Hypermarkets to rule the roost in retailing

The domestic retail landscape is set to see a greater shift towards hypermarkets and value-retailing as retailers increasingly focus on tier-II cities.

A report released by Ernst & Young said the hypermarket route has emerged one of the most preferred formats for international retailers entering India.

In most emerging retail markets, such as Eastern Europe, Latin America and China, hypermarkets have been the major high growth format.

Ranjan Biswas, partner, Ernst & Young, said, "Of the 12 million retail outlets, more than 80 per cent are run by small family businesses which use only household labour. It took 10-15 years for China and Brazil to raise the share of their organised retail sector to 20 per cent and 38 per cent respectively, from 5 per cent. India too is moving towards growth and maturity in the retail sector at a fast pace."

Currently, in India, there are less than 50 hypermarkets operated by four-five large retailers. The report said India's 67 cities "" with population of half-a-million or more "" have potential to absorb many more hypermarkets in the next four-five years.

Drawing a parallel with China, the report said there is some similarity in the buying pattern between India and China, and hypermarkets have been extremely successful in China.

The other trend the report pointed out is that most multinationals, which are planning to venture into the Indian market, would take the franchisee route. Franchising is gaining steam with retailers and the franchisee activity in tier-II cities is expected to surge.

Biswas said as the Indian market is extremely diverse with each state and region having different preferences, franchising has become popular with multinationals.

Although the government is likely to continue with its cautious approach towards allowing more FDI in the sector, moves like the 51 per cent FDI for retail trade in 'single brand' products will attract more investment, technology, international best practices, catering to the demand for branded goods in India.

The report also said fraud and theft are turning out to be the biggest problem the sector is facing, apart from hurdles like lack of trained manpower and an inefficient supply chain.