The Indian retail industry has emerged as one of the most dynamic and fast-paced industries due to the entry of several new players. It accounts for over 10 per cent of the country’s Gross Domestic Product (GDP) and around 8 per cent of the employment. India is the world’s fifth-largest global destination in the retail space.
Indian Retail Industry has immense potential as India has the second largest population with affluent middle class, rapid urbanisation and solid growth of internet.
India’s retail market is expected to grow at a Compound Annual Growth Rate (CAGR) of 10 per cent to US$ 1.6 trillion by 2026. While the overall retail market is expected to grow at 12 per cent per annum, modern trade would expand twice as fast at 20 per cent per annum and traditional trade at 10 per cent#. Indian retail market is divided into “Organised Retail Market” which is valued at $60 billion which is only 9 per cent of the total sector and “Unorganised Retail Market constitutes the rest 91 per cent of the sector.
India’s Business to Business (B2B) e-commerce market is expected to reach US$ 700 billion by 2020.## Online retail is expected to be at par with the physical stores in the next five years.
India’s total potential of Business to Consumer (B2C) is estimated to be US$ 26 billion, of which $3 billion can be achieved in the next three years from 16 product categories, according to a study by Federation of Indian Chambers of Commerce and Industry (FICCI) and Indian Institute of Foreign Trade (IIFT).
India has replaced China as the most promising markets for retail expansion, supported by expanding economy, coupled with booming consumption rates, urbanizing population and growing middle class.
India is expected to become the world’s fastest growing e-commerce market, driven by robust investment in the sector and rapid increase in the number of internet users. Various agencies have high expectations about growth of Indian e-commerce markets. Indian e-commerce sales are expected to reach US$ 120 billion! by 2020 from US$ 30 billion in FY2016.Further, India’s e-commerce market is expected to reach US$ 220 billion in terms of gross merchandise value (GMV) and 530 million shoppers by 2025, led by faster speeds on reliable telecom networks, faster adoption of online services and better variety as well as convenience@.
India’s direct selling industry is expected to reach a size of Rs 23,654 crore (US$ 3.54 billion) by FY2019-20, as per a joint report by India Direct Selling Association (IDSA) and PHD.
Indian exports of locally made retail and lifestyle products grew at a CAGR of 10 per cent from 2013 to 2016.
The size of modern retail in India is expected to double to Rs 171,800 crore (US$ 25.7 billion) from Rs 87,100 crore (US$ 13 billion) in three years driven by omni-channel retail. **
The Indian retail trading has received Foreign Direct Investment (FDI) equity inflows totalling US$1.04 billion during April 2000–June 2017, according to the Department of Industrial Policies and Promotion (DIPP).
With the rising need for consumer goods in different sectors including consumer electronics and home appliances, many companies have invested in the Indian retail space in the past few months.
- US-based footwear company, Skechers, is planning to add 400-500 more exclusive outlets in India over the next five years and also to launch its apparel and accessories collection, as it increases its operations in India.
- Paytm Ecommerce Pvt is planning its first major sale on the Paytm mall for the upcoming festive season and will invest Rs 1,000 crore (US$ 156.14 million) for promotion, cash backs, and marketing.
- Investments by private equity firms in Indian retail sector reached US$ 200 million in the first half of 2017, with seven new global brands entering India during the period.
- Japanese low-cost retail chain, Miniso, opened its first store in India in August 2017 and is targeting revenue of Rs 10,000 crore (US$ 1.56 billion) over two years by reaching a count of 210 stores by the end of 2018 and 800 by 2019.
- IKEA, the Netherlands-based furniture company, has purchased 14 acres of land in Bengaluru for setting up its third retail outlet in the country.
- Future Group, a consumer goods company in India has entered into a joint venture with Khimji Ramdas Group in UAE for selling garments in Oman with both the companies having invested US$ 11.7 million each. The joint venture will first launch four to five stores in Oman and gradually increase the count to 17 to 18.
- Amazon India plans to double its storage capacity in India by adding 14 new warehouses by June 2017, aimed at maintaining rapid growth in sales and catering to the remote parts of India.
