Contributing over 10% to the GDP of India, Retail industry of India is the fifth largest destination for retail across the globe. It is currently growing at a CAGR of 15% and is expected to reach INR 47 lakh crores by 2016 -17. The top seven cities customers have spent INR 3.58 lakh crores on retail last year with 19% of the penetration through the organized sector. The allied industries to retail are FMCG, real estate and e-commerce industries. It has been speculated that online retail sector would be at par with physical stores in the next five years due to an exponential increase in internet users and investment in e-commerce sectors. That would be at the cost of real estate since there would be stifling in investments in physical stores. With a projection of 200 million new customers shopping online by 2017, E-tailers have increased their investments in their online segments. The top retail giant in India is Future Retail with a market capitalization of INR 4,906 crores. The following chart shows the market shares of top retailers domestically.
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Food and groceries account for the highest category of retail sales followed by apparel and telecom. Higher spending and a rise in disposable incomes have pushed retail sales through both organized and unorganized sectors.
The past decade has seen an exponential growth in the organized segment of Indian retail with domestic companies establishing themselves through strategies that focus on verticals and formats. Many transnational brands have emerged in the country through collaborations with domestic companies. With more than 31% of the country below 14 years of age, retail growth has seeped to Tier I and Tier II cities with greater velocity. With 1.3 crores of retail outlets of the unorganized sector, Indian retail, despite its growth, has remained largely in the hands of unorganized sector (95%-96%). Owing to the emergence of nuclear families, increase in double – income household trends, increasing demand for luxury items and rapid urbanization, this industry can see comfortable platforms for a healthy growth through increase in customer bases.
The Government of India has initiated a Free Trade Agreement with the European Union to augment exports in various segments. The Foreign Investment Promotion Board has paved the way for proposals worth INR 420 crores from foreign companies like Bestseller, PUMA SA and Flemingo, clearing 100 % single brand proposals to the tune of INR 222.5 crores. The government of Telangana has entered in to a MoU with IKEA to aid the latter’s entry in to Indian retail markets with INR 500-600 crores investments.
It would be safe to say that pure play e-commerce companies have been winning at this industry. With Indian retail markets expected to double at $ 1 trillion by 2020 from its current $600 billion owing to the rising affluence and growing preference for branded products, this industry can rely on big-ticket items such as scooters, cars and real estate to be shopped online in the coming years. Through a favorable change in the taxation structure for products of this industry, the retail formats prevailing in this industry can meet international standards.
A bottleneck of this industry that needs to be addressed is the lack of required retail space and good supply chain management. The Sales per square foot ratio of Indian retail stores being INR 1,500-2000 per square foot are far being the international averages clocked at about INR 8,000 – 12,000 per sq. ft. Companies need to build up on profits as their gross margins fall nowhere near the global standards.
The domestic retail market will clock a 12 – 15% growth per annum, but one needs to keep in mind that modern trade will pick up pace as against traditional trade by 10% more. Ecommerce retail channels have to be tapped, thus bringing in advantage of lesser investments in costly real estate. A good structure for organized retail, sustainable strategies to tie up with foreign participants and proper balance between online and physical retail would ensure a smooth roadway to boost retail growth in India as well as its exports.
What this report contains:
A detailed overview of the industry
Structure of the industry from both, domestic and international perspectives
Related industries that this industry has inter-dependencies with and their understanding
Detailed analysis of industry segments in terms of the value and depth of corresponding market
Analysis & insights about the elements and critical success factors of this industry using strategic models
A forecast on the state of this industry in 2020, predicting the growth and movement patterns for 2016 - 2020
Our professional analysis on the future of the industry based on strategic actions adopted by major industry participants
Quantitative estimates and forecasts of the growth prospects of the industry using revenue and financial forecasting models