The UK-based retail markets research agency, IGD, expects an eventual liberalisation of Indian FDI rules and the completion of over 350 malls by 2007-end will not only drive the organised grocery retail market forward, but also significantly increase the supply of suitable retail space.

In an in-depth study on Retailing in India, available on www.igd.com/india in a PDF format for 1,495 Euros to 3,000 Euros, the research agency says it " anticipates significant developments" in the grocery retail market as the leading retailers rapidly gain scale to secure market share and customer loyalty and new players enter the market to capitalise on the market potential.

"In the short- to medium-term," the reports states, "IGD expects that many of the existing retailers will continue to develop their portfolios as the Indian grocery market evolves. IGD believes that this expansion is driven not only by the retailers' desire to secure market share, but, in some cases, to raise the value of their assets, with a view to selling the portfolio at a later date to domestic or foreign investors."

On malls, the report advises caution. "There are concerns that the supply of malls will quickly exceed demand as consumer spending increases, but at a slower rate. There is little doubt that shopping malls are desirable retail sites as they attract the young, affluent middle-class consumers. R etailers will need to carefully assess the potential of each mall to ensure that they are finding suitable sites." IGD's research indicates that of the 350 malls expected to be built by 2007, only a third are expected to survive.

The report goes on to make a important point, which many restaurant and store owners missed in the initial euphoria over malls. It says: " The majority of visitors view mall shopping as a form of entertainment: many will only visit the malls to window shop, meet with friends for a snack or go to the cinema. It is estimated that only 10% of visitors currently make purchases from the retail outlets." IGD expects the following retailers, and the new players who are moving in fast, to expand their operations along these lines:

Dairy Farm plans to consolidate its market position in southern India and is expected to announce expansion plans into the primary cities located in the relatively underdeveloped and uncompetitive northern and western states (e.g. Delhi).

Metro has announced its intention to open a cash & carry store in Kolkata.

Pantaloon is seeking to double its retail space by 2007 to create a portfolio of over 100 stores. Its Food Bazaar supermarket format will drive this expansion.

Subhiksha has received increased funding from ICICI Ventures and that will enable it to expand its portfolio through organic growth. By the end of 2006, Subhiksha plans to open 140 new discount stores in Bangalore, Mysore, Gujarat, Mumbai and Delhi.

Reliance Industries , India's largest business conglomerate, plans to establish a multi-format portfolio from the latter part of 2006. Initially, the group will open 50 stores in 22 cities across the states of Maharashtra, Gujarat, Andhra Pradesh, Punjab and West Bengal .

Hyper City , the retail arm of the real estate conglomerate K. Raheja Corp, has opened its account with Mumbai's first hypermarket. It is the first of 55 its plans to launch across India by 2015. After Mumbai, the group plans to open one hypermarket each in Ahmedabad and Pune by 2006-end.

Wal-Mart clearly has the ambition and scale to enter the Indian market. In addition, it has the ability to use its cash & carry format Sam's Club to make a foray into the wholesale sector before restrictions on FDI are lifted in the retail sector.