Will the new entrants benefit?

The Indian retail market, being the fifth largest retail destination globally, has been ranked the second most attractive emerging market for investment after Vietnam in the retail sector by AT Kearney's seventh annual Global Retail Development Index (GRDI), in 2008. The share of retail trade in the country's gross domestic product (GDP) was between 8–10 per cent in 2007. It is currently around 12 per cent, and is likely to reach 22 per cent by 2010.

But how far are these predictions true with the new policies and the signal that retail trade sector may not be opened any further by the government in order to protect the interests of small traders as the retail industry is the second largest employer after agriculture. Also with Parliamentary Standing Committee report opposing the entry of heavyweights into the retail trade, Indian Retailers looking for foreign tie-ups are in a cautious mood. Faced with the double-edged sword of slowdown and Government policies restricting stake dilution, retailers and market analysts observe that foreign inflow and technical know-how, crucial to the business, could be hampered,

And how does this really effect the entrant of big international players which had been eyeing India as a big retail market? Ikea has already dropped its India plan although there have been studies showing that opening the retail trade sector does not really indicate any decline in overall employment in the unorganized sector as a result of the entry of large companies into the business and it also shows that farmers actually benefit “significantly” by selling directly to organized retailers with a profit realization of about 60 percent higher than that received from selling in the mandi (wholesale market),” as per the Icrier report.

Looking at the current scenario we see that Indian cities have the potential to have over 300 new hypermarkets by 2011, mostly in tier-I and tier-II cities and even in 2008, 212 towns had sufficient market potential for hypermarkets for break-even existence. Also today things are gradually picking up momentum especially in the country’s home retail segment  which was among the categories worst affected by the slowdown with a decline of 15-25% in sales for e.g. leading players in this segment are hopeful of the trend picking up further steam, especially with the festive season right around the corner.  One can only watch and be hopeful about the quick revival of the retail segment.