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Organized Retail Grows in India

The blurry figure of the shopper and where they are buying has been brought more in focus with a new retail survey from Nielsen.

NEW DELHI — As retail grows in India, the blurry figure of the shopper and where they are buying has been brought more in focus with a new retail survey from Nielsen.

While the size of India’s retail sector is estimated to be $450 billion, it is characterized by a strong unorganized segment. Organized retail is estimated to be only about 6 percent of the total. It is often referred to as “modern trade,” as against the traditional “general trade.”

A close look at where modern-trade shoppers are turning for their needs in the fast-moving consumer goods market shows a sharp increase in some urban cities.

Overall, 17 key metropolitan areas account for 73 percent of organized retailing in India. “With value growing faster than volume, it implies that even in an inflationary environment, modern-trade shoppers are expanding the share of their wallets dedicated to shopping for categories sold through organized retail,” said Adrian Terron, executive director of Retailer and Shopper, Nielsen India. Volumes through modern trade have grown by 16 percent, while value sales have increased nearly twice as fast at 28 percent.

Among the top 10 fastest-growing cities in relation to organized retail is New Delhi at No. 1, with a growth of 50.2 percent from 2010 to 2011. The others in the top five come as a surprise — neither Mumbai nor Bangalore make the list, while smaller cities such as Jaipur at almost 40 percent, Indore at 39 percent, Pune and then Surat at nearly 27 percent, are witnessing rapid growth.

Mumbai is seventh on the list.

“As shoppers in these geographies awake to the possibilities that modern-format outlets bring, this is only likely to gain momentum,” the report noted.

Modern-trade penetration is better in some categories, with nonfood areas dominating the list. Skin creams, for example, grew by 38 percent from 2010 to 2011, shampoos grew 28 percent and hair oils grew 21 percent in value terms. Private labels continue to grow, appealing to the value conscious shopper.

Meanwhile, Hindustan Unilever, the Indian arm of Unilever, has set up its first center in India to study how Indians shop. This is its seventh such center around the world.

According to industry estimates, Hindustan Unilever retails out of more than 7.2 million outlets, and Procter & Gamble from more than 5.6 million outlets. HUL has reportedly set a target to double its turnover to 500 billion rupees, or $9.3 billion at current exchange, by 2015.