Shopper's Stop Limited - Securities and Exchange Board of India

The Indian Mall Scene in 2005
30
25
20
15
10
5
0
2001 2002 2003 2004 2005
Mn Sq. ft.
Source: Images Retail
Most malls are coming up in a few cities in the country reflecting the purchasing power that exists in
these cities.
Pro-active steps taken by the government permitting use of land for commercial development in various
cities including Mumbai and Delhi has also contributed to increased availability of retail space in the
country. Availability of retail space is expected to increase further whenever property funds and
investment trusts (REITs) are permitted, which will help create a secondary market for real estate in the
country.
Availability of brands and merchandise
Consumerism and brand proliferation has been another enabler for organised retailing in India. Most of
the world’s leading brands are now present in India. Brands like L’Oreal, Espirit, Louis Vuitton, Marks &
Spencer, Tommy Hilfiger, Louis Phillipe, Levis, Pepe, Lee, Arrow, Dockers, Red Tape, Clarence, Hugo
Boss, Tiffany, Bulgari, Ecco, Chambor, Revlon, Philips, Corel, Magpie, Nike, Reebok, Parker, Ray Ban,
Lego, Mattel are now present in India.
Media Proliferation
Another factor that accelerated the concept of organised retail is media proliferation. The resultant
exposure to advertisements and brand promotions across product categories has led to a growing
consumer spending across a wide range of product categories.
Possible facilitators for further development of organised retail
A number of factors that drive transformation in retail – such as income growth, changing demographic
profile and socio-economic environment , availability of quality retail space at affordable costs – are
already falling in place in India. However, organised retail has to overcome significant challenges in terms
of regulations and infrastructural barriers in order to realise its full potential. Although some of these
bottlenecks are mere irritants, others significantly impact the economics and viability of the business.
Implementation of VAT
In India there exist differential sales tax rates across states. Besides, there is multiple-point octroi/entry
tax collection. All these add to cost and complexity of distribution as this necessitates multiple
warehouses and does not allow for centralization of certain procurements given the incidence of local
levies. Implementation of VAT will streamline the complexities in the tax structure besides narrowing the
cost disadvantage between organised and unorganised retailers.
Enhanced funding options
The retail sector has received limited funding from banks and financial institutions. The capital
requirements for a retailer are in the real estate (which banks have historically restricted lending to) and
for working capital requirements.
While some of the leading retailers are still able to get bank funding, the smaller ones are constrained for
growth funding. Similarly, equity options are also restricted with Foreign Direct Investment not being
permitted in the retail trading sector.
42
City Area (mn sq ft)
NCR 10.62
Mumbai 4.80
Bangalore 2.12
Hyderabad 1.26
Calcutta 1.15
Chennai 1.22
Pune 2.03
Ahmedabad 1.95
Lucknow 1.07
Ludhiana 0.20
Chandigarh 0.12
Jaipur 0.67
Indore 0.06