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Retailer’s Sharpen their Focus
An economic slowdown is prompting India’s retailers to sharpen their focus, while foreign firms are pausing after scrambling to enter a market named most attractive retail destination three years running. As economic growth picked up to more than 9 percent in recent years, a swelling middle class attracted big Indian corporates such as Reliance, Tata Group, Aditya Birla group and Bharti Enterprises to the retail sector. Global retailers Wal-Mart, Tesco and Germany’s Metro AG also felt the pull. But the lure has dimmed as economic growth has slowed to below 7 percent and spending has tightened.
Retailers are closing stores, curbing spending and repositioning themselves to ride out the tough times. But the shake-out should leave the sector in a stronger position to take advantage of any rebound in growth, analysts say. Brokerage Edelweiss Securities expects the upheaval to last 12-18 months. “This will test the resilience of business models and operational efficiencies. Players who can continue to attract consumers with attractive discounts and maintain efficiencies in the system will emerge winners,” Edelweiss analyst Priya Ayyar said in a report. “We expect value retailers like Pantaloon Retail to fare better.” A.T. Kearney, which ranked India the most attractive retail destination from 2006 to 2008 in its annual Global Retail Development Index, last year valued the Indian retail market at $511 billion.
It sees this rising to $833 billion by 2013. But in a market dominated by small-scale owner-operators, often using basic and temporary premises, organised retail is estimated at less than 5 percent, offering huge potential for growth.
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