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Market Study of Indian Retail Market |
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India is today is amonst the fastest growing economies in world & is one of the first nations to emerge from the global financial crisis of 2007. Mall developers and operators are getting wiser & are evolving in their approach. New theme based projects with innovative design, management and location are being developed. India's retail sector is now getting matured & has moved beyond infancy. Organized retail sector is gradually picking up in major metros getting deeper penetration into Indian markets. Studies reveal potential opportunity lies in the Indian retail property markets.
Defined City Tiers: Jones Lang LaSalle's city tiering system is based on the combined current levels of real estate activity (supply and demand) in three key sectors - offices, retail and hospitality.
Cities can move between tiers as market circumstances change. Kolkata, for example, moved from a Tier III to Tier II city in 2007 to reflect increasing levels of real estate activity. Similarly in Chennai, real estate activity is growing so rapidly that the city may be reclassified as a Tier I city in the near future. Examination of these 20 markets also goes into categorizing them into levels of maturity and places that information against current rental levels to assess which ones pose the greatest opportunities for developers, investors and occupiers. Now that the nation's economic recovery is well under way, it is becoming apparent that the underlying factors which propelled India's high-octane consumerism in the past remain true today:
The Indian retail market stood at USD 330 billion in 2007 with little more than 4 percent of it being attributed to the organized retail sector. By the end of 2010 the organized segment is to grow to 10 percent of total retail within the country. This rapid growth of organized retail is partially attributed to the phenomenal burst of new shopping malls built over the last three years, an increasing number of which are located in the nation's smaller, under-served markets. However, organized retail is also being driven throughout India by resilient consumers who are typically young, urbanized and brand-conscious shoppers with changing preferences towards consumerism. Malls differ greatly in size, maturity and purchasing power. Developers and operators of retail property in smaller Indian markets need to be cognizant of the variations that exist between metros and non-metros as they plan, build and operate shopping malls. TYPOLOGY AND FORM The retail activities in India's smaller cities are typically known by their traditional markets - bazaars and fairs - which have over eons served as crossroads for retail and wholesale trade, barter and entertainment, much like souks in the Middle East. Historically, these stretches of urban patch provided "shopping entertainment" for traders and consumers. Indeed, the traditional markets, which contained the bazaars and fairs, have played a pivotal role in the origin and growth of these cities. In present-day emerging cities, shopping areas display some common trends that can be discerned and discretely classified into non-exclusive categories of CBD-Linked Street, Arterial Street, Affluent Market or Landmark Adjacent Market. Shopping areas in emerging cities have historically been formed along important transport corridors or trade routes. As these cities evolve, new routes and neighborhoods provide fertile ground to develop new age, organized retail destinations. MR-10 in Indore is one such example of a new transport corridor around which clusters of new residential and retail settlements have developed as the population has grown. KEYS TO SUCCESS: PLANNING, DESIGN, OPERATING & FIRST-MOVER ADVANTAGES The first shopping centres developed in India's emerging cities witnessed an unprecedented level of interest from consumers and became the primary destination for shopping, eating and entertainment. A lack of entertainment options and an inconvenient retail environment caused by lack of parking, crowded lanes and uncomfortable weather, made the first such developments in each city very successful. First movers into cities such as Indore (Treasure Island, 2005), Surat (Iscon Mall, 2008) and Vadodara (Central Mall, 2008) witnessed healthy footfalls and sales volumes. These pioneering developments provided the means for national and international brands including Pantaloon, Westside, Levis Strauss, Big Bazaar, Nike and PVR to penetrate into India's untapped markets. THE TRADITIONAL MARKETS INCLUDING THE BAZAARS AND FAIRS HAVE HISTORICALLY PLAYED A PIVOTAL ROLE IN THE ORIGIN AND GROWTH OF CITIES ACROSS INDIA. A first-mover advantage, while critically important, is not sufficient to guarantee the success of mall projects in emerging cities. Another essential factor is the ability to provide cost-effective space solutions for retailers. Effective utilization of FSI is crucial in containing capital expenditure. Shopping activities diminish significantly at upper levels as shoppers tend to avoid climbing extra floors and vertical transportation adds to project development costs. An ideal configuration is one in which malls restrict retail and entertainment activities within the first three levels of the property and utilizes the remaining FSI for hospitality, healthcare and lifestyle activities such as gyms and salons, thus making the location a centre of multipurpose activities and enhancing critical footfalls for retailers. Operational issues, while not different from malls found in India's metro cities, take on an even greater importance in emerging cities. A judicious tenant mix, carefully controlled operational costs (CAM), revenue sharing models, and store-in-store concepts to allow smaller, local brands to have a presence in malls are some of the issues that mall operators must address to ensure a project's long-term viability. The number and size of malls that a given market can absorb will vary from city to city. As with larger metros, retail market dynamics of non-metro cities can differ significantly. Smaller, nascent cities don't offer adequate trade volumes to experiment with a single, large "mega-mall". Rather, a greater number of smaller-sized malls, ranging from 200,000 to 400,000 sq.ft. and strategically dispersed throughout the city would be more suitable. Other non-metros, such as Indore, can accommodate significantly larger projects such as Treasure Island, an integrated development with 700,000 sq.ft. of retail space. In planning the appropriate size and location for mall projects within non-metros, developers need to take into consideration numerous factors that will impact the success of their project, including the following:
20 RETAIL DESTINATIONS TO WATCH In 2007, Jones Lang LaSalle's World § Winning Cities Research Programme published a landmark study on the Indian retail sector entitled "The Geography of Opportunity - The India 50". In that report, 50 Indian cities were classified into 5 categorie based upon the socio-economic fundamentals, retail demand and retail supply found within those markets. As the retail industry in India matures and looks for new growth strategies in the wake of the global economic downturn , we felt a fresh look at our analysis was appropriate. While the methodology employed and factors considered for classification remained the same in our most recent analysis, we expanded the set of cities that we considered.
