Last fortnight, on a humid September afternoon, a motley bunch of organised retailers got together at the Taj Apollo Bunder in South Mumbai to flag off the Retail Association of India, a body that will ostensibly safeguard the interests of the players in one of India's newer sunrise sectors. The head honchos present included virtually all the poster boys of Indian retail as you know it today: Noel Tata of Trent, Kishore Biyani of Pantaloon Retail, B.S. Nagesh of Shoppers' Stop, Vinay Nadkarni of Globus Stores and B.A. Srinivasa of Vivek Ltd.

An impressive line-up to be sure, but Biyani, Nagesh and company will be well aware that some of the biggest names in corporate India are preparing to gatecrash the existing cozy club of Indian retail. The Tatas, Goenkas (with RPG retail) and Piramals (Crossroads and Piramyd) may have been a part of the first wave, but seven to eight years after organised retail was spotted as a business opportunity, a whole host of mega Indian corporations are blueprinting their entries into this sector even as the existing majors, after achieving critical mass and maturity, draw up huge expansion plans. The models being pursued are varied, ranging from rural to foods and groceries to petrol pumps to lifestyle, but if the Godrejs, Wadias, Ambanis, Mittals of Bharti, Munjals of the Hero group, the Singhanias of Raymond and ITC have been seduced by retail, it's simply because of the awesome opportunity up there for grabs. According to consultants KSA Technopak, the organised slice of the pie is expected to balloon to a mind-numbing Rs 1,80,000-2,00,000 crore by 2010-a ten-fold increase over the next six years! By then, organised retail, currently just 2 per cent (or Rs 22,500 crore) of total retail, will move up to 10-12 per cent.

Those projections are being translated into frenetic activity on the ground. KSA estimates that in three to four years, over 300 malls, over 50 million sq. ft. of retail space, will spring up. And over 600 malls over 100 million sq. ft. will dot the Indian landscape by 2010. Unitech Ltd., a Delhi-based construction company, is developing seven malls and four regional town centres. "Our focus is on malls in Delhi, Gurgaon, Noida, Faridabad, Bangalore and Kolkata," says Sanjay Chandra, Director, Unitech Ltd. Amongst these is a 15-lakh sq. ft. shopping mall in Noida. According to Unitech, this would be the largest mall in the country, with another five lakh sq. ft. of parking space spread over two basement levels. The project would be completed in two phases by 2006 at a cost of around Rs 1,000 crore. Similarly, in Bangalore, Mantri Developers are coming up with an 18 lakh sq. ft.-mall in Koramangala.

Tata Westside	Reliance WebWorld
RPG Music World	Lifestyle

The existing players for their part have little problems (and little choice too) in rolling out the welcome wagon for mega-India Inc.-"There's enough of a market for all," suggests Nagesh of Shoppers' Stop-and at least one of them predicts that most big businesses will take the plunge into hypermarkets. So if an Ambani or a Godrej decides to sell foodstuff and groceries, there's a simple reason for that: 52 per cent of the total retail pie of Rs 8,57,000 crore is accounted for by these items. Another trigger for the entry of the Godrejs and the Wadias is that both these Mumbai-based business groups are sitting on acres and acres of real estate. Meanwhile, the Ambanis and the Sahara Group are the largest acquirers of land today. The best way of jacking up the value of that land? Elementary, open a mall there. For instance, if Godrej Properties and Investments Ltd. is building a residential complex in Vikhroli (a Mumbai suburb roughly 40 km from the city), the best way to rack up the real-estate rates in that area is by opening a large mall, complete with a hypermarket. And remember, you don't need to be particularly well-heeled to visit those markets-(almost) everybody spends on food and groceries, right?

CALL OF THE MALL Malls are driving real estate prices.

