DISCOUNT RETAIL IN INDIA TO REACH Rs.30,000 Crore By 2012

By: Bharat Ratna

Discounts stores which were mere dump yards for factory seconds a few years ago have emerged as a brand new business opportunity for Indian retailers. These stores no longer stock export surplus rejects and offer a great value proposition to the savvy, price sensitive Indian consumer, in price, ambience, service and overall shopping experience.

Indian Retail Business Scenerio

o Market size (total) 2006: US$ 300 bn/annum o Market size (total) 2010: US$ 427 bn/annum

o Market size (total) 2015: US$ 637 bn/annum

o Market size (modern retail) 2006: US$ 9-12 bn/annum

o Market size (modern retail) 2011: US$ 60 bn/annum

o Annual rate of growth (modern retail): 35%

o Penetration (modern retail) 2006: 3 to 4%

o Penetration (modern retail) 2010: 10%

o Number of retail outlets (total): 12 million

Retail Space

o Typical space per outlet: 100 to 500 sq.ft. o Space occupied (modern retail): 35 mn sq.ft.

o Operating Malls 2007: 114 (35 mn sq.ft.)

o New Malls under construction: 361 (117 mn sq.ft.)

o New space distribution: 65% (top 7 cities), 35% (tier II & III cities)

o New space distribution (among top 7 cities): NCR 34%, Mumbai 23%, Rest 43%

While discount retailing is the fastest growing segment in retail worldwide, the next decade in organised retail in India will be dominated by it, said Mr R. Subramanian, MD, Subhiksha. Subhiksha is the largest Indian supermarket, pharmacy and telecom chain, which introduced an ‘every day, low price format’ in 1997. Analysts say, the opportunity in the discount retailing space will peak at Rs 30,000 crore by 2012 and Indian retailers have massive ramp up plans to capitalise on this trend. What is a discount store? “Any store that sells 60 per cent to 70 per cent of its merchandise at 15 per cent to 25 per cent or more, below the maximum retail price, all through the year, qualifies to be a discount store,” said Mr Gibson G. Vedamani, CEO of Retailers Association of India.

According to Mr Venkatesh Kumar, business head, Big Bazaar, south, discount stores are a big draw attracting footfalls from up to 50 per cent of households in the Southern markets. Future Group is gearing up to double its Big Bazaar footprint from 89 outlets to 170 across the country, by 2009 end. Subhiksha, which offers up to 25 per cent discounts is ramping up from 1,380 stores to 2,200 by March 2009.

“Nearly 20 per cent to 25 per cent of revenues of most brands comes from discount sales” averred Mr Rajesh Seth, vice-president Marketing, Central & Brand Factory (Future Group). Brand Factory sells surplus merchandise of various brands at discounts ranging up to 50 per cent, along with great service and ambience, he added. The company has plans to ramp up to 50 outlets by 2010 from 6 at present.

Megamart from Arvind Mills, a medium format discount store offering year-round discounts ranging up to 65 per cent has a presence in 32 towns with 85 outlets. It recently opened a large format store spanning 50,000 sq. ft in Chennai. “We are planning to open five more large format Megamarts this year, with the second outlet opening in Pune next month” said Mr J. Suresh, CEO, Brands & Retail Division, Arvind Ltd. Coupon Mall from Prateek Lifestyle Ltd, is yet another large format discount mall offering discounts up to 50 per cent on over 140 brands.

Present in Bengaluru and Raipur, the company plans to ramp up with Coupon Mall launches in Mumbai, Hyderabad, Delhi NCR and Kolkata this year.Consumers got their first taste of deep discount retailing with the entry of My Dollar Store in Mumbai in 2004 from Sankalp Retail Value Stores. Today, there are as many as 50 My Dollar Stores across the country with 50 more planned for fiscal 2008-09, said Mr Soumitra Ghatak, CEO, My Dollar Store.