The next phase of the Indian Retail story has begun

The past couple of weeks have witnessed two major announcements that could change the face of the Indian Retail industry. The first announcement a few weeks ago came from Mukesh Ambani when he announced that the target turnover from his retail business will be Rs 50,000 crores by 2015-16. The renewed focus on Retail has been interpreted by some as a strategy that follows from the lack of growth in the established Reliance businesses, rather than a bet on an exciting new sector. Having said that, Reliance has maintained its bullish stand on domestic consumption and apart from Telecom, Retail is one of the few other opportunities that promise significant growth in the next decade.

If Reliance Retail, led by American management from Walmart China, follows through with its ambitions it will indeed change the face of Indian retail. Aditya Birla, Tata and other business houses will be forced to ramp up their growth plans as well, leading to massive growth in the sector. Realistically though, the bottlenecks of high rentals, an inefficient supply chain and a lack of national brands will continue to constrain the sector. So, despite Reliance's ambitious plans, reality might be dictated more by operational constraints than anything else.

The second announcement came from Ikea, just a couple of days ago. The Swedish furniture giant has promised Rs 10,500 crores in investment for various stores in the country over the next few years. While it remains to be seen if Indian customers will lap up the "affordable design" offerings of this iconic retailer, the effect this will have on sentiment should not be underestimated. Global retail giants (especially the single-brand ones) will watch eagerly how the Ikea story plays out in India. They will also fast-track their India plans once they gain confidence in the regulatory aspects. Entry of foreign players in the single-brand segment (and hopefully multi-brand shortly) will raise the standards of retailing in the country. Indian retailers will be forced to compete with the best. Customer service will improve, merchandising will become more targeted and supply chain and inventory management will become more efficient. This will also benefit Indian manufacturers and brands who supply to these retailers. Retail employees will also have more options for career growth. So, here's to the next phase of growth in Indian retail!

About the author:

Sreekumar (Sree) Vijaykumar - The Author and Managing Director at TradeBriefs (www.TradeBriefs.com), a content-focused email newsletter company with over 450,000 corporate subscribers