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Focus: Retail Sector
CHALLENGING TIMES...
The Retail sector is throwing
mixed signals currently. On the
one hand, reports are coming in
about the closure of retail outlets
and retrenchment of the staff.
On the other hand, reports are
flowing in about the expansion
plans being announced by vari-
ous firms both national and inter-
national. Amidst negative senti-
ments prevailing in the economy
triggered by the global financial
meltdown, there are signs of
hope and optimism that things
will get back to normal in India
within few months time. The out-
come is unpredictable, but one
thing is clear, the cost effective-
ness and better long term play
by the retail sector is assured.
Sandeep Sharma reports...
T
he retail scenario has changed dramatically con- the benefit of reduction in product prices to the end user,
sidering the high it has achieved by the end of remain content with lower margins but aggressively
2007. Just a year back, lot of expansion in retails pitch for more volumes to ensure overall profitability.
was being reported and expected.Companies like The companies like Vishal Retail are already negotiating
Reliance, Subhiksha and others were going ahead with for reducing rentals on existing locations, which have
plans to open hundreds of retail outlet across India become economically unviable or having expensive
despite higher store rentals. Now, after a year, things rentals.
have changed, one can hear reports of reputed stores
like Subhiksha announcing the closure of its number of Sectoral Composition
branches, Future Group reviewing its retail plans in the The sector is composed of organised and
light of real estate project’s delay. Many of the retail sec- unorganised retail. According to Ernst & Young report
tor companies are going slow on their expansion plans titled ‘The Great Indian Retail Story’, there are about 12
and people losing jobs in hundreds who were part of this million retail outlets spread across India. Out of this,
lucrative sector. The retail sector share in India’s GDP was around 80 per cent are run by small family businesses
estimated at around 8-10 percent in 2007 and was which use only household labour.As per the estimates of
expected to reach 22 per cent by 2010. But the current Indian Council for Research on International
scenario doesn’t speak much of this target becoming a Economic Relations (ICRIER), the consuming class with
reality by 2010. Due to depressive market conditions, annual household income above Rs 90,000 is expected
the retail rentals has dropped by 30-40 per cent. The sur- to rise from about 370 million in 2006-07 to 620 million
vival of the organised retail very much depends on how in 2011-12. Consequently, the retail business in India is
well they are able to cope with changes and go ahead estimated to grow at 13 per cent annually from US$ 322
with re-negotiations for decrease in rental, trim down billion in 2006-07 to US$ 590 billion in 2011-12. The
administrative and logistic cost, formulate good schemes unorganized retail sector is expected to grow at about
to attract the customer to sell their merchandise, pass on 10 per cent per annum with sales rising from US$ 309
Project Reporter 9 March 1, 2009
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