Retail Industry in India

Retail Industry in India

Overview

Indian retail industry has emerged as one of the fastest growing industries mainly because of the entrants of new players recently. The emergence of Kirana stores (Provision stores) can be considered as the archetype of retailing in the country. Once the Indian government liberalised the economy in the 1990’s many companies vertically integrated their operations to serve a larger customer base. After 2005, large domestic corporations opened multiple stores especially in the food & general merchandise category and this led to the growth of the retail industry in India. During the same period of time, many international players entered the Indian retail market which further accelerated the industry’s demand. India being one of the fastest growing economies in the world administers a strong platform for manufacturers, distributors and customers. Retailers are continuously trying to unlock the true potential of the industry by incorporating latest technologies such as Artificial Intelligence based data analytics, CRM tools etc.

The Retail Industry in India is segmented as;

  • Organised Retail
  • Unorganised Retail

Retail Market Size in India

The retail industry in India ranks 4th in the world in terms of size and accounts for 10% of the overall GDP of the country. The industry’s market size in 2020 was approximately INR 65.50 trillion and is expected to reach INR 96.43 trillion by 2024. The retail industry is estimated to grow at a CAGR of 10.15%.

Retail Industry Market Size

Competitive Landscape

India’s retail industry is highly competitive as it is majorly dominated by unorganised retailers. There are approximately 13 million kirana stores and neighbourhood stores that sell food & groceries. Organised retail segment consists of supermarkets or convenience stores, Hypermarkets, Departmental stores, Cash & carry stores and Specialty stores. Reliance Retail Limited leads the retail industry in India with over 12,000 offering various products. Other leading players include Future group, Aditya Birla Fashion and Retail, Avenue Supermarts Limited and Shoppers Stop.

Growth Drivers for Indian Retail Industry

Increase in Income Level

An increase in income level generally means people have more purchasing power. With rising income levels, a greater number of households are being added to the consumption class. This leads to an increase in demand for retail goods.

Increasing Awareness

As a result of increased literacy levels in the country, exposure to the western culture, foreign magazines, newspapers and other factors, there has been an increasing customer awareness among Indians. Today’s customers are more selective over the brand and quality of the products they purchase.

Brand Consciousness

The major portion of India’s population comprises Millennials making around 35% of the total population. This set of customers are more conscious about brands and willing to spend more to satisfy their needs.

Growth of Shopping Malls

The major portion of India’s population comprises Millennials making around 35% of the total population. This set of customers are more conscious about brands and willing to spend more to satisfy their needs.

Availability of Consumer Credit

Consumer credit in terms of consumer durable loans or credit cards, offer customers to pay the price of a product in several installments at a minimum rate of interest. As this option provides the convenience of not paying the full amount in advance, this may create demand for certain products in the retail sector.

Challenges for Indian Retail Industry

Lack of Technology Adoption

One of the major challenges is the availability, feasibility and adoption of technology in the retail industry. Retailers use technology in payments, scanning the products etc. but the scope is wider. Softwares to understand the customer’s preferences based on their buying habits, CRM tools and so on can be adopted for efficient functioning of the retail outlets.

Competition from Unorganized Retail

Unorganized retail consists of small retailers including mom-and-pop and kirana stores. They operate near to or in the residential areas. These stores do not pay taxes and almost negligible real estate & human labour costs. They also offer free home deliveries to attract customers. These stores pose a major challenge for retail outlets in India.

Operational Cost

Retailers in India incur high cost of operations. Expenses such as store rents, utilities, labour cost, warehousing costs, taxes etc. cannot be transferred to the customers as the majority are looking for low cost goods.

Impact of Covid-19 on Indian Retail Industry

The coronavirus pandemic has forced governments all around the world to shutdown the country for weeks to curb the spread of the deadly virus. Immediate closure of retail outlets and manufacturing units caused an immediate fall of sales to an all time low. The organised retail sector reported a loss of INR 90,000 Crore in the first two months of the lockdown period. Retailers in the country witnessed a sales degrowth of 60-80% across high street outlets and malls during the four months lockdown period from April to July, 2020. According to a survey conducted by Retail Association of India(RAI), Home Furnishings and Jewellery categories sales declined by 73% and 72% in 2020 when compared to the previous year. Food & Groceries sales were down by 31%. The pandemic not only impacted the retailers but also had a huge influence on brand perseverance. As supply chains were distracted, well established brands were not able to meet the demand causing local brands to gain more attention from customers.

Future Outlook

The retail industry in India is currently undergoing a major transition from an unorganized sector to a more organised one. The ongoing covid19 pandemic has fueled this shift as most of the retailers in the country are forced to adopt technology to move their business forward. Retailers are expecting a surge in revenge shopping as most people were confined to their homes with many losing their jobs in 2020. As a result the sales numbers for the retailers have plunged and we expect a v-shaped recovery for the industry in 2021.


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