Emerging Retail Sector in India

Emerging Retail Sector in India

Retail is the process of selling consumer goods or services to customers through multiple channels of distribution to earn a profit. Retailers satisfy demand identified through a supply chain. Retail businesses sell finished goods to consumers in exchange for money.

Retail goods can be sold through stores, kiosks, or even by mail or the Internet. Retail businesses can include grocery, drug, department and convenience stores. Service related businesses such as beauty salons and rental places are also considered retail businesses.

Grocery stores, General Merchandise stores, speciality stores, Non - Store Retailers & restaurants are a few examples of the type of retail businesses.

Retail in India

Retail in India has taken a remarkable transformation over the last two decades. Rising income levels, urbanization, and changing consumer behaviour has given an optimistic outlook to the retail sector, promising an undoubted growth in the future. The digital medium has influenced retail with a powerful strike, reshaping customer behaviour and expectations. To summarize, the retail business is in a constant need to retrospect their strengths, reinvent their offerings across the purchase pathway, and rewrite their approach of retail economics.

India is also the world's fifth largest destination in the retail space. While India's retail market is expected to grow at a Compound Annual Growth Rate (CAGR) of 10% to US$ 1.6 trillion by 2026, India's Business to Business (B2B) e-commerce market is expected to reach US$ 700 billion by 2020.

The Indian retail industry has emerged as one of the most dynamic and fast-paced industries as a result of competition from several new players. It accounts for over 10% of the Gross Domestic Product (GDP) and around 8% of employment. India is also the world’s fifth largest destination in the retail space.

It is not surprising that India has replaced China as the most promising market for retail expansion, supported by Expanding economy, Skyrocketing consumption rates, Urbanizing population, and The emergence of the middle class.

The Indian retail business has seen Foreign Direct Investment (FDI) inflows of around US$ 1.04 billion between April 2000 and June 2017, according to the Department of Industrial Policies and Promotion. With the need for consumer goods rising daily, especially in the electronics and home appliances sector, there is a jump in new entrants investing in the Indian retail industry.

The retail sector in India is one of the largest contributors to its GDP. It accounts for around 8% of India’s employment and contributes to over 10% of the GDP

And government initiatives to improve the retail industry in India have led to many positive policy changes. The FDI rules in food processing have been changed to allow e-commerce companies and foreign retailers to sell ‘Made in India’ products. The government is also allowing 100% FDI in the online retail of goods and services.

With the expansion of e-commerce, choice of products, especially in terms of getting the lowest price for an item is greatly benefiting the consumer. Touted as the biggest revolution of the retail industry, e-commerce can teach brick-and-mortar retailers how to leverage digital channels to improve reach in tier-2 and tier-3 cities while reducing costs at the same time. Both the industry and the consumer are going to benefit in the long run.

Growth Factors:

On a micro basis, the growth of the retail industry in India will be driven by the following factors:

Growth in household incomes: India will witness more 2x growth in average household incomes from around $8000 currently to $18500 by 2020. Also, it is estimated that by 2030, India will have around 91 Million ‘middle-class’ families from its current number of around 21 Million.

Urbanization: Around 32% i.e. ~43 Crores of India’s population is urban and this number is expected to reach around 40% by 2020. This will significantly increase businesses of the companies falling under the ‘modern retail’ category.

The nuclearization of families: Close to 65% i.e. ~28 Crores of the urban population and 60% i.e. ~53 Crores of the rural population is now nuclear. This is enabling an increase in the spending power of the people by 30%-50% which is significantly diverted to the retail sector.

Generation Vary: India is set to become the youngest country on this planet by 2020, with close to 69% of its population in the working age group with a median individual age of around 29. This will provide our economy with an unprecedented edge over China, Japan and the West whose population ageing and boost our GDP growth rate by 2%.