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Retail Industry in India

December, 2013


Estimated to be worth more than US$ 500 billion, the Indian retail industry is considered as one of the world’s top five retail markets in terms of economic value. The industry is experiencing exponential growth, with retail development taking place not just in major cities and metros, but also in Tier-II and Tier-III cities.

India's strong growth fundamentals along with increased urbanisation and consumerism have opened up immense scope for retail expansion. Further, easy availability of Debit/ Credit cards has contributed significantly to a strong and growing online consumer culture in India. With the online medium of retail gaining more and more acceptance, there is a tremendous growth opportunity for retail companies, both domestic and international. Currently, the online retail penetration in India stands at around 60 per cent, according to a report by an industrial body.

“India has a young, well-educated and professional population, core customers. It has a very good market. We chose to be in India before China,” as per Mr Jonathan D Caplan, President and Chief Executive, Genesco Inc.

Market Size

The Indian retail market is expected to touch US$ 1.3 trillion by 2020 from its existing level of around US$ 500 billion, according to Mr KV Thomas, Union Minister for Food and Consumer Affairs.

The foreign direct investment (FDI) inflows in single-brand retail trading during the period April 2000– September 2013 stood at US$ 97.29 million, as per data released by Department of Industrial Policy and Promotion (DIPP).

Online Retail

India’s urban population has contributed immensely 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, as per Mr Arvind Singhal, Chairman and Founder, Technopak Advisors.

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.

The growing online retail market has become a very lucrative business for international majors as well. 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.

Moreover, online fashion retailer Jabong has an exclusive partnership with Spanish casual clothing brand Desigual. Many offline brands are also launching their new products first on the online portals, as in the case of Lee Cooper which placed its Originals Frames and Sunglasses range on the online portal Snapdeal earlier this year.

Key Developments and Investments

  • Reliance Retail plans to enter the e-commerce segment in six to eight months, a move that will pitch it against established players such as Amazon, for a share of India's fast growing online retail market. The company currently operates over 1,500 stores, including hypermarkets, digital stores, jewellery outlets and apparel stores, in 136 cities nationwide. For the quarter ended September 2013, the company's sales jumped 31 per cent from a year ago to Rs 3,456 crore (US$ 557.76 million).
  • Swedish furniture retailer IKEA had proposed setting up 10 furnishing and homeware stores as well as allied infrastructure in India, over the next 10 years. The company also plans to open 15 more stores. It has already identified Haryana, Andhra Pradesh, Maharashtra and Karnataka as possible states to set up its stores.
  • Myntra has entered into an exclusive partnership with UK-based apparel manufacturer, Raised on Denim. The UK brand will manufacture its premium youth apparel range, Stanley Kane, locally and sell it on Myntra, aiming to reach the fashion-conscious clientele who are increasingly shopping online.
  • Shoemaker Johnston & Murphy, which is known for having made shoes for several US Presidents, plans to open 15 stores across Indian metros in the next four–five years, and leverage the wholesale channel. It is expecting business of Rs 50 crore (US$ 8.06 million) in the initial three–four years.
  • Tesco Plc, the UK’s largest supermarket company, plans to be the first foreign multi-brand chain to enter the Indian market. Extending its back-end and wholesale support franchise agreement with the Tata Group's Trent, Tesco will invest US$ 110 million in the Indian market for front-end multi-brand retail stores.
  • Apollo Tyres Ltd has opened its first branded outlet in Sri Lanka strengthening its presence in the island country. The outlet deals in both passenger and commercial vehicle tyres.