Advantage India
Robust
Demand
*India is one of the most promising and developing marketplaces in the world. There is a great deal of desire among multinational corporations to take advantage of the consumer base in India and to enter the market first.
*Increasing purchasing power has led to growing demand.
*Nearly 60 shopping malls encompassing a total retail space of 23.25 million sq. ft are expected to become operational during 2023-25.
Innovation
In Financing
*Collective effort of financial houses and banks with retailers are enabling consumers to go for durable products with easy credit.
*Many global investors are investing in the retail sector either by buying a stake in existing assets or through greenfield development platforms.
*E-commerce and consumer internet companies raised US$ 15.4 billion in PE/VC funding in 2022, almost twice the amount raised in 2020 of ~US$ 8.2 billion.
Increasing
Investments
*Due to India’s wealth of resources, availability of labour at relatively low costs, and special investment wages such tax breaks, etc., foreign corporations prefer to invest here.
*India’s retail trading sector attracted US$ 4.48 billion FDIs between April 2000- June 2023.
*The retail sector in India accounts for over 10% of the country’s GDP and around 8% of the workforce (35+ million). It is expected to create 25 million new jobs by 2030.
Policy
Support
*To improve the business climate and make it simpler for foreign companies to register fully owned subsidiaries in India, the Indian government has implemented a number of rules, regulations, and policies.
*100% FDI allowed in single-brand retail under the automatic route.
*Liberalisation of FDI is expected to give a boost to Ease of Doing Business and Make in India.
Introduction
Indian retail industry has emerged as one of the most dynamic and fast-paced industries due to the entry of several new players. It accounts for over 10% of the country’s gross domestic product (GDP) and around eight % of the employment. India is the world’s fifth-largest global destination in the retail space. India ranked 73 in the United Nations Conference on Trade and Development's Business-to-Consumer (B2C) E-commerce Index 2019. India is the world’s fifth-largest global destination in the retail space and ranked 63 in the World Bank’s Doing Business 2020. The retail sector in India accounts for over 10% of the country’s GDP and around 8% of the workforce (35+ million). It is expected to create 25 million new jobs by 2030.
The sizeable middle class and nearly unexplored retail market in India are the main enticing factors for international retail behemoths seeking to move into newer markets, which will help the Indian retail business grow more quickly. The urban Indian consumer's purchasing power is increasing, and branded goods in categories like apparel, cosmetics, footwear, watches, beverages, food, and even jewellery are gradually evolving into business and leisure that are well-liked by the urban Indian consumer. The retail sector in India is expected to reach a whopping US$ 2 trillion in value by 2032, according to a recent analysis by the Boston Consulting Group (BCG).
India is the world’s fifth-largest global destination in the retail space. In the FDI Confidence Index, India ranked 17 (after US, Canada, Germany, United Kingdom, China, Japan, France, Australia, Switzerland, and Italy).
India is one of the most promising and developing marketplaces in the world. There is a great deal of desire among multinational corporations to take advantage of the consumer base in India and to enter the market first. Nearly 60 shopping malls encompassing a total retail space of 23.25 million sq. ft are expected to become operational during 2023-25.
India ranks among the best countries to invest in Retail space. Factors that make India so attractive include the second largest population in the world, a middle-income class of ~158 households, increasing urbanization, rising household incomes, connected rural consumers, and increasing consumer spending.
As of 2021, there were 1.2 million daily e-commerce transactions. Online shoppers in India are expected to reach ~500 million in 2030 from +150 million in 2020. The E-Commerce market is expected to touch US$ 350 billion in GMV by 2030.
India’s retail sector was experiencing exponential growth with retail development taking place not just in major cities and metros, but also in small cities. Healthy economic growth, changing demographic profile, increasing disposable income, urbanisation, and changing consumer tastes and preferences have been some of the factors driving growth in the organised retail market in India.
To improve the business climate and make it simpler for foreign companies to register fully owned subsidiaries in India, the Indian government has implemented a number of rules, regulations, and policies.
Market Size
As per Kearney Research, India’s retail industry is projected to grow at 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. Revenue of India’s offline retailers, also known as brick and mortar (B&M) retailers, is expected to increase by Rs. 10,000-12,000 crore (US$ 1.39-2.77 billion) in FY20. India’s direct selling industry is expected to be valued at US$ 2.14 billion by the end of 2021. 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. Despite unprecedented challenges, the India consumption story is still robust. Driven by affluence, accessibility, awareness and attitude, household consumption stood at Rs. 130–140 trillion (US$ 1.63-1.75 trillion) in 2021.
India has the third-highest number of e-retail shoppers (only behind China, the US). The new-age logistics players are expected to deliver 2.5 billion Direct-to-Consumer (D2C) shipments by 2030. Online used car transaction penetration is expected to grow by 9x in the next 10 years.
According to recent industry reports, the e-commerce industry witnessed a phenomenal 36.8% YoY growth in terms of order volumes. As consumers prefer to shop online throughout the year, this fast-changing consumer preference towards online shopping reveals the mature status acquired by e-commerce brands in India.
As of 2021, there were 1.2 million daily e-commerce transactions. The total value of digital transactions stood at US$300 billion in 2021 and is projected to reach US$ 1 trillion by 2026. Online shoppers in India are expected to reach ~500 million in 2030 from +150 million in 2020.
India’s digital economy is expected to touch US$ 800 billion by 2030 and the E-Commerce market is expected to touch US$350 billion in GMV by 2030.
Investments/ Developments
The Retail sector in India has seen a lot of investments and developments in the recent past.
