CBRE South Asia Pvt. Ltd, India’s leading real estate consulting firm, has announced the findings of its latest Global retail report titled ‘India Retail 2.0 and the way forward’. As per the report findings, owing to policy changes that have resulted in an investor-friendly business environment as well as the economy’s sturdy market fundamentals, global interest in investing in India remains high. As per CBRE’s ‘How Active are Retailers in APAC?’, 2017, India was one of the top choices for expansion among retailers among the emerging retail markets in the APAC region.
The report highlights that the retail real estate sector is witnessing growing investments by leading PE funds and institutional investors against the backdrop of growing consumer demand, stable economic and political environment, and quality retail real estate development. Some of the key investors in the retail segment include Blackstone, Canada Pension Plan Investment Board, GIC Private Limited and The Xander Group.
Commenting on the findings of the report, Anshuman Magazine, Chairman, India & South East Asia, CBRE said: “There is immense potential for growth in the retail segment that has been aided by the recent relaxation in investment norms by the government. With a population base of over 1 billion, the Indian market provides a wide customer base which is poised to be the 3rd largest consumer market by 2025. This provides a significant rationale for developers to invest in shopping centers, thereby providing retailers with quality real estate to set shops in, which in turn can change the retail dynamics of India.”
Bimal Sharma, Head – Retail, India for CBRE South Asia Pvt. Ltd. said: “The retail industry is moving forward and growing in the right direction with many more retailers looking at India & actively scouting for partners and opportunities to enter the country. The size of the market has also attracted key investors, who have been aggressively investing, increasing the availability of quality retail real estate for retailers, which has been in short supply lately.”
The report also highlighted the limited availability of space in operational well-performing malls coupled with an upward pressure on real estate costs in these centers, as a concern for brands looking to enter the Indian market. Secondly, the report also highlights some key factors, global retailers should keep in mind when they enter India, since each market has its own distinct characteristics, which these global retailers need to adapt to.
Processes and approaches which work in the home country of these retailers may not necessarily work in other geographies and certain critical factors where professional guidance can be an asset for these retailers have been highlighted below:
Location and Costs: While driving relatively long distances for grocery/dining/shopping may be acceptable in countries such as the US and UK, the convenience of the store location is of prime importance in India, especially in F&B & grocery segments. The right location at the right price is the key success factor for any retail format in the country.
Store Size: Retailers need to keep their store sizes tight in India and need to find what is the optimum size for them here. Many have rationalized sizes soon after their entry into the country, hence right sizing of the store is of utmost importance while entering the country, to ensure high productivity of the space leased.
Tapping Tier II Cities/New Markets: Rising consumer base and increasing spending potential & patterns even in Tier II & Tier III cities have generated an opportunity for many retailers, who are now progressing aggressively into Tier II & III cities. With a large number of cities / towns available for growth, brands entering India have a lot more avenues to open doors and reach out to customers.
Professional Guidance: The success of a store is largely dependent on the way its location is managed and designed. Since high streets in India grow in an unplanned manner and lack professional management, malls are becoming the preferred destination for retailers to grow today. Hiring the right advisor / consultant for a brand to advise them while entering the country is of utmost importance and could significantly impact their growth story in India.
India is already witnessing the entry of prominent global chains, which are displaying keen intent on making long term commitments in the country. By positively influencing government strategies for growth and working in tandem with domestic groups, such large retail chains can help contribute to strategic, operational and financial synergies in the system, thus driving the country’s retail market on to a higher trajectory, the report said.