Indian retail industry is one of the fastest growing in the world. As per Kearney Research, India’s retail industry is projected to grow at a slower pace of 9% over 2019-2030, from US$ 779 billion in 2019 to US$ 1,407 billion by 2026 and more than US$ 1.8 trillion by 2030. 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 would be valued at US$ 2.14 billion by the end of 2021. 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 US$ 3.95 billion in 2021.
According to India Ratings and Research (Ind-Ra), domestic organised food and grocery retailers are expected to increase by 10% YoY in FY22, with organised retailers and e-commerce likely to benefit from the ongoing demand for essentials.
India’s population is taking to online retail big way. By 2024, India's e-commerce industry is expected to increase by 84% to US$ 111 billion, driven by mobile shopping, which is projected to grow at 21% annually over the next four years. In 2020, the most common payment methods online were digital wallets (40%), followed by credit cards (15%) and debit cards (15%). Online penetration of retail is expected to reach 10.7% by 2024 versus 4.7% in 2019.
In FY21, digital transactions in the total non-cash retail payments volume increased to 98.5% versus 97.0% in FY20.
According to data released by the Ministry of Statistics & Programme Implementation (MoSPI), India’s Consumer Price Index (CPI) based retail inflation increased to 5.6% YoY in December 2021. RBI sees the retail inflation to be around 4.5% in FY23.
E-Retail has been a boon during the pandemic and according to a report by Bain & Company in association with Flipkart ‘How India Shops Online 2021’ the e-retail market is expected to grow to US$ 120-140 billion by FY26, increasing at approximately 25-30% p.a. over the next 5 years.
In November 2021, Department for Promotion of Industry and Internal Trade announced that it is working on a regulatory compliance portal to minimise burdensome compliance processes between industries and the government.
In October 2021, retailers in India increased by 14% compared with last year
In July 2021, the Andhra Pradesh government announced retail parks policy 2021-26, anticipating targeted retail investment of Rs. 5,000 crore (US$ 674.89 million) in the next five years.
In July 2021, DP Retail, a subsidiary of Darwin Platform Group of Companies (DPGC), entered the retail space with the launch of its first megastore in Andheri, Mumbai. The company would be opening other self-owned exclusive stores at five locations in Mumbai. The launch signifies the DPGC’s ambitious plan to leverage potential of the Indian retail space. DP Retail plans to invest Rs. 1,000 crore (US$ 134.43 million) in FY21 to expand in other cities and allocated Rs. 100 crore (US$ 13 million) towards market penetration across the omnichannel retail business (including an innovative franchise model).
In October 2021, Reliance announced plan to launch 7-Eleven Inc.’s convenience stores in India.
In October 2021, Realme launched 100 new exclusive stores across India to expand and strengthen its footprint in the country.
In October 2021, Reliance Retail introduced Freshpik, a new experiential gourmet food store in India, to expand its grocery segment in the ultra-premium category.
In October 2021, Plum, the direct-to-consumer beauty & personal care brand, announced plan to launch >50 offline stores across India (by 2023) to expand its customer base.
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 inflows stood at US$ 572.8 billion between April 2000-December 2021. India’s retail trading sector attracted US$ 3.75 billion FDIs from April 2000 to December 2021. According to a report by PGA Labs and Knowledge Capital, investors had put in US$ 1.4 billion into D2C companies between 2014 and 2020. The sector recorded an investment of ~US$ 417 million in 2020.
In October 2021, the RBI announced plans for a new framework for retail digital payments in offline mode to accelerate digital payment adoption in the country.
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.
The Ayurveda Company (TAC), a direct-to-consumer (D2C) beauty and wellness brand, has raised US$ 3 million from Wipro Consumer Care Ventures, to expand its production capabilities and enter the retail sector.
91 Squarefeet, a retail store development business, has worked with over two dozen companies, including Tata, Aditya Birla Group, and Reliance Retail, illustrating the quick pace with which brick-and-mortar stores are being opened.
In March 2022, Reliance Brands has bought the India franchisee rights and the current Sunglass Hut retail network from DLF Brands.
DLF would invest about Rs. 2,000 crore (US$ 262.2 million) in Gurugram and Goa to build two new retail complexes.
Many fintech companies are competing for their presence in local stores. In May 2020, Paytm announced a US$ 1 billion loyalty programme and launched online ledger services for kirana stores in India. Other fintech companies such as PayNearby, Phonepe, BharatPe and Mswipe introduced different services for small shop owners, enabling better digital payments and delivery options at these stores. For example, Amazon partnered with local stores to provide a platform for many small shops and merchants on its Amazon marketplace. While, Walmart has its own network of 28 ‘best-priced’ stores serving local stores across the country.
Flipkart Wholesale, a digital B2B marketplace, announced strengthening of its commitment towards growth and prosperity of kiranas and MSMEs by boosting supply chain infrastructure and enhancing employment opportunities. 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. Online retail market in India is projected to reach US$ 350 billion by 2030 from an estimated US$ 55 billion in 2021, due to rising online shoppers in the country.
Note: ^ - According to a study by Boston Consulting Group