East India is in the cusp of being transformed from a traditional customer base into a brand conscious, product-savvy market. Its young generation is shopping and demanding both fashion and quality along with value for money spent from retailers. Retailers – big and small, branded and unbranded, regional, national and even international – are gearing up to meet these impossible demands retailers, and some very successfully.
To cater to evolving consumers, retailers are waking up to the importance of managing retailing efficiently and effectively. Retail management saves time and ensures the customers easily locate their desired merchandise and return home feeling satisfied that they have received what they have paid for.
The consumers’ ambitions to reach global standards in lifestyle, coupled with high disposable incomes, are aggressively scripting a radical change in the business viability of organised retailing East India. Retailers are formulating new and modern strategies and tactics to keep up with changing consumer dynamics and accordingly provide the best for their users.
IMAGES Retail Bureau, spoke to the Retail Czars of the East, who gave us details on their growth, industry trends, challenges and how to overcome these bottlenecks. Here are excerpts from the chat…
Industry Overview & Growth
The retail sector is India is the second largest employer after agriculture. In East, the sector used to be highly fragmented and predominantly consisted of small independent, owner-managed shops. In the last decade or so, the region has slowly eased into the groove of modern trends. Rapid urbanization has boosted consumer demand in the fields of fashion, F&B, and luxury – which in turn has given an impetus to retail growth.
“Over the past few years there has been a dynamic change in East in terms of retail. All good brands in all different fields have come up and many are in the pipeline. I think retail has a huge scope, to take an example eastern India largest mall South City mall is going under a tremendous renovation. The reason behind this is that all big retail brands are coming there. Even we have one showroom there and soon we are coming up with another one in the same mall. Jewellery retail is different, people prefer to come to the store and check it out themselves before making a decision to buy. In past three to four years, we have seen a drastic change in East specifically in Kolkata with new malls and new brands emerging, which is definitely a positive sign for retail sector, said Pratik Dugar, Director, Indian Gem and Jewellery Creation.
“The Indian retail industry has emerged as one of the most dynamic and fast-paced industries with the entry of several new players. The industry has immense potential as India has the second largest population with affluent middle class, rapid urbanisation and solid growth of internet. Smoothly riding the crest of Eastern India’s aspiration wave and changing shopping trends in the metros, Tier II and III cities of the region have driven the conventional trader-run stores to morph into more organized, large-format retail outlets. And, to facilitate this growth of retail, many retail realty projects have sprung up in all major markets of East India. The home furniture market of India has observed a steady evolution over the past decade with a shift in customer perception to choose organized brands instead of developing furniture products from carpenters. The increase in knowledge about designs, wood materials and pricing schemes has propelled the Indian customer to choose more branded products,” added Arun Biyani, Director, Mobel.
Retailers are of the view that Tier II cities are propelling retail growth and crafting success stories. Cities like Patna, Bhubhaneshwar, Ranchi and Raipur are showing extremely robust demand. Currently two popular formats – hypermarkets and supermarkets are growing very fast. From the brick-and-mortar format to brick-and-click and finally click-click formats – all are making their presence felt on the Eastern retail landscape, gaining momentum among Millennials.
“Retail market has been undergoing a tremendous makeover in Eastern India. The new age generation is more inclined to new ways of spending their disposable income, which is propelling growth of retailers. The onset of e-commerce has also created great awareness among people regarding brands and stores which are not even present in their cities. Thus, it becomes easier for new brands to set up in new cities,” said Vikram Khinwasara, Co-Founder, Yellow Straw.
“The Eastern region market is still developing – apart from a few Tier I & II cities most other smaller towns still depend on small mom-and-pop stores or they travel to bigger cities for their shopping needs. However, we are seeing more brand penetration in Tier III & IV cities with large formats like Bazaar Kolkata, Pantaloons and Reliance Trends foraying here. We are also seeing some excellent per sq. ft. and top-line revenues being generated from these smaller towns as well. With the spread of online shopping the brand exposure and aspirations have certainly increased across the region. Going forward more physical store presence and online presence will drive the growth and evolution of this market,” stated Shitanshu Jhunjhunwalla, Director, Turtle.
