Retail Industry in India

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The Indian retail market is growing at a very fast pace of about 20% and has a market size of US$ 500 billion.The retail sector is the second largest employer after agriculture. The retail industry alone managed to generate more than 35 million job opportunities.

The Indian retail industry is segregated into two sectors: organized and unorganized retailing.Organized retailing comprises of those kind of trading activities which are undertaken by retailers who are registered for sales tax, Income tax etc.Corporate backed hypermarkets, retail chains, privately owned large retail businesses are some of the examples of organized retailing. Unorganized retailing mainly comprises of local kirana shops, owner managed general stoes, street vendors, convenience stores etc.

However now it can be seen that traditional markets are paving way for development of departmental stores, supermarkets, specialty stores. shopping from malls and buying branded products is also gaining momentum. Inspite of all this Indian retail sector is mainly dominated by Unorganized segment with 95% -97& share. The reason for this being deep penetration of this sector in the rural areas and large number of mom and pop stores in the urban areas.

Some of the key players in the organized retail sector
  • Pantaloons Retail Ltd, a future group venture
  • Shoppers Stop Ltd
  • Spencer Retail, RPG enterprises
  • Lifestyle, Landmark Group Venture
Other major indigenous players in retailing are Reliance Retail, Bharti Retail, Globus, Aditya Birla "More" etc.

Many Foreign players have entered India through Joint Venture with domestic firms like :
  • Carrefour in New Delhi, which launched its first cash and carry store here.
  • Wall Mart,joint venture with Bharti Retail,owns Easy Day
  • British retailer TESCO Plc entered into JV with Trent , retail segment of TATA group.
  • Marks & Spencer joint venture with Reliance Retail
Trends in retail Industry
  • Flourishing organized retail sector: The construction of mega malls and hypermarkets is boosting organized retailing.
  • Spending capacity of youth is showing an upward trend. India has large youth population
  • Easy availability of customer credit, increase in use of credit cards, access to cheap and quick loans.
  • Changing mindset of consumers. The mindset of buyers is shifting from low price and higher quantity to better quality and high satisfaction.
  • High brand consciousness amongst buyers.
Segments of Retailing and scope of opportunities

  • Food and Grocery retail: Food market in India is largely unorganized. The expenditure on food products by Indian household is the highest in the world.With rapid urbanization and consumerism there exists huge untapped potential which needs to be explored

  • Apparel: Demand for stitched garments and western outfits is increasing at the rate of 40% to 45%. Factors critical to the success of this segment are easy availability and affordability of fashionable garments along with value added benefits.

  • Beauty and Wellness: Pharmacy retailing in India is largely occupied by local pharmacist.However new chemist stores like 98.3 are emerging which offer along with drugs health and beauty care products.

  • Consumer durable: Market for consumer durable is US $6.5 billion and is expected to grow at the rate of 18%.

  • Furniture and furnishings: There has been a new trend evident in the market wherein the modern retailers are setting up home furnishings section in hypermarkets and specialty stores. This segment faces tough competition from local retailers.
Online Retailing

As Online shopping has gained popularity amongst large number of people especially youngsters, online retailers are flourishing as important sales medium for various consumer brands. Everything ranging from apparels to accessories for all the age groups is available online these days. Brands like PUMA, NIKE etc have recorded huge increments in their online sales in 2012.

Nike, a footwear brand has its associations only with online retailers such as Myntra and Jabong. And it has recently launched its new variety of cricket gear on Jabong.These online retailers help such brands widen their visibility and make them easily accessible to buyers.

Foreign Direct Investment in retail

100% FDI has been permitted, under the government approval route,in single brand product retailing as per DIPP guidelines.For projects involving FDI beyond 51% it is mandatory to source atleat 30% material from indigenous small and cottage industries, having a maximum investment of about 5 crore in plant and machinery.

In multi brand retail Central government has permitted 51% FDI. However final decision rests with the state government. States that are led by Congress party like Delhi, Assam, Haryana, Rjasthan foreign supermarkets will be allowed to set up their ventures. However states led by BJP like Gujarat, West Bengal Kerala etc. will not permit 51% FDI in multi brand retail.

Last Updated on : 07/15/2013