While ecommerce and brick-and-mortar stores will continue to co-exist in India, ecommerce currently has a definite edge over physical retail in India’s tier II and tier III cities, said Anarock Property Consultants on Wednesday.

In a report titled, ‘Rebirth of Retail Malls: New, Improved and Revitalized’, mentions that India’s tier-II and tier-III cities will also be key contributors to the country’s retail growth going forward. The organised retail market is growing at CAGR of 20-25 percent.

Tier-II cities alone received investments of more than $6,000 million between 2006-2017 and tier-III cities received around $500 million. Tier-I cities collectively saw $1,300 million investments in the same period.

"Nearly 100 million people out of India’s 300-400 million-strong middle class currently live in tier-II and tier-III cities,” said Anuj Kejriwal, managing director and chief executive officer – ANAROCK Retail.

"This indicates that a significant portion of Indian retailers’ target clientele lives in the non-metro cities. In cities such as Jaipur and Surat, household incomes are expected to cross Rs 800 billion and 26 other cities will cross Rs. 400 billion by 2020," Kejriwal added.

The report warns that the lack of physical outlets is allowing e-commerce to flourish in these towns and cities. This main competitor to physical retail is growing rapidly and is expected to cross $100 billion of value by 2020.

The major share of online shoppers in India includes millennials (Gen Y) aged 18-35 who currently account for 34 percent of the population.

The high purchasing power of this online shopping population is insufficiently tapped in these cities due to the lack of good quality physical retail spaces.

On a larger scale, the report confirms that the great Indian mall story is alive and growing rapidly. As much as 91 percent of retail sales in the country are driven by brick-and-mortar stores in India.

With respect to the quality of the operational mall stock, around 40-45 percent meet ‘good quality’ requirements, 30-35 percent of them are in the mediocre range, while the remaining in the weak category.

In the next five years, good quality stock will increase by 10-15 percent while the mediocre and weak stock may decline by 5-10 percent respectively.

First Published:Sept 5, 2018 5:37 PM IST