Retail Industry in India

The Indian retail industry is growing at a rapid pace, slowly inching towards becoming the next big boom industry; in fact, retail India is heralded as one of the sunshine industries accounting for nearly 11% of the country’s GDP. A surging economy, with policies that create an environment conducive for investment, has revolutionised the Indian retail industry which is turning out to be a perfect playing field for the leading global retail brands and the small entrepreneurs trying to get a foothold in the industry. Though unorganised retailing is still the dominant segment in the retail market, organised retailing has grown in tandem with the global retail trends, slowly emerging from the shadows of unorganised retail and taking it towards a higher growth trajectory. The vibrant economy leading to the increase in income levels and spending potentials of the middle class has brought a complete reversal in the behavioural pattern of the generally price conscious Indian consumers. For a rapidly growing economy like India with a billion population (50 percent of them under the age of 25, and a whopping 70 percent under 35), organised retailing is at a very nascent stage though it has the potential to emerge as the biggest market in the near future.

The AT Kearney's Global Retail Development Index has identified India as the most attractive destination for retail business, all set to become one of the top five retail markets of the world in 10 years. The present government’s policy of allowing 100% FDI in the cash and carry wholesale format, and 51% FDI in single brand retailing, along with significant Franchisee agreements and other further liberalisation would propel the value of the Indian retail industry to about US$1065 billion by 2016, with organised retail holding around 15.5% of the total sales at US$165 billion.)

Traditional and Modern Retailing

Traditional retailing (Indian unorganized retailing) constitutes a major share (around 97%) of the total retail market in India, offering a stiff competition to the advent of organised retail. Most of these ‘mom and pop’ outlets in the neighbourhood colonies and residential areas have a fair advantage over organised retail as they have been in the business for years, running from generation to generation and enjoys a closer relationship and kinship with the consumers. Unorganised retail outlets consisting of kirana stores and street side vendors are generally low cost ventures operated with cheap labour, smaller retail space and lower or sometimes no taxes at all.

Modern retailing (Indian organised retailing) is geared for the big times with a vibrant economy and a positive shift in the demography of the Indian population. The younger generation with high disposable incomes in today’s consumerist global era are spending more, demanding better service, and looking for quality products to keep up with the rapidly changing lifestyles that come with exposure to the latest global trends and cultures. The massive influx of young population(with high income) from rural hamlets to urban settlements, phenomenal rise in the number of nuclear families with double incomes, greater representation of women in the workforce and a general growth in prosperity make India a hot destination for organised retail companies. Market analysts predict that organized retail in India is poised to overtake the GDP growth in the next few years with favourable government policies, rapid lifestyle changes, swing (positive) in the demographic pattern, and the steady growth in the income levels.

Indian Retail – Categories, Formats and Players

Unorganised retailers largely dominate the retail space in India, occupying a major chunk of the business especially in the food and grocery segments. However, organised retail is slowly and steadily picking up momentum in segments like apparels, footwear, and electronic durables, and in various retail formats like departmental stores and supermarkets. The major segments of organised retail in India would consist of Apparel and Accessories, Consumer Durables, Home Decor, Telecom, Technology, Entertainment, Finance, Health and Wellness, Food & Beverage, Travel, Automotive, Child Care etc.

Some of the more common formats of organised retail in India are Hypermarkets, Supermarkets, Online Stores, Kirana Stores, Wholesale Retail Markets, Direct Marketing, Convenience Stores, and Shopping Malls etc.

The Tatas, the Reliance Group, the Bharti Group, Aditya Birla Group, ITC, RPG Group, and the Piramals et al are the leading retail companies with a stake in the organised retail sector in India. These major Indian retail companies have been successfully running brands like Westside, Big Bazar, Lifestyle, Foodworld, Music World, Subhiksa, Crossword, Wills Lifestyle, Globus and Ebony to name a few. Benetton, Addidas, Reebok, Levis, Diary Farm, KFC, Metro, Wal Mart, Marks & Spencers etc are some of the more popular global retail brands that have set up retail business in India.

With 70 percent of the Indian population living in rural areas, where almost half of the country's national income is generated, the rural market offers huge opportunities to serious retail marketers looking for a long haul. Some of the prominent retailing companies have set up shop in the rural sector introducing innovative business models, like Chaupal Sagar (an ITC initiative), Project Shakti (HLL), Adhar Stores (Godrej Agrovet) Hariyalli Kishan Bazar etc. These rural retail initiatives enable the farmers to access multiple services and products like retail banking, fertilizers and chemicals, health products, farm needs etc.

Indian Retail - Challenges

Indian retail industry still has to overcome a number of challenges and roadblocks, before it establishes itself as an organised retail market at par with international standards. In India, unorganised retail marketers still pose a serious challenge to the entry of any organised retail player. Some debilitating factors in the progress of Indian retail may include:

Growth Drivers of Indian Retail

Retail industry in India, however, has a huge growth potential, with opportunities existing in multiple sectors and segments. Organised retailing in India in the near future would be driven by: