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Retail in India The Past, Present and Future

Retail in India The Past, Present and Future

Before the decade of eighties, India with hundreds of towns and cities was a nation striving for

development. The evolution was being witnessed at various levels and the people of India werelearning to play different roles as businesspersons and consumers.

Retail-which literally means to put on the market, is a very important aspect of every city.

Without a well-organized retail industry, we would not have our necessities and luxuriesfulfilled. Be it our daily groceries or fashion accessories and everything in between, retail

industry brings us the blissful experience of shopping. Though organized retailing industry beganmuch earlier in the developed nations, India had not actively participated. However, with its vast

expanse and young population, India in the 21st century emerges as a highly potential retailmarket. The journey of retailing in India has been riveting and the future promises further

growth. Here is a complete picture deciphering the past, present and future trends of Indian

Retail Market.

Retail in India Past

Before the decade of eighties, India with hundreds of towns and cities was a nation striving for

development. The evolution was being witnessed at various levels and the people of the nationwere learning to play different roles as businesspersons and consumers. The foundation for a

strong economy were being laid, youth were beckoning new awareness in all spheres. Inaddition, this brought in an opportunity for retail industry to flourish. First in the metros and

major cities later to impact, sub urban and rural market as well.

Retailing in India at this stage was completely unorganized and it thrived as separate entitiesoperated by small and medium entrepreneurs in their own territories. There was lack ofinternational exposure and only a few Indian companies explored the retail platform on a larger

scale. From overseas only companies like Levis, Pepe, Marks and Spencer etc. had enteredtargeting upper middle and rich classes of Indians. However, as more than 50 % population was

formed by lower and lower middle class people, the market was not completely captured. Thiswas later realized by brands like Big Bazaar and Pantaloons who made their products and

services accessible to all classes of people and today the success of these brands proves thepotential of Indian retail market.

A great shift that ushered in the Indian Retail Revolution was the eruption of Malls across all

regional markets. Now at its peak, the mall culture actually brought in the organized format forRetailing in India, which was absent earlier. Though malls were also initially planned for the

higher strata, they successfully adapted to cater to the larger population of India. And it nowonder, today Malls are changing the way common Indians have their shopping experience.

However there is still great scope for enhancing Indian mall culture as other than ambience andbranding many other aspects of Retail Service remains to be developed on international

standards.

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To your surprise there was not a single mall in India a decade before and just a few years agoonly a handful of them were striving, today there are more than 50 malls across different cities

and 2 years from now around 500 malls are predicted to come up.

Indeed this shows a very promising trend ahead, however before taking a leap into the future of

Retail in India, let us see what the Indian retail Industry is currently occupied with.

Retail in India Present

At present the Retail industry in India is accelerating. Though India is still not at an equal pacewith other Asian counterparts, Indian is geared to become a major player in the Retail Market.

The fact that most of the developed nations are saturated and the developing ones still notprepared, India secures a great position in the international market. Also with a highly diverse

demography, India provides immense scope for companies brining in different products targetingdifferent consumers.

According to the Global Retail Development Index, India is positioned as the foremostdestination for Retail investment and business development. The factor that is presently playing asignificant role here is the fact that a large section of Indian population is in the age group of 20-

34 with a considerably high purchasing power; this has caused the increase in the demand in theurban market resulting in consistent growth in the Retail business. And though the metros and

other tier 1 cities continue to sustain Retail growth, the buzz has now shifted from these greatcities to lesser-known ones. As the spending power is no longer limited to metros, every tier 2

city in the country has good market for almost every product or service. Due to this, tier 2 citieslike Chandigarh, Coimbatore, Pune, Kolkatta, Ahmedabad, Baroda, Hyderabad, Cochin, Nagpur,

Indore, Trivandrum etc. provide a good platform for a brand to enter Indian market.

