MGF MALL Gurgaon The emergence of quality real estate is helping the spread of organised retail

India is not one country, but a hundred different markets. You'll often hear marketers say that. And for good reason. With 28 states and seven union territories, 14 different official languages and hundreds of dialects, multiple ethnicities, cultures and habits, not to mention trade rules and regulations, India is a difficult market to get your arms around. Adding to that, from the marketer's point of view, is the fragmented nature of the retail industry. Organised retail in 2003-04 is estimated to have been worth Rs 22,500 crore, or less than 2 per cent of the total retail market (according to ksa Technopak). That means the nine million or so neighbourhood stores, or traditional trade, dominate the industry. The average Indian store sells just Rs 300 worth of branded consumer goods a day, making a bare Rs 30 in profit margins. No wonder, then, while India accounts for half of all FMCG stores in Asia-Pacific, its value share is an abysmal 7 per cent. "Even in the next five years, (organised retail) won't account for even a double-digit share of our sales. The market is too fragmented," says C.K. Ranganthan, Chairman & Managing Director of CavinKare.

That said, there's no denying the fact that organised retail has been growing steadily since the mid-90s. A variety of players has entered the market with several innovative formats; organised real estate, in the form of malls, is coming up, making it easier for retailers to standardise the look and feel of their stores and offer consistent consumer experience across the chain. Supply chain remains a big area of concern still, but that's likely to fall into place too once the larger retailers like Pantaloon, Spencer's, Shoppers' Stop and Trent gain critical mass. The key piece in the retail equation, however, is foreign investment. Allowing foreign retailers to come in would help the industry mature faster and result in the creation of a viable ecosystem-just like it happened in the case of the automotive industry.

While it's hard to say how much of FDI in retail will be permitted, one thing is apparent: The face of Indian retail is changing with every passing day. So just how will the retail landscape of tomorrow look? A recent study by market research firm ACNielsen offers some clues. Using its proprietary Modern Store Format Census, the firm analysed the modern format stores in top 28 towns in India. The findings are interesting. Even without any FDI in retail, the study expects the number of organised retail stores to go up from 2,500 currently to 5,500 by 2010. That means, while it took the first 2,500 stores 10 years to open, the next 3,000 will be up and running in half that time.

ACNielsen Shoppers' Trends shows that 67 per cent of consumers already use modern trade (acnielsenese for organised retail), indicating that there will be no dearth of footfalls when the new stores open. The study estimates that these stores will contribute to 10 per cent of FMCG sales in India, and close to 30 per cent in the top 28 towns. Who will be the other early adopters of modern retail? acnielsen reckons that these will likely be the towns that have adopted modern banking practices, and range from towns like Bhubaneshwar and Ludhiana to Thiruvananthapuram and Surat. Says Dinesh Sharma, General Manager (Marketing), Whirlpool of India: "Organised retail invites a different profile of customer, more upmarket, so the business is more profitable for us even after accounting for the chain's better bargaining power."

The question that marketers, however, want answered is, whether the shift to modern trade will be uniform across all product categories or are there certain categories where the shift will be faster? The answer: it'll unlikely be uniform. Take FMCG, for example. In urban India, FMCG sales via modern trade account for 4 per cent of overall sales, but some categories like cheese, liquid soaps and hair conditioners account for a significantly larger 20 per cent. The point: some product groups such as lifestyle, convenience and health-based products are more likely to get sold through modern trade.

To a marketer, this means that his category could have high, medium or low modern trade contribution, in the short term as well as in the long term. This would not only have a bearing on how he manages his sales activities, but also impact the kind of promotions he needs to offer. Given the bargaining power of modern trade in other developed nations, it is likely that for categories with high modern trade contribution, more and more money will be spent on store-specific discounts and promotions.

Just the same, the marketer would ignore the traditional stores at his own peril (see Small Is Big). Last year alone, some 500,000 of them opened all over India. Now you know why there's no retail market like India.