Around 315 hypermarkets are expected to come up in tier I and II cities of India by 2011 to sell off all articles from automobiles to needles under one roof as by then recovery from current downturn would have firmly established, according to a joint study by industry body Assocham and KPMG.
The study entitled ‘Reinventing India’s Retail Sector’ in its analysis of Feasibility of Hypermarkets in tier I and II towns between 2008-11 points out that even in year 2008, 212 towns had sufficient market potential for hypermarkets for break even existence. However, the study pointed out that the potential of those markets are yet to be realized by the industry. “That is a different matter that this potential has yet to be realized,” stated the report.
The report further stated that organized retail, which is growing at 20 per cent annually, is encouraging mall building activities at phenomenal rate, which would ultimately amount to creation of chains of hypermarkets.
Sajjan Jindal, president, Assocham, said that given the expected growth in number of households as well as in income and consumption per household in urban India, particularly in its leading 25 towns, 5 or more hypermarkets per city are feasible even in 2009.
“Going forward, in 2011, this number is anticipated to grow to 52 as a few tier III towns also gain the market potential to support 5 or more hypermarkets. Tier IV towns that constitute the bottom of the pyramid, considered for this analysis emerge as unviable for modern retail formats not only in 2009 but also in 2011,” said Jindal.
The Assocham president, however, pointed out that after 2011, the organized retail would grow by 15 per cent as enough competition will have emerged by then and the Chamber expects that in most of 400 good towns in India, the number of hypermarkets would have risen to 475.
The study further pointed out that tier III, IV and V towns should be on the radar of retail majors today, since even if they decide to set up stores in these towns three years from now, planning for the same should begin at this stage. Further, in case of a large number of towns beyond tier I and II, one hypermarket may be sufficient to cater to consumption of that town due to which a first mover advantage will be crucial. “This fact necessitates the need of evaluating potential of these towns beyond tier I and II as early as possible,” the study stated.
— IndiaRetailing Bureau