However there are a few precautions for every brand that explores Indian market. As Indianconsumers are very curious and have a broad perspective, they respond well to a new product or

concept and there are very fair chances of a brand surviving well, but every Indian consumer beit an urbanite or a small town dweller needs a feeling of value for money. Although labeled as

tight fisted, Indian consumers are great spenders once they realize that they are getting value fortheir money. Also new product /service concepts from the western world are better adopted first

by the urban Indians, the smaller markets respond well to the need based retailing rather thanluxury concepts.

As the Indian retailing is getting more and more organized various retail formats are emerging tocapture the potential of the market.

Mega Malls Multiplexes Large and small supermarkets Hypermarkets Departmental stores are a

few formats which flourishing in the both big and small regional markets

As the major cities have made the present retail scenario pleasant, the future of the IndianRetailing industry lies in the rural regions. Catering to these consumers will bring tremendousbusiness to brands from every sector. However as the market expands companies entering India

will have to be more cautious with their strategic plans. To tap into the psyche of consumers with

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different likes and dislikes and differing budgets a company has to be well prepared and highlyflexible with their product and services. In this regard focusing on developing each market

separately can save a brand from many troubles.

Retail in India The Future

According to a study the size of the Indian Retail market is currently estimated at Rs. 704 crores,

which accounts for a meager 3 % of the total retail market. As the market becomes more andmore organized the Indian retail industry will gain greater worth. The Retail sector in the small

towns and cities will increase by 50 to 60 % pertaining to easy and inexpensive availability ofland and demand among consumers.

Growth in India Real estate sector is also complementing the Retail sector and thus it becomes a

strong feature for the future trend. Over a period of next 4 years there will be a retail space

demand of 40 million sq. ft. However with growing real estate sector space constraint will not bethere to meet this demand. The growth in the retail sector is also caused by the development ofretail specific properties like malls and multiplexes.

According to a report, from the year 2003 to 2008 the retail sales are growing at a rate of 8.3%

per annum. With this the organized retail which currently has only 3% of the total market sharewill acquire 15-20 % of the market share by the year 2010.

Factors that are playing a role in fuelling the bright future of the Indian Retail are as follows:

The income of an average Indian is increasing and thus there is a proportional increase in the

purchasing power. The infrastructure is improving greatly in all regions is benefiting the market.Indian economy and its policies are also becoming more and more liberal making way for a widerange of companies to enter Indian market. Indian population has learnt to become a good

consumer and all national and international brands are benefiting with this new awareness.Another great factor is the internet revolution, which is allowing foreign brands to understand

Indian consumers and influence them before entering the market. Due to the reach of media inthe remotest of the markets, consumers are now aware of the global products and it helps brands

to build themselves faster in a new region

However despite these factors contributing to the growth of Indian retail Industry, there are a fewchallenges that the industry faces which need to be dealt with in order to realize the complete

scope of growth in Indian market.

Foreign direct investment is not allowed in retail sector, which can be a concern for many

brands. But Franchise agreements circumvent this problem. Along with this regulation, locallaws, and real estate purchase restrictions bring up challenges. Other than this lack of integrated

supply chain, management, and lack of trained workforce and flux of the market in terms of priceand product choice also need to be eliminated.

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Despite these challenges many international brands are thriving in the Indian market by findingsolutions around these challenges. A company that plans to enter Indian market at this time can

definitely look forward to great business if it analyzes and puts efforts on all parameters.

And with Good Planning, Timely Implementation and a media campaign that touches Indian

consumers any brand can go far ahead in the Indian Retail Revolution.

CONCLUSION

The retail sector has played a phenomenal role throughout the world in increasing productivity ofconsumer goods and services. It is also the second largest industry in US in terms of numbers of

employees and establishments. There is no denying the fact that most of the developedeconomies are very much relying on their retail sector as a locomotive of growth. The India

Retail Industry is the largest among all the industries, accounting for over 10 per cent of thecountrys GDP and around 8 per cent of the employment. The Retail Industry in India has

come forth as one of the most dynamic and fast paced industries with several players entering the

market. But all of them have not yet tasted success because of the heavy initial investments thatare required to break even with other companies and compete with them. The India RetailIndustry is gradually inching its way towards becoming the next boom industry.

