India - world’s most attractive retail market.

adi001 · #1 28-06-2007, 08:17 AM

India has been ranked the most attractive market in the world for the third consecutive year, although its appeal is starting to decline, according to a survey by management consulting company AT Kearney.

A combination of increased consumption and an under-developed organized retail environment has made India an attractive destination for global retailers, the study said. However, India’s attractiveness has dropped from 100 to 92, on a scale of 100, this year.

This is because new players have entered the market and the “window of opportunity will get smaller over time”, said Hemant Kalbag, principal, consumer industries and retail practice at AT Kearney. “There is still significant opportunity, but the new players will have to deal with more competition, shrinking margins and more expensive real estate,” he said.

India, in fact, has scored behind Russia, China, Chile, Mexico and Argentina among other countries on market attractiveness, which was one of the four criterion used for the global retail development index.
While the potential for organized retail sales is high because of the upswing in young India’s spending power, regulatory and infrastructure issues have held back growth.

While India is ranked first on general attractiveness, it ranks behind Malaysia, the Slovak Republic and Thailand on the retail labour index.

Retailers compete with business process outsourcing units and other better paying companies, driving up their wage costs.
This, combined with rising real estate costs, has encouraged retailers to enter the Indian market through tier-II and tier-III cities before they enter the metros. New retailers, such as Liberty International and Prozone Retail, plan to enter the Indian market in smaller cities first. India scored better on country and business risk this year because both the regulatory environment as well as acceptance of foreign retailers has improved, the report said.

Source: Indianrealestateforum.com

enabletechnologies · #2 11-07-2007, 05:31 PM

Why is the retail not so good, when the real estate is booming?

Rishi

adi001 · #3 26-07-2007, 01:31 PM

Dear Rishi,

I dont know on which basis u r saying stating that 'retail is not so good'. More and more national and international retail investors are rushing towards indian retail sector. I mean your thinking is exactly ironical to the situaltion. With the increase in per capita income retail is also getting boost. For u only I would introduce some excerpts of this article published in Indian real estate forum (indianrealestateforum dot com). Pls read on...

Quote:

Highlighting the growth opportunities and the emerging geography of Indian retail and property market activity, Jones Lang LaSalle Meghraj released its World Winning Cities report on Indian Retail. The report entitled “The Geography of Opportunity -- The India 50” is the first report in a series on Indian Retail Futures. It highlights the significant opportunities for both domestic and international retailers and property investors across a broad range of geographies and formats.

“The Geography of Opportunity – The India 50” paper highlights that India’s retail sector is evolving at a swift pace, fuelled by a strong economy, favourable demographics, rising wealth levels and rapidly changing lifestyles and consumer aspirations of an ever burgeoning middle class. The real estate sector has responded well to this retail growth. The total retail mall stock has been doubling every year, from a meagre one million square feet in 2002 to a staggering 40 million square feet by end of 2007 and an estimated 60 million square feet by end of 2008.

Jones Lang LaSalle Meghraj’s research identifies 50 cities across India that are ideally positioned to benefit from the booming retail sector. The report launches a new retail city classification based on socio-economic characteristics, retailer activity and shopping mall development. The research identifies five types of cities (Maturing, Transitional, High Growth, Emerging and Nascent), each of which is at a different stage in its retail market evolution and offers different types of opportunities for retailers and the property sector.

Organised retail activity is still overwhelmingly concentrated in Delhi and Mumbai (the Maturing Cities) and considerable opportunities still exist in these two vast and diverse metros. We expect these two metros to contribute 40% of national organised retailing by year 2008. Delhi and Mumbai lead the Indian mall culture with estimated total mall stock of 22 million and 15 million sq ft respectively by 2008-09. Nonetheless, the report concludes that increasing competition in the NCR and Mumbai markets, combined with growing opportunities in India’s regional markets, is encouraging both retailers and property developers to move into new and potentially more rewarding markets further a-field. Organised retailing in India’s other main cities, such as Bangalore, Kolkata, Hyderabad, Pune and Chennai (the Transitional Cities) is growing rapidly however such is the pace of change, that many smaller Tier III cities are now firmly on the radar of the retail sector and mall developers.

Vincent Lottefier, CEO, Jones Lang LaSalle Meghraj, says, “India’s 50 cities identified in our report clearly offer substantial and compelling opportunities for India’s growing retail sector. With a population of over 1 million each, these cities will form the very core of India’s emerging retail hierarchy. Interestingly, the top 15 cities (Maturing, Transitional and High growth) from the 50 retail destinations are expected to contribute more than 80% of the total national retail business by 2008. India’s retail awakening is characterised by rapidly changing customer behaviour, new market entrants and evolving government policy. It is imperative to comprehend India’s enormous cultural and regional diversity to get a realistic perspective on the opportunity at hand.”

The report highlights tertiary cities such as Chandigarh, Ludhiana, Jaipur, Lucknow and Kochi (the High Growth Cities) as leading the pack, attracting considerable retailer interest due to high incomes and strong brand awareness. The “next retail destinations” over a three year horizon are likely to be “Emerging Cities” such as Nagpur, Coimbatore and Thiruvananthapuram, where IT/ITES companies are expanding their workforces, which in turn is stimulating retailing activity. The more pioneering retailers and mall developers are now seeking to benefit from first mover advantage and are moving into “Nascent Cities” such as Aurangabad and Rajkot, which are likely to provide good long term opportunities.

“Emerging City Winners” is Phase IV of Jones Lang LaSalle Meghraj’s World Winning Cities research. It brings to the fore cities that are already buzzing with retail activity and those which are catching up rapidly to be the next retail hot spots. Many of these Indian rising urban stars offer significant retail opportunities and have not traditionally been on the radar screen on the property sector.

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