Small is really big. The real growth in Indian retail seems poised to come from some of the so called second rung of cities, beyond the four metros and other megacities. Consider this: Surat, Kanpur, Jaipur, Lucknow, Nagpur, Bhopal and Coimbatore are the ‘boomtowns’ of the country, next only to the eight ‘megacities’ of India in terms of high expenditure per household (These megacities being Delhi, Mumbai, Kolkata, Chennai, Hyderabad, Bangalore, Ahmedabad and Pune).
Next comes the five niche cities of India, which are relatively less populated than the boomtowns but whose household spend is above the national average. These cities are Faridabad, Amritsar, Ludhiana, Chandigarh and Jalandhar. (All in Haryana and Punjab)
These eight megacities, added to the seven boomtowns and five niche cities are the top 20 Indian cities to look for, as per a new authoritative study, The next urban frontier: twenty cities to watch. The book is written by Rajesh Shukla of the National Council of Applied Economic Research (NCAER) and Rupa Purushottam of Future Capital Research.
While the deep pockets of the megacities is well known, it is the focus on the next set of cities and towns , which is interesting for both retailers in search for the elusive customer and brands who want to reach fertile grounds, despite the odds of brand disloyality, brand fatigue and last but not the least inflation. The study says that outside of the top 20 cities, annual household income for the rest of India would grow at 7.9 per cent, between 2008-16. But for these top 20 cities, annual household income would have a double digit growth of 10.1 per cent till 2016.
The boomtowns and niche cities may be much smaller in terms of their income and spending weights but they are growing rapidly, says the report. It states, “Many of the cities that have registered the fastest economic growth along with the highest asset and financial penetration, over the past five years have been within the boom towns and niche cities, not the typical megacities”.
The potential of the second rung of cities, has not been lost on the mall developers and retailers either. It seems that one mall developer, who has been way ahead in assessing the big potential of the second rung of cities is EWDPL. The entire strategy of the Manish Kalani led company is to usher in the mall development led retail phenomenon in the tier II cities of India. On the anvil are 50 shopping malls, 35 hotels and 10 residential townships.
At present EWDPL has one Treasure Island mall in Indore. By the end of this fiscal, four malls are expected to be completed. Indore Central, which is a 50: 50 JV between EWDPL and the Future group is slated to open in late October this year. A Treasure Bazaar, which is the neighbourhood format of mall offering from the group, will open at Nanded in the Marathwada region in early December. Another Treasure Island mall is coming up in Chattisgarh in early February.
According to EWDPL, apart from the fact that the tier two cities and the emerging cities allows the company to harness the real estate potential of these cities, the company has a clear cut strategy to be known as the largest tier II developer in India.
In short, the company is gung ho about the potential of such cities to generate future growth.
Tail piece: Along with the second rung of cities, there is a lot of action happening in the domain of retail technology in the country. Recently domestic IT major Infosys has come up with a software application, Shopping Trip 360, that aims to go a long way, literally, inside the mind and the shopping bag of the consumer.
It tracks the products that a shopper picks up and more importantly, what they don’t, what finally goes in the shopping cart as also routine informations about SKUs, stock details et al, using wireless sensors placed on shelves. In short, the software application will help in tracking both inventory and shoppers.