India an Retailing Hub

Dr. Priya Kalyanasundaram 

Professor

Sankara Institute of Management Science(SIMS)

Indian Retailing sector has become one of the booming sectors with a market size of USD 585 million and it is expected to grow reach 1080 million by 2020. This sector is experiencing growth, not only in major cities and metros, but also in Tier-II and Tier-III cities.  The major players FMCG are focusing more on rural market. With an increasing investment in infrastructure, retailers would be able to increase their access to high-growth potential rural markets. India’s ecommerce market is expected to become the world’s largest market. The retail industry’s business to business (b2b) is expected to reach US$ 700 billion by 2020 and business to consumer (b2c) is to reach US$ 26 billion.  With this increasing trend many Multinational companies like IKEA, Amazon, Wal-Mart, Bong and Olufsen have started investing in India.

Investment Analysis show that,

• IKEA has purchased 14 acres of land in Bangalore for setting its third retail outlet in the country.
• Future group has entered into a joint venture with Khimji Ramdas group in Oman.
• Amazon has planned to double its storage capacity in India.
• Bong and Olufsen , Danish stereo and speaker system maker has a plan for selling 8 to 10 standalone satellite in cities like Kolkotta, Hyderabad , Ahemdhebad .
• Amway India has planned to open 50 retail stores by 2018 for enhancing direct and online sales of its products.
• The world’s largest spirits maker Diageo, has planned to open a new business services centre in Bengaluru and give employment to 1,000 people, by end of 2017 .
• Marks and spencer has plans to open annually 10 new stores in joint venture with Reliance Retail by 2017.

Government Initiatives

         Government of India has taken many initiatives for the growth and development of the retail sector. Until 2011 FDI was not permitted for multi brand retail or in any other retail outlet in India. Only during January 2012 Indian government allowed 100 per cent foreign Direct Investment and the growth of the Indian retail industry got accelerated. It  has approved 51 per cent  of FDI in multi-brand retail and increased FDI limit to 100 per cent (from 51 per cent) in single brand retail, and also has a plan  to allow 100 per cent FDI in e-commerce, under the plan that the products sold must be manufactured in India so to gain from the liberalised regime. The Government has changed the 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.  As per Indian Council for Research on International Economic Relations (ICRIER) prediction the Indian economy will grow by 13 percent for unorganised sector and 10 percent for organised sector. In India organised Retail Penetration (ORP) is only 8 – 10 per cent which is low in 2017 compared to other Countries US (85) Per cent which indicates strong potential for organised retail in India. Organised retail in India is growing at CAGR of 20- 25 per cent per year and it is expected to reach 18-20 per cent by 2020 and unorganised retail would hold a major 80- 82 per cent share. Food and grocery segment by 2020 is expected to account for 66 per cent of the total revenue followed by apparel segment readymade garments and western outfit has been growing at 40 -45 per cent annually. India has replaced China in retail sales in 2017 and it is also expected to double by 2020.

Path Ahead

  The Indian population is going towards online retail in a big way. As today’s consumers are keener towards online shopping. The online retailing is expected to grow to US$ 70 billion during 2020. E-tailers have started using creative ideas to keep the consumers always connected with them. So E-commerce industry is one of the fastest growing industries and it is bringing a revolutionary change in the retail industry. Many technology stores in India are focussing to integrate physical and online stores and trying to develop analytical model to understand the customers and to manage the supply chain.