Our results reveal that the set of cities in our top two categories, Mature and Transitional, have not changed from our original analysis. Retail in these top eight markets is fairly well understood and documented, and these cities no longer represent the frontier of retail in India. Conversely, the next three categories of retail classification - High Growth, Emerging and Nascent - is where the action will be as retailers and developers endeavour to deepen their understanding of these markets and capitalize on the opportunities that Market are located on M.G. Road, which, along with Jawaharlal Nehru Road, defined the retail hub of the city before the emergence of markets they present. While a large number of Tier III cities in India can be placed in one of these three categories, we have limited our discussion to 20 markets which we feel best illustrate the characteristics of the category based upon consumer profiles, market characteristics and developer activity. HIGH GROWTH CITIES INCLUDES INDORE: the commercial capital of Madhya Pradesh, is the centre of business and trading activities in Central India. While the city is also known for its textile industry, Indore is undergoing fast-paced infrastructure j development to match the future demand from other industrial sectors. The state and local government are undertaking several initiatives to promote Indore as a premier destination for investment. Being a historic city, Indore has a distinct core (old city) with newer developments spread spatially around in a concentric manner. Residential, retail and institutional areas dominate adjacent to Palasia Chauraha and Bombay Hospital. Presently, a significant amount of retail activity is occurring in the central and eastern parts of the city close to the high-end residential locations such as Palasia, Race Course, Saket, Gulmohar as well as the upcoming locations such as Vijay Nagar, MR 10 and Indore Bypass. A high number of affluent entrepreneurs who reside in Indore are driving the demand for local brands along with national and international retailers. Older, unorganized high street markets are slowly giving way to organized retail with the arrival of new malls and shopping centres in the city. Approximately 1.7 mn sq.ft. of retail space currently exists in Indore with another 2.5 ran sq.ft. expected in the next few years as 3-4 mall projects have been announced. With several prominent retailers considering venture in the city, organized retail has a bright future in Indore JAIPUR: the capital of Rajasthan, is a major international and domestic tourist destination as part of India's Golden Triangle tourism circuit. Proximity to Delhi and Gurgaon is helping to fuel both tourism and retail activity in Jaipur. Economic growth, rising disposable incomes and a changing socio-economic environment have led to the expansion of urban spaces around the city with suburban and peripheral locations becoming the focus of development. Arterial roads, such as M.I. Road and Sansar Chander Road have become fully commercialized for retail and wholesale trade. Jaipur is the first city in Rajasthan to have experienced modern shopping plazas and multiplexes. Approximately 10 shopping mall-cum-multiplexes, totalling 800,000 sq.ft, are operational at various locations in the city, with another 15 in the developing or planning stages. Upcoming integrated townships within Jaipur's suburbs and along its growth corridors also have a retail component as a part of their product mix. Major malls currently operational in the city include Crystal Court, Mile Stone, Mall 21, Silver Square, Crystal Palm, City Flex, MGF Metropolitan and Silver Square. Retail spaces have a high rate of absorption in Jaipur with major brands and anchors such as Shoppers Stop, Blackberry, McDonald's and Big Bazaar taking up space. There may be a temporary oversupply condition, but it is likely to get absorbed by organized retail spaces offering unique shopping experiences and an increasing population as Jaipur continues to mature as a commercial destination. KOCHI: also known as Cochin, is the commercial capital of Kerala and has historically been an important port city in India. As a major tourist destination and the gateway to Kerala's backwaters, Kochi has witnessed growth in medical tourism and eco-tourism, along with a boom in its local IT/ITES sector, elevating the city into an important investment destination in South India. As with other emerging cities in India, retail activity in Kochi has traditionally been concentrated on a central high street, with M.G. Road being the dominant retail corridor of merchants dealing in gold, textiles and various other items. Marine Drive, a more recent retail destination, is challenging M.G. Road as the preferred high street in Kochi, as are the areas of Vytilla Junction, Palarivattam and Edapally. High street dominance is about to change in Kochi with a variety of new retail formats being developed throughout the city. The North-South National Highway 47 bypass is being transformed into a mall corridor. Presently the city has one functional mall and six malls are under various stages