INDIAN RETAIL MARKETS
By the turn of the 21st century, the face of the Indian retailing industry
had changed significantly. The retailing industry, which, until the early 1990‟s
was dominated by the unorganized sector, witnessed a rapid growth in the
organized sector with the entry of corporate groups into the retailing market.
The retail sector in India is witnessing a huge revamping exercise as
traditional markets make way for new formats such as departmental stores,
hypermarkets, supermarkets and specialty stores. Rated the fifth most attractive
emerging retail market, India is being seen as a potential goldmine. A recent
McKinsey study titled “India‟s Retailing Comes of Age” has predicted a retail
revolution in India. While India is the last among the large Asian economies to
liberalize its retail sector, the „licensing raj‟ has well and truly passed.
Hence, two aspects of retail marketing are Store Retailing and Non-store
Retailing. Store Retailing as the departmental store, which is a store or multi
brand outlet, offering an array of products in various categories under one roof,
trying to cater to not one or two but many segments of the society and Non-
store Retailing as the direct selling, direct marketing, automatic vending. Most
of these stores believe in creating not just a marketing activity with its
customers, but rather favor relationship building with him so as to convert first
time customers into a client.
A number of Indian and international retailers are entering this nascent,
though dynamic market. Market liberalization and increasingly assertive
consumers are sowing the seeds of a retail transformation that will bring bigger
Indian and multinational players on to the scene. Buoyed by a strong increase in
private consumption, retailing is one industry that is waiting to explode. Though
retail may well be our next sunrise industry after Information Technology,
capitalizing on the opportunities is still a formidable task for retailers. We may
have made several forays into the world of international retailing, but success
has only been moderate. At about 2 per cent of the total global retail market, we
are still only scraping the surface. (Economic Times Knowledge Series –
Changing Gears: Retailing in India, 2003).
According to B S Nagesh, CEO, Shoppers Stop, “Indian retailing is on
the threshold of growth – early leaders have to take their technology and current
learning into much larger scales. Companies like us will lead in creating retail
experiences and retail brands, whereas mall developers will lead in providing
retail space. But it is for the government to make India a great shopping and
travel destination through right policy decisions and direction.”
The retail sector in India is witnessing a huge revamping exercise as
traditional markets make way for new formats such as departmental stores,
hypermarkets, supermarkets and specialty stores. Retail is India‟s largest
industry, accounting for over 10 per cent of the country‟s GDP and around eight
per cent of the employment. It has emerged as one of the most dynamic and fast
paced industries with several players entering the market. Western-style malls
have begun appearing in metros and second-rung cities alike introducing the
Indian consumer to a shopping experience like never before. India‟s vast middle
class and its almost untapped retail industry are key attractions for global retail
giants wanting to enter newer markets. The relationship and services offered by
the retailer has emerged as another important issues which were given due
consideration and scored better in their preference list. The importance of
recognition of consumers‟ value system and the discount offered by the retailer
are another important factor which respondent has considered in selecting the
retail showroom. The organized retail sector is expected to grow stronger than
GDP growth in the next five years driven by changing lifestyles, strong income
growth, better products and shopping options, and favourable demographic
patterns. In modern retailing, a key strategic choice is the format. Innovation in
formats can provide an edge to retailers. Organized retailers in India are trying a
variety of formats, ranging from discount stores to supermarkets to
hypermarkets to specialty chains. Adding one more feather in cap, notably,
organized retail market has also registered very rapid growth in India. ETIG
(Economic Times Intelligence Group) estimated the size of the organized retail
industry at about Rs. 16,000 cr in 2001-02.
Due to increased number of retailers and new entrants in retail business,
the management of the business has become of paramount importance for
individual growth of businessmen and also in economic planning of country.
Retail management can orient the efforts of business in right direction and at
depth pace. For this a complete knowledge of basic facts and environmental
changes is necessity of the day to run, develop and maintain the retail business
in Indian circumstances.
The distribution of consumer products begins with the producer and
ends at the ultimate consumer. Between the producer and the consumer there is
a middleman- the retailer, who links the producers and the ultimate consumers.
