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Retail dream hits big bumps

Last August, global consulting firm McKinsey, in a tantalizingly titled report called, “The Great Indian Bazaar,” said that by 2015, India’s retail market would be worth $450 billion, roughly the current size of the Italian market, writes Saurabh Turakhia.

india Updated: Feb 16, 2009 22:16 IST
Saurabh Turakhia

Last August, global consulting firm McKinsey, in a tantalizingly titled report called, “The Great Indian Bazaar,” said that by 2015, India’s retail market would be worth $450 billion, roughly the current size of the Italian market.

Other consultants have different, but somewhat comparable numbers.

A who’s who of corporate names has jumped into the retail market pool: Reliance Industries Ltd, Bharti, Aditya Birla group, Future Group, Rahejas, Goenkas, Wadhwa group as well as smaller outfits such as Subhiksha and Vishal Retail.

Tesco and Wal-mart have forged ties with Tata and Bharti respectively, for their cash and carry business in India while Metro has also been active in India through its cash and carry outlets at multiple locations.

Big talk veered around the barriers to foreign direct investment (FDI) in the retail sector, with vehement opposition from those who feared this would lead to local shopkeepers going out of business. But suddenly, everything is in a phase of consolidation.

Subhiksha, which grew to over 1,000 outlets, is now in the middle of news over payment problems to employees. Debt-ridden retailers are struggling to meet capital needs for working capital purposes. The economic slowdown has hit both the demand outlook.

The economic slowdown, cues of which started appearing in October 2008, however took a toll on small fries such as Subhiksha and Vishal. Being debt ridden worsened their state as they struggled to get adequate working capital. Even big names like the Rahejas, the RPG Group and Reliance are busy tightening their belts, calling off partnerships or shutting down stores.