Retailers to invest $20b, cut prices

Look no further for the next big story in India Retailing is here. Entry of big business houses like Reliance, the Bharti Group and the Tatas and a flurry of high profile appointments is only the precursor. Investments job and consumer bonanza should follow soon.

To go hypermarket: Ernst & Young New Delhi: Hypermarkets will be the most preferred format for international retailers entering India, according to the annual retail report by Ernst & Young. The report adds that malls will move beyond the metros and increase presence significantly in tier II cities. The retail penetration will be highest across footwear and clothing segments, adds the report. It further says that franchising will gain steam with retails.	According to consultancy firm Technopak, the industry will see $20 billion of fresh in vestments (excluding investments in real estate), at least 6.5 million new direct and indirect jobs and 2,000 hyper markets coming up in the next five years. But the biggest news is for the consumers who will see a 3-5% dip in food and grocery prices over the next five years. "Big buyers with bulk orders will invest in supply-chain, eliminate middlemen, remove inefficiencies and make it a win-win situation for the producers as well as the consumers," says Arvind K Singhal, chairman, Technopak. Considering that 40% of a consumer's shopping basket comprise of fresh fruits and vegetables this will lower their conventional grocery bills and increase their disposable income.
Wastage in the vegetable and fruit supply chain in India is estimated at Rs. 50,000 crore annually. "So far farmers and consumers both have been losers – the former got little money for his produce and the latter paid far higher price for it due to middle men. That will change," Singhal says. The entry of big players, MNCs included, will mean that retailers will enter into direct contract farming with fanners and lift produce directly from the fields. This will also dramatically change the face of the $230-bil-lion retailing industry in India. So far, fragmented and small scale, the sector has primarily been dominated by 6 million kirana stores. At $7 billion, organized retailing is barely 3% of the total market. In the next five years, Singhal expects it to grow to around $80 billion. "But this will in no way mean the end of kirana stores – as is being discussed and feared today," he says.