“The real GDP is expected to grow at 8 to 10 per cent per annum in the next five years. As a result, the consuming class with annual household incomes above Rs 90,000 is expected to rise from about 370 million in 2006-07 to 620 million in 2011-12. Consequently, the retail business in India is estimated to grow at 13 per cent annually from USD 322 billion in 2006-07 to USD 590 billion in 2011-12,” states the findings of the report furnished by the Indian Council for Research on International Economic Relations (ICRIER).
The study also shows that the unorganised retail sector is expected to grow at about 10 per cent per annum with sales rising from USD 309 billion in 2006-07 to USD 496 billion in 2011-12.
“Given the relatively weak financial state of unorganised retailers, and the physical space constraints on their expansion prospects, this sector alone will not be able to meet the growing demand for retail,” analyses the ICRIER report. “Hence, organised retail which now constitutes a small four per cent of total retail sector is likely to grow at a much faster pace of 45-50 per cent per annum and quadruple its share in total retail trade to 16 per cent by 2011-12.”
The majority of unorganised retailers surveyed in this study, indicated their preference to continue in the business and compete rather than exit. “This represents a positive sum game in which both unorganised and organized retail not only coexist but also grow substantially in size,” said the report.
The study comprised of a survey of all segments of the economy that could be affected by the entry of large corporates in the retail business. The findings are based on a survey of 2020 unorganised small retailers across 10 major cities; 1318 consumers shopping at both organised and unorganised retail outlets; 100 intermediaries; and 197 farmers. In addition, a ‘control sample’ survey was done of 805 unorganised retailers who are not in the vicinity of organised retail outlets in four metro cities.
On the impact on unorganised retailers, main findings suggest, “Unorganised retailers in the vicinity of organised retailers experienced a decline in their volume of business and profit in the initial years after the entry of large organised retailers. However, the adverse impact on sales and profit weakens over time.”
Meanwhile, the report did not find an evidence of a decline in overall employment in the unorganised sector as a result of the entry of organised retailers. Further, the rate of closure of unorganised retail shops in gross terms is found to be 4.2 per cent per annum which is much lower than the international rate of closure of small businesses, the report said.
On the impact on consumers, the study revealed that consumers have definitely gained from organised retail on multiple counts and their overall spending has increased with the entry of the organised retail.
While all income groups saved through organised retail purchases, the survey revealed that lower income consumers saved more. “Unorganised retailers have significant competitive strengths that include consumer goodwill, credit sales, amenability to bargaining, ability to sell loose items, convenient timings, and home delivery,” he study added.
— IndiaRetailing Bureau