Pest Analysis Of Retail Industry In West Bengal

Retail Scenario in India : Touching Meteoric Scales

As the corporates Ð'- the Piramals, the Tatas, the Rahejas, ITC, S.Kumar's, RPG Enterprises, and mega retailers- Crosswords, Shopper's Stop, and Pantaloons race to revolutionize the retailing sector, retail as an industry in India is coming alive.

Retail sales in India amounted to about Rs.7400 billion in 2002, expanded at an average annual rate of 7% during 1999-2002. With the upturn in economic growth during 2003, retail sales are also expected to expand at a higher pace of nearly 10%. Across the country, retail sales in real terms are predicted to rise more rapidly than consumer expenditure during 2003-08. The forecast growth in real retail sales during 2003- 2008 is 8.3% per year,

compared with 7.1% for consumer expenditure. Modernization of the Indian retail sector will be reflected in rapid growth in sales of supermarkets, departmental stores and hypermarts. Sales from these large-format stores are to expand at growth rates ranging from 24% to 49% per year during 2003-2008, according to a latest report by Euromonitor International, a leading provider of global consumer-market intelligence.

A. T. Kearney Inc. places India 6th on a global retail development index. The country has the highest per capita outlets in the world - 5.5 outlets per 1000 population. Around 7% of the population in India is engaged in retailing, as compared to 20% in the USA.

In a developing country like India, a large chunk of consumer expenditure is on basic necessities, especially food-related items. Hence, it is not surprising that food, beverages and tobacco accounted for as much as 71% of retail sales in 2002. The share of food-related items had, however, declined over the review period, down from 73% in 1999. This

is not unexpected, because with income growth, Indians, like consumers elsewhere, have started spending more on non-food items compared with food products. Sales through supermarkets and department stores are small compared with overall retail sales. Nevertheless, their sales have grown much more rapidly, at almost a triple rate (about 30% per year during the review period). This high acceleration in sales through modern retailformats is expected to continue during the next few years, with the rapid growth in numbers of such outlets due to consumer demand and business potential.

The factors responsible for the development of the retail sector in India can be broadly summarized as follows:

Rising incomes and improvements in infrastructure are enlarging consumer markets and accelerating the convergence of consumer tastes.

Looking at income classification, the National Council of Applied Economic Research (NCAER) classified approximately 50% of the Indian population as low income in 1994-95; this is expected to decline to 17.8% by 2006-07. Liberalization of the Indian economy which has led to the opening up of the market for consumer goods has helped the MNC brands like Kellogs, Unilever, Nestle, etc. to make significant inroads into the vast consumer market by offering a wide range of choices to the Indian consumers. Shift in consumer demand to foreign brands like McDonalds, Sony, Panasonic, etc. The internet revolution is making the Indian consumer more accessible to the growing influences of domestic and foreign retail chains. Reach of satellite T.V. channels is helping in creating awareness about global products for local markets. About 47% of India's population is under the age of 20; and this will increase to 55% by 2015. This young population, which is technology-savvy, watch more than 50 TV satellite channels,

and display the highest propensity to spend, will immensely contribute to the growth of the retail sector in the country. As India continues to get strongly integrated with the world economy riding the waves of globalization, the retail sector is bound to take big leaps in the years to come.

 CII REPORT "RETAIL SCENARIO IN INDIA 2005"

Retail Opportunity in West Bengal

Though Kolkata has been a bit late in catching up with the retail revolution in the country, the city has great potential to become a retail hub in the near future. Going by the 1991 census, the city qualifies as the second largest metro market in India; nearly one out of every six shops located in the country's top 25 cities, can be traced to Kolkata. To a market

strategist, Kolkata undoubtedly is an ideal location for the growth of the retail industry.

Besides being the principal retail-and-services market to a vast hinterland comprising of the eastern and northeastern states of the country, the city also serves as a center of trade and commerce for the region. Its proximity to Bangladesh, a country of 13 crore consumers, and to the South-East Asian markets, is another factor for which the city is fast emerging as

a vibrant business center. The Kolkata Port and the Haldia Port are also instrumental in acting as gateways to landlocked countries like Nepal and Bhutan. The disposable incomes of Kolkatans have also been on the rise Ð'- according to a report by the National Council of Applied Economic Research (NCAER), about 62% of the households in Kolkata had annual

incomes of up to Rs.18, 000 in 1985-86; while just a decade later, the figure had touched Rs.25,000-77,000 for some 61% of the households. The city truly represents an amalgamation of the advantages of a metro city, and the comparatively modest living costs of a non-metro town.

 CII REPORT "RETAIL SCENARIO IN INDIA 2005"

FDI in RETAIL

 Current Indian FDI Regime

 FDI not permitted in retail trade sector, except in:

 Private labels

 Hi-Tech items / items requiring specialized after sales service

 Medical and diagnostic items

 Items sourced from the Indian small sector (manufactured with technology provided by the foreign collaborator)

 For 2 year test marketing (simultaneous commencement of investment in manufacturing facility required)

 Metro Group of Germany

 Cash-and-carry