of construction including a Imn sq.ft. project by the Lulu Group. Other builders such as Prestige Group, Aerens Group, Abad Builders and Emkay Group are working on mall projects that will be of various standards, specialities and use formats. LUDHIANA: known for its hosiery and sporting goods industries, is the most populated city of Punjab. The service sector, which includes financial, banking and public services, also plays an important role in the city's economy. Good connectivity with major cities and an encouraging business environment has made the city the favourite investment destination of the state. Ferozpur Road is the main growth corridor for retail and commercial development in Ludhiana, in addition to being a well-known, high-end residential destination. Punjab Agricultural University, Hotel Majestic Park Plaza (the only 5-star hotel in the city) and the Feroze Gandhi Market (the only organized commercial centre of Ludhiana) are located along this major artery. Over the past couple of years, Ferozpur Road has witnessed major developments in the organized retail sector with Ansal Plaza, Flamez Mall and Westend Mall becoming operational. This is mainly a result of its proximity to the city centre and posh residential colonies, presence ol prominent hotels, and the declining popularity of Mall Road (the city's fir organized retail corridor) among the retailers and consumers for its scarce parking facilities. Arterial development together with improving infrastructure has facilitated the growth of the real estate market in Ludhiana. The entry of established players has induced competition into the market, thereby Jeading to a renewed focus on quality real estate projects. Numerous national and local developers including Ansal API, DLF, MBD Group, Omaxe and Chadha Group have proposed further retail developments along Ferozpur Road. MOHALI: can be regarded as a planned extension of the city of Chandigarh. Residents of this town are compelled to travel to Chandigarh to shop due to a shortage of quality local retail destinations. The main markets of Mohali have been developed as sector markets, as the cities of Chandigarh and Mohali are collectively divided into 74 sectors. Many of Mohali's sector markets are located on a straight road from Sector 58 to 65. Most of the ground floor space in this retail corridor has been occupied by local merchants including restaurants, grocery shops, departmental stores, jewellers, white good showrooms and banks. The Punjab Urban Planning & Development Authority [PUDA) is developing the Sector 70 market to entice Mohali residents to shop locally. Underlying factors including a large segment of population in the higher socio-economic profiles seeking residential options in the region, proximity to Chandigarh, and initiatives taken by the Government of Punjab to promote industrial and IT/ ITES development are likely to have a positive impact on Mohali's retail development. Shalimar Mall and Mall Matrix, with a combined area of 300,000 sq.ft., are the first malls proposed in Mohali. Six additional malls are in various stages of construction. These projects, along with others that have been planned could add an additional 5.5 mn sq.ft. of new retail space. SURAT: renowned for its textile manufacturing and diamond cutting/polishing industries, is a major industrial hub in Gujarat. Industrialization has not only boosted the local real-estate market but has also drawn an influx of migrants from neighbouring cities. Rising population and income, along with an optimistic employment outlook, will continue to boost retail development in Surat which is flush with affluent consumers. Excellent road connectivity has encouraged retail mall development in outlying areas such as Piplod, Vesu, Varachha Road and near Udhana Navasi Road. The most preferred retail destinations in the city are Dumas Road, Parle Point, Ghoddod Road, Piplod and Ring Road. Well-known brands have not only entered Surat but have also expanded with multiple outlets in the city. Surat has several retail investments from major domestic brands such as Croma, @ Home, Reliance Fresh, Big Bazar and Shoppers Stop. Existing retail space in Surat totals to approximately 600,000 sq.ft. With three to four malls in the planning stage, another 560,000 sq.ft. of new retail space is expected to enter the market. VADODARA: Vadodara lies along Gujarat's golden corridor which extends from Ahmedabad to Vapi. The city is one of India's foremost industrial centres with dominant groups of chemicals and Pharmaceuticals manufacturers. The centre of Vadodara is dominated by residential, commercial and institutional districts. Wholesale markets and high-street retail areas dominate the retail typology in this core area of the old city and adjacent areas. Here, Vadodara's traditional, established markets can be found along the prominent shopping corridors of Mahatma Gandhi Road (Nyay Mandir Gate to Mandavi Gate), Raopura Road, Rajmahal Road, Mangal Bazaar and Dandiya Bazaar. Vadodara's emerging commercial and retail districts are principally located on the western side of the city's railway line. R.C. Dutt