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Retail Industry in India

December, 2012

Introduction

India is one of the most desirable retail destinations in the world. India has emerged as the fifth most favourable destination for international retailers, outpacing 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.

Reforms in the retail industry in India announced recently could provide an opportunity for Dutch companies in supply chain management, as per Mr Alphonsus Stoelinga, Netherlands Ambassador to India.

Market Size

The retail industry in India is worth US$ 350 billion and has a low organised retail penetration (ORP) of 5 per cent to 8 per cent and is now growing at a compound annual growth rate (CAGR) of 15 per cent to 20 per cent, according to a PricewaterhouseCoopers (PwC) research report titled 'Winning in India's retail sector: Factors for success'.

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

E-tailing

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 24 hours a day. Though nascent, 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.

As the world's 11th largest economy (and fourth-largest emerging economy after BRIC peers China, Brazil, and Russia), India has started to appear on eBusiness organizations' lists of key international markets. The e-commerce revenues in India is expected to increase more than five times, from US$ 1.6 billion in 2012 to US$ 8.8 billion in 2016, as per a Forrester report titled 'Trends in India's eCommerce Market'. In 2011, venture capitalists invested US$ 177 million in e-commerce in India.

The Indian digital consumer industry, e-tailing is set to become a Rs 53,000 crore (US$ 9.76 billion) market by 2015 from the current Rs 3,600 crore (US$ 662.98 million), as per a November report by Avendus Capital Pvt Ltd.

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. This fact is further making marketers focus their strategies according to customers in rural areas.

Videocon Industries promoted Next Retail plans to move out of the metros and re-locate its stores in tier 2 and 3 cities. "Consumers in smaller towns have an emotional connect with indigenous brands such as Videocon and there is a demand for home-grown brands and we would be pushing such brands in these markets," as per K S Raman, Director, Next Retail.