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Rapid Expansion


Rapid Expansion

Last updated: August 2 2007
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  • Rapid Expansion

    Mumbai and NCR are leading the way in the retail boom, but smaller cities are quickly catching up

    Mumbai and Delhi/National Capital Region (NCR) are well above other Indian cities in terms of the number of shopping malls and organised retailers. The NCR and Mumbai will unquestionably continue to dominate the Indian retail scene, and despite strong growth in secondary and tertiary cities, these two metros will still account for 40% of India's organised retail sector by 2008. Both are sufficiently large and diverse to accommodate a variety of new formats, including one-stop malls, speciality malls catering for luxury brands, city hypermarkets, smaller neighborhood malls and "big box" retailing.

    However, while retail property activity is still overwhelmingly concentrated in India's two largest metros, others are entering the fray with a lot of plus points going for them. The secondary metros are those throwing a strong challenge to these two regions. These already have a very mature market with larger floor space and are perceived by retailers as the "next retail destinations".

    Pune, Bangalore, Kolkata, Hyderabad and Ahmedabad all have significant mall development in the pipeline. By 2008 these six transitional cities are likely to account for one third of India's organised retail sector. Kolkata, Pune and Hyderabad currently have the largest shopping mall floor space of the transitional cities. Retail activity is rapidly expanding across the country. On the basis of the future plans of major hypermarkets and department store retailers, a group of six "emerging" cities are likely to be the next growth markets over a three-year horizon.

    Factors such as growing incomes, rising aspirations, scarcity of branded stores and growing corporate activity are increasing the demand for organised retailing. In cities such as Nagpur, Indore, Nashik, Bhubaneshwar, Vizag, Coimbatore, Mangalore, Mysore and Thiruvananthapuram, IT/ ITES companies are rapidly expanding their workforces, which in turn, is stimulating retailer activity. These cities currently represent among the most interesting locations for property developers, as retailers scour these cities for opportunities, and demand exceeds supply.

    Other categories identified are High Growth Cities like (Jaipur), rapidly growing IT hubs (such as Chandigarh and Kochi), as well as several other medium-sized cities (including Lucknow, Surat and Vadodara). Nascent cities are those like Kolhapur, Solapur, Ranchi. Jabalpur, Aurangabad, Meerut, Sonepat which are not really on the retailing map, but are being watched closely.

    Both domestic and international retailers, as well as the property industry see the Indian retail market, as the greatest untapped market of the globe.

    International retailers have shown avid interest, in the back end model of the business, which is the only way for them to enter the market. India is home to 20% of the global population under 25 years. A tidal wave of young adults is entering India's consumer society with rising aspirations, new lifestyle requirements and an insatiable demand for consumer brands. A growing middle class, estimates of which vary enormously, but there is little doubt that the numbers are large. Currently 70 million + earn over $8,000 a year, and a notable shift from a "saving" to "spending" mindset. This itself is a very important driver for the industry.

    New shopping malls are the place to head out to over the weekend. Mall shopping in India is currently viewed as an "experience", a leisure pursuit and a form of entertainment, which has encouraged huge footfalls in new shopping malls. However, the challenge for mall retailers and owners is converting the Indian "window shopper" from browser to purchaser. Over time this excitement will wane and the Indian consumer will get more discriminating.

    Whilst Indian middle classes are attracted to global brands, they are committed to their traditions and culture. The consumer sees no dichotomy in wearing a sari in the daytime and a slinky western ensemble to the latest lounge in the evening, this is what is leading to hybridization of Indian and
    "western" cultures, reinforced by the strong "Indian Brand". This will increasingly translate into new retail concepts catering to this consumer.

    Economic Times
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