Organised retail to form 18% of overall retail pie: McKinsey

This may be good news for leading global retail players waiting to enter the Indian retail bazaar scene: the organised segment of the retail industry is expected to grow from the current 5 per cent of the total market to about 14-18 per cent of the expected Rs 18-lakh crore market by 2015. But a report by leading management consulting firm McKinsey and Co cautions global players waiting to enter the great Indian retail bazaar that a ‘cut and paste’ format of their stores elsewhere would not work here.
“They need to have innovative formats based on where to participate in the retail value chain, which geographies to play in and what price points to offer. They also have to craft a customer-insight driven merchandise strategy and create an efficient retail operating platform,” suggests the report. Indian shopper
McKinsey’s retail report also talks about the uniqueness of the Indian shopper vis-À-vis the rest of the world: least loyal to a single retailer, dislike for pre-packaged fresh foods, willingness to pay more for convenience and services but not a premium price for a brand and demands ethnicity in apparel accessories. And, in the absence of quality control, information about the product and trust in retailers, brands serve as a proxy for all these factors.
Of the current 204 million households in India, the report estimates that only about 13 million households have the income to patronise organised retail. The great news is that this relevant consumer segment will grow five fold from 13 million to 65 million households in the next eight years but mom and pop stores would continue to be relevant across the country, in both small and large towns.
The report, titled ‘The Great Indian Bazaar: Organised Retail Comes of Age in India,’ also suggests retailing in India would require an approach that is distinctively different from the rest of the world. To achieve leadership position in the sector, players would have to integrate real estate into the business model, create an effective and scalable supply chain, increase basket size by shaping consumption, develop and retain talent, influence regulation to ensure healthy development of the sector and to de-risk margins.
“Given the nascent state of organised retail and the rapid evolution of the industry, it is imperative for retailers, manufacturers, real estate developers, logistics providers and partners along the value chain to work in a collaborative spirit,” says Mr Laxman Narasimhan, Director, McKinsey & Co and leader of the Consumer, Retail and Media Practice in India.

Reebok Retail India set to bring in Classics

Reebok India, in an effort to capture the fitness-inspired lifestyle clothing market, is bringing its global lifestyle brand ‘Reebok Classics’ to India. The company will set up separate stores for Classics, 75 outlets by March 2009.

Reebok India has built up a lifestyle-product portfolio for apparel, shoes and accessories. It has signed up style icon Bipasha Basu and youth icon Yuvraj Singh to represent the fusion of fitness and lifestyle through Reebok merchandise. To be rolled out in the menswear and womenswear segment, Classics will cater to niche market of style-and-fitness conscious youth in the country.

Reebok India MD Subhinder Singh Prem told ET: “The lifestyle space will be a focused business for Reebok. We see more people interested in wearing stylised sportswear, and hence we will be rolling out up to 70 specialty lifestyle retail outlet stores by this year-end, besides existing 700 Reebok performance stores.” With the introduction of this new vertical, Reebok India expects to garner revenues of Rs 1,400-crore by this year-end. Reebok, currently, claims to enjoy 51% marketshare in the Indian sports-footwear and apparel market.


The global Classics collection to be launched in India will include lifestyle merchandise for dance, biking, NFL sports gear and street style. Besides these four ranges, the company will also launch designer products—a collection
under Hollywood actress Scarlett Johansson name, jeans styled by cricketer MS Dhoni, Manish Arora collection, besides many other inspired by global sports like skating, et al.

Indian Retail to Comprise 25% of Retail Revenue by 2011

As per Deloitte Haskins and Sells, the Indian organized retail market is rapidly growing and is expected to account for 25% of the total retail revenue by 2011.

A study by the accounting company Deloitte Haskins and Sells has found that the organized retailing in India is growing faster than anticipated. As forecasted in the study, the organized retailing could represent one-fourth of the total retail revenue by 2011 from its present 8% share, as reported by Livemint.

Presently, both organized and unorganized retail sectors in India are valued at $295 Billion (Rs 12.3 Trillion). The growth in the Indian organized retail market is primarily due to change in customers’ behavior owing to rise in income, changing lifestyles and demographic patterns – the most essential factors for the growth of the retail industry of any nation.

Moreover, the retailing framework is also growing at a rapid pace. Shopping malls are gaining popularity in India with new projects for shopping malls are being announced. Indian supermarkets have also captured a large chunk of the Indian food and grocery market. Customers also prefer to shop at a place where they get food, recreation and shopping facility under one roof that has boosted the Indian organized retail market.

Also, rising customer spending capacity and availability of credit is promoting organized retail market in India. By 2011, the growth in the Indian organized retail market is projected to grow strongly due to growing income, which will be further supported by the favorable demographic patterns. The success of organized retailers in India is largely due to reaching prospective customers at the lower end of the income graph.

However, as the retail market in India is growing, the distribution is also getting better, but it still continues to be a disorganized area. Poor standard infrastructure, together with weak distribution sector, cause high logistics costs, which is very high in terms of proportion of GDP.

According to a Research Analyst at RNCOS, “The biggest challenge in the Indian consumer market is distribution and marketing cost. Decline in distribution and marketing prices could allow retail sales to grow as anticipated. The Indian retail firms and retailers can apply innovative methods to cut down this cost, such as upgrading the existing infrastructure and introducing new methods like public relation to sustain growth in organized retail sector of India

This article was first seen on: http://www.rncos.com/Blog/2008/06/Indian-Retail-to-Comprise-25-of-Retail-Revenue-by-2011.html