In a surprise finding that organised retail is growing faster than expected in India, a study has forecast that this segment could account for a quarter of the total retail revenues by 2011 from the current 8 per cent share.
The study has been done by accounting firm Deloitte Haskins and Sells. India’s retail industry, both organised and unorganised, is worth $295 billion at present. A February study by Mumbai-based brokerage Edelweiss Capital had said that organised retail would form 15 per cent of the retail sales by March 2011 from 4.1 per cent now. But Deloitte’s study says that organised retail grew at a scorching pace in 2007, going to 8 per cent of total retail sales from 5 per cent in 2006.
New stores, more spending power and access to credit had led to organised retail’s 50 per cent growth in 2007, said Shyamak Tata, partner at Deloitte who did the research.
Several large retailers including US-based Wal-Mart Stores Inc and UK’s Marks and Spencer Plc have announced plans for the Indian market, spurred by this explosive growth. But organised retail’s march has been checked to some extent by protests from India’s small retailers, who form the backbone of retail in India—in the dominantly unorganised sector. They argue that large retailers would gain market share at their expense. Some retailers scaled back plans in the face of opposition from small retailers and legislation in some states that large retailers would have to pay a tax on food and grocery sold in their stores or a share in their profits.
Deloitte’s estimates suggest that organised retail is still set to explode. Deloitte’s estimates, to be released at a retail conference on Thursday, are pegged to the amount of retail space coming up in the country. Retailers have bought or will buy around 316 million sq. ft of retail space, several times the 68 million sq. ft of space they took up in 2006. For this investment in space to pay off, the industry would have to grow at around 50 per cent or so, Tata said. "If retail continues to grow at this pace, the malls will get used,” he said. “If not, then rentals will get affected."