In the last decade or so, India has witnessed a lot of traction in development of retail sector with many big players coming into the arena. In particular, during the last few years, this market has gone through a considerable growth in the organised sector, which amounts to 5% of the pie. The obvious other is the unorganised sector. Major domestic players – like Reliance, Tata, Bharti – have entered this field with huge investments. The retail sector in India has seen a very fast paced growth.This amounts to about 14-15% of the GDP and has an expected market size of US$ 500 billion1. With such huge potential, this sector has got the credit as the second largest employer in the country generating more than 35 million job opportunities.
The retail sector, while it is trying in a lot of things for consumer attraction, still is striking an imbalance. In India, unorganized retailers still have the major predominance. The organized retail players although picking up, still need to come up with a pertinent strategy that would attract most of the consumers into their shops, not to exclude costs and product quality. We’ve a youth nation of over 65% being below 35 years2. Since the country is young, it has got the potential both towards maximum savings and quality spending. The country is also in anticipation of high economic growth that would, in turn, bring a great change in the lifestyle that would help fuel the retail sector growth further more.
The prominent trends that the retail industry in India has witnessed are:
- The overall sector is flourishing: The concept of “shopping malls”, which is basically a concept from America, is gaining momentum in India. These malls and hypermarkets are boosting organised retailing in India
- More Purchasing Power in the hands of consumers: Spending capacity of the consumers at large has gone up and is showing an upward trend. More than half of the population is earning youth
- The working population has got easy access to the customer credit and cheap/quick loans: The usage of credit cards are on the rise
- The customer mindsets are changing from low-price-and-high-quantity to better-quality-and-high-satisfaction
- The buyer base is getting more brand conscious
To take a step back and to know more about retail brings us to the below:
Retail is the sale of goods and services from individuals or businesses to the end user. Retailers are part of an integrated system called supply chain. A retailer purchases goods and products in large quantities from manufacturers directly or through a wholesale, and then sells small quantities to the consumers for a profit.
Like any other segment, even this segment is not far from its challenges. Cost of the real estate, higher cost of personnel, not having enough and good infrastructure and a highly competitive domestic retailer groups are few.
In most of the economies, the organised retailing pass through the below phases typically.
- Phase I: New entrants create awareness of the new models like department stores, supermarkets, hypermarkets to increase the customer expectations
- Phase II: As the markets develop, consumers start demanding more modern formats leading a stronger growth
- Phase III: With this growth at a higher rate, the market reaches the state of “mature market”
- Phase IV: The domestic market reaching the so called saturation point, this leads to the growth to be very limited. Thus, it pushes retailers to evaluate new markets across the globe
During early 1990s, post the liberalisation of the economy; many Indian players like Pantaloons, Shoppers Stop and Spencer pioneered the organised retail segment in India. The Indian economy posted a remarkable CAGR [Compounded Annual Growth Rate] of 8.9% between 2004 and 20083. This growth did lead to increase in per capita income and disposable income with a larger section of the society. This stimulated the consumption and a sharp increase in retail trade. According to one of the reports from MGI [McKinsey Global Institute], the average household disposable income is like to increase by 5.3% during 2005-2025 and reach Rs.318896 per annum as compared to 3.6% in the previous 20 years. This indicates that there is a huge potential for the retail sector in India.
1Wikipedia 2Prime minister’s Maiden speech in parliament Lok Sabha 09/06/2014 3Indian Retail Industry: Challenges, Opportunities and Outlook – A report by Dun&Bradstreet in 2009