Indian Retail sector: Next big wave?

Indian retail sector is undergoing a sea change. According to the study conducted by ICRIER, total retail business in India will grow at 13% from 322 billion $ in 2006-2007 to 590 billion $ in 2011-2012 and further to 1 trillion $ by 2016-2017.

Recent phenomenal changes in single brand retail FDI policy and significant discussion emanating towards allowing 100% FDI in multi brand retailing will be having a game changing impact on the modern retail sector in India. AT Kearny has ranked India at 5^th position in its Global Retail Development Index (GRDI). GRDI is unique because it does not just identify markets that are bigger or richer but markets with bursting with hot opportunities.

As per the Economist Intelligence unit though retail percentage contribution to India’s GDP is around 40% but organized retail penetration in India is only 6%. However the recent FDI policy changes are bringing along a sea change in the retail landscape.

As per the government regulation at least 50% of investment needs to be made for the backend infrastructure. IKEA (single brand) brand to invest 1.5 billion euros to open up 25 stores in India. It has decided to roll out 600 million Euros to set up 10 stores in India. With the Indian government planning to open up the sector for multi brand retail stores we can expect huge investment in India from the global players like Wal-mart and Carrefour.

Under the obligation to invest at least 50% investment in the backend infrastructure, one can foresee huge investments by these multinational giants in setting up of supply chains and related systems. Germany based Metro group has partnered with SAP, Intel, Microsoft and IBM to implement RFID technology which will gradually replace bar coding. Such technologies would percolate down to Metro stores in India. There appears to be no reason why similar partnerships and investments could not be expected by other international retailers in Indian market

Therefore to summarize I observe that retail sector is going to be the next booming bet for Indian economy. If the regulations permit we will notice multiple multinational retail brands making great investments in their supply chains and related IT systems. The question left to be answered is how ready are we to exploit this opportunity?