Mall swarm: 600 malls are expected in India by 2010 Opening a mall on a piece of land, complete with a multiplex and a hypermarket, is the best way to push up the real estate rates of a locality. Unlike in the past, where high interest rates and low degree of consumerism had made the mall business unprofitable, today malls offer the highest return on investment (RoI) in the real estate business. According to Anuj Puri, Managing Director, Chesterton Meghraj, the RoI for malls is 12 per cent per annum. For corporate buildings and residential complexes, on the other hand, the RoI is 10 per cent and 5-6 per cent, respectively. B.S. Nagesh, Managing Director and CEO, Shoppers' Stop, says it's this high RoI that is driving new players into the retail business. If a mall is well run, the capital appreciation is the highest in this sector. What's more, 40-50 per cent of the retail space in a mall gets leased out even before the developer has begun to dig the ground. For instance, according to a Chesterton Meghraj report, in 2006, 26 new malls will come up in metros, adding 7.1 million sq. ft. of retail space. But as of today, over 32 per cent of that space has already been leased out. By the time the superstructure of a mall is ready, 70 per cent of the retail space is invariably leased out. "Malls, in that sense, is a low risk business," adds Puri. The moment a mall comes up in an area, residential property surrounding the mall gets a premium of Rs 50 to 60 per sq. ft. Now you know where to buy your next home.

MALL MANIA The lure of the mall.

» Over the next 3-4 years, 300 malls* will come up across the country, translating into over 50 million sq. ft. of new retail space » By 2010, over 600 malls are expected to come up across the country. That would be 100 million sq. ft. of new high-quality retail space (* Malls with space equivalent to 1,00,000 sq. ft. or more) Source: KSA Technopak

Of course, retailers can't live on bread alone. Mukesh Ambani, Chairman of Reliance, is talking about "revolutionalising petroleum retailing." Reliance Petroleum will be rolling out 5,849 petroleum retails over the next three to five years. The market buzz is that some of Reliance's fuel pumps would have a supermarket that sells food and groceries, a Reliance Infocomm WebWorld, a Java Green coffee shop and perhaps even a Vimal showroom offering you suits, shirtings, dress material, pillows, cushions and bedcovers.

Reliance Infocomm has already got into broadband-driven retailing. Reliance WebWorlds offer video conferencing facilities, online gaming and cyber café facilities. You could get your business cards and greeting cards printed, and computer classes for kids and their mothers are also held. According to Sarup Chowdhary, CEO of Reliance WebWorld, out of the existing 240 WebWorlds, 200 are into the broadband mode. Soon, you could also burn CDs with your favourite music at these WebWorlds. As compared to Reliance Infocomm Mobile (rim) sales and service, the broadband services should generate three times as much revenues, feels Chowdhary. All these broadband initiatives are linked to Reliance Infocomm's larger gameplan of offering broadband to homes and offices. Besides this, Reliance also hopes to set up 2,000 Java Green Coffee stores across the country.

Even the Bharti group has plans to get into broadband-driven retailing. After integrating its telecom services under the Airtel brand, the group has some interesting broadband-related retailing plans. These will be offered through 600 Airtel Connects across the country.

The Rs 404-crore Shoppers' Stop is setting up 11 new stores in three years. Its promoters are also getting into the hypermarket space B.S. Nagesh, MD and CEO/Shoppers' Stop

A few of the new entrants like the Godrejs and Wadias are tightlipped about their plans. According to a Godrej official, the group is tracking developments in retail since this is a fast growing sector of the economy. "As part of our environment scanning process, we are evaluating the retail sector," adds this official. According to market sources, the Godrej group has evinced keen interest in the hypermarket business. Similarly, according to market sources, the Wadias are also evaluating a retail format. The retail venture, it is learnt, would be headed by Ness Wadia (the Wadias did not respond to a BT questionnaire).

The Singhanias of Raymond are already present in retail with the Raymond Shop concept, which has 310 outlets nationally and internationally. Another 30 stores are in the offing and 22 exclusive stores for brands like Park Avenue and Parx will be coming up shortly. Besides this, the premium Raymond brand, Manzoni, will have 50 new outlets. Raymond also has a designerwear store-Be-which has 15 outlets in 10 cities. Over the next year, Be will have six to eight more outlets. Besides these initiatives, Raymond is open to entering any other formats of retailing. "If we see enough opportunity in getting into other formats of retailing, we would get into it," says Pradeep Bhandari, Deputy Group President, Raymond Ltd.

