by Akhilesh K Prasad
2018 has been an active year for the Indian retail sector. Consequently, the retail real estate has witnessed growth. As we move into 2019, the following is our analysis of the retail market trends:
- Reforms: The Government has allowed 51% FDI in multi-brand retail and 100% FDI in single-brand retail under the automatic route. The move is a definite crowd puller and global retail giants such as Walmart are making forays into the Indian retail space. The Government is also in the process of tweaking norms for retail trade and enacting a 365-days working policy, in order to further improve India’s ranking in Ease of Doing Business.
- Demand: Apart from the above, rapid urbanization, digitization, rising disposable income and change in lifestyle has also promoted the retail markets and consequently, the demand for retail space will continue to increase.
- Online retail boom: In 2018, there has been an unprecedented growth in online retail. Given the rapid increase in investment and the growth in the number of internet users, India is touted to be the world’s fastest-growing e-commerce market in the next 5 years. In fact, e-commerce is expected to be at par with physical retail. This has prompted investment in warehousing and other related infrastructure.
- Tier 2 and 3 cities: In 2018, much of the retail growth momentum was seen to be coming from Tier 2 and 3 cities. In fact, 35% of luxury shopping sales came from these areas. It has been observed that the contemporary shopper in these cities is more demanding, aware and has higher disposable income than before. This has caught the attention of domestic and international brands which have now started penetrating these cities via online marketing and sales. Physical retail is obviously not an option here as of now, due to the lack of sufficient physical retail infrastructure. It is estimated that out of the total supply of retail space becoming operational in 2019, nearly 3 million sq ft will be in Tier 2 and 3 cities. As per industry estimates, the market size of tier 2 and tier 3 cities is expected to grow from the current USD 5.7 billion to USD 80 billion by 2026.
- Malls: While e-commerce is becoming a fad, physical retail has not yet lost its significance. In 2019, as many as 32 new malls are slated to become operational across major cities as well as Tier 2 and 3. Developers will continue to lay stress on F & B, multiplexes and entertainment centres. The focus will remain on experiential shopping as malls will continue to be looked at as shopping-cum-recreational destinations.
In summation, 2019 will see a balanced growth of e-commerce infrastructure as well as the physical retail space.
An MBA by qualification, Akhilesh has dabbled into various businesses. He is a keen debater, data miner and analytically inclined. His blogs tend to present a fresh perspective on any given matter