Retail market expected to touch Rs 37 lakh crore : Survey

By SiliconIndia   |   Monday, 29 November 2010, 14:14 Hrs
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Bangalore: Retail sector is experiencing a drastic change as new global players and expansion by Indian retailers have paved the way for strengthening the domestic markets in terms of tie-ups,joint ventures and franchise agreements.

The India Retail Report 2010, a survey conducted by business consultancy Technopak Advisors, yields that the country's retail market is expected to touch 620 billion euros (around Rs 37 lakh crore) by 2020 at a compounded annual growth rate (CAGR) of more than 25 percent.

New partnerships and tie-ups will be a common feature with growth and consolidation being important business objectives. While many international retailers and brands are continuing to enter India, the focus of the already established ones will be to experiment with new formats, services, private labels, locations and to go much beyond metros to smaller towns, the study reveals.

In the last five years, international retailers have already marked their presence in the Indian market, through tie-ups and joint ventures (JVs) with top Indian players. Trent, the retail arm of Tata Group, sells high-end clothing brands like Zara and Sisley. They also run a 50:50 JV with UK's biggest retailer Tesco, which operates cash-and-carry stores in Mumbai, Delhi and Bangalore, and supplies merchandise to Trent's hypermarket chain Star Bazaar. Wal-Mart operates a cash-and-carry joint venture with Bharti Enterprises, while Italian luxury fashion brand Dolce & Gabbana operates a 51:49 single brand retailing venture with real estate major DLF.

In the latest global retail development index (GRDI), India has been ranked as the most attractive nation for retail investment among 30 emerging markets, by US-based global management consulting firm AT Kearney. Technopak Advisors chairman Arvind Singhal said, "A lot of international retailers and brands are most likely to look at India, as global markets have stabilised and the Indian economy has proved to be better than most other countries. These factors give a lot of confidence for them to invest in India."

Reliance Retail (RRL) signed a 20-year franchise agreement in 2009, with British toy retailer Hamleys and plans to set up 20 stores in India by FY 2015. RRL president & chief executive-lifestyle Bijou Kurien said, "The Indian market has opportunities for global brands to partner with the best domestic retailers and increase consumption. The nature of such partnerships can be JV, franchise or licensing agreements. Our JV with UK's Pearle Europe has allowed us to start a large optical chain in India, called Vision Express." He added that RRL is in talks with other global brands but refrained from divulging more details.

Another notable partnership is the master franchise agreement between McDonald's and Hardcastle Restaurants, which owns and operates its fast food outlets in Western and Southern India. McDonald's India MD (west & south) Amit Jatia said, "In 1996, when Hardcastle Restaurants entered into an agreement with McDonald's, the market did not have as much potential as it has today. Earlier, people ate out only thrice a month. Today, the Indian retail market is very exciting with lot of opportunities. We are a domestic consumption economy and income levels of people are rising. 60 percent of our population is below 30 years of age and are open to new ideas and innovation. So, there's tremendous scope for global retailers to set up base in India."

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