The Hero Group plans to have 10,000 7-Eleven type convenience retail stores over the next three years Rahul Munjal, CEO/ Easy Bill

ITC plans to set up 50 Choupal Sagars spread across rural MP and UP over the next one year Yogi Deveshwar, Chairman/ITC

ITC, which had restricted itself to lifestyle retailing through its Wills Lifestyle stores, recently made a foray into rural retailing through its first Choupal Sagar store at Sehore in mp. According to Y.C. Deveshwar, while ITC's e-choupal initiative (whereby an internet kiosk is installed in a village to deliver information on agriculture to farmers) is aimed at increasing the earning of the farmers, Choupal Sagar is a one-stop physical infrastructure for farmers to sell their agricultural produce to ITC. Besides, it houses a soil testing laboratory, a farmer training centre, a medical consultation and diagnostic facility, a restaurant, a store selling quality products for both farm and household consumption sourced from manufacturers at competitive prices, and banking and insurance services. Deveshwar's dream is to have 1,000 Choupal Sagars and 25,000 e-choupals serving one lakh villages. According to S. Sivakumar, head of Agri Business, ITC, the company plans to set up about 50 such stores spread across rural MP and UP over the next one year.

Meanwhile, as the industry attains critical mass and consumers become more willing to take a shine to organised retail, the existing players are steaming ahead with ambitious expansion plans. K. Raheja, promoter of Shoppers' Stop (whose initial public offering will hit the markets in the coming weeks), is getting into the hypermarkets space via a new company. The Rs 404-crore Shoppers' Stop will set up 11 new stores in three years. Speciality store Globus will add five new outlets to the existing seven in one year flat. And Lifestyle International (p) Ltd., which has seven stores across the country, will be setting up 14 new stores over the next three years at a cost of Rs 140 crore.

Raymond is already in retail with Raymond Shop and Be, and is open to other retail formats like hypermarkets Gautam Singhania, Chairman/Raymond

Market sources say that Godrej is interested in the hypermarket business, but the company is tightlipped Adi Godrej, Chairman/ Godrej Group

At least for the next few years, the existing players needn't fear too much the muscle of the new big boys. As Arvind Singhal, Chairman, KSA Technopak, says, "The opportunity is huge. And I wish more corporates would look at retailing in a big way." Singhal puts the opportunity in foods and groceries in perspective: That segment, according to him, is worth upwards of Rs 6,00,000 crore per annum. "The biggest player in food retailing-Foodworld-is no bigger than Rs 400 crore," he says. Similarly, textiles is a Rs 85,000-crore business (including clothing, home furnishing, lingerie, sleepware, etc.) and the largest supplier-Madura garments-is only around Rs 400 crore. Even Shoppers' Stop, which gets about 60 to 70 per cent of its turnover from textiles, is a Rs 404-crore company. In comparison, Japanese retail firm Aeon is a $20-billion (Rs 92,000-crore) firm. "In India, the largest retailer-RPG Group-has a retail business of only $118 million (Rs 542.8 crore)," adds Singhal.

Reliance Petroleum has plans to roll out 5,849 petroleum retails over the next three to five years Mukesh Ambani, Chairman/ Reliance Group

The Tatas are launching a chain of hypermarkets called Star India Bazaar, starting with Ahmedabad Noel Tata, Managing Director/Trent

Consolidation perhaps will be inevitable but as Anuj Puri, Managing Director of real estate consultancy Chesterton Meghraj, points out: "It may not happen very soon." Singhal is of the view that once FDI in retail is allowed, several multinational retail chains will make a beeline for India and could merge with (if not acquire) the existing large players. According to Puri, so long as demand far exceeds supply, M&As in retail won't happen. "It will take India some time to reach the level that America has reached today-a market that is consolidating on the retail front," adds Puri. According to him, M&As in retail are at least seven to 10 years away. Till then, the players in India's retail sector can step on the gas and grow their respective businesses. Don't forget that us retailer Wal-Mart is the largest company in the world, according to Fortune 500. Wal-Mart's Indian counterparts have just begun that quest for size and scale. They have a long road ahead, paved with countless opportunities and limitless potential. (See Hot Retail Formats on page 66).

-additional reporting by Arnab Mitra, Sahad P.V., Priyanka Sangani, Amanpreet Singh and Nitya Varadarajan