Growth of the Organized Retail Sector in India

The word ‘retail’ means to sell or be sold directly to individuals. Retail is India’s largest industry, and arguably the one with the most impact on the population. It is the country’s largest source of employment after agriculture, has the deepest penetration to rural India, and generates more than 10 percent of India’s GDP. However, retailing in India has so far, been mostly in the hand of small unorganized entrepreneurs. It is also India’s least evolved industries.

The industry suffers from lack of management talent, poor access to capital, unfavorable regulation and denial of access to best practices. The Indian retail industry is only now beginning to evolve in line with the transformation that has swept other large economies. Fifty years of restricting the consumer goods industry, a national mindset which favored denial over indulgence, and a fractured supply chain for agricultural products have all contributed to prevent the development of modern tenants based on scale advancements and consumer preferences.

India has some 12 million retail outlets, but many of these act merely as subsistence providers for their owners and survive on a cost structure where labor and land is assumed to be free and taxes nil. Compare this with the global retail industry, which is one of the world’s largest organized employers, is at the cutting edge of technology, and leverages scale and scope to offer value-added services to its customers.

However, only recently has there been an awakening in this sector, with more organized retailers starting to make an impact. The liberalization of the consumer goods industry, initiated in the mid-80s and accelerated through the 90s has begun to impact the structure and conduct of the retail industry. Backed by changing consumer trends and metrics, liberalization in mindsets driven by media, new opportunities and increasing wealth, retailing in India, presents a vast opportunity for a variety of businesses – real estate, store design & operations, visual merchandising logistics and communications, B2C service providers, and FMCG companies who can add to their offers by partnering this revolution.

Global Retail Industry

Retail, with total sales of $ 6.6 trillion, is the world’s largest private industry ahead of financial industries $ 5.1 trillion. It is also home to a number of the world’s largest enterprises. Over 50 of the Fortune 500 companies, and around 25 of the Asian top 500 companies, are retailers. The industry accounts for over 8 percent of the GDP in western economies.

By 2010, the list of India’s top 10 retailers will have at least 5 Indian corporates. Retail Marketing will go through a tremendous change in India this millennium. It will change India’s cities, its people, and its households. The Indian consumer is reportedly the largest spender in Singapore and London. It is, therefore, strange that there have, so far, been few efforts to present the product in the right kind of environment in India. Indeed, the right shopping experience does induce Indian consumers to spend more.

Few factors that driving the growth are:
•    Mall Mania: The developing mall culture in India
•    Emergence of region-specific formats
•    Emergence of discount formats
•    Entry of international players

Major Retail chains in India

  • Shopper’s Stop
  • Big Bazaar and Future Bazaar
  • RPG group
  • Lifestyle
  • Ebony
  • Trent Retail

India has the scale and the potential to transform itself into a retail powerhouse. It has been rated as the fifth most powerful and most attractive emerging market for retail globally. Over the next five years the market is certain to evolve significantly and we shall see growth of a few retailers beyond the Rs 1000 crore turnover (USD 230 million), with significant expansion in network size it is sure to offer huge employment opportunities.

Anshul Goel