India’s organised retail sector is expected to add about 39 million sq ft of space in four years to the end of 2022, of which 71% will be in metros and tier-I cities, according to Anarock Property Consultants.
Anuj Kejriwal, managing director of Anarock Retail, a retail advisory service, told ET that Ahmedabad, Bhubaneswar, Ranchi, Kochi, Lucknow, Surat and Amritsar are among the metros and tier-I cities where the next chapter of growth is likely to unfold.
“The arrival of foreign brands forces domestic brands to up their game as well. This is what is happening in Indian retail, and what 'getting organised' is all about,” said Kejriwal. “Global retailers are now also eyeing cities like Chandigarh, Lucknow and Jaipur, to name a few.”
In an earlier interaction, Kejriwal had said the country’s retail market is projected to grow to nearly $1.1 trillion by 2020, up from nearly $672 billion in 2017, with organised retail growing at a CAGR of 20-25%. The market size of tier-II and tier-III cities is expected to grow to $80 billion by 2026, up from $5.7 billion at present.
The organised retail segment is projected to grow to 19% of the overall retail market by 2020, up from 4% 10 years ago, boosted by rapid urbanisation, digitisation, rising disposable incomes and lifestyle changes.
Over the past two decades, the Indian retail market has transformed from traditional shops to large multi-format stores in malls offering a global experience and on to the highly tech-driven ecommerce model.
Organised retailing refers to any trading activity conducted by licensed retailers from modern retail formats such as hypermarkets, supermarkets and departmental stores. Organised retail formats can exist either as standalone shops or occupy space in a mall.
Between 2015 and 2018, the sector has attracted cumulative investments of more than 5,500 crore, of which close to 1,300 crore was in 2018, said a report by Anarock. This made 2018 one of the best years for the Indian retail sector.
“The increasing involvement of foreign and private players in India’s retail infrastructure indicates long-term growth potential for organised retail in the country,” said Kejriwal.
The easing of restrictive foreign direct investment (FDI) policies, and the decision to allow 51% FDI in multibrand retail and 100% FDI in single-brand retail under the automatic route was followed by the entry of retail giants like Walmart and IKEA.
"There is huge demand of retail space from across segments and we are very bullish on retail. Prestige has six malls under construction, with most of it coming up in south India," said Venkat K Narayan, chief executive of Prestige Group, one of the biggest mall operators in the country.
Despite the positive numbers, organised retail in India is nowhere close to the level in more developed countries.
For instance, in the US, 85% of the overall retail market is organised, while in the UK it is 80%.