Retailing is defined as a conclusive set of activities or steps used to sell a
product or a service to consumers for their personal or family use. It is
responsible for matching individual demands of the consumer with supply of all
Retailers perform specific activities such as anticipating customer‟s
wants, developing assortments of products, acquiring market information, and
financing. A common assumption is that retailing involves only the sale of
products in stores. However, it also includes the sale of services like those
offered at a restaurant, parlour, or by car rental agencies. The selling need not
necessarily take place through a store. Retailing encompasses selling through
mail, the internet, door visits- any channel that could be used to approach the
consumer. Manufacturers like Dell Computers sell directly to the consumers
and also perform the retailing function.
The India Retail Industry is the largest among all the industries,
accounting for over 10 per cent of the country‟s GDP and around 8 per cent of
the employment. The Retail Industry in India has come forth as one of the most
dynamic and fast paced industries with several players entering the market. But
all of them have not yet tasted success because of the heavy initial investments
that are required to break even with other companies and compete with them.
The India Retail Industry is gradually inching its way towards becoming the
next boom industry.
The total concept and idea of shopping has undergone an attention
drawing change in terms of format and consumer buying behaviour, ushering in
a revolution in shopping in India. Modern retailing has entered into the Retail
market in India as is observed in the form of bustling shopping centres, multi-
storied malls and the huge complexes that offer shopping, entertainment and
food all under one roof.
A large young working population with median age of 24 years,
nuclear families in urban areas, along with increasing workingwomen
population and emerging opportunities in the services sector are going to be the
key factors in the growth of the organized Retail sector in India. The growth
pattern in organized retailing and in the consumption made by the Indian
population will follow a rising graph helping the newer businessmen to enter the
India Retail Industry.
In India the vast middle class and its almost untapped retail industry
are the key attractive forces for global retail giants wanting to enter into newer
markets, which in turn will help the India Retail Industry to grow faster. Indian
retail is expected to grow 25 per cent annually. Modern retail in India could be
worth US$ 175-200 billion by 2016. The Food Retail Industry in India
dominates the shopping basket. The Mobile phone Retail Industry in India is
already a US$ 16.7 billion business, growing at over 20 per cent per year. The
future of the India Retail Industry looks promising with the growing of the
market, with the government policies becoming more favourable and the
emerging technologies facilitating operations.
Retail importance in India
Retail is India‟s largest industry, accounting for over 10 per cent of the
country‟s GDP and around eight per cent of the employment. Retail industry in
India is at the crossroads. It has emerged as one of the most dynamic and fast
paced industries with several players entering the market. But because of the
heavy initial investments required, break even is difficult to achieve and many
of these players have not tasted success so far.
However, the future is promising, the market is growing, government
policies are becoming more favourable and emerging technologies are
Retailing in India is gradually inching its way toward becoming the
next boom industry. The whole concept of shopping has altered in terms of
format and consumer buying behaviour, ushering in a revolution in shopping in
India. Modern retail has entered India as seen in sprawling shopping centres,
multi-storied malls and huge complexes offer shopping, entertainment and food
all under one roof. The Indian retailing sector is at an inflexion point where the
growth of organized retailing and growth in the consumption by the Indian
population is going to take a higher growth trajectory. The Indian population is
witnessing a significant change in its demographics. A large young working
population with median age of 24 years, nuclear families in urban areas, along
with increasing working-women population and emerging opportunities in the
services sector are going to be the key growth drivers of the organized retail
sector in India.
Retailing is one of the pillars of the economy in India and accounts for
35% of GDP. The retail industry is divided into organized and unorganized
sectors. Over 12 million outlets operate in the country and only 4% of them
being larger than 500 sq ft (46 m²) in size. Organized retailing refers to trading
activities undertaken by licensed retailers, that is, those who are registered for
sales tax, income tax, etc. These include the corporate-backed hypermarkets and
retail chains, and also the privately owned large retail businesses. Unorganized
retailing, on the other hand, refers to the traditional formats of low-cost
retailing, for example, the local kirana shops, owner manned general stores,
paan/beedi shops, convenience stores, hand cart and pavement vendors, etc.