“The retail market of Eastern India is a growing market. Since the market is bare in comparison to the markets in the other regions of the country, the rate of growth is witnessing a continuous growth. It has always been a value conscious market and East India appreciates the brands that are value added,” added Suvankar Sen, Executive Director, Senco Gold and Diamonds.
According to Manish Agarwal, CEO East, Future Group: “The retail market of the East is very encouraging. The population density in Eastern States of West Bengal, Bihar, Jharkhand, Orissa and North East is quite high. Both urban and rural centers are doing quite well. Shopping in most part of Eastern India is highly influenced by community and regional festivals, which leads to high consumption of products in fashion and food categories. Modern retail penetration is increasing at a rapid pace. Competition in the organised retail space is comparatively low in the Eastern part of the country. Many of big cities of East India like Kolkata, Bhubaneshwar, Patna, Ranchi, and Guwahati are expanding rapidly and most of these cities act like regional centres leading to high resident and floating customers. Few cities like Siliguri, Durgapur, Asansol, Muzaffarpur, Cuttack, Jhamshedpur, Dhanbad, Bokaro, Rourkela are also developing and expanding at a good pace. Construction of new homes is also leading to growth in consumption of household products.”
Aksh Sahni, Business Development Analyst, Grace Craft Pvt Ltd, said, “As far as the retail industry in East is considered, the middle and lower segments are witnessing growth. The consumer wants value for money. The small growth in the upper segment of the market is pseudo growth in my opinion. I don’t consider that as growth. Factors propelling growth: Influence of progressive cities in the West, North and South while people from the East are majorly on jobs in those three regions. It is the demand of these people who have exposure to their culture that brings new brands and concepts to the East.”
“Purchasing power has increased over the last two to three years. We have opened three stores till now in East India and feel there is immense scope for retail industry here,” said Deep Agarwal, Director, Knot Me.
“Eastern India has been the least active region to contribute in the evolution of organised retail. While our peers from south and west were torch bearers, Eastern India remained focused on its traditional forte. In the last few years with the active support and participation of regional government, east is emerging as the fastest growing region in consumer electronics retail. It will continue to propose a strong and steady growth as emerging markets in Odisha and Bihar will shine in years to come,” said Pulkit Baid, Director, Great Eastern Retail.
Challenges & Bottlenecks
Eastern India has all the potential to become an upcoming hub of modern retail. But certain factors, including facilitation of entrepreneurship, creation of quality infrastructure and upliftment of poor are critical if consumers in East India are to take the lead in modern retail.
“Hurdles are never-ending there but the most important thing is we need to learn to cope with them. The introduction of GST in the jewellery section was one of the biggest challenges. The craftsmen who make the jewelry are not educated, they don’t know how to handle the accounts also but over the time they will get used to it,” said Dugar.
“First and foremost, the availability of quality real estate space at reasonable price is a major problem. The second challenge is scarcity of skilled and educated manpower and high rates of taxation,” added Biyani.
According to Piyush Kankaria Co-Founder, Yellow Straw: “One of the biggest problems in this part of the country is the mindset of the manpower which is an important aspect to run the retail outlets. A great product backed with an equally great sales team can do wonders. This can be probably resolved to an extent by extensive and continuous training.Another existing challenge is the mindset of the customers. If we leave aside the new age generation, people are quite averse to experimentation as most of them like to be in their comfort zone. New innovative marketing strategies can help overcome this particular problem.”
“There are two major challenges, First and foremost is the lack of real estate. Good malls or high street shopping areas where market exists is very few and concentrated. This makes store space availability very rare and limited and also increases the rentals costs for the same reason. The other challenge is the lack of trained manpower, especially in the smaller towns. When a brand penetrates the smaller towns – most of the managers and store staff have to be trained or brought from the larger towns. Emphasising on creating more training centres and manpower availability will drive growth in future,” said Jhunjhunwalla.
Knot Me’s Agarwal stated that in Tier II cities, people still prefer purchasing from a general store. They don’t distinguish the product on the parameters of brand and quality. They just go for it on the basis ofprice due to which the retail industry is growing slowly.
