Retailing Boom and Real Estate Trends

The world of retail merchandising has come a long way since the days when general stores, that stocked everything from groceries to stationery, and small kirana shops that sold limited varieties of products, reigned supreme. There is a movement now from the unorganised to the organised sector. There are now more modern retail formats such as supermarkets and malls. Several companies are setting up exclusive showrooms and large format stores and several others are expanding. The whole concept of shopping has altered in terms of format and consumer buying behaviour, ushering in a revolution in shopping in India.

For Example, Metro Rail Project in NCR has ignited this trend to an extent that every property builder in the Capital Region have something to do in Retail Real Estate Development. Bharti is also in talks with real estate developers including DLF, Unitech, Parsvnath and MGM for space for its retail venture, for both leasing and buying. The first store of Bharti Retail is expected next year as it had tied up with Wal-Mart for the backend cash-and-carry business.

Organised retail stores are characterised by large professionally managed format stores providing goods and services that appeal to customers, in an ambience that is conducive for shopping and agreeable to customers.

Taking their cue from foreign retail outlets with their focus on creative display of merchandise, a number of general stores donned a new garb. But the transformation was far from complete. The attitude remained the same. The traditional consumer, initially overawed by the new look and used to equating glitzy with expensive, refrained from entering the store. But newer consumer segments, including single women, college goers with allowances and working couples, enthusiastically took to the new concept.

A number of big players are entering the market. However, in spite of the momentum that the retail segment is experiencing, it is still seen as very nascent and unorganised. The per capita retailing space in India is very small in comparison with that in other countries.

There are many different retail stores in India - convenience stores, supermarkets, hypermarkets, departmental stores, brand stores and discount stores. The consumer can choose between different stores for different needs.

Till the early nineties, the organised retail industry had not evolved. There was no consumer culture, there were limited brands and people bought what was available. There were no ‘shopping areas’. The retail industry lacked trained manpower. It was also difficult to compete with the unorganised sector because they operated with minimal labour costs and overheads. Tax laws and government restrictions added to the problem.

Liberalisation has changed all this. The customer has evolved. He has more spending power, is better educated, and most importantly, exposed to brands and products through television and foreign trips. The Indian customer now has the desire to acquire. Personal consumption is on the rise. Customer segments, already diverse, have been sub-divided with joint families giving way to nuclear families, and the increasing number of working couples. This has also fuelled the residential property market.

These changes, along with increased availability of retail space and qualified manpower, have had a positive impact. New players are now entering the market.

In the days to come, supermarkets will face competition from kiranas. Perhaps, the Indian customer will go to the supermarket for his bulk needs and to his local store for his daily necessities.

A new concept in India is the hypermarket, exemplified in the Big Bazaar, the first of its kind in Mumbai. It is perceived as being successful because of its low pricing and the convenience of shopping for all items in one place.

The retailing boom in foodstuff has caught on only in urban India. Semi-urban areas, non-metros and rural areas are yet to feel the impact of retailing. Whether this will change will depend upon how near the supermarkets are located. Most people still associate supermarkets with "expensive" rather than "cost-effective". A number of stores have sought to counter this notion by projecting themselves as "value for money" stores.

In the apparel and consumer items segment, the retail industry has seen many changes. The Tata Group entered the retail industry in 1998 with Westside as it saw a growth opportunity in this sector. Today it has nine stores across the country. The metros now have exclusive shopping areas and upcoming malls.

Despite the aura associated with shopping malls, they have not taken off on the scale they were expected due to space and cost constraints. Malls require a lot of real estate, something not easy to find in a prime location. The high overheads and labour costs make their setting up an even more expensive proposition.

The promoters of a mall must realise that they have to create a shopping destination. Globally, malls are built by real estate developers, who take the help of retail experts. Malls must have the right tenant mix so that the clientele gets a good blend of products. There cannot be designers and bargain corners in the same place.

It is too early to say whether malls will be successful in the long run. Most malls have many small shops with one or two anchor stores, consisting of the large format stores.

Success would involve attracting diverse customer segments, including nuclear families, working women etc. to the malls. What would attract all these groups of buyers would be the wide choice and the comfort of being able to shop for everything in one place.