- Reliance Industries is likely to sell another 8-10% stake in Reliance Retail Ventures Ltd (RRVL) to fund expansion, retire debt and prepare for the initial public offering of the conglomerate's retail business.
- Reliance Consumer Products, the FMCG arm of Reliance Retail announced the launch of its made-for-India consumer packaged goods brand 'Independence' in Gujarat.
- IKEA, the Swedish furniture maker has drawn up plans to invest Rs. 850 crore in its Indian operation.
- Swedish retailer H&M is set to launch its home décor and accessories products such as dinnerware and bed linen in India next month. H&M HOME will be available on the company’s website and through Myntra in March.
- Lulu Group, a UAE-based retail company, will invest Rs. 2,000 crore to develop a shopping mall near Ahmedabad in Gujarat as part of its plans to expand business in India.
- India’s retail trading sector attracted US$ 4.48 billion FDIs between April 2000- June 2023.
- According to data released by the Ministry of Statistics & Programme Implementation (MoSPI), India’s Consumer Price Index (CPI) based retail inflation stood at 6.44% YoY in February 2023.
- In November 2022, Aditya Birla Fashion and Retail Ltd. entered a strategic partnership with the Galeries Lafayette to open luxury department stores and a dedicated e-commerce platform in India.
- In August 2022, Louis Philippe, India’s leading premium menswear brand from Aditya Birla Fashion and Retail Ltd., announced the launch of its outlet in Vadodara, Gujarat.
- In August 2022, Wipro Consumer announced the launch of traditional snacks and spices as it forays into packaged foods.
- In July 2022, Reliance Brands Limited (rbl) partnered with Maison Valentino to bring to India the most established Italian Maison de Couture.
- In June 2022, Reliance Brands Limited inks a JV with plastic legno spa to strengthen toy manufacturing ecosystem in India
- In June 2022, Aditya Birla Group formally launches TMRW – a Digital First ‘House of Brands’ venture in the Fashion & Lifestyle space
- In May 2022, Reliance brands limited (rbl) partnered with Tod’s S.p.A, the iconic Italian luxury brand to become the official retailer of the brand across all categories including footwear, handbags and accessories in the Indian market.
- In April 2022, Wipro Consumer Care inaugurated its factory in Telangana. It has invested in a state-of-the-art soap finishing line that runs on highest speed of 700 Nos of soap /minute.
- In FY22 (till 20th March 2022) total number of digital payment transactions volume stood at Rs. 8,193 crore (US$ 1.05 billion).
- In July 2023, UPI transactions were valued at Rs. 15.33 lakh crore (US$ 185.60 billion).
- In March 2022, Reliance Brands has bought the India franchisee rights and the current Sunglass Hut retail network from DLF Brands.
- Retail tech companies supporting the retail sector with services such as digital ledgers, inventory management, payments solutions, and tools for logistics and fulfillment are taking off in India. In the first nine months of 2021, investors pumped in US$ 843 million into 200 small and mid-sized retail technology companies, which is an additional 260% of capital compared to the entire 2020.
- In November 2021, Department for Promotion of Industry and Internal Trade announced that it is working on a regulatory compliance portal to minimize burdensome compliance processes between industries and the government.
- In October 2021, retailers in India increased by 14% compared with last year
- 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.
- In October 2021, Reliance announced plan to launch 7-Eleven Inc.’s convenience stores in India.
- 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.
- Tanishq, Shoppers Stop and Bestseller India (sells fashion brands Vero Moda, ONLY and Jack & Jones) plan to add 10-35 stores in FY22.
Government Initiatives
The Government of India has taken various initiatives to improve the retail industry in India. Some of them are listed below:
- In April 2022, the government approved PLI scheme for textiles products for enhancing India’s manufacturing capabilities and enhancing exports with an approved financial outlay of Rs. 10,683 crore (US$ 1.37 billion) over a five-year period.
- 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.
- 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.
- Government may change Foreign Direct Investment (FDI) rules in food processing in a bid to permit E-commerce companies and foreign retailers to sell Made in India consumer products.
- Government of India has allowed 100% FDI in online retail of goods and services through the automatic route, thereby providing clarity on the existing businesses of E-commerce companies operating in India.
- The Minister of MSME announced inclusion of retail and wholesale trades as MSMEs. Retail and wholesale trade will now get the benefit of priority sector lending under the RBI guidelines.
Road Ahead
The COVID-19 pandemic has caused changes in consumer preferences, habits, and attitudes over the past two years. This has a significant impact on how people buy and consume goods and services. Global retailers are now using cutting-edge business strategies to take advantage of new retail opportunities. Consumers no longer distinguish between offline and online consumption channels. Due to this, major companies are experimenting with different ways to design seamless retail experiences that are integrated across all channels. By utilising both established e-commerce platforms and traditional techniques, retailers are also experimenting with revenue models to improve their customer value offer.
E-commerce is expanding steadily in the country. Customers have the ever-increasing choice of products at the lowest rates. E-commerce is probably creating the biggest revolution in retail industry, and this trend is likely to continue in the years to come. Retailers should leverage digital retail channels (E-commerce), which would enable them to spend less money on real estate while reaching out to more customers in tier II and tier III cities. 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. Online penetration of retail is expected to reach 10.7% by 2024 versus 4.7% in 2019. Nevertheless, long-term outlook for the industry looks positive, supported by rising income, favourable demographics, entry of foreign players, and increasing urbanisation.
Note: Conversion rate used in August 2023, Rs. 1 = US$ 0.012
References: Media Reports, Press Releases, Deloitte report, Department of Industrial Policy and Promotion website, Consumer Leads report by FICCI and Deloitte - October 2019, News Articles, KPMG Blogs,
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