Growth of retail in India
An increasing number of people in India are turning to the services sector
for employment due to the relative low compensation offered by the traditional
agriculture and manufacturing sectors. The organized retail market is growing at
35 percent annually while growth of unorganized retail sector is pegged at 6
The Retail Business in India is currently at the point of inflection. Rapid
change with investments to the tune of US $ 25 billion is being planned by
several Indian and multinational companies in the next 5 years. It is a huge
industry in terms of size and according to management consulting firm
Technopak Advisors Pvt. Ltd., it is valued at about US $ 350 billion. Organized
retail is expected to garner about 16-18 percent of the total retail market (US $
65-75 billion) in the next 5 years.
India has topped the A.T. Kearney‟s annual Global Retail Development
Index (GRDI) for the third consecutive year (5), maintaining its position as the
most attractive market for retail investment. The Indian economy has registered
a growth of 8% for 2007. The prediction for 2008 is 7.9%. (6) The enormous
growth of the retail industry has created a huge demand for real estate. Property
developers are creating retail real estate at an aggressive pace.
With over 1,000 hypermarkets and 3,000 supermarkets projected to come
up by 2011, India will need additional retail space of 700,000,000 sq ft
(65,000,000 m²) as compared to today. Current projections on construction
point to a supply of just 200,000,000 sq ft (19,000,000 m²), leaving a gap of
500,000,000 sq ft (46,000,000 m²) that needs to be filled, at a cost of US$15-18
Organized retail at present comprises merely 3% of the total market in
India, and is likely to grow from its current 3% to 15-20 % over the next 10
years analysts feel. The contribution of retail industry to India‟s GDP is more
than 13%. The organized retail sector is expected to grow at a higher rate than
GDP growth in the next five years, says KPMG report titled ‘Consumer
Market in India’. FDI Confidence Index survey done by AT Kearney showed
that the retail industry is one of the most attractive sectors for FDI‟s in India.
Opening the door partly – 51% FDI permitted to Single Brand Retail. Very
shortly the market will also witness IPO‟s for some these Retail Ventures.
According to the 8th Annual Global Retail Development Index (GRDI) of AT
Kearney, India retail industry is the most promising emerging market for
investment. In 2007, the retail trade in India had a share of 8-10% in the GDP
(Gross Domestic Product) of the country. In 2009, it rose to 12%. It is also
expected to reach 22% by 2010.
According to a report by Northbride Capita, the India retail industry is expected
to grow to US$ 700 billion by 2010. By the same time, the organized sector will
be 20% of the total market share. It can be mentioned here that, the share of
organized sector in 2007 was 7.5% of the total retail market.
Indian Retail Scenario
In 2004 about 12 million sq feet space was occupied by the organized retail
industry and by the end of 2006 it crossed 40 million sq feet.
Indian retail industry spreads over more than 6 million outlets (2.4 million
urban and 3.6 million in rural).
Just over 8 per cent of India‟s population is engaged in retail (compared to 25
per cent in the United States).
The Indian Retail Market
Providing good growth potential for global retailers amid economic
slowdown, India has emerged as most alluring market for investment in the
retail sector, surpassing China, Russia and the United Arab Emirates.
According to New York, Press Trust of India, India is top retail
destination for investors.
India has been ranked as the most attractive nation for retail investment
among 30 emerging markets by US-based global management consulting firm
According to the entity‟s Global Retail Development Index (GRDI), India
is followed by Russia (2), China (3), United Arab Emirates (4) and Saudi
India was placed at the second spot last year. Similarly, the other four
countries in the top five have improved their ranking, with the United Arab
Emirates jumping 16 places from previous year‟s 20th rank. Noting that “larger,
resilient developing countries sit atop the 2009 GRDI as they are most likely to
lead the economic recovery,” the report said India has become the most
attractive destination for retail investment for the fourth time in five years.
Indian market has high complexities in terms of a wide geographic
spread and distinct consumer preferences varying by each region necessitating a
need for localization even within the geographic zones. India has highest
number of outlets per person (7 per thousand) Indian retail space per capita at 2
sq ft (0.19 m²)/ person is lowest in the world Indian retail density of 6 percent is
highest in the world. 1.8 million Households in India have an annual income of
over 45 lakh. Delving further into consumer buying habits, purchase decisions
can be separated into two categories: status-oriented and indulgence-oriented.
