Arvind Singhal: Unlocking opportunities in retail

MARKETMIND

Against the total discretionary consumer spending exceeding Rs 800,000 crore a year, the largest retail business in India is just about Rs 600 crore.

Four of the largest retail businesses operate in the department store format (Shoppers' Stop, Westside, Lifestyle, and Pantaloon) adding up to no more than Rs 1,100 crore in annual sales, while the upcoming hypermarket and food grocery supermarket formats like Giant, Food World, and Big Bazaar may just about tot up a revenue of Rs 1,000 crore in 2004-05.

In the consumer durables segment, the top three players (Viveks, Vasanth, and Vijay Sales) may just notch up a combined revenue of Rs 500 crore in the current financial year.

Surprisingly, with all indicators looking quite encouraging for starting up a vast range of new retail formats, even today most of the attention seems to be focused on just three major business opportunities, e.g. department stores, food and grocery supermarkets, and now hypermarkets.

Undoubtedly, these businesses have tremendous potential and should certainly be looked at. However, it is also time to realise that India offers a much wider range of attractive options""both in terms of product categories as well as business formats.

In this column, I would like to highlight these opportunities in the area of product retailing. In some of the future ones, I shall also take up the opportunities in food and in lifestyle/personal care services.

In the product retailing category, some promising opportunities (amongst many) include:

Sari and Indian ethnic wear: It may surprise many to learn that in the Rs 100,000 crore household textile consumption (clothing and home textiles) market in India, the single largest category for spending is the sari. With the inclusion of "salwar suit" and intimate wear, the market opportunity is in excess of Rs 20,000 crore! Nalli remains the only real national player in the sari retail business but more players can make a play for an Indian hybrid comprising Nalli and Victoria's Secret (US).

Children's & maternity clothing/infant accessories: With over 25 million births every year, India is potentially one of the biggest markets in the world for products targeted towards women expecting as well as the new-born/infant. The range of products goes well beyond clothing, and includes a wide array of consumables, hardware, and accessories.

Toys: With such a high birth rate, and the global phenomenon of the toy category now being dominated by educational and video categories largely based on electronics/information, it is surprising that in even cities like Mumbai and Delhi, hardly any chains exist that focus on the toys and entertainment category (e.g. the currently beleaguered Toy's R Us or Early Learning Center).

Jewellery and Accessories: While the traditional need hierarchy is "roti, kapda, and makaan" (food, clothing, and shelter), in the Indian context it would not be improper to state it as "food, clothing, jewellery and shelter" if one were to note that at over Rs 45,000 crore in 2003, the jewellery market was perhaps bigger than the housing realty market! Tanishq remains the only real significant national organised player in this sector though there are a number of notable local or regional players. There is no reason why many more national businesses cannot be started in this field, offering contemporary fashion "off-the-shelf" product options to the burgeoning young middle and upper middle class consumers.

Footwear: This category is one of the few that have shown consistent growth in the past four years, and is very likely to continue to do so in the coming years. However, it is largely characterised by exclusive single-brand retail stores with some variety being provided by Bata as well as the department stores. Globally, chains like Foot Locker and Athletes Foot have carved successful niches in the active/outdoor footwear category while department stores provide the complete array of selection in the formal and casual wear segment. Loft in India is an encouraging example but many more need to start up on a national basis.

Gifts and artifacts: Gifting is one of the fastest-growing activities in India with gift occasions not limited just to weddings and birthdays. Yet, most of the interesting options as far as retail is concerned remain the state emporia like Cottage Industries Emporium which are otherwise not the epitome of consumer-friendliness. Private options based on the state emporia as well as on global role models such as Crate & Barrel (US) should provide a good business opportunity.

Sports/outdoor lifestyle: Related to healthy living as well as active lifestyle, there is an outstanding opportunity in retailing sports, leisure, and outdoor-activity products modelled on successful international retailers such as Decathlon, REI, and JJB Sports.

Even in the large format retail options, hypermarkets are a great opportunity but Indian adaptations of successful retail businesses such as Ikea (Furniture), Best Buy (Consumer Durables and Electronics), and Home Depot (Home Hardware/Maintenance), should be seriously considered and launched.

This list by no means is not exhaustive but only illustrative of the incredible entrepreneurial opportunity India currently provides in the retail sector. What is needed is the ability to think (in this case) on the obvious rather than only the Wal-Marts, the Macy's, and the Tescos.

These globally successful businesses can rather be role models for efficiency, convenience, customer-friendliness, and value while the product category offer can be based on current Indian market needs and preferences.

Hopefully, in the coming years, we would see many or all of these opportunities taken up by existing Indian business groups as well as new entrepreneurs.

arvind@ksa-technopak.com