Road, Race Course Road and Old Padra Road have emerged as the prime retail and commercial destinations within the city. A majority of national and international brands operating in Vadodara are primarily located along these roads. The predominant typology of retail developments found here are commercial complexes with retail space on the lower ground and upper ground floors with office space above. Approximately 4.6 mn sq.ft. of retail space is operational in Vadodara with another 1 mn sq.ft. of new retail space expected to enter the market in the next few years as additional projects are in various stages of planning and development. CQIMBATORE: Coimbatore, a key industrial city in South India, is regarded as the preferred IT destination in Tamil Nadu after Chennai. Several private sector initiatives in the city have contributed to an increase in real estate activity in the region. Since commercial establishments already have their presence in the CBD of the city, located at the high density areas of RS Puram and Race Course Road, new commercial locations have been encouraged to set up along major corridors towards the outskirts of the city. Coimbatore has its traditional retail markets on Oppankara Street and Cross Cut Road where both wholesale and retail businesses are conducted. Other retail markets can be found in I and around the residential locations ol Avinashi Road, Race Course Road and 100 Feet Road. High streets such as Bharathiyar Road, Avinashi Road, Mettupalayam I Road and Cross Cut Road are current™ the main retail hubs of the city. Brands including Ford, Nokia, Philips,! Hyundai, Sony, Bajaj.and Hero Honda] presently have their showrooms scattered across these markets while I the likes of Zodiac, Lee, Nike, Reebok I and United Colors of Benetton are found in RS Puram. GOA: The state of Goa, located along India's Western coast, is the nation's foremoa tourist destination. A steady growth of tourist arrivals, both foreign and domestic, has resulted in the state achieving rapid economic growth. The northern part of the state has seen greater relative prosperity, infrastructure development and early I commercialisation. South Goa has provided the region with a dynamic I hospitality industry including a number of five-star deluxe hotels along its coast-line. Panaji, the CBD of Goa, comprises a significant part of Goa's retail market. With its year-round flow of international and domestic tourists, Goa is a small but significant retail destination. Retail real estate development is concentrated along three of the city's major arteries: A. B. Road, M.G. Road and 18th June Road. International and domestic brands are located along M.G. Road, while local retailers are concentrated on 18th June Road. The predominant retail typology found in Goa is high street shopping with major clusters located near Main Avenue, Dr. A.B. Road, 18th June Road, and M.G. Road. Being a tourism hub, the retail markets in Goa are largely unorganized and are located at the beach towns of Baga, Candolim and Calangute, with the latter two having well-developed high streets that are home to high-end brands. While mall developments are yet to come up, a number of multi-storied shopping centres are underway in Goa. A further two retail developments [Osia Mall and Profit Centre) are proposed in Margao and will total 100,000 sq.ft. retail space. NAGPUR: the largest city in central India, is also the third most populous city of Maharashtra. The city's retail market has existed in an unorganized form in areas such as Itwari and Sitabuldi, and in a semi-organized form in the western part of the city. These markets typically developed near high-end residential settlements where residents belonging to Nagpur's trading class possessed a high propensity to spend. The city's I established prime retail areas include] Dharampeth, Ramdaspeth, Gokulpetl Central Avenue, Gandhibagh, Sadar, and Sitabuldi, with locales such as Wardhaman Nagar, Wardha Road, ai Khamla having been identified as hig potential areas. Six malls are currently operational in Nagpur. The city's planning authority is working with private developers to ensure balanced retail development in Nagpur. Large scale projects such as MIHAN (Multimodal International Hub Airport at Nagpur), a proposed IT SEZ, and Butibori Industrial Estate have lead to an increased demand in the residential sector, which in turn has generated demand for retail and commercial spaces in the city. An ongoing IT/ ITES boom has also led to the influx of young migrants who demand organized retail outlets and have a willingness to pay. The past few years have seen an emphatic transformation in the number of retail brands that have come into Nagpur. Retailing itself hai undergone a considerable shift, and more can be expected in the near future as traditional markets slowly give way to organized retail formats. The existing 1.5 mn sq.ft. of existing retail space in Nagpur is expected to double as*three to four malls are beii planned or developed. RAIPUR: a major trading and business hub for the entire Chhattisgarh regioi has a large number of specialized markets for