CTVs/LCDs, refrigerators, washing machines, dishwashers, microwave ovens
and DVD players fall in the status category. Indulgence-oriented products
include plasma TVs, state-of-the-art home theatre systems, iPods, high-end
digital cameras, camcorders, and gaming consoles. Consumers in the status
category buy because they need to maintain a position in their social group.
Indulgence-oriented buying happens with those who want to enjoy life better
with products that meet their requirements. When it comes to the festival
shopping season, it is primarily the status-oriented segment that contributes
largely to the retailer‟s cash register.
The break-up of organized retailing sales into various product
categories Books, Music & Gifts: 3% Mobile Handsets: 3% Clothing & Textile:
39% Food & Grocery: 11% Consumer Durables: 9% Footwear: 9% Furniture &
Furnishings: 8% Catering Services: 7% Jewellery & Watches: 7% Others: 4%.
Major Indian Retailers
Indian apparel retailers are increasing their brand presence overseas,
particularly in developed markets. While most have identified a gap in countries
in West Asia and Africa, some majors are also looking at the US and Europe.
Arvind Brands, Madura Garments, Spykar Lifestyle and Royal Classic Polo are
busy chalking out foreign expansion plans through the distribution route and
standalone stores as well. Another denim wear brand, Spykar, which is now
moving towards becoming a casual wear lifestyle brand, has launched its store
in Melbourne recently. It has also opened many stores in London.
The low-intensity entry of the diversified Mahindra Group into retail is
unique because it plans to focus on lifestyle products. The Mahindra group is
the fourth large Indian business group to enter the business of retail after
Reliance Industries Ltd, the Aditya Birla Group, and Bharti Enterprises Ltd. The
other three groups are focusing either on perishables and groceries, or a range of
products, or both.
Pantaloon is one of the biggest retailers in India with more than 450 stores
across the country. Headquartered in Mumbai, it has more than 5 million sq. ft
retail space located across the country. It's growing at an enviable pace and is
expected to reach 30 million sq. ft by the year 2010. In 2001, Pantaloon
launched country's first hypermarket „Big Bazaar‟. It has the following retail
Food & Grocery: Big Bazaar, Food Bazaar
Home Solutions: Hometown, Furniture Bazaar, Collection-I
Consumer Electronics: e-zone
Shoes: Shoe Factory
Books, Music & Gifts: Depot
Health & Beauty Care: Star, Sitara
Entertainment: Bowling Co.
Tata group is another major player in Indian retail industry with its subsidiary
Trent, which operates Westside and Star India Bazaar. Established in 1998, it
also acquired the largest book and music retailer in India „Landmark‟ in 2005.
Trent owns over 4 lakh sq. ft retail space across the country.
RPG Group is one of the earlier entrants in the Indian retail market, when it
came into food & grocery retailing in 1996 with its retail Food world stores.
Later it also opened the pharmacy and beauty care outlets „Health & Glow‟.
Reliance is one of the biggest players in Indian retail industry. More than 300
Reliance Fresh stores and Reliance Mart are quite popular in the Indian retail
market. It's expecting its sales to reach Rs. 90,000 crores by 2010.
AV Birla Group
AV Birla Group has a strong presence in Indian apparel retailing. The brands
like Louis Philippe, Allen Solly, Van Heusen, and Peter England are quite
popular. It's also investing in other segments of retail. It will invest Rs. 8000-
9000 crores by 2010.
Retail formats in India
Today malls are the largest form of organized retailing. Located mainly in
metro cities, in proximity to urban outskirts. Ranges from 60,000 sq ft to 7,
00,000 sq ft and above. They lend an ideal shopping experience with an
amalgamation of product, service and entertainment, all under a common roof.
Examples include Shoppers Stop, Piramyd, and Pantaloon.
Chains such as the Bangalore based Kids Kemp, the Mumbai books
retailer Crossword, RPG's Music World and the Times Group's music chain
Planet M, are focusing on specific market segments and have established
themselves strongly in their sectors.
