Indian Retail Industry (current & future scenarios)Apoorva Deshpande

Evolution of Retail in India

Initiation Conceptualisation Expansion Consolidation

Pre 1990s 1990-2005 2005-2010 2010 Onwards

• Manufactures opened their own outlets

• Retailers realised the potential of the market

• Most of them in apparel segment

• Substantial investment from large corporates

• Entry in food and general merchandise category

• Pan-India expansion to top 100 cities

• FDI in single-brand & multi-brand retail

• Rise in private label brands by retail players

• Sourcing and investment rules for supermarkets were relaxed

• E commerce has emerged as one of the major segments

• Large-scale entry of international brands

Key players in Indian retail industry

RETAIL

Grocery Food & Beverages

Department Stores Pharmacy Books, music &

gifts

RETAIL

Market size of Indian retail industry

• Indian retail industry accounts for 10% of country’s GDP and around 8% of the employment

• India is worlds fifth largest global destination in the retail space

• India’s retail market is expected to nearly double to US$ 1 trillion by 2020 from US$ 600 billion in 2015, modern trade would expand twice as fast at 20% per annum and traditional trade at 10%

• India’s Business to Business (B2B) e-commerce market is expected to reach US$ 700 billion by 2020. Online retail is expected to be at par with the physical stores in the next five years

• India is expected to become the world’s fastest growing e-commerce market, driven by robust investment in the sector and rapid increase in the number of internet users

• Indian e-commerce sales are expected to reach US$ 120 billion by 2020 from US$ 30 billion in FY2016.Further, India's e-commerce market is expected to reach US$ 220 billion in terms of gross merchandise value (GMV) and 530 million shoppers by 2025

Advantages of India for the retail industry

Demand potential• Healthy economic growth• Changing demographic profile• Increasing disposable incomes• Changing consumer tastes• Rapid urbanisation with increasing

purchasing power

Policy support• 51% FDI in multi-brand retail• FDI of up to 100% in single-brand retail and for cash and carry (wholesale)

trading and exports• Introduction of GST as a single unified tax system from next fiscal year• Single policy framework for retail, FMCG and e-commerce

Innovation in financing• Collective efforts of financial houses

and banks with retailers are enabling consumers to go for durable products with easy credit

• In January 2016, Bank of India announced reduction in rate of interest on retail loans offered by the bank

Key drivers of the Indian Retail Industry• Emergence of nuclear families

• Large working population

• Reasonable Real estate prices

• Demand as well as increase in expenditure for luxury items

• Growing preference for branded products and higher aspirations

• Growing liberalization of the FDI policy in the past decade

• Increasing urbanisation

• Rising affluence amid consumers

Bottlenecks for the Indian Retail Industry

• A long way to meet international standards

• Lack of efficient supply-chain management

• Lack of required retail space

• No fixed consumption pattern

• Shortage of trained manpower

• Lack of proper infrastructure and distribution channel

Strategy adopted by retailers

• Omni Channel retailing

• Strong supply chain

• Offering discounts

• Lowering prices

• Offering value added services

• Leveraging partnerships

• Joint Ventures

• Marketing innovations

Future investments in the retail sector

• International Finance Corporation (IFC), the investment arm of The World Bank, plans to invest up to Rs 134 crore (US$ 19.86 million) in Kishore Biyani's Future Consumer Enterprises Ltd, which is expected to aid the company in driving its growth plans

• IKEA, the world’s largest furniture retailer, plans to invest Rs 10,500 crore (US$ 1.56 billion) to set up 25 stores across India and hire over 15,000 permanent employees and 37,500 temporary employees to assist in running its stores

• Aditya Birla Fashion and Retail Limited (ABFRL) has announced that it will acquire exclusive online and offline rights of Forever 21, an American fast fashion brand, in the Indian market

• Adidas AG, re-knowned for its Adidas and Reebok sports brands, has become the first foreign sports company to get government approval to open 100 per cent foreign-owned stores in India

• British brand ‘Marks & Spencer’ (M&S) plans to open 10 new stores annually, under its joint venture business with Reliance Retail in India

• Amazon India has opened six new fulfilment centres across Chennai, Coimbatore, Delhi, Jaipur and Mumbai, which will open up 5.5 million square feet of storage space for sellers on the marketplace who use the ‘Fulfilled by Amazon’ service

• Amazon India expanded its logistics footprint three times to more than 2,100 cities and towns in 2015, as Amazon.com invested more than US$ 700 million in its India operations since July 2014

• Amazon Inc. has announced that the company would invest an additional US$ 3 billion in India operations, thereby taking its committed investment in the country to over US$ 5 billion

• In 2016, Amazon witnessed growth of 160% in the seller base, over 2015, and attracted 1,40,000 sellers in India

Shoppers journey for grocery and apparel

Future scenarios in the retail sector• Retail industry is expected to grow to USD1.3

trillion by 2020, registering growth at a CAGR of 7.46 per cent between 2000-2020

• By 2020, food & grocery segment is expected to account for 66% of the total revenues in the retail sector, followed by apparel segment

• Demand for Western outfits and readymade garments has been growing at 40–45% annually; apparel penetration is expected to increase to 30-35% by 2015

CAGR: Compound annual growth rate

• E-commerce is expected to be the next major area supporting retail growth in India. The industry is projected to touch USD100 billion by 2020 growing from USD30 billion in 2016

• The government plans to allow 100 per cent FDI in e-commerce, under the arrangement that the products sold must be manufactured in India to gain from the liberalised regime

• The key drivers of online retail are a young population aided by easier access to credit and payment options, increasing internet penetration and speed, 24-hour accessibility, and convenient and secured transactions Online retailers continue promotional prices in the market, offering a significant boost to e-retailing in consumer durable sector

• Options like cash-on-delivery and manufacturers’ warranty add fuel to this rage. Cash-on-delivery is the most preferred payment option with over 30 per cent of buyers opting for it in India

• In 2019, it is estimated that organised retail penetration share would reach 13% and unorganised retail penetration would hold a major share of 87%

• India has occupied a remarkable position in global FDI Confidence Index 2016 retail rankings; the country has high market potential, low economic risk, and moderate political risk

• In FDI Confidence Index, India ranks ninth (after United States, China, Canada, Germany, UK, Japan, Australia and France)

• City-wise share in upcoming malls from 2015-2018 in India

• Large percentage of Indian population is in the working age group and hence there is huge scope for growth in both off-line and online shopping

• The number of internet users and mobile users has increased tremendously in India which offers a very huge scope for online retailers. In addition the introduction of 4G services has further enhanced the scope of online retail

• Retailers are now moving to Omni-channel approach to increase market share

Thank You!!!