Accounting for around 14-15 per cent of the gross domestic product (GDP), the Indian retail industry is estimated to be worth around US$ 500 billion currently. Home to one of the top five retail markets in the world, India offers immense scope of growth and opportunities in this arena. As of now, almost 90 per cent of the Indian retail sector is controlled by tiny family-run shops i.e. the unorganised segment. Thus, organised retailers have a lot of room for further penetration in this flourishing economy. In 2010, larger format convenience stores and supermarkets accounted for about 4 per cent of the industry, and these were present only in large urban centres. Now the trend is changing, and such concepts are mushrooming in smaller cities and towns as well. Organised retail segment is expanding at 20 per cent a year, driven by the emergence of shopping centers and malls and growing middle class.
India allowed overseas investment in its supermarket sector in September 2012. Since then, the retail landscape is witnessing a flurry of foreign investments. Some of the facts, recent statistics and developments related to the same are discussed hereafter.
- 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 a 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 June 2013 stood at US$ 96.96 million, as per the data released by Department of Industrial Policy and Promotion (DIPP).
Indian consumers are demonstrating an increasing interest in online shopping, thanks to the surging number of online users. The growing online retail market has become a very lucrative business for international majors as well. For instance, internet giant Amazon, which was dedicated to the biggest markets until now, has commenced an India-centric website in June 2013.
India has surpassed Japan to become the world’s third largest Internet user after China and the United States with almost 74 million Internet users, stated global digital measurement and analytics firm comScore.
In addition to that, online retail web sites have witnessed a 65 per cent rise in the traffic from the previous year, according to a survey by the Associated Chambers of Commerce and Industry of India (Assocham).
The survey indicated that the market for online shopping in India, estimated to be around Rs 52, 000 crore (US$ 8.19 billion), is expanding at a very fast pace. The trend is not only catching up in metros, but in smaller towns and cities as well.
Retail Industry: Key Developments and Investments
- Sahara Q Shop has recently initiated its operations with 100 exclusive convenience stores in Delhi/ NCR. The company is planning to open 400 such stores by March 2014 in the region. Currently, Sahara Q operates 901 stores in 12 states and by the end by FY14; the company intends to have 10,000 such stores across India. About 2,000 of these will be opened in metros.
- American real estate firm Trump Organisation is very positive on the Indian real estate sector. The company has bog growth plans for the Indian market and is scouting for a local partner to achieve its goals. Trump reveals that India has always been an important growth market for them and they want to harness the growing demand for luxury products in the sub-continent. It believes that the brand will add significant value to ultra-luxury developments - be in residential, hotel, commercial, retail or golf.
International luxury products major are also very bullish on Indian retail market.
- Italian luxury goods firm Bulgari is awaiting Foreign Investment Promotion Board (FIPB)’s nod to set up exclusive retail stores in India that will sell high-end jewellery, watches and accessories under its 'Bvlgari' brand. Part of the French luxury major LVMH Group, Rome-headquartered Bulgai has made its application under the single-brand route.
- On the similar lines, Meanwhile, Villeroy & Boch AG, the Germany-based bath, wellness and tableware firm, has partnered with 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 FIPB. The FDI infusion in the JV would be to the tune of Rs 1.12 crore (US$ 176, 949.21).
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$ 4.74 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.