NEW
DELHI: Ever wondered why so many new malls are mushrooming all around us
everyday? And why top retailers are making a beeline for cities like Pune,
Lucknow, Ahmedabad or Bhubaneshwar?
Here is the answer —
India has emerged as the most attractive destination for retailers. In fact, the
latest AT Kearney study shows India, Russia and China top the annual list of
most attractive emerging markets for retail investment. What's more India has
retained its top position three years in a row. Russia too kept its place at
number two, while China moved up from the fifth rank to the third this year.
Vietnam and Ukraine was fourth and fifth respectively.
The study says China gained
largely on the strength of its continued growth in consumer spending and
retailers moving into smaller markets. It reveals that modern retail formats
grew between 25%-30% in India and 13% in both China and Russia in the last
year.
The study shows how
retailers now prefer to invest in tier-II and III cities globally. For example,
in China, Wal-Mart and Tesco, are moving into smaller cities, such as Yuxi,
Weifan, Nanchang and Wuhu. In Russia, Carrefour announced it's entering the
country via tier-II cities. And this explains the sudden spurt or retail
activity in cities like Pune, Mysore, Kanpur, Hyderabad.
As Hemant Kalbag, principal,
consumer industries and retail practice with AT Kearney India explains, "Apart
from large population, these cities also have a huge consuming-class who are
exposed to world-class goods now. They are upwardly mobile and willing to spend
as well. That is why the Aditya Birla Group opened its super market chain in
Pune and Reliance invested in Ahmedabad."
Moreover, these cities also
have cheaper and readily available realty. "They need space to open these
chains, and for storage of goods. tier II-III cities are more attractive options
for they are more affordable and have plenty of space for new malls to come
up,"explains Kalbag.
He
expects seeing another year of major investments and new retail concepts
changing the rapidly evolving organised retail landscape in India. However,
Kalbag cautions investors not to go into tier II-III cities with the same
strategy as they did in tier I.
''Successfully entering a new
country via smaller cities requires careful identification of cities with
consumers who are ready to embrace modern retail formats. Since incomes are
smaller in tier II-III cities, products need to be customised based on the
market."
The report shows
Asia's attractiveness for retail expansion is not limited to just India, China
or Vietnam.
Countries like Malaysia,
Thailand, Saudi Arabia and UAE too are among the top 20 attractive countries
this year. Kalbag says the strong economic growth make countries attractive
retail destinations.