“The biggest challenges are the lack of quality infrastructure, retail spaces and manpower. The only way to overcome the bottlenecks is to invest heavily in the infrastructure and training of manpower. The special retail policy by the government should also be there,” added Sen.
“More than problems and challenges, we have a huge scope for improvement as the opportunity that exists in this region is quite large. There is a need for more availability of quality retail spaces, industry-friendly policies and newer labour laws to facilitate manufacturing and services. We need more high-street developments and newer shopping malls to come up. Future Group has always believed in the potential of East and continues to do so. All our retail formats have started from Kolkata and from there we have expanded to other cities of East and other parts of the country,” said Manish Agarwal.
Baid said that the biggest problem in the East was the absence of quality resources. “The absence of institutes and poor work culture forces retailers to compromise on the quality of the product available at their stores,” he stated.
“Lack of good malls is the prime concern in the Eastern part of the country. The Eastern region has very few good malls. We are miles behind premium malls of Delhi, Bengaluru, Chennai and Mumbai. For the good malls in the East, the rentals are disproportionate to returns. Any brand that opens for the sake of prestige bleeds to survive. Retail in big malls isn’t a money-making proposition in the East. Another problem is that the workforce in the East doesn’t show hunger for success and achievement thus the industry exhibits sluggish growth. The labour force is easily satisfied. This needs to change,” concluded Sahni.
Why the East is Lagging Behind
If you compare the Eastern markets to the retail industry in the North, South and West zones, the East is still lagging, although good brands have started tapping the region in all segments – F&B, clothing, and jewellery being the foremost.
“Everything takes time, but once it catches pace, everything falls in place. If we compare to the markets of Delhi, Mumbai or other cities in West and North, we still have a long way to go. I think East India, over the past few years has done a tremendous job of getting good brands to Kolkata and its nearest cities,” said Dugar.
“The industry should organize training and welfare meets with all the people. The government should make changes in the law, as many of them are old and are not even applicable to modern retail. Laws should be amended according to time and need. We also need to abolish ‘Inspector Raj’ and taxation should be moderate,” said Biyani.
According to Khinwasara, the presence of big brands is something that the Eastern part of the country is lagging behind in. “Most brands turn to East India only after they have established themselves in the West, South and North, which is surprising considering the fact thatease of starting or running a retail business is comparatively easier in this part of the country,” he said.
In Jhunjhunwalla’s opinion, the spending power and consumption habits in the East are more conservative. People are more prone to save in comparison to those in other parts of India. “The edge the East has is the consumers are more loyal towards a brand or format and aren’t easily swayed by new players. The overall store operations cost is also lower in most towns compared to the other parts of the country, he said.
“Visual merchandising and staff smartness are the two key areas where the Eastern market is miles behind the rest,” added Sen.
Manish Agarwal was of the opinion that East needs more quality shopping malls with flagship stores of popular brands. “We also need more cities to develop and grow. Retail business takes a giant leap where there is a high density of population. Advantages can also be attributed to growing middle class, rising disposable income, growing aspirations for improved living especially among the youth segment. As retailers are now looking for scale, sustainability and growth, Eastern India with its population and untapped market potential has the biggest advantage,” he stated.
“Customers are happy that brands are reaching the East, but they don’t want to pay for brand names. They do not value the intangible input of the product but only evaluate the cost of the material input. As a result, high-end brands do not bring in fresh stocks to this part of the country. The edge which East has over others is the fact that there is a lot of value for money especially since they are manufacturing and selling low-priced products which are in great demand,” said Sahni.
Pulkit Baid sums it up succinctly saying: “Modern retail in east lags in creating unique shopping experiences in the luxury segments in this region in comparison to North and West. The affluent still prefer the malls of Bangkok as Eastern India cities don’t create a similar value proposition which malls in Gurugram or Andheri do. However, the availability of real estate at reasonable low prices certainly create an edge for the region and are a boost for retailers to expand in eastern India.”
How the Government Can Help
Contrary to popular belief, the East has been the breeding ground for many major retail brands and large format retail players who are present across multiple categories.
