Nov 15 2012 | Focus

Going Forward

The retail sector  is about to benefit from the recent spate of announcements  by the Government of India  to open up the sector  for foreign investment. The decision to allow 51% FDI in multi-brand retail  is  largely debated. Big time retailers like Walmart,  Tesco, Carrefour are  waiting to  capture world’s largest market  that  exists  in India.  Domestic retailers like Future Group,   Shopper’s  Stop   and  Aditya Birla Group  are gearing up to take ad- vantage  of the reforms initiated in the retail  sector.  It is believed that organised  retailing on a grand  scale  would ultimately benefit  India in terms of better pricing for  the farmers, setting up of cold  chains, warehouses and streamlining of other  supply chain  issues.  The middle class  segment having  increased  purchasing  power forms  the major chunk of the consumer bouquet. They are likely  to benefit from  lot of competition in the retail space  and  strengthening of  the  supply chain.


The retail sector faces an uphill task in terms of i) establishing supply chains. ii) small players consolidating into organised retail outfit to reap benefits of economies of scale. iii) building storage capacity by constructing cold chains, warehouses, godowns is another challenge iv) getting trained personnel to conduct retail operations. v) customising delivery mechanism as per the requirement vi) changing customer habits towards packaged products vii) maintaining balance between quality v/s quantity in their product offerings. It is highly challenging for the retailers to retain customer attention amidst highly competitive environment. The consumption pattern is ever changing, retailers and consumer goods  producers need to be quite alert about changing consumer tastes and preferences. They need to develop innovative strategies to attract more business. The focus should be on coming out with new business models or upgrade the existing ones constantly in order to match up with the changed market scenario.


As per the FDI policy announcement for multi-brand retail. The foreign investor will have to invest at least 50% of total FDI brought in ‘backend infrastructure’ within three years of the induction of FDI. The ‘back-end infrastructure’ will include in- vestment made towards processing, manufacturing, distribution, design improvement, quality control, packaging, logistics, storage, ware-house, agriculture market produce infrastructure etc. This would open up window of opportunities for individuals in terms of increase in number of employment opportunities and more b2b opportunities for companies engaged in all the above-mentioned activities.


The biggest beneficiary of the expected retail  boom would be the real estate sec- tor. For developers like DLF, this translates into billion  dollar  opportunity.  DLF has 1.8 million sq ft under construction in Noida and is also likely to commence construction on India’s largest mall in Gurgaon sometime next year. Boom in retail is likely to rescue the falling real estate market where there are few  buyers and lots of inventory getting piled up. In cities like- Bangalore retail market is in the growth stage, with multi-tenant malls currently accounting for around 8.5 mn sq ft out of 7.5 mn sq ft are occupied. As per news reports, in Bangalore about 18 malls are currently in different stages of construction and development. This is to ensure that  upcoming  retail  opportunities  can be tapped.

As of now real estate pricing on the higher side including rentals is one big constraint in the path of retail sector growth. This issue should be addressed by all stakeholders to maintain growth momentum in future.  Due  to higher  construction  cost and lower retail footfalls, real estate companies like Realty firms like Suraj Develpers , K Raheja Corp, Sheth Developers and   others   are   planning   to   set   up smaller malls.


Bharti Enterprises is in talks with Wal- Mart to form a 50:50 joint venture to launch retail outlets in India.

Mahindra Retail, retail arm of Mahindra Group plans to open 50 ‘Mom & Me’ brand stores. They also plan to open 15 stores of its toy store, Beanstalk, over the next four months.

Evok is a retail chain promoted by Hindware group, deals with home interior solutions plans to invest Rs 250 crore for expanding its retail presence in key markets by 2014-15. They also plan to set up 8-10 mega home interiors stores by end of the current financial year.

Madura Fashions promoted menswear brand Allen Solly plans to launch another 20 stores across India taking it’s tally to 160 stores. The investment required per store is in the range of Rs 30-40 lakh.

Titan Industries, a joint venture between Tata Group and Tamil Nadu Indus- trial Development Corporation (TIDCO), plans to expand its accessories division.

Nahar Group company Monte carlo Fashions plans to expand both its manu- facturing capacity as well its retail business.

Ebony Gautier, master franchisee of Gautier, the French furniture major, has plans to expand its retail business in India.


The future seems to be bright and promising for India’s retail sector. As per FICCI study, India’s retail sector current value is around $ 500 billion  and it is ex- pected  to touch $1.3 trillion opportunity by 2020.

Sandeep Sharma, Executive Editor / Project Reporter

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