The first phase of Euphoria in Modern Indian Organized Retail Sector settled down with the collapse of Subhiksha, Vishal Megamart and Pyramid / IndiaBulls Retail. However, the sector is roaring to make a comeback and will definitely do. But will be the size of the Organized retail after some support from the government in terms of back end infrastructure ?
Organized retail at US$28bn, currently, contributes hardly ~7% to the total pie. Size of India’s retail sector at US$425bn is expected to touch US$1,250bn by 2020.By 2015, the size of Organized retail is expected to expand to $85 Bn and thereafter rapidly rise to $260 Bn by 2020 thus bringing 21% of the total market under the Organized hood.
Given the extremely small profit margins in the retail sector, ability to chop cost at all levels e.g. space, employee as well as overheads will be the key determinants of future profitability. While scale will help cut cost, product mix as well as the ability to drive higher penetration of private brands, which enjoy higher margins, will be crucial.