Global Retail Majors Expected to Enter into Indian Retail Sector in 2011

If consolidation was the buzzword for the retail sector in 2010, the coming year is expected to see some big-bang entries of global retail majors as the sector looks forward to a positive outcome on the relaxation of FDI norms in retail. Even while India added around 5 million sq ft of retail space in 2010, some stores were relocated and some unviable ones faced closure. Once-lucrative businesses were bought out.

While Vishal Retail was acquired partly by Shriram Group and partly by private equity fund Texas Pacific Group, Indiabulls, which had acquired Piramal’s Piramyd Retail in 2007, put its retail expansion plans on hold to focus on its main businesses of financial services and real estate. Yet, with the lessons learnt from the past few years, prudent modern retailers managed to clock double-digit growth rates. Same store growth was well above 15%.

According to Thomas Varghese, CEO, Aditya Birla Retail , 2010 can rightly be called a revival year as “starting from the budget announcements to modifying income tax slabs, good salary increase across sectors and a fairly good monsoon—all aided in driving consumption across categories” . The revival though, had to overcome hurdles such as high rentals , attrition, higher cost of compliance and low investments flowing into the sector.

According to Varghese, the recession was a blessing in disguise for the retail industry. Though it slowed down the pace of growth, it helped retailers to introspect and revisit their business models. As a result , strong business fundamentals took over ambitious expansion plans, which warranted restructuring exercises , relocation of stores and renegotiating rentals. These initiatives helped improve the profitability and viability of different retail formats and also enabled retailers to innovate , adopt best practices and bring in efficiencies in their operations. “I am confident that rich learning from the last couple of years will enable them to expand and build a sustainable business,” said Varghese.
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