Last Updated: April 21, 2015
CEO, Marks & Spencer Reliance India
Updated: March, 2015
SECTORAL REPORT | October, 2014
The Indian retail industry has presently emerged as one of the most dynamic and fast paced industries as several players have started to enter the market. It accounts for over 10 per cent of the country’s gross domestic product (GDP) and around eight per cent of the employment in India. The country is today the fifth largest global destination in the world for retail.
Several corporates have planned to exploit the opportunities in the Indian retail space, such as Reliance Industries Ltd (RIL), which has lined up capital expenditure of Rs 1.8 trillion (US$ 28.94 billion) for the next three years for its petrochemicals, telecom and retail ventures.
With the growth in the retail industry, the corresponding demand for real estate is also being created. Further, with the online medium of retail gaining more and more acceptance, there is a tremendous growth opportunity for retail companies, both domestic and international.
India’s retail market is expected to double to US$ 1 trillion by 2020 from US$ 600 billion in 2015 driven by income growth, urbanisation and attitudinal shifts, highlighted the Boston Consulting Group and Retailers Association of India’s report titled, ‘Retail 2020: Retrospect, Reinvent, Rewrite’.
While the overall retail market will grow at 12 per cent per annum, modern trade will grow twice as fast at 20 per cent per annum, and traditional trade at 10 per cent, according to a report titled Retail 2020: Retrospect, Reinvent, Rewrite by Boston Consulting Group and Retailers Association of India.
The retail spending in the top seven Indian cities of India currently amounts to Rs 3.58 trillion (US$ 57.56 billion), with organised retail penetration at 19 per cent in 2014. It is expected that the online retail will be at par with the physical stores in five years
India is expected to become the world’s fastest growing e-commerce market on the back of robust investment activity in the sector and the rapid increase in internet users. It is expected that India’s e-commerce market will grow from US$ 2.9 billion in 2013 to over US$ 100 billion by 2020.
E-tailers are betting on more Indians switching to shopping online, with a projection of 200 million new consumers by 2017, according to a report released last year by Accel India,
The Indian retail industry in the single brand segment has received foreign direct investment (FDI) equity inflows to the tune of US$ 275.38 million in the period April 2000—January 2015, according to the Department of Industrial Policies and Promotion (DIPP).
With the rising need for consumer goods in different sectors including consumer electronics and home appliances, many companies have invested in the Indian retail space in the past few months. Some of them are:
Ms Nirmala Sitharaman, Union Minister of Commerce and Industry, Government of India has stressed on India building a culture of branding and marketing its products to the rest of the world. The ministry is also willing to take steps to start a Free Trade Agreement (FTA) with the European Union (EU).
The Government of India has taken various initiatives to improve the retail industry in India. Some of these initiatives are:
The share of e-Commerce is growing steadily. Customers have an ever increasing choice of products at the lowest rates. E-Commerce is probably creating the biggest disruption in the retail industry and this trend will continue in the year to come. Almost everything is sold on the internet now and this means that pretty much all of the retail industry faces the challenge of either being a part of e-commerce or taking it head on.
For better prospects of this industry, as a whole, both organized and unorganized retail companies should work together to improve the overall retail industry, while generating new benefits for their own customers.
Also, the retailers should take advantage of digital retail channels (e-commerce), which would enable them to spend less money on real estate while reaching more customers in tier-2 and tier-3 cities. Nevertheless, the long term outlook for the industry remains to be positive on the back of rising incomes, favourable demographics, entry of foreign players and increasing urbanization.
Exchange Rate Used: INR 1 = US$ 0.016 as on March 24, 2015
References: Media Reports, Press Releases, Deloitte report, Department of Industrial Policy and Promotion website, Union Budget 2014-15
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.