News: India's retailers change fast as Wal-Mart waits
(RTR 24/03/2006) New Delhi - In the New Delhi suburb Gurgaon, shiny new shopping malls line the main street, housing Western brands ranging from apparel retailer Benetton Group to restaurant chain Ruby Tuesday.
In Mumbai, an electronics store draws crowds of customers by listing discounted prices on flat-panel televisions and refrigerators -- a major shift for shoppers accustomed to haggling with small, independent shopkeepers.
India's fast-growing, young, urban middle class is driving a retailing revolution, bringing Western-style formats including hypermarkets, department stores, specialty chains and even dollar stores. As many as 250 malls are expected to open in India over the next two years, up from around 60 now.
But the next phase is still to come as global giants such as Wal-Mart Stores Inc. wait anxiously for India's government to ease restrictions on foreign investment.
"India is becoming a consumer economy," Mike Duke, Wal-Mart's vice chairman and head of international operations, told Reuters in a recent interview in New Delhi.
Duke was the second high-level Wal-Mart executive to meet government officials here in the past year, as the world's biggest retailer tries to convince India to open up its retail market to outsiders.
Wal-Mart and other retailers see huge opportunity in the country of one billion people, with a middle class estimated at nearly 60 million people, and another 220 million who have significant buying power.
"The average (Indian) consumer today is richer, younger and more aspirational in his/her needs than ever before," consultants KPMG wrote in a report for the Federation of Indian Chambers of Commerce and Industry, which is actively pushing for India to relax rules on foreign direct investment.
Analysts say it is only a matter of time, perhaps a year or two, before retail sector investment rules are eased.
India recently allowed retailers that sell a single brand -- Nokia, for example -- to own a majority stake in stores. Nokia, Benetton and others are already here through franchise deals.
Opponents say big foreign players will drive local firms out of business and destroy jobs, replacing quaint corner shops with characterless superstores.
But many analysts argue that modernising retailing will add good jobs with opportunity for advancement, particularly for Indians who don't have the education to find high-paying work in hot sectors such as information technology.
CORNER SHOPS TO HYPERMARKETS
Small, corner shops dominate the retail sector, accounting for some 97 percent of trade, but chain stores are popping up as retailers scramble to expand before Wal-Mart and others arrive.
Analysts say most consumers aren't worried about foreign investment, and appear more than ready to embrace Western-style retailing.
A recent clearance sale at India's biggest retailer, Pantaloon Retail (India) Ltd., drew such large crowds that police were called in to control traffic jams and the store was forced to close early.
At Pantaloon's Big Bazaar chain, which sells food and general merchandise, similar to a Wal-Mart, shoppers sometimes wait for over an hour to get through checkout lines.
"Indian consumers are a smart lot and they will choose between good versus bad, not necessarily foreign versus domestic," said Asitava Sen, principal consultant with PricewaterhouseCoopers in New Delhi.
A study by his firm found modern trade in India would create jobs, increase efficiency in agriculture and boost exports.
MALL BOOM OR BUST?
There are signs that trouble is brewing, however.
In Gurgaon's malls, retail analysts say foot traffic has declined, suggesting the novelty is wearing off. A KPMG survey found most retailers think India is heading toward mall overcapacity.
Part of the problem is planning. In Gurgaon, analysts say some malls will likely fail because too many are too close together, selling too much of the same merchandise.
Newer malls are being built near public transportation -- a key issue in India's major cities where trucks, buses, taxis, cars, pedestrians, pushcarts and cows vie for space.
Developers are also paying more attention to demographics, choosing tenants that fit local income levels and tastes.
All this brings a smile to the face of Wal-Mart's Duke, who sees the rapid changes as a sign that Indian consumers are ready for more retailing options -- including Wal-Mart stores.
"It's already happening in India," he said. "That's what is encouraging. It's not waiting for Wal-Mart."
In Mumbai, an electronics store draws crowds of customers by listing discounted prices on flat-panel televisions and refrigerators -- a major shift for shoppers accustomed to haggling with small, independent shopkeepers.
India's fast-growing, young, urban middle class is driving a retailing revolution, bringing Western-style formats including hypermarkets, department stores, specialty chains and even dollar stores. As many as 250 malls are expected to open in India over the next two years, up from around 60 now.
But the next phase is still to come as global giants such as Wal-Mart Stores Inc. wait anxiously for India's government to ease restrictions on foreign investment.
"India is becoming a consumer economy," Mike Duke, Wal-Mart's vice chairman and head of international operations, told Reuters in a recent interview in New Delhi.
Duke was the second high-level Wal-Mart executive to meet government officials here in the past year, as the world's biggest retailer tries to convince India to open up its retail market to outsiders.
Wal-Mart and other retailers see huge opportunity in the country of one billion people, with a middle class estimated at nearly 60 million people, and another 220 million who have significant buying power.
"The average (Indian) consumer today is richer, younger and more aspirational in his/her needs than ever before," consultants KPMG wrote in a report for the Federation of Indian Chambers of Commerce and Industry, which is actively pushing for India to relax rules on foreign direct investment.
Analysts say it is only a matter of time, perhaps a year or two, before retail sector investment rules are eased.
India recently allowed retailers that sell a single brand -- Nokia, for example -- to own a majority stake in stores. Nokia, Benetton and others are already here through franchise deals.
Opponents say big foreign players will drive local firms out of business and destroy jobs, replacing quaint corner shops with characterless superstores.
But many analysts argue that modernising retailing will add good jobs with opportunity for advancement, particularly for Indians who don't have the education to find high-paying work in hot sectors such as information technology.
CORNER SHOPS TO HYPERMARKETS
Small, corner shops dominate the retail sector, accounting for some 97 percent of trade, but chain stores are popping up as retailers scramble to expand before Wal-Mart and others arrive.
Analysts say most consumers aren't worried about foreign investment, and appear more than ready to embrace Western-style retailing.
A recent clearance sale at India's biggest retailer, Pantaloon Retail (India) Ltd., drew such large crowds that police were called in to control traffic jams and the store was forced to close early.
At Pantaloon's Big Bazaar chain, which sells food and general merchandise, similar to a Wal-Mart, shoppers sometimes wait for over an hour to get through checkout lines.
"Indian consumers are a smart lot and they will choose between good versus bad, not necessarily foreign versus domestic," said Asitava Sen, principal consultant with PricewaterhouseCoopers in New Delhi.
A study by his firm found modern trade in India would create jobs, increase efficiency in agriculture and boost exports.
MALL BOOM OR BUST?
There are signs that trouble is brewing, however.
In Gurgaon's malls, retail analysts say foot traffic has declined, suggesting the novelty is wearing off. A KPMG survey found most retailers think India is heading toward mall overcapacity.
Part of the problem is planning. In Gurgaon, analysts say some malls will likely fail because too many are too close together, selling too much of the same merchandise.
Newer malls are being built near public transportation -- a key issue in India's major cities where trucks, buses, taxis, cars, pedestrians, pushcarts and cows vie for space.
Developers are also paying more attention to demographics, choosing tenants that fit local income levels and tastes.
All this brings a smile to the face of Wal-Mart's Duke, who sees the rapid changes as a sign that Indian consumers are ready for more retailing options -- including Wal-Mart stores.
"It's already happening in India," he said. "That's what is encouraging. It's not waiting for Wal-Mart."
posted by InCar Group Press Room at 12:47
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