Retail riddle to spur growth

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  • Published 26.09.08

Mumbai, Sept. 25: Indians love shopping but they also distrust retailers — a seeming paradox that is expected to trigger a retailing boom in the country.

“These are exciting times for Indian retail,” says a new study by McKinsey and Company titled “The Great Indian Bazaar: Organised Retail Comes of Age in India”.

The study predicts that India will emerge as a $450-billion retail market by 2015, comparable in size to Italy ($462 billion) and much larger than Brazil ($258 billion).

Organised retail — which accounts for less than 5 per cent of the retail market today — will expand to anywhere between 14 and 18 per cent by 2015, the study says.

The management consultancy says over 300 million shoppers will flock to organised retail stores against roughly 60 million, at present.

The study has tried to understand the psyche of the Indian shopper and throws up a few interesting facts that retailers can use to sharpen their strategies.

The positive sign is that Indians — 67 per cent of those surveyed — believe that shopping is fun. Indians love to spend time in a mall and regard it as the favourite leisure activity for the family. Forty per cent of the Chinese shoppers also believe this is true, which is in marked contrast to the mature markets in the US and France where shopping is regarded as a chore.

The study says retailers must create exciting formats that encourage window-shopping. So, the first lesson is “not to drive these shoppers away as they will shortly become bigger spenders when their incomes rise.”

But there’s a flip side as well. In general, shoppers in the BRIC countries — Brazil, Russia, India and China — do not trust retailers much. But the level of distrust is highest in India at 67 per cent against 60 per cent in Brazil and Russia and 25 per cent in China.

It is this distrust that makes the Indian shopper the least loyal. “How retailers gain trust will be a key differentiator in the retail market of tomorrow,” the study says, while suggesting that they can use price and quality guarantees to build trust.

Shoppers in both India and China are very finicky about fresh food and tend to make daily trips to ensure this. “Indian shoppers will buy only a small share of fresh food from organised retail,” the study predicts even as it says that in China, organised retailers sell less than 10 per cent of fresh produce and an even smaller percentage of meat.

According to the survey, the concept of “freshness” is perceived differently in various markets. In India fresh implies “unpacked fruits and vegetables and meat freshly cut from a butcher”.

“In China, fresh connotes live seafood while in South Africa, it has to be packed or frozen to be considered fresh,” the study says.