India was positioned 5th in 2012 on the Global Retail Development Index, placing it as one of the most desirable investment destinations in the world. But in 2013 the position fell to 14th because of the economic slowdown, slow purchasing power together with policy concerns over authorization of multi brand retail across many states in India. Now in 2016 this trend is reversing thanks to the factors like improving demographics, increasing disposable income levels, development of controlled retail sector into tier 2 and tier 3 cities, changing the consumer habits, etc. This will provide a window of openings for national and international players in the next 5 to 10 years.
India Retail Scenario in Past & Present!
Few decades ago, retailing was practiced in an unorganized way in our country, and retailing was somehow only indicates to the local ‘kirana’ stores. Aside from these kirana stores, other ways of the shopping are local fairs, street hawkers and pavement vendors. There were no standard followed by the vendors and retail field was mostly considered for the illiterate or less educated persons. The only reason that attracted shoppers to these sellers was to meet out daily requirements. Awareness level and spending power of the consumers were very low, because families are big and only depended on male earners. The females & children did not interfere in the family purchase and consumers had limited choice but to buy what was sold to them.
Now at this time Indian retail industry is marked by the presence of both organized and unorganized sellers. But still approx 90% of the market is captured by unorganized retailers, from the last few months sectors has started facing hard competition of the organized retail. The organized retail comprise chain stores, malls, supermarkets and departmental stores etc. which selling single or multiple brands under one roof. The best thing about organized retailers is that they follow complete selling procedure, well arranged products and their workforce is well educated and well trained. Currently complete retail industry of India is valued at 450 billion Dollars, so its contribution to GDP can’t be ignored. Point of views of the consumers about retailing has completely changed, now shopping is not only restricted to the daily necessities; it is rather a means of recreation, lifestyle and many luxury products as well. Now females also contribute to the family’s monthly income also takes the buying decisions and kids also control the family purchases.
Indian Retail Industry Forecast & Factors!
Retail market of India is expected to reach $1 trillion by the end of 2020 from recent figure of $600 billion, thanks to the growing income, urbanization and government initiative, as confirmed by the report of reliable source. Complete retail market of India is growing at the rate of 12% per annum, organized retail individually grow at the pace of approx 20% per annum. Growing value proposition that supports the future of real estate investment in India are:-
Emerging opportunity in Indian Retail
1. Retail Infrastructure
• India has appeared as one of the most attractive retail destinations in the world. The CAGR expected for retail (in value terms) is 13 percent (2013 – 19).
• The modern trade stores are estimated to increase from 11,192 in 2006 to 67,100 by the end of this year.
• Supermarkets are estimated to increase from 500 in 2006 to about 9000 by 2016
• Total supply of retail space in India is estimated to grow from 5.3 million sq. ft. to 6.6 million sq. ft. over 2013-2016.
2. Rural Retailing
Rural markets, which comprise – 70 % of the total population base, comprise only 40 % of the total consumption in India at this time; this highlights the huge prospective in terms of utilization boom in the coming years.
3. Luxury Market
• With growing awareness of brand and luxury projects in India the CAGR is projected to be about 20 percent. High-growth categories are jewellery, watches, clothings and accessories.
4. Online Retail
• With speedily rising internet access in India, online retailing in India is estimated to reