The Indian retail industry has been thrown open to foreign majors and is packed with players who strive to offer great products and value-for-money to Indian consumers. The country holds vast promise for retailers with its burgeoning spending power and rising middle class.
The US$ 500 billion market, growing at an annual rate of about 20 per cent, is largely dominated by small shops and stores as of now. The organised segment is in its nascent stage and has huge potential to harness in the sub-continent. Foreign giants like Wal-mart and IKEA have recently received the Government’s nod to enter the Indian market, after making all the necessary compliances.
- India’s retail market is majorly dominated by the unorganised sector. Organised segment accounts for 8 per cent of the total retail landscape, according to a study by Booz & Co and RAI.
- The Indian retail industry has expanded by 10.6 per cent between 2010 and 2012 and is expected to increase to US$ 750-850 billion by 2015, according to another report by Deloitte. Food and Grocery is the largest category within the retail sector with 60 per cent share followed by Apparel and Mobile segment.
- The foreign direct investment (FDI) inflows in single-brand retail trading during April 2000 to December 2012 stood at US$ 95.36 million, as per the data released by Department of Industrial Policy and Promotion (DIPP).
Internet is the buzzword in India these days. People have online access 24x7 through their laptops, iPads and mobile phones. As a result they have continued access to online retail markets as well.
Online retailers are emerging as important sales channels for consumer brands in India as more and more people, especially the young generation, are shopping online. From apparel to accessories, kids and infants’ product lines and almost everything under-the-sun is available on the net these days. Apparel and accessory brands, such as Puma, Nike and Wrangler, have recorded a big increment in online sales in 2012, led largely by purchases from smaller towns and cities with consumers paying the full price for these products.
For instance, footwear brand Nike has tie-ups only with online retailers such as Myntra and Jabong. And in a very unique initiative, it recently launched its new range of cricket gear on Jabong. Such partnerships turn out to be very successful as online retailers provide greater visibility than a physical store. "Our online store can carry around 10,000 options, while an offline store can carry only 20 per cent of a given range," said an official.
Online retail in India is projected to grow to US$ 76 billion by 2021, accounting for over 5 per cent of the Indian retail industry, according to a report by advisory services firm Technopak. This forecast is encouraging more companies- big and small- to sell aggressively online. Experts believe that much of this growth will come from the rising purchasing power of consumers in smaller cities, who do not have access to brick-and-mortar stores stocking high-end brands.
Retail Industry: Key Developments and Investments
- Kottayam, in Thiruvananthapuram, is an emerging market for luxury cars. BMW has launched its ‘mobile showroom’ in the city wherein people can check-out the brands’ models and go-in for a test drive as well. A weather-proof and air-conditioned structure, the mobile showroom is a replica of BMW’s luxurious dealerships.
- Hindustan Unilever (HUL), India's largest packaged consumer goods firm, will soon launch the country's first liquid laundry detergent, hoping that wealthy consumers will not be hesitant to pay a premium for a product that promises to make their laundry chore easier. The company claims that the new product removes stains two times better than any other detergent powder in the market.
With 90 per cent penetration in the core detergent space, HUL is trying to create newer consumption opportunities in the over Rs 15,000 crore (US$ 2.51 billion) laundry market with niche and premium products including Comfort fabric conditioner and Rin liquid blues in the post-wash segment.
- Villeroy & Boch AG, the Germany-based bath, wellness and tableware firm, has partnered with Delhi-based Genesis Luxury Fashion to commence its operations in single-brand retail trade in India.
Villeroy & Boch’s application, seeking 50 per cent equity in the joint venture (JV) company for single-brand retail trade, has recently got a nod from the Foreign Investment Promotion Board (FIPB). The FDI infusion in the JV would be to the tune of Rs 1.12 crore (US$ 187,463.60).
Genesis Luxury Fashion, that has brands such as Paul Smith, Bottega Veneta, shoe brand Jimmy Choo, Italian label Etro and Armani and home and personal care products from Crabtree and Evelyn under its business in India, will exclusively manage the distribution of Villeroy & Boch tableware products in the country. The alliance ensures the establishment of a distribution network through the opening of Villeroy & Boch’s exclusive retail stores in India.
- In a bid to tap the branded footwear market in India, which is estimated to be about Rs 30,000 crore (US$ 5.02 billion), Aero Group (known for its flagship Woodland brand) is planning to revive one of its old brands, Woods. The company is contemplating to open around 30 new, revamped Woods stores in 2013. The eight-year-old brand would now lay its focus on the fashion quotient, rather than the typical outdoor, rough and tough image of Woodland, and will have more of the range for women.
- RP-Sanjiv Goenka Group’s company Spencer’s Retail is on an aggressive growth strategy, with a focus on hyper-format stores. The company intends to infuse about Rs 600 crore (US$ 100.46 million) in setting up new stores and come out with branded and co-branded products in the food and beverage segment. One of the official spokesperson from the company revealed that Spencer’s would set up 80 hyper stores in the next 48 months. As of now, the company has 132 stores, including 26 hyper stores, 14 super market and 92 daily (convenient) stores.
- Godrej Interio, the furniture retailing arm of Godrej Group, is aiming for Rs 5,000 crore (US$ 837.14 million) of turnover by 2016-17, with plans to invest over Rs 300 crore (US$ 50.23 million) to expand manufacturing capacity and retail stores. The company is planning to set up more than 75 stores in 2013 itself with focus on tier II and III cities.
The Indian branded furniture market is worth about Rs 10,000 crore (US$ 1.67 billion) out of which Godrej Interio accounts for 15 per cent of the share. The company also plans to establish 200 speciality stores which will design and built products according to the consumer's convenience and preference.