Potential and Benefits
Retail is inching its way towards becoming the next boom industry in India, ushering in a revolution in shopping. Retail is India's largest industry, accounting for nearly 14 per cent of our GDP and employing about 7 per cent of our total labor force. The proposal to allow upto 49% FDI in retail will not shrink employment and on the contrary will give rise to huge employment opportunities, as suggested by few research groups.
The other advantages of an organized retail industry in India would be greater enforcement of taxation mechanisms, better monitoring of labor laws and better ability to achieve zero waste.
The key question
Fuelled by the potential of a huge growth, traditional and unorganized retail structures are gradually making way for new formats such as departmental stores (Around 40,000 sq.ft in area) and hypermarkets (More than 1 lakh sq.ft in area).
However a question arises whether Indian cities should have a few hypermarkets that can cater to a large population or a large number of departmental stores for smaller populations.
Retail in Indian Cities Analysis and Classification
The decision on the format of organized retailing in a city will be based on a number of factors as follows:
Size of target customer base
Psychographics and demographics of target customer base
Retailing in India A selective strategy
A combination of hypermarkets and large sized departmental stores for Tier1 cities, medium and small sized departmental stores for Tier2 cities and larger number of smaller departmental stores in Tier3 cities would be a viable option considering the factors enlisted above. This kind of a selective approach to organized retail could ensure long-term profitability and sustainability for the investing companies.
In addition, the government should play a pivotal role by formulating policies, which ensure that the booming...