According to Dugar, there are some good industries in the region, but we need more. “The Government is playing a key role in setting up more industries. Another reason for the industries to extend in East is due to the availability of the resources. Kolkata has abundance of affordable labour and artisans. No one can match the handmade work of a Kolkata artisan. All over India, Kolkata has the best artisans in handmade jewellery and clothing sector,” said Dugar.
“The Government should take necessary steps to prevent the emergence of private monopolies in retail trade. A single large format retailer should not be allowed to capture a large market share. For this it is important to restrict the number of retail outlets that a single private entity can open in a city, state as well as region. The state governments or urban local bodies should levy an access on the VAT on all goods sold by large format retail outlets (including those in the public sector) in order to create a level playing field between the organised and unorganised retailers. In order to prevent the development of big private monopolies it is also important for the Government to ensure its presence in the market. Several government marketing agencies exist, both at the Central as well as State levels, which need to be revived and made to reinvest in modernizing infrastructure,” added Biyani.
“Maybe a better, more relaxed compliance policy as well as licensing structure – these will certainly work towards luring more brands to the East along with providing them with some sort of tax relief or better financial facility. However, this is easier said than done,” said Kankaria.
“The industry and government should provide more real estate opportunities to open more malls, food parks, retail parks around the state with controlled rental costs. They should open retail training centres and institutes which would provide job opportunities within the region. Today a lot of manpower from the east migrates to other parts of India for better job opportunities and money,” said Jhunjhunwalla.
“The industry along with state administration should ease the statutory requirements in carrying out large scale retail operations. They should understand the labour laws and shop and establishment laws for mom and pop stores and large retailers cannot be the same. An accommodating and welcoming approach by the state governments will help give retail in eastern India a much-needed boost,” said Pulkit Baid.
“There is an urgent need to have a robust business-friendly retail policy. Besides this, we also need training schools would help the retailers to learn the technical aspects of the modern retail,” stated Sen.
“Some steps which should be initiated at the earliest include labour-friendly policies, building cities with better infrastructure, encouraging mall developers to come Eastward and set up large shopping destinations and retail centers with subsidies and sops. We need to build positivity about the East so that brands are drawn here,” said Manish Agarwal.
“I think putting more disposable income into the hands of the public will be a good step. This will give the customers a medium to afford and spend more in different, more sophisticated categories of retail like those of higher paying cities,”added Sahni.
“The government needs to fire up industrial revolution which will kickstart the growth in the East. It will also boost confidence in the lackluster market of the Eastern region of the country,” stated Dhiraj Ladha, Director, C K International.
Promoting East’s ‘Organised Retail’ Sector
“I am sure the Goverment is doing its best to bring more good brands in the city and we have seen it over past few months, everything takes time I believe. Retail sector plays a very important part for the consumer market. More the number of shops in the market, there will be more consumers. Building new technological equipped malls and stores would be a fantastic turn around for the eastern region market,” said Dugar.
“As far as the organised retail sector is concerned they should make a careful study before making investments because the need of the hour and biggest challenge is the retail space and the cost of rentals. The new practices that have emerged such as outsourcing service, franchising private labels etc. have great potential in generating employment opportunities. Since the requirements of organized retail sector are huge therefore the entrepreneurs should jump at these promising prospects, their liking or 455 preferences. The analysis also showed that the customers are saving more in the unorganized retail than the organized retail,” said Biyani.
“Organised players need to be acknowledged industry-wise pan India. There needs to be a proper channel through which their achievements can be boasted about and a way through which they can be made to feel at par with other regions of the country,” said Khinwasara.
“We need to open more shopping malls in East India and need to promote modern trade. We also need to make consumers understand the quality difference between a store present in the mall in comparison to that on the high street and local market,” said Deep Agarwal.
“We need to have better real estate availability. There is a huge opportunity for organized retail in the East India,” said Jhunjhunwalla.
According to Pulkit Baid: “Organised retailers need to wear the local hat to attract the traditional customers of the region and win them over. Modern retail needs to blend seamlessly with traditional retail more in such markets where customers are lured by an emotional connect.”
