers, laptops, handycams, mobile phones, and MP3 players; Experience Zone for entertainment products such as plasma/LCD TVs, home theater systems, etc; and the Home Zone for appliances such as refrigerators, air-conditioners, microwave ovens, etc. Clearly, the coming of the retail age in India offers great prospects for appliance manufacturers.

 

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