The Indian retail industry has presently emerged as one of the most dynamic and fast paced industries as several players have started to enter the market. It accounts for over 10 per cent of the country’s gross domestic product (GDP) and around eight per cent of the employment in India. The country is today the fifth largest global destination in the world for retail.
With the growth in the retail industry, the corresponding demand for real estate is also being created. Further, with the online medium of retail gaining more and more acceptance, there is a tremendous growth opportunity for retail companies, both domestic and international.
In 2013, the Indian retail sector was estimated at US$ 520 billion and was among the largest employers in the country. By 2018, the Indian retail sector is likely to grow at a compound annual growth rate (CAGR) of 13 per cent to reach US$ 950 billion. Food and grocery is the largest category within the retail sector with 60 per cent share followed by the apparel and mobile segment.
Organised retail, which constituted seven per cent of total retail in 2011-12 is estimated to grow at a CAGR of 24 per cent and attain 10.2 per cent share of total retail by 2016-17, according to a study titled 'FDI in Retail: Advantage Farmers' conducted by an industrial body.
India has about one million online retailers – small and large – which sell their products through various e-commerce portals. Presently, these online retailers have started to use the medium of online mobile apps to increase their reach to the customers.
The foreign direct investment (FDI) inflows in single-brand retail trading during the period April 2000 – July 2014 stood at Rs 842.53 crore (US$ 137.70 million), as per data released by the Department of Industrial Policy and Promotion (DIPP).
IKEA has entered into a memorandum of understanding (MoU) with the Government of Telangana to set up its first store in India at Hyderabad. Liberty Shoes has planned to improve its retail presence as it plans to double the revenue to Rs 1,000 crore (US$ 165.38 million) within three years.
Walmart Stores invested Rs 623 crore (US$ 101.82 million) into its Indian cash-and-carry operations in June 2014 to expand its network. Online marketplace Infibeam looks to build an online presence for large retail clients in West Asia with its technology platform Buildabazaar.
Argentina-based luxury brand La Martina – a polo lifestyle company known for its apparel, technical equipment and accessories – has started operations with its maiden store in New Delhi. Japan-based Uniqlo plans to open up to 1,000 stores in India in the coming years to tap into the growing consumption story and has announced a strategy to source garments from the country.
UK-based Tesco in equal partnership with the Tata Group's Trent plans to open six to eight new stores in Maharashtra and Karnataka under three of its formats this financial year.
Driven by a combination of demand, supply and regulatory factors, the Indian retail sector is set to grow rapidly with a gradual shift toward organised retailing formats. Organised retail penetration is expected to increase from 7.5 per cent in 2013 to 10 per cent in 2018 at a robust CAGR of 19-20 per cent during that period.
Tier-II and Tier-III cities such as Jaipur, Nagpur, Ludhiana, Vadodara, Aurangabad, Kochi, etc., are emerging as the new ‘hot spots’ of consumption. Organised retailers are increasingly setting up stores in these smaller cities with increasing focus on profitable growth in the sector. E-commerce is also expected to be the next major area for retail growth in India.