India's retail revolution
As India embraces large-scale shopping malls, its retail outlook is gradually changing – but the high street remains as vital as ever. Lucy Davis reports.
‘‘The market is estimated to grow from US$330 billion in 2007 to US$427 billion by 2010, and US$637 billion by 2015. This represents an increase of over 90 percent during an eight-year period’’
With India poised to become the world’s second biggest economy after China by 2050, the country’s retail market is rapidly taking off, so much so that US consultancy firm AT Kearney has placed India at the top of its list of 30 emerging retail markets – ahead of China and Russia. The market is estimated to grow from US$330 billion in 2007 to US$427 billion by 2010, and US$637 billion by 2015. This represents an increase of over 90 percent during an eight-year period.
The fifth largest retail destination in the world, India’s biggest industry has been fuelled by a strong economy and rising wealth levels, and as consumer demands become increasingly sophisticated, glossy malls housing expensive designer brands are springing up all over the country. A report by local analyst Images Retail estimates that the number of shopping malls will more than double to over 400 by 2010, and that there will be 715 by 2015.
In view of such rapid growth, it’s almost staggering to consider that the first mall in India, Ansal Plaza in South New Delhi, opened its doors less than ten years ago in 1999.
A recent report by Jones Lang La Salle Meghraj, ‘The Geography of Opportunity: The India 50’ identifies 50 different cities ripe for retail development. These 50 are broken down into five types of city – maturing, transitional, high growth, emerging and nascent. The maturing segment features India’s two biggest cities, Delhi and Mumbai; transitional and high-growth markets include Bangalore, Kolkata and Pune, and Jaipur and Kochi respectively; emerging are places like Indur and Nashik; Jodhpur and Patnar are listed as nascent cities.
“India’s ‘mega-cities’, Mumbai and New Delhi currently account for 40 percent of India’s organised retail sector,” says Avinash Mirchandani, assistant vice president, World Winning Cities Research Programme at Jones Lang La Salle Meghraj. “And they will be the world’s second and third largest cities by 2015, providing massive concentrations of retailing potential.”
With around 50 cities now boasting a population of over one million, there are clearly substantial new retail opportunities to be had; importantly too they represent remarkably good value. “At the beginning of 2007, retail rental value was approximately 350 rupees (HK$63) per square foot per month in a mature city like New Delhi. Prime shopping street rentals in the capital, for instance at Connaught Place have already crossed the IRP1,000 (HK$181) per square foot per month mark,” says Mirchandani.
These prices are ludicrously cheap when compared to the sky-high cost of premier rental in Hong Kong, where big brand retailers are paying as much as HK$500 per square foot per month, but expensive when compared with the rest of India.
While India’s retail market is undoubtedly on the up and up, the Jones Lang La Salle report also stresses that the sector faces many challenges, particularly as it is going through structural changes at an unprecedented rate. In the rush to expand retail formats, the company estimates that many malls are badly structured, with some developers further compromising standards due to rising construction costs. Poor asset management and lack of integration with neighbouring residential areas are also cited as problem areas.
Nevertheless, several malls have risen above such difficulties and stand as shining examples of what can be achieved. According to Mirchandani these include Mumbai-based Inorbit and Select City Walk, as well as the Prestige Forum in Bangalore.
On a smaller scale, hypermarkets such as Spar, Magnet and Reliance Hypermart are also increasing their presence across the country. While Reliance Hypermart plans to open 500 superstores by 2010, local retail chain Big Bazaar, India’s version of Wal-Mart and the largest retail chain in India with 92 stores, is also expanding rapidly. It aims to have opened 350 stores by the end of 2010.
As India’s retail market continues to mature, market watchers predict it will begin to incorporate more and more one-stop malls where consumers can shop, eat, and be entertained all under one roof. Opening next year, the Mall of India in Gurgaon will be the largest mall in the country, with an area of 3.5 million square foot. Here, however, the aim is not simply to impress consumers with size, but rather to reach out to specific markets. The city’s IT capital Bangalore for example, is about to open its first luxury mall, UB City, which will serve the upwardly mobile young shoppers who work in India’s silicon valley.
“The Indian luxury retail market is estimated to grow from US$3.5 billion to US$30 billion by 2015,” says Mirchandani. “The range of upscale malls will increase to cater to these discerning consumers.”
The malls may be moving in to cast their towering shadows over India’s fast-growing cities, but the traditional Indian high street, evidenced by dynamic shopping spaces such as Breach Candy in Mumbai and Begumpet in Hyderabad, will likely continue to be the mainstay of the country’s retail scene. These thriving neighbourhoods have the advantages of proximity and familiarity, and local retailers in India remain renowned for their high levels of personal service.
Realising the potential of these time-honoured market streets, international brands are also keen to set up shop. In Breach Candy, for example, street vendors selling exotic fruits are found alongside leading brands such as Sony and Gas, while Begumpet plays host to independent silk saree and pearl showrooms, as well as Levis and Samsonite.
It’s clear that India is experiencing a retail revolution but independent sellers are unlikely to be knocked out of the market just yet. New shopping districts such as those set up on Mahatma Gandhi (MG) Road in the city of Pune, which is fully pedestrianised on the weekends and replete with food and market stalls, continue to embrace the best of both worlds.
Initiatives like these are sure to keep consumers pounding the pavements of the high street as well as meandering through its increasing number of malls.
Click here for international property listings and reference articles
|
