Due to the rapid growth of the retail sector in India since the 1990s, the future of the $372 billion retail industry is set to double in just five years according to management consultancy Technopak.
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And yet, Purnendu Kumar of Technopak says, that with retail market growing at a fast pace, modern retail alone won’t be able to cater to the growing needs of the consumer. Currently, India has more than 12 million kiranas growing at 5-6% annually. Thus according to the study Neighbourhood kiranas are not likely to be impacted by the rise of the modern retail.
As incomes increase, Indians are likely to spend more. The expenditure on food and groceries has declined consistently from 40% in 2003 to 36% in 2008.In 2013 this could further decrease to 32%. The expenditure on eating out, entertainment, and tourism is on the rise, Purnendu Kumar of Technopak said.
In India modern retail, still considered in its nascent stages, has had difficulty in working out a format for the consumer. Retailers focused more on opening stores rather and ignored sourcing and supply chain and the aspirations of each consumer segment, Kumar added.
Those who focused on the front-end were in trouble as they weren’t driven by profitability but by the number of stores they could open.
Many retailers expanded rapidly without the right amount of capital in place. It takes 2-3 years for one store to break even and 6-7 years for the business to break even, says Kumar.