Indian Urban Markets: Brief Overview
The urban India has emerged as a major consuming segment across all industries and marketers are readily tuning their offerings and strategies to woo them. Urban markets are set to explode in coming years as urban population is expected to grow at about 2.3 per cent during 2006-2016 while the overall population is anticipated to grow at an annual rate of about 1.4 per cent.
Thus, acknowledging urbanisation at such a massive scale facilitates a plethora of opportunities to domestic and foreign majors to invest and expand their presence in Indian urban markets.
The urban markets in India are primarily driven by the youth and their growth is propagated by better infrastructure and facilities disseminated by the Government.
Urban expansion in India is anticipated to pace-up unlike anything the country or the world has seen before. It took nearly 40 years (from 1971 to 2008) for India’s urban population to rise by nearly 230 million; it will take only half that time to add the next 250 million, according a report by McKinsey.
Key Developments/ Investments
India’s growth story is getting aligned with that of developed nations like the US and Europe and the urban can is playing a pivotal role in this growth. For instance, majority of the foreign luxury brands are eyeing urban Indian markets as the class of high net-worth individuals (HNIs) is expanding in the country.
- The UK-based multinational hotel, coffee shop and restaurant company Whitbread’s brand Costa Coffee is planning to enhance its presence in India with another 200 outlets by 2015. The company would invest around Rs 200 crore (US$ 36.84 million) for expansion. The company has already set up 100 coffee shops in various parts of the country through its master franchisee, Devyani International Ltd (DIL)
- Wanting to drive benefits from the liberalisation of the Indian foreign direct investment (FDI) policy, Italian cosmetics company Officina Farmaceutica Italiana (OFI) is all set to venture into India’s Rs 26, 400 crore (US$ 4.86 billion) cosmetics market
OFI has sought Foreign Investment Promotion Board’s (FIPB) approval to launch its natural products brand ‘Bottega Di Lungavita’ in India. Even though the Government has allowed 100 per cent FDI in single-brand retail, Officina is considering retailing in India in a joint venture (JV) with the New-Delhi based businessman Arjun Khurana. OFI has proposed that it will hold 51 per cent in the potential venture and the remaining share will be held by the local partner.
- Since the relaxation of FDI regime in multi-brand and single brand retail, many foreign majors have planned to escalate their investments in India. The amount of FDI between April 2000 and January 2013 stood in tune to US$ 42.7 million for single-brand retail ventures only. That amounted to 0.02 per cent of overall FDI in India, according to a Department of Industrial Policy and Promotion (DIPP) fact sheet
For instance, Swedish home and lifestyle retailer Ingka Holding Overseas BV, which operates Ikea, has also proposed an investment of Rs 10, 500 crore (US$ 1.93 billion) in India under single-brand retail
- Indian apparel industry is also scaling new heights owing to rapid urbanisation, growing consumer class and changing fashion trends. This has further lead to retail penetration, growing service class and the increasing share of the designer wear. Zara, for example, is a Swedish apparel brand that performed beyond expectations in urban Indian markets