various commodities. A majority of these traditional markets are located in the centre of the city with newly emerging retail areas aloi the Grand Eastern Road [NH-6). The stretch on NH-6 between Tati Bandh to Teli Bandha has emerged as the most active retail destination in the recent years whereas Sharda Chowk and Jaistambh Chowk are noteworthy markets in the city centre. A few small, unorganized shopping centres have been completed over the past few years with Raipur getting its first shopping mall, City Mall 36, followed by two or three more in recent years. TRIVANDRUM: the capital of Kerala, is the second largest city in the state and home to a large population of urban professionals. Technopark, a 340 acre IT park located in Trivandrum, is one of the largest IT parks in India with 150 marquee IT firms and over 20,000 employees. Large-scale employment opportunities such as this are a major part of the reason that Trivandrum witnessed a 42 percent increase in population during 1991-2001 and why it is ranked second in the state of Kerala in terms of market potential and affluence. Trivandrum's central business district is also the heart of the city's traditional retail district with Palayam, Chala and East Fort being the 3 most prominent markets. M.G. Road and the area between Pattom and Kesavadasapuram are the growth corridors of retail in the city. Kedaram, Karimpanal Arcade and Attukal Shopping Complex are some of the noteworthy shopping destinations within the city. The suburbs, which are residential in nature, currently only have neighbourhood format retail stores. While retailers have land banks in the suburban areas {in close proximity to Technopark), no major development has taken place yet to explore the potential of this area. Only 58,000 sq.ft. of retail space exists in Trivandrum. UDAIPUR: The lake city of Udaipur is a popular tourist destination in India. Historically, retail markets in Udaipur have been an integral part of the city. As Udaipur grew beyond the banks of its lakes, major transportation arteries developed into retail corridors. Retail high streets continue to be fixture along Bapu Bazaar, Chetak Circle, Suraj Pole, Ashwini Bazaar, Nehru Bazaar, Bada Bazaar, Shastri Circle, Delhi Gate, Sindhi Bazaar, Town Hall and Chand Pole. These are complimented by specialized high streets at Ghantaghar Market Udaipur (jewellery), Malda Estate (apparel) and Hathi Pole (antiques). Organized retail is widespread throughout Udaipur with Durga Nursery Road, Shakti Nagar and Sudkhadia Circle having the largest concentration of new entrants. A wide selection of international and domestic brands is present in Udaipur across numerous categories of retail with Nokia, Adidas, John Players, Levis, Strauss and Pizza Hut already having a presence in the city. Domestic supermarkets such as Big Bazaar and Reliance Fresh have also established themselves in prominent locations within Udaipur. Movie theatres, both new (Fun Cinemas) and reconstructed (Paras Cinema) are also well represented in the city.
Source: Images Retail
THE PURCHASING POWER AND AFFLUENCE OF INDIA'S EMERGING CITIES The opportunity for retailers in India's smaller cities is often underestimated as these emerging markets are often dwarfed by the nation's seven large metros. While the size of non-metros is relatively smaller, they should not be written off by retailers. Nor should all emerging cities be painted with the same brush as there exists a great deal of variation in the purchasing power and affluence levels of these markets. " In an analysis conducted by R. K. Swamy BBDO, 24 parameters were used to assess the market potential and affluence levels of cities across India. Amongst the parameters used were per capita income, per capita bank deposit, proportionate affluent households, home, automobile and consumer durable ownership, and consumption of FMCG goods. The results of this study, printed in The Guide, reveal that a significant variance exists in aggregate potential (purchasing power) and affluence levels, not just between metros and non-metros, but also amongst emerging cities. Two indicators were used to quantify these variations with Market Potential Value (MPV) representing the aggregate purchasing power of a city and Market Intensity Index (Mil) representing the quality and affluence of consumers and markets. A graphical analysis of the 20 emerging cities considered for this report illustrates that white alt cities score well below the maximum MPV index value of 1000 for Greater Mumbai, the cities of Surat, Nagpur, Jaipur, Vadodara, Coimbatore and Indore emerge from the pack in terms of purchasing power. Over half of our 20 cities scored above the all-India Mil average of 100 with Goa, Mohali, Ludhiana, Vadodara, Coimbatore, Kochi and Nagpur showing the highest levels of affluence within the group.
SIZE OF RETAIL MARKETS IN INDIA
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Images Retail for the purposes of analysis, studied 20 markets that are in various stages of retail maturity. Then examined the changes & trends in Indian retail.
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