As the name suggests, discount stores or factory outlets, offer discounts on the
MRP through selling in bulk reaching economies of scale or excess stock left
over at the season. The product category can range from a variety of perishable/
Large stores ranging from 20000-50000 sq. ft, catering to a variety of consumer
needs. Further classified into localized departments such as clothing, toys,
home, groceries, etc.
Departmental Stores are expected to take over the apparel business from
exclusive brand showrooms. Among these, the biggest success is K Raheja's
Shoppers Stop, which started in Mumbai and now has more than seven large
stores (over 30,000 sq. ft) across India and even has its own in store brand for
clothes called Stop.
Large self-service outlets, catering to varied shopper needs are termed as
Supermarkets. These are located in or near residential high streets. These stores
today contribute to 30% of all food & grocery organized retail sales. Super
Markets can further be classified in to mini supermarkets typically 1,000 sq ft to
2,000 sq ft and large supermarkets ranging from of 3,500 sq ft to 5,000 sq ft.
having a strong focus on food & grocery and personal sales.
These are relatively small stores 400-2,000 sq. feet located near residential
areas. They stock a limited range of high-turnover convenience products and are
usually open for extended periods during the day, seven days a week. Prices are
slightly higher due to the convenience premium.
Multi Brand outlets, also known as Category Killers, offer several brands across
a single product category. These usually do well in busy market places and
They are family owned business catering to small sections; they are
individually handled retail outlets and have a personal touch.
These are retailers providing online buying and selling of products and services.
It is a relatively new entry, in the retail sector. Here beverages, snacks and
other small items can be bought via vending machine.
These are small specialty stores that offer a variety of categories. They are
known as category killers as they focus on specific categories, such as
electronics and sporting goods. This is also known as Multi Brand Outlets or
These are retail chains dealing in specific categories and provide deep
assortment. Mumbai's Crossword Book Store and RPG's Music World is a
couple of examples.
Entry of MNCs
The world's largest retailer by sales, Wal-Mart Stores Inc and Sunil
Mittal's Bharti Enterprises, have entered into a joint venture agreement and they
are planning to open 10 to 15 cash-and-carry facilities over seven years. The
first of the stores, which will sell groceries, consumer appliances and fruits and
vegetables to retailers and small businesses, is slated to open in north India.
Carrefour, the world‟s second largest retailer by sales, is planning to setup two
business entities in the country one for its cash-and-carry business and the other
a master franchisee which will lend its banner, technical services and know how
to an Indian company for direct-to-consumer retail.
The world‟s fifth largest retailer by sales, Costco Wholesale Corp
(Costco) known for its warehouse club model is also interested in coming to
India and waiting for the right opportunity.
Opposition to the retailers' plans has argued that livelihoods of small
scale and rural vendors would be threatened. However, studies have found that
only a limited number of small vendors will be affected and that the benefits of
market expansion far outweigh the impact of the new stores.
It pointed out that unlike most developed markets, GDP in emerging
markets is expected to continue to grow, albeit at a slower rate, and populations
in many countries are younger, increasingly urban and showing a growing
interest in modern retail formats. A report by Indian Council of Research in
International Economic Relations submitted last year said the nation‟s Indian
retail market was estimated to be of US$322 billion in 2007 and is expected to
reach a figure of US$590 billion by 2011-12. It said emerging markets continue
to represent attractive investment opportunities for global retailers and the
economic downturn has made entry to many of these markets more critical and
The Indian retail market is the fifth largest retail destination all across the
globe. It has been ranked as the most attractive emerging market for investment
in the retail sector in 2009. In the entire Gross Domestic Product of India, the
share of retail trade was between 8-10% in 2007, where presently it has touched
around 12%, and in all probability will touch 22% by the end of 2010.
Consumerism is on the rise with the rising trend of middle class segment
in the country. The Indian consumer (retail) market, in all probability, will grow
four times by 2025. The value of India's retail market has touched US$ 511
billion in 2008. India has escalated up to the 39th most preferred retail
destination globally in 2009 (in 2008, they ranked 44th).
