India is likely to be the world's largest consumer market by 2030, according to a report by global consultancy Deloitte. The country’s retail market is projected to touch US$ 1.3 trillion by 2020, as per Mr KV Thomas, India’s Consumer Affairs Minister. With the online medium of retail gaining more and more acceptance, there is a tremendous growth opportunity for companies (international and domestic) in the retail and fast-moving consumer goods (FMCG) segment.
The Indian consumer sector can be broadly categorised into urban and rural markets. The bourgeoning sector is attracting global marketers like never before. The pace at which India’s consumer market is changing can be put down to dramatic shifts in consumer behaviour, increasing urbanisation, presence of a strong service sector, changing lifestyle, and most significantly, the expanding retail segment.
Businesses that can cater to the requirements of India's ambitious middle class, keep prices reasonable, build brand loyalty in new consumers, and adapt to a rapidly changing environment will find tremendous rewards in India’s potential-filled consumer market.
Companies across the world are tuning their strategies and offerings to cater to Indian tastes and preferences. The following are some of the efforts, investments and developments in the sector:
India’s urban population has contributed majorly to the growth of the online market in the country. Around 30–40 per cent of the total retail in India’s top 75 cities is expected to be carried out online in the next 7–10 years, said Mr Arvind Singhal, Chairman and Founder, Technopak Advisors. Amazon, the world’s biggest internet retail company, has seen potential in the Indian market. In June 2013, India became only the tenth market where Amazon has established a country-specific retail website.
With rural India getting increasingly empowered with all forms of technology, online portals are going to be vital for companies trying to access these markets. Of the total online market products, consumer durables account for 34 per cent, apparel and accessories 30 per cent, books 15 per cent, beauty and personal care 10 per cent, and home and furnishing 6 per cent. Over 50 per cent of sales in these product categories take place in non-metro cities.
Some of the biggest deals in the online retail and retail space in the past three years materialised in the quarter ended September 2013. Flipkart.com raised US$ 200 million from existing investors – private equity firms Tiger Global Management LLC, Accel Partners and Iconiq Capital, and MIH (a part of South Africa’s Naspers Group ). This investment is the largest in online retail in the country.
Italian high-end accessories brand Furla plans to expand its presence in the Indian market, with the government clearing the company’s joint venture with Gurgaon-based Genesis Luxury Fashion. The alliance is expected to invest about Rs 13 crore (US$ 2.08 million) in the first four years to open stores.
The Cabinet Committee on Economic Affairs (CCEA) has given the go-ahead to Swedish furniture retailer IKEA's application to enter the Indian industry and establish a single brand retail venture in the country. The projected Rs 10,500 crore (US$ 1.68 billion) FDI would be the largest investment by a foreign brand in the Indian retail sector.
The Indian government is also looking to simplify investment norms in multi-brand retail in order to attract more foreign investment. The government will be receptive to any issues that global investors have in mind and clarify the guidelines, according to Mr Anand Sharma, India’s Union Minister for Commerce and Industry.
Economic reforms together with rapid urbanisation have brought about big opportunities for investment and growth prospects in India. "By 2030, India is likely to surpass both countries (China and the US) with an aggregated consumer spend of nearly US$ 13 trillion," according to a report titled 'India matters: Winning in growth markets' by Deloitte.
E-tailing (electronic retailing) in India has the potential to grow more than hundred-fold to reach a value of US$ 76 billion by 2021 from US$ 0.6 billion in 2012, according to a study 'E-tailing in India: Unlocking the Potential’ by Technopak.
Exchange Rate Used: INR 1 = US$ 0.01607 as on 13 December, 2013
References: Media Reports, Press releases.