The booming retail industry and its future

The Chennai Retail Summit organized by Retailers Association of India (RAI) was held on Wednesday last week. The summit was chaired by Dr K. Rosaiah, Governor of Tamil Nadu who expressed the need for modernization of retail to keep pace with the changing lifestyle of consumers, in his inaugural speech.

According to Dr Rosaiah, various major retail brands have established themselves in Tamil Nadu owing to its excellent infrastructure in terms of road and rail connectivity, water, skilled labor pool and telecommunications network. He also spoke of the state's initiatives to boost the retail sector as a significant ‘thrust area' along with the pragmatic approach to support the industry, contributing to the growth of retail.

The state has seen developments in the retail sector ranging from consumer durables segment to fashion garments and also books. (Read more)

At the national level also, the retail sector is growing at a significant rate. One of the major factors for the growth of retail in India is the vast consumer base owing to diversity in culture, religion and social customs that encourage generous spending on occasions, especially marriages. Retailers worldwide are keen to enter the Indian market. Here are some of the other factors contributing to the retail boom: (Read more)

• Increased consumerism with a capacity to spend on luxury items
• Increased spending power in the hands of young consumers as well
• Exposure to different cultures, international lifestyles and more brands

However, there is cause for concern that threatens the growth of the sector in the long run. B.S. Nagesh, chairman, RAI, feels that even though the spending capacity of the consumers looks strong at present, poor market sentiment will eventually make it weak.

One of the major factors of hindrance will be downtrading due to economic slowdown where disposable income comes under pressure. Downtrading from consumer's point of view happens in functional and basic categories like detergents, soaps, toothpastes, where buyers may not mind switching from premium bath soap to a cheaper brand of soap.

Another troublesome factor, according to Nagesh is the escalating operational cost of retail outlets including rental, power and employee cost. Scarcity of land in India's urban centres is posing a big challenge for construction of malls or shops even though several cities seem to hold great potential for retail growth and development. This is affecting expansion plans of ambitious retail brands wanting to establish their presence across different markets in the country. (Read more)

Other interesting reads:

- Scope of Retail Management in India is Growing: Survey

- Ideal Retail Course