- Bang and Olufsen, Danish stereo and speaker system maker, has plans of setting up about eight to ten standalone satellite stores by the end of FY 2017-18 in cities like Kolkata, Hyderabad, Ahmedabad, among others.
- Walmart, global retail giant, plans to open 50 new cash-and-carry stores in India over the next three to four years and locate half of the stores in Uttar Pradesh and Uttarakhand while creating over 40,000 jobs in the two states.
- Global e-commerce giant, Amazon is planning to enter the Indian food retailing sector by investing US$ 515 million in the next five years, as per Mr Harsimrat Kaur Badal, Minister of Food Processing Industries, Government of India.
- US apparel retail major Gap Inc, has tied up with Arvind Group’s fashion portal NNNow.com to sell its products online, which will help the retailer expand its presence beyond metros and tier-I cities.
- Hamleys, has stated that India is one of the most important markets for Hamleys globally, and outlined plans of opening six more stores, taking its total store count in the country to 32 by the end of March 2017.
- Roche Bobois Group, outlined plans of opening new stores in cities like Hyderabad, Chennai, Pune, Kolkata and Ahmedabad, in order to make India one of its top five markets by 2022.
- A joint venture between Dutch asset manager APG Asset Management and real estate asset platform Virtuous Retail, has acquired a portfolio of three shopping malls for US$ 300 million, and has committed an additional US$ 150 million as equity capital to expand the portfolio.
- Future Consumer Ltd has formed a joint venture (JV) with UK’s largest wholesaler, Booker Group, with an investment of Rs 50 crore (US$ 7.5 million), to set up 60-70 cash-and-carry stores in India in the next 3-4 years.
- Adidas India Private Limited, outlined plans of opening around 30-40 big flagship stores across Delhi, Mumbai and Bengaluru, by 2020.
- Mad Over Donuts (MoD), outlined plans of expanding its operations in India by opening nine new MOD stores in Hyderabad and Chennai by March 2017.
- Switzerland’s luxury retail brand Bally, plans to re-enter the Indian market in a joint venture with Reliance Brands Ltd, by opening its first store in New Delhi in March 2017, and thereafter aiming to expand to four stores in Delhi, Mumbai, Kolkata and Chennai over the next 3 to 4 years.
- Urban Ladder, an online furniture store, is in advanced talks to raise around US$ 25-30 million from existing investors Kalaari Capital, SAIF Partners and Sequoia Capital, along with one new investor, which will be used to fund its expansion plans.
- Hennes & Mauritz (H&M), the Sweden-based clothing retailer, is in advanced talks with Mumbai-based Prakhhyat Infraprojects Pvt Ltd to lease around 275,000 square feet of space at Bhiwandi, Maharashtra, to set up its first warehousing hub in India.
- Future Group has partnered with UK clothing and hardware retailer Laura Ashley to make and sell merchandise as well as wholesale distribution in India.
- Parle Agro Pvt Ltd is launching Frooti Fizz, a succession of the original Mango Frooti, which will be retailed across 1.2 million outlets in the country as it targets increasing its annual revenue from Rs 2,800 crore (US$ 0.42 billion) to Rs 5,000 crore (US$ 0.75 billion) by 2018.
The Government of India has taken various initiatives to improve the retail industry in India.
- The Government of India may change the Foreign Direct Investment (FDI) rules in food processing, in a bid to permit e-commerce companies and foreign retailers to sell Made in India consumer products.
- Government of India has allowed 100 per cent Foreign Direct Investment (FDI) in online retail of goods and services through the automatic route, thereby providing clarity on the existing businesses of e-commerce companies operating in India.
E-commerce is expanding steadily in the country. Customers have the ever increasing choice of products at the lowest rates. E-commerce is probably creating the biggest revolution in the retail industry, and this trend would continue in the years to come. Retailers should leverage the digital retail channels (e-commerce), which would enable them to spend less money on real estate while reaching out to more customers in tier-2 and tier-3 cities.
Both organised and unorganised retail companies have to work together to ensure better prospects for the overall retail industry, while generating new benefits for their customers.
Nevertheless, the long-term outlook for the industry is positive, supported by rising incomes, favourable demographics, entry of foreign players, and increasing urbanisation.