Retail in India is still at a very early stage. Most retail firms are companies from other industries

that are now entering the retail sector on account of its amazing potential. There are only ahandful of companies with a retail background. One such company is Nilgiris from Bangalore

that started as a dairy and incorporated other areas in its business with great success. Theirachievement has led to the arrival of numerous other players, most with the backing of large

groups, but usually not with a retail background. Most new entrants to the India retail scene arereal estate groups who see their access to and knowledge of land, location and construction as

prime factors for entering the market.

New retail stores have traditionally started operations in citieslike Mumbai and Delhi where there has been an existing base of

metropolitan consumers with ready cash and global tastes. Thenew perspective to this trend is that new entrants to the retail

scenario should first enter smaller cities rather than focusingentirely on the metros. Spending power in India is not

concentrated any more in just the 4 metros (Delhi, Mumbai,Chennai, Kolkata). Smaller but upcoming cities like Chandigarh, Coimbatore, Pune,

Ahmedabad, Baroda, Trivandrum, Cochin, Ludhiana, Simla etc will fast be catching up to themetros in their spending capacity.

Cities in south India have taken to the supermarket style of shopping very eagerly and so far themaximum number of organized grocery and department stores are in Chennai, Bangalore and

Hyderabad. The north has a long way to go to come up to par. International stores now prefer togauge the reaction of the public in these cities before investing heavily in a nation-wide

expansion. Milou, the Swiss childrens wear retailer, recently opened up its first store inChennai, bypassing Delhi and Mumbai.

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Besides the urban market, Indias rural market has just started to beseen as a viable option and companies who understand what the rural

consumer wants will grow to incredible heights. The bulk of Indiaspopulation still live in rural areas and to be able to cater specifically to

them will mean generating tremendous amounts of business.

Business, specifically retail business must focus on the most importantfactor in the Indian mind-set----Value for Money. Indian consumers areready to pay almost any amount of money for a product or service as

long as they feel they are getting good Value for Money. This is oftenmisconstrued as being tight fisted or interested in lower priced and/or

lower quality products.

In the past decade, international companies entering India (Levis, Pepe,Tommy Hilfiger, Marks and Spencer, Mango) have generally offered

moderately priced to expensive items. They have aimed for the upper-middle and rich classes ofIndian society. These are consumers who travel abroad often and can buy these items overseas

quite easily. Instead, international companies should be focusing on the lower and lower-middleclasses of India. This is where the real potential is, the aspirational class of consumers who want

to lead a better lives and believe in education, hard work and absorb knowledge from everypossible angle. The phenomenal success of Big Bazaar, Pantaloons version of Wal-Mart, is proof

that there is enormous potential in providing products and services to this class of consumers.

Indians are very curious by nature and will try everything at least once before rejecting it. Theinitial success of KFC in India proved that Indians could make a success of most new ventures

entering India but reject a concept once they have tried and tested the offering and found nothingworth going back for. The menu at KFC was rather boring and insipid to the Indian consumer

who is used to the innumerable combinations and permutations of street food. For their secondrun in India, KFC re-thought its menu and has been very successful marketing at specific groups

within India, like the Punjabis who have quite a history of loving the Chicken leg and havemade the Chandigarh outlet a huge success!

A company entering India cannot have just one game plan to apply to the entire country as thepeople, their tastes, the lifestyle, the budgets etc are all too divergent. International entrants must

enter each market specifically focusing only on that area to be successful.

Metros: Delhi, Mumbai, Chennai and Kolkata

Second rung but will soon outpace metros: Hyderabad, Bangalore, Ahmedabad, Gurgaon, Pune,Baroda

Small and developing fast: Chandigarh, Coimbatore, Trivandrum, Faridabad, Ludhiana, Cochin,Simla, Mysore

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