Components of the Indian retail Market
Banks, capital goods, engineering, fast moving consumer goods (FMCG),
software services, oil marketing, power, two-wheelers and telecom companies -
they are the main driving force in the retail growth of India. Global retailers still
now find India to be among the most attractive destination. On July 2009, the
foreign direct investment (FDI) inflows, in single-brand retail trading, touched
approximately US$ 46.60 million.
Size of Indian retail market
India's retail sector is estimated to touch US$ 833 billion by 2013 and US$ 1.3
trillion by 2018, with a compound annual growth rate (CAGR) of 10% - which
is quite lucrative. Al these estimations are due to the fact that the consumer
spending has seen a rise of around 75%, in the past four years. The organized
Indian retail market is slated to grow at a CAGR of 40%, touching US$ 107
billion by 2013.
5% of the Indian retail market is occupied by the organized retail sector,
which is all slated to witness the majority number of large format malls and
branded retail stores. The increase in the number of such malls would be first
seen in South India, followed by North, West and the East over the coming two
years. Another latest research shows that more than 100 malls spanning a space
of over 30 million sq feet is estimated to open in India between 2009 and 2010
end. Investment in the organized retail market would be around US$ 503.2
million in 2009. This could go further up to US$ 1.26 billion in the next four to
five years, at a CAGR of 40%.
India has emerged as the third most attractive market destination for
apparel retailers over the years. In India, apparel is the second largest retail
category and will have a 12-15% growth rate every year. Apparel, food and
grocery are expected to lead the organized retail sector in India.
The Indian retail market has been witnessing exponential growth with
developments taking place not only in major cities and metros but tier-II and
tier-III cities in India are also on the focus.
Developments in the Indian retail market
Marks & Spencer Reliance India has plans to open 35 stores over the
next five years. The 51:49 joint ventures between UK's Marks and Spencer and
Reliance Retail Ltd. already have 15 stores spanning India.
Carrefour SA, the largest retailer of Europe, is expected to start wholesale
operations in India by 2010 and also has shared its plan for setting up the first
cash-and-carry outlet in the National Capital Region. The present status looks
alluring with Carrefour exporting goods valued US$ 170 million from India to
Europe, UAE, Indonesia, Europe, Thailand, Singapore and Malaysia.
Jewellery manufacturer and retailer, Gitanjali Group and MMTC will set
up a chain of exclusive retail outlets jointly known as Shuddi-Sampurna
Vishwas. This joint venture will see 60 stores across India by end of 2009. They
will retail hallmarked gold and diamond Jewellery.
Mahindra Retail, a part of the Mahindra Group, is hopeful about its
investment plans to the tune of US$ 19.8 million. This investment will help
them come out with a specialty retail concept by 2010 known as 'Mom and Me'.
Pantaloon Retail India (PRIL) has investment plans of more than US$ 103.3
million for expanding its seamless mall Central and the value fashion format
Brand Factory in the next two years.
Bharti Retail has launched eight Wal-Mart private labels-including two
large labels 'Great Value' and 'George'- in its supermarket chain Easy day. It is
all set to attract more consumers because of their international design and
Italian sportswear brand Lotto is all set to launch two new footwear brands
Sabots and Calcetto in India very soon. By March 2010, they will have at least
50 exclusive outlets.
Steel players such as JSW Steel and Essar Steel are focusing on opening up
more retail outlets across the Indian market. JSW Steel presently has 50 steel
retail outlets known as JSW Shoppe and the target is to increase the number to
around 200 by March 2010. Similarly, Essar Steel has retail outlets known as
Essar hypermarts. With around 150 such outlets, this segment is responsible for
about 20-25% to the Essar's total revenue.
Expansion mode for the large retailers - Aditya Birla Retail, Reliance
Retail and Shoppers Stop, and food chains like McDonald's as the rentals are
Few of the major international brands are aiming to establish a strong
foothold in India. Few of such brands are The Pizza Company and Spicchio
Pizza (from Thailand), Coffee Club from Australia, Japanese brand Lolita
Fashion, Revive Juice Bars from the UK, Mrs Fields Cookies and Jamba Juice
from the US, and French fashion brand Jules.
