The retail sector which is emerging as one of the most dynamic and fast paced industries in the country accounting for over 10 percent of India’s Gross Domestic Product (GDP), is expected to grow by 9.5 per cent annually, says a Ernst and Young Report.
The report, released here today by Chairman of Federation of Indian Chamber of Commerce and Industry (FICCI) Retail Committee, Rajan Bharti Mittal, said the retail sector in the country was highly fragmented with over 12 million unorganized retailers across the country.
“More than 80 per cent of these outlets are small businesses using household labour. With the entry of large modern retailers over the last few years, the share of the organized market has been growing rapidly to reach five per cent of the total market,” the report said.
It said India will follow China and Brazil in establishing the modern retail formats over the next ten years.
“Within the retail sector in India, organized retail in consumer durables and apparel categories have gained higher penetration levels of over five per cent and 15 per cent respectively, while food and grocery retail category penetration stands at around one per cent,” the Ernst and Young report said.
It is indeed ironical that while food and grocery is the largest category as far as consumers were concerned presenting the biggest opportunity for the organized retailers, yet the penetration of this sector by them has been low, the report said.
According to the report, one of the major challenges facing the retail sector in India was an underdeveloped supply chain apart from the losses of about US$120 to US$ 130 million annually due to frauds, thefts and employee pilferage, shop lifting, vendor frauds or inaccurate supervision despite installation of modern security systems.
Another obstacle in the growth of organized retail was inadequate infrastructure such as poor quality of road networks, power shortages and insufficient storage spaces, the report said.
The multiple taxes at the state and federal level, lack of clear policies on the entry of foreign retailers and huge shortage of experts in areas such as supply chain and store management were also hampering the growth of retail sector, the report noted.