India’s shopping bill: Rs 55,000 cr

Organised Retail Consumption Matches Its Defence Budget

THE echoes of the footfalls are getting louder and louder. For a market new to the idea of organised retailing, India is taking real big strides. Sample this: In 2006, Indian consumers spent Rs 55,000 crore ($12.4 billion) on organised retail — the figure equals the country’s defence budget, and is a billion more than Vodafone’s pitch for Hutch. The total consumer spend stood at Rs 20 lakh crore or $445 billion, which is close to 50% of the country’s GDP at current price. The bulk of the spend, around Rs 12 lakh crore, was in the retail market (both organised and unorganised) in 2006. The rest of the spend, Rs 8 lakh crore, went towards other spends such as rent, education, family health, et al. The organised retail spend, however, hogged all the attention with an annual growth of 34.8% between 2004 and 2006 and is expected to touch $75 billion by 2011. Inthe first ever initiative, Images Fashion and Retail Research and some of the known global research and consulting firms including AT Kearney, Ernst&Young, PricewaterhouseCoopers, Technopak, KPMG, ICICI, AC Nielson-ORG Marg, Synovate and Cushman & Wakefield came together for a detailed study of the Indian retail industry. Last year, health & beauty, entertainment, books, music and gifts ruled the Indian consumers’ spending patterns . While beauty spend grew 52.9% and entertainment 44%, spend on books and gifts were up 34.9% and footwear 34.2%. Restaurants, food & beverage, currently estimated at Rs 3,400 crore industry, grew by over 30% in calendar 2006 over calendar 2005. Peer pressure WHILE rising incomes are allowing spending on newer things, analysts say peer pressure is driving them more. “It’s no longer a manifestation of functional spending. With easy access to what’s new and hot across the world, Indians are making informed purchase decision on all kinds of products,” says Alok Shanker, MD, Synovate India. Most agree that with an average salary hike of 15% plus and increased growth in organised retail space, the trend may gain momentum. The study gives credence to the hypothesis by throwing up some mouth watering numbers. The number of effective buyers will cross 600 million by 2010; over 550 million buyers will be under 20 years of age by 2015; and the number of people earning Rs 8 lakh plus will cross 140 million, up from 70 million today. The Retail Report 2007 numbers show that the food and grocery space is likely to be the most action oriented in the next three to five years. Consumer spend on grocery through the organised retail format is estimated at Rs 5,000 crore, a mere 0.8% of the total food and grocery industry of India. Most big corporates are jumping into this segment and some like Bharti are even backed by global heavyweights like Wal-Mart. “By 2011, consumers would buy grocery worth $30 billion through the modern retail channels. So, it doesn’t come as a surprise that heads of large global corporations (supermarket and hypermarket majors Tesco, Carrefour and other convenience stores companies) are flying down to India to plan early entry strategies,” said Arvind Singhal, chairman of Technopak. Things have started falling into place with close to Rs 20,000 crore investments lined up for retail infrastructure, systems and shopfit. The planned 100 million sqft of retail space by ‘07-08 may generate Rs 50,000 crore of additional sales.

Chaitali Chakravarty & Bhanu Pande NEW DELHI

courtesy:Economic Times

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