Indian Retail Industry – Blog

By | October 26, 2016

In recent years, Indian Retail industry has emerged as one of the most fast-paced industry. Currently, it accounts for over 10 percent of GDP and also employs around 8 percent of the population. From Retail industry perspective, India is the fifth-largest global destination.

Market Size

According to the BCG report, India is expected to reach the market size of $1.3 trillion by 2020 from $600 billion in 2015. The report also suggest that overall retail market is expected to 12% per annum. Modern trade will expand at 20 percent while traditional trade at 10 percent per annum.

In 2014, retail spending of India’s top 7 cities amounted to $53.7 billion and organized retail penetration was at 19 percent. By 2019, online retail market size will be at par with physical stores market size.

From ecommerce market perspective, India is expected to become fastest growing market mainly due to two reasons: investments and increase in number of internet users. Indian e-commerce sales are expected to reach $55 billion by 2018 from $14 billion in 2015. Further, India’s e-commerce market is expected to reach $220 billion in terms of gross merchandise value (GMV) and 530 million shoppers by 2025.

India’s direct selling industry increased 6.5 percent in 2014-15 to $1.19 billion and is expected to reach a size of $3.55 billion by 2019-20, as per a joint report by India Direct Selling Association (IDSA) and PHD.

Investment Scenario

According to the DIPP, the Indian retail industry in the single-brand segment has received Foreign Direct Investment (FDI) equity inflows totaling US$ 344.9 million during April 2000–September 2015. There are many examples of heavy investments in Indian retail space. For e.g., IKEA has announced that they will open stores in Hyderabad and Mumbai; considering the business model of IKEA, they will have to invest heavily to open stores.

Another good example would be of DataWind, they partnered with HomeShop18 to expand its retail footprint in the country. Under the partnership, HomeShop18 and DataWind would jointly launch special sales programs across broadcast, mobile and internet media to provide greater access to the latter’s tablet range.

Government Initiatives

The Ministry of Urban Development has come out with a Smart National Common Mobility Card (NCMC) model to enable seamless travel by metros and other transport systems across the country, as well as retail purchases.

The Government of India has accepted the changes proposed by Rajya Sabha select committee to the bill introducing Goods and Services Tax (GST). Implementation of GST is expected to enable easier movement of goods across the country, thereby improving retail operations for pan-India retailers. The Government has approved a proposal to scrap the distinctions among different types of overseas investments by shifting to a single composite limit, which means portfolio investment up to 49 per cent will not require government approval nor will it have to comply with sectoral conditions as long as it does not result in a transfer of ownership and/or control of Indian entities to foreigners. As a result, foreign investments are expected to be increase, especially in the attractive retail sector.

The Road Ahead

One thing is for sure that ecommerce is the way forward mainly due to its expansion in the country. Because of ecommerce, customers have more choice of products at the lowest rates. In the current scenario, all the retailers should leverage the digital channels 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 organized and unorganized 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, favorable demographics, entry of foreign players, and increasing urbanization.

Also in the current scenario, company like Patanjali has changed entirely the sentiments of the people and the ways companies market their products. Companies will have to market their products more from Indianized perspective and sometimes they will have to admit that they may have made some mistakes in the past. For example, till recently many people in rural areas were using charcoal to brush their teeth and some companies have ridiculed that and now they are marketing the same product.

Also MNCs will have to keep tab on Indian companies like Patanjali. Just give a thought that if Patanjali start exporting its products than what kind of scenario could get created. Also we cannot predict if tomorrow Patanjali decides to introduce some other Line of Business and again it will hurt the market share of MNCs.

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