I think my mother would die if she walked into a store to find the aisles narrow and the shelves that should fit 50 items holding 75. But this is the norm in India. In fact many hypermarket retailers deliberately outfit their stores with narrow aisles and overflowing display bins that simulate the feel of open-air markets common in India.
The bazaar-style shopping is so common that organized stores only account for 4% of India’s $322 billion retail industry. This percentage is expected to increase to 22 of $427 billion by 2010.
The difficulty with retail in India is the country’s diverse population and distinct regional cultures. When you say Indian consumer, there is at least 10 distinct consumers. Cultural and religious preferences influence how a consumer and region shop. For example, types of rice and how people buy it differs in the north and south. In the north, rice is sold in open sack so consumers can inspect the goods. In contrast, in the south rice is common staple and sold in sealed packets.
Tiny, crowded, hole-in-the-wall neighborhood shops have an advantage over “organized” retail. Small shopkeepers know their customers personally, offer free home delivery, let customers order by phone and keep a tab. It is not uncommon for a CEO to order his groceries over the phone and pay the bill at the end of the month. Personal service has been traditionally favored, and it is the cultural custom that the large foreign box stores are having trouble competing with in India.
Not only is India emerging as a luxury retail leader, it is also attracting retailers from around the world, especially the West. Foreign retailers that are expected to enter the Indian market include: Germany’s sporting goods company Adidas, UK’s health and beauty company Alliance Boots, fast fashion retailer Topshop, American grocery store Kroger, French hypermarket Carrefour and Dubai’s Max Retail. These retailers are not interested in opening just one store, but rather anywhere from six to several hundred. Adidas plans to open 6 of its Originals stores, while Alliance Boots hopes to be in over 300 units. Along with expanding the international retail presence within the country some Indian corporations like jewelry company, Tanishq, are venturing outside India. Within the next several years, Tanishq plans to open 25 stores in the United States.
As India continues to gain economic power, debate over whether to encourage local and traditional, or foreign and modern retailers also gains importance as an often-controversial topic. While many Indian consumers greatly oppose organized and large retail and prefer local markets, there are others that believe that those same retailers are necessary to the betterment of the country. For example, in the western state of Maharashtra, local farmers are developing their own chain of grocery stores where they will sell directly to the consumers. Additionally, local neighborhood merchants, known as kirana stores, are hoping to have legislation passed that would help ensure their protection and longevity amidst the competition from the new malls and large-scale retailers. To help these small retailers, mall developers are also using different methods of rent models, where rent is determined by either percentage of revenue or a set minimum rent, whichever is higher.
