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Special Report: Malls Are Fast Emerging
Posted by Pradeep Sadanapalli | December 7, 2007 | 382 views
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Loading ...Malls are fast emerging as temples of modern retail revolution and even space constraints and adverse state policies will not be able to stem the tide. Prabhakar Sinha reports.
Despite opposition from a section of retailers and the decision of state governments like Uttar Pradesh to ask for the closure of organised retail outlets, particularly in the agricultural products, India continues to be one of the most attractive retail markets in the world.
Though the recent developments are a setback to the new retail revolution that is taking place in the country, analysts say it is temporary in nature. In the long run, modern retailing would flourish, as this is the need of the hour. This is quite evident from the fact that one of the largest retail chains of the world, Carrefour, is going ahead with its plan to start its business in India, under franchisee model, as foreign direct investment in retail business is not allowed in the country. According to a reliable source, the company has already zeroed down upon three domestic players to venture into the business. A company source said a number of players had shown interest in forging partnerships to start retail business in the country. He said the company would roll out its retail chains in a number of cities by 2009. The preparation to launch wholesale business under cash-and-carry model is already at a very advanced stage and it is likely to be launched within a couple of months.
Another global giant, Wal-Mart, has already joined hands with the promoter of telecommunication giant Airtel, Bharti Enterprises. Wal-Mart and Bharti plan to exploit the Delhi government’s desire to generate much needed relatively lowskilled service sector jobs by suggesting that the partnership could create 60,000 jobs over next 5-8 years. In this model, while Bharti will manage the front end, Wal-Mart will handle the back end of the operations.
A number of domestic players are also planning to venture into the business as it has emerged as a sunrise sector in the country. A senior analyst said that with the expansion of the existing cities and the development of a number of new ones in the form of private townships and special economic zones, there would be a huge demand for modern retailing in the country. Besides, with the availability of better quality goods and food stuffs, there would be a popular demand for malls in the existing cities, he says.
He adds that even states like Uttar Pradesh,which had banned organised retailing in agri-fresh products, saying that it causes law and order problem in the state, might find it difficult to hold out for long,as middle and upper-class people in cities want modern retail outlets as it helps them in availing better life-style goods.
ORGANISED RETAIL BOOM
According to a report of Cushman and Wakefield, by 2010 India’s retailing structure should start to look a lot more like China’s with a far higher number of organised retail chains. For this, India needs more organised retailing. Retail chains account for only about 5% of the market now, but they are expected to grow at an annual rate of about 25%.The source said this would not just boost the number of modern stores in India but also streamline the distribution and logistic sector by taking care of the current inefficiencies.
TREND
Opening up of any mall in the vicinity of a new township has inevitably led to the rise in real estate prices in the area. Not only this, the occupancy rates in the area have also gone up. As a result, all new townships are making a provision for malls in their area. Interestingly, the demand for space in a mall is very high. The rental rates for space in a mall is about double the prevailing rates in high street shops nearby.
As the economy has revived in the last four years, the disposable income in the hand of the Indian middle-class has also gone up.This has led to a hike in demand for consumer items, which has pushed the profitability of retailers in the country substantially. This is also evident from the rise in the rentals of retail outlets in cities like Delhi, Mumbai, Bangalore, Chennai, Pune and Hyderabad, among others.The rentals or retail outlets in Delhi have more than doubled in the last couple of years. In Gurgaon and Noida, the rentals have also more than doubled despite of the fact that a number of malls have come up in the region.
This clearly suggests that there is a huge shortage of retail space in the country. China has added massive amount of retail capacity - 2.4 billion sq ft between 1995 and 2003 alone. Against this, till 2001, the whole of India had just 1.5 million sq ft of modern retail space - just 5% of the total space added in china that year.
A retail-building boom has happened since then and by the end of 2006, India had 27 million sq ft of modern space. From just 30 malls in 2003, India will have nearly 230 by 2007. By 2012, India may have 14 times as much space dedicated to modern retailing as it had in 2002, provided the supply of land rises quickly enough to match demand, says the C&W report.
But still,the demand for retail space is currently outstripping supply.The continued increase in demand for quality retail space is putting pressure on prices.This is leading to increase in the entry and operating costs.Despite this,retailers are committing to space due to the confidence and viability of a profitable operation in the mid-term.
But, if the government facilitates the growth of the sector by providing land and other infrastructural facilities, this sector can transform the face of retailing in the country. This will also bring in efficiency in the entire supply-chain which will benefit the both the producers and consumers.
SOURCES:
Times Of India
Topics: Latest Trends, Consumer Market, Reports, Business News |
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