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Retail Industry in India

March, 2013

Introduction

The Indian retail segment accounts for 22 per cent of the country's gross domestic product (GDP) and contributes about 8 per cent to the total employment. India continues to be among the most attractive investment propositions for global retailers.

India has emerged as the fifth most favourable destination for international retailers, outpacing the UAE, Russia, Indonesia and Saudi Arabia, according to A T Kearney's Global Retail Development Index (GRDI) 2012. "India remains a high potential market with accelerated retail growth of 15-20 per cent expected over the next five years," highlighted the report.

Market Size

India's retail sector is worth US$ 350 billion and is growing at a compound annual growth rate (CAGR) of 15 per cent to 20 per cent at present, as per a PricewaterhouseCoopers (PwC) research report titled, 'Winning in India's retail sector: Factors for Success'.

Mass grocery and apparel are the two most favoured segments for foreign direct investment (FDI) in multi-brand retail in India, according to a study titled 'Indian Retail Market-Opening More Doors' by Deloitte Touche Tohmatsu India.

The FDI inflows in single-brand retail trading during April 2000 to December 2012 stood at US$ 42.70 million, as per the data released by Department of Industrial Policy and Promotion (DIPP).

E-tailing

The Indian retailers are using a mix of formats, of which a relatively new but rapidly growing retail format is the online channel, which offers consumers convenience, price benefits and the ability to shop around the clock. Though in a nascent stage, India's online retail market is growing at double-digit rates and is likely to be the next format that retailers will incorporate into their array of channels.

The Indian digital consumer industry, e-tailing is set to become a Rs 53,000 crore (US$ 9.71 billion) market by 2015 from the current Rs 3,600 crore (US$ 659.34 million), as per a November report by Avendus Capital Pvt Ltd.

Edukart.com, an online education company is planning to extend its franchise network across India. The company aims to open more than 50 centers in the coming year. The focus of such expansion will be metro cities, tier I and tier II cities.

Retail in Rural India

Rural chains in India are focussing on hinterlands in a big way. For many companies, a large portion of their revenues comes from rural sales. The companies thus are aligning their marketing strategies in accordance to the requirements of their customers in rural areas.

Turtle, one of India's leading men's lifestyle brands unveiled their limited edition collection of Khadi menswear with the theme "Ecological Weave". This is an initiative which not only hopes to revive the khadi industry and the livelihood of its weavers and their families in rural India, but is also poised to revolutionalise menswear fashion.