India: An Attractive Retail Destination

chillibreeze writer — Aashish Sood

Need an editable PowerPoint map of India

India has been topping the AT Kearney's annual Global Retail Development Index (GRDI) for three consecutive years, thus presenting itself as an attractive market for retail investment.

The Indian retail market is the fifth largest retail destination globally. According to leading industry estimates, the Indian retail is estimated to grow from the US$ 412 billion in 2008 to US$ 483 billion by 2010 and $860 billion by 2018. In the same manner; modern retail, presently accounting for 4 per cent of the total market, is likely to increase its share to 25 per cent by 2018.

India has one of the largest numbers of retail outlets in the world. Of the 12 million retail outlets present in the country, nearly 5 million sell food and related products. However, India’s mass grocery retail sector is dominated by small-scale traditional retail outlets. Not only in grocery but in other categories as well, India’s retail scene is still dominated by unorganised retail players. The organised retail accounts for only 4 per cent of the total market with the rest being fulfilled through the fragmented offering. This is in contrast to the international picture. However, this is changing, and fast, as multinationals begin to seek opportunities to enter India and as local organised players accelerate their own expansion and business activity efforts in preparation for greater competition. The country’s economic development has allowed for the further development of mass grocery retail as increasingly wealthy consumers in major towns and cities turn to modern formats in search of the convenience and quality, which they now desire and can increasingly afford.

The various key drivers of the consumption in the Indian markets, and subsequently retail sector, are:

Indianization of western culture
Novelty of the shopping mall ‘concept’
Malls being a focus point for social interaction
Status associated with shopping

The sheer size of India’s population and the number of major towns and cities contained in the country, provide enough consumers to guarantee growth well beyond the forecast period. On the other hand, the rising disposable incomes and increasing urbanisation provide ample opportunity for strong growth rates. However, a big challenge for the retailers is to have similar access to the rural poor as to the urban rich.

The future outlook of the Indian retail market appears to be bright, with Euromonitor expecting the Indian Retail market to grow in value terms by a total of 39.6 per cent between 2006 and 2011, averaging growth of almost 7 per cent a year.

BMI (Business Monitor International) is anticipating the strongest growth in India’s hypermarket sector, with sales set to grow by an explosive 1025% to reach US$1.35bn in 2011. Supermarket sales will increase by 119.1%, discount stores by 242.9% and convenience stores by 134.1%.

Key focus areas for the future development of the Indian Retail industry are:

lack of proper consumer insights
Development of adequate supply chain
Develop the Human Infrastructure

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—About our writer:

Aashish Sood is a chemical engineer from Delhi College of Engineering. Subsequent to his graduation in 2005, he worked for 2 years with Evalueserve.Com Pvt. Ltd. in their Intellectual Property vertical. He is currently pursuing his MBA from IIM Lucknow and is specialising in Finance and Operations. His interests are reading and listening to music.

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