“Already lot of work has started by the retailers and the association to build more awareness and focus on building organised retail in East. Retailers have very aggressively started exploring and penetrating the Tier II &III cities. We need affordable retail spaces along with more malls and brands. Encouraging entrepreneurship and creating quality infrastructure are an important aspect for the growth of modern retail,” said Agarwal
“East is one of the most unorganised markets of India, but the volume of trade and the size is commendable and is growing at an unexpected rate. There are several factors which need to be taken care of in the field of technology, infrastructure, logistics and skill development. Development at each stage is required to bring the East India Retail at par with the rest of the country,” said Ladha.
The true demographic dividend of India would remain untapped if the Eastern region is not explored. As retailers are now looking for scale, sustainability and growth, EastIndia with its huge population base and untapped market potential poses to be ‘The Market for Tomorrow’.
Over the past few years, retailers have realised the scope and opportunity of this zone and now they seem to be all set to reap the demographic dividend. While until a few years ago, many retail brands seemed hesitant to step into this market, today they are vying to build presence.
“Cities like Guwhati, Siliguri and suburbs of West Bengal are witnessing a major change and coming 10 years we will definitely be standing at par to international markets too. A lot has been done in the development sector which will eventually help a lot to the retail sector. 10 years is a very long time and if we go at the same pace then Eastern India retail market will definitely be a unique place,” said Dugar.
Biyani expressed some concern for the market, saying: “I see it hit by high rentals and low footfalls, one-third of retailers at shopping malls in large cities such as Mumbai, Delhi-NCR, Chennai, Bengaluru and Kolkata are shifting to Tier II and III cities. Development in a Tier II and III city is more challenging as the target audience is in the process of changing its buying and consumption patterns. In a metro, one has competition, and the consumption pattern is already set, so the value proposition is a little different. However, in all cases, the ‘experience’ one delivers to the customer is what defines one’s success.”
“Tier II and III cities are untapped markets where it is important for retailers to establish their brands. Both these statements establish the imperative need for creating visible brick-and-mortar presence by brands and retailers. The process has already begun in real earnest by both regional and national players, evident by the presence of brands in different formats. Eastern India has all the potential to become an upcoming hub of modern retail. But certain factors, including facilitation of entrepreneurship, creation of quality infrastructure and upliftment of poor are critical if consumers in East India are to take the lead in modern retail,” he added.
“In ten years, this region should definitely see one of the better rates of growth as compared to any other region because of the limitless possibilities here. People have tremendous amounts disposable income in this part of the country and are willing to spend on new retail chains or brands. It’s just the question of availability,” said Kankaria.
“I see the penetration in towns other than Kolkata, Ranchi, Jamshedpur, Bhubaneshwarand Guwahati increasing substantially. I hope to see at least a mall in all the Tier II &III towns in ten years from now. We would see more national and international players enter the eastern region, recently brands like H&M, Starbucks, Hard Rock Café have entered the eastern region, with brands like Forever 21 and Zara soon to follow, said Jhunjhunwalla.
“The eastern region will be witnessing a massive growth and development in ten years from now and retail industry will benefit the maximum from it,” said Sen.
“East India is gearing to be explored on a larger platform. The process and signs are already visible. With the help of the Government, modern retail will create huge job opportunities, fulfill aspirations of millions of consumers. Middle class is being upgraded to higher level, value retail segment will grow at a rapid pace. Luxury segment is also showing increased penetration, Tier II & III cities are becoming new growth engines. An improved communication system, real estate development, urbanisation and growing service sector all are helping and acting as growth drivers in the region. East is undoubtedly ‘the’ market to be in for the next 10 years. We are very sure that every brand and retailer in East would definitely not miss this golden opportunity to grow,” said Manish Agarwal.
“I see mild growth in the luxury segment, but medium and lower retail segment will continue to flourish at a good pace. East India’s Retail industry is seeing a massive makeover all around. Many new value retailers can be seen in all the parts, but premium and semi-premium stores are still to focus on the east. In the coming years, they will be focusing on the East as well. East India retail is still struggling for its pace with the rest of India, but hopefully, this will improve in the coming years as many ambitious projects are coming up. Many brands have also lined up for space in this region. Many home groups have started their operations and are doing good and growing fast. The rate of growth and consumption is yet to cope with the other parts of India. We take this as an opportunity, so there is ample space to grow and shine,” concluded Sahni.