Retail roadblocks in India
Its not the easiest of things for retailers to set up shop in India. The 3 major roadblocks they face ?
One, An underdeveloped supply chain, lack of a strong cold chain, poor warehousing facilities and storage are areas of concern, especially for perishable goods. So, retail chains in India have to start from scratch. Typically, in the more organised markets, retailers prefer to outsource the supply chain to specialised companies. However, in case of India, they will have to develop the entire infrastructure on their own.
Two, The high real estate cost, which shows no sign of stabilising. In the developed economies, a hypermarket spends less than 5% of its revenue in real estate. Conversely, in India, a one-lakh sq. ft. hypermarket in the NCR (National Capital Region) would end up paying 10-12 % of its revenue on real estate costs alone. In case of smaller formats, the spend on real estate is as high as 25-30 %. The industry believes that the present real estate costs are a result of artificial scarcity, leading to widespread speculations.
Three, Taxes and licence requirements are other major issues that the retail sector has been complaining about. For instance, a hypermarket in Mumbai has to apply for 29 licenses and the process can take six months. And when the retailer opens a second store, he has to apply for the licenses all over again.
Sign Pic : www.animationlibrary.com
One, An underdeveloped supply chain, lack of a strong cold chain, poor warehousing facilities and storage are areas of concern, especially for perishable goods. So, retail chains in India have to start from scratch. Typically, in the more organised markets, retailers prefer to outsource the supply chain to specialised companies. However, in case of India, they will have to develop the entire infrastructure on their own.
Two, The high real estate cost, which shows no sign of stabilising. In the developed economies, a hypermarket spends less than 5% of its revenue in real estate. Conversely, in India, a one-lakh sq. ft. hypermarket in the NCR (National Capital Region) would end up paying 10-12 % of its revenue on real estate costs alone. In case of smaller formats, the spend on real estate is as high as 25-30 %. The industry believes that the present real estate costs are a result of artificial scarcity, leading to widespread speculations.
Three, Taxes and licence requirements are other major issues that the retail sector has been complaining about. For instance, a hypermarket in Mumbai has to apply for 29 licenses and the process can take six months. And when the retailer opens a second store, he has to apply for the licenses all over again.
Sign Pic : www.animationlibrary.com
Comments