Retail brands like United Colors of Benetton, Tommy Hilfiger and Puma
have been opening up factory outlets for selling excess stock. This step is
always an interesting method for wooing the price-conscious buyers.
Retail Sector in India
Post liberalization the Retail sector in India is heralded as one of the
sunrise industries. It has never been better for the retail sector in India. Today
within the booming service sector, retailing is the single biggest contributor in
terms of GDP to the National Income. Retailing itself can be further divided
into organized and unorganized sector.
Organized retailing came into its own in tandem with the retail boom.
Indian corporate like Reliance, ITC and Pantaloon have made foray into this
segment along with several foreign brands changing the landscape of retailing
in India. It coincided with the high growth in the Indian economy, resulting in
greater purchasing power amongst the middle class, which in turn went on a
purchasing spree. Other factors like consumer awareness, investments by
venture capitalists and private equity firms have also contributed to the growth
of organized retail. The growth in the organized retailing has resulted in the
establishment of departmental stores, supermarkets, rural retailing, e-retailing
and luxury retailing. Each one of these formats has a unique advantage and the
scale of operation depends upon factors like average footfalls, sales per sq ft etc.
However the process of acquiring license is still a bottleneck for the
development of Indian retailing.
The unorganized sector is still dominant in India, since it has the
advantage of low investment need. Since retailing is the process of connecting
the supplier and consumer, pricing of products is very important in a price
conscious market like India. Unorganized retailers play an important role in this
regard and are a vital part of the supply chain. If unorganized retail segment
positions itself correctly, it can carve a niche for itself in India's booming retail
Challenges Faced By the Industry
Even though India has well over 5 million retail outlets of different sizes
and styles, it still has a long way to go before it can truly have a retail
industry at par with International standards. This is where Indian
companies and International brands have a huge role to play.
Indian retailing is still dominated by the unorganized sector and there is
still a lack of efficient supply chain management. India must concentrate
on improving the supply chain management, which in turn would bring
down inventory cost, which can then be passed on to the consumer in the
form of low pricing.
Most of the retail outlets in India have outlets that are less than 500
square feet in area. This is very small by International Standards.
India's huge size and socio economic and cultural diversity means there is
no established model or consumption pattern throughout the country.
Manufacturers and retailers will have to devise strategies for different
sectors and segments which by itself would be challenging.
The tax structure in India favours small retail business
Lack of adequate infrastructure facilities
High cost of real estate
Dissimilarity in consumer groups
Restrictions in Foreign Direct Investment
Shortage of retail study options
Shortage of trained manpower
Low retail management skill
The drawbacks provide a huge opportunity for the retail industry. The
entry of foreign majors like Benetton, Dairy Farm and Levis underline the
opportunity for the industry in India.
The retail industry in India is currently growing at a great pace and is
expected to go up to US$ 833 billion by the year 2013. It is further expected to
reach US$ 1.3 trillion by the year 2018 at a CAGR of 10%. As the country has
got a high growth rates, the consumer spending has also gone up and is also
expected to go up further in the future. In the last four year, the consumer
spending in India climbed up to 75%. As a result, the India retail industry is
expected to grow further in the future days. By the year 2013, the organized
sector is also expected to grow at a CAGR of 40%.
Organized retailing is dominated by large conglomerates like TATA's,
ITC, RPG group, Piramals and Rahejas apart from the various MNC's.
This trend is expected to continue in future.
Textile and Garment companies like Raymond, Madura Garments and
Arvind Denims have achieved forward integration by opening their own
retail outlets for their branded garments. This gives them a huge
advantage by reducing the role of intermediaries, increase profit margin
and enables them to be close to the end user.
Inflation and the global meltdown have had an effect on the growth of
retailing in India. Experts believe the retail industry should focus on
distinction, branding, after sales service, exploring commoditization,
share of purchasing power and innovation to tide over the crisis.
The year 2009 is seen as a year of consolidation for Indian retail sector.
By ushering in best practices and restructuring business models, the retail
industry in India is expected to adjust to the changing market conditions
and ensure new opportunities for growth.
The retail sector is expected to grow at 8 to 12 per cent in 2009-2010.