Indian Retail Industry Analysis

Indian retail industry is one of the fastest growing in the world. Retail industry is expected to reach Rs. 76.87 lakh crore (US$ 1.1 trillion) by 2020. India ranked 63 in the World Bank’s Doing Business 2020 publication. India ranked 73 in the United Nations Conference on Trade and Development's Business-to-Consumer (B2C) E-commerce Index 2019. India’s direct selling industry recorded sales of US$ 2.47 billion in 2019, improving its rank to 15 from 19 a year before. Consumer spending in India increased to US$ 245.16 billion in the third quarter of 2020 from US$ 192.94 billion in the second quarter of 2020

India is the fifth largest and preferred retail destination globally. The country is among the highest in the world in terms of per capita retail store availability. India’s retail sector is experiencing exponential growth with retail development taking place not just in major cities and metros, but also in tier II and III cities. Healthy economic growth, changing demographic profile, increasing disposable income, urbanisation, changing consumer tastes and preferences are some of the factors driving growth in the organised retail market in India.

Indian online grocery market is estimated to exceed sales of about Rs. 22,500 crore (US$ 3.19 billion) in 2020, witnessing a significant jump of 76% over the previous year.

India’s population is taking to online retail big way. India’s E-commerce business will reach US$ 99 billion by 2024, growing at a CAGR of 27% over 2019. Online penetration of retail is expected to reach 10.7% by 2024 versus 4.7% in 2019.

After an unprecedented decline of 19% in the January-March 2020 quarter, the FMCG industry displayed signs of recovery in the July-September 2020 quarter with a y-o-y growth of 1.6%. The growth witnessed in the fast-moving consumer goods (FMCG) sector was also a reflection of positivity recorded in the overall macroeconomic scenario amid opening of the economy and easing of lockdown restrictions.

India is expected to become the world's third-largest consumer economy, reaching Rs. 27.95 lakh crore (US$ 400 billion) in consumption by 2025. ^Increasing participation from foreign and private players has given a boost to Indian retail industry. India’s price competitiveness attracts large retail players to use it as a sourcing base. Global retailers such as Walmart, GAP, Tesco and JC Penney are increasing their sourcing from India and are moving from third-party buying offices to establishing their own wholly owned/wholly managed sourcing and buying offices in India.

The Government of India has introduced reforms to attract Foreign Direct Investment (FDI) in retail industry. The Government has approved 51% FDI in multi-brand retail and 100% FDI in single-brand retail under the automatic route, which is expected to give a boost to Ease of Doing Business and Make in India schemes, with plans to allow 100% FDI in E-commerce. Cumulative FDI inflow in retail stood at US$ 2.17 billion between April 2000 to June 2020. India’s retail sector attracted US$ 970 million from various private equity (PE) funds in 2019.

According to the Ground Zero Series findings of the consulting firm RedSeer, the retail sector is expected to recover ~80% of pre-Covid revenue (amounting to US$ 780 billion) by end-2020.

India will become a favourable market for fashion retailers on the back of a large young adult consumer base, increasing disposable income and relaxed FDI norms.

During the online festive sale in October 2020, the Indian e-commerce firms—Flipkart, Amazon, Myntra and Snapdeal—together sold goods worth US$ 3.1 billion.

Note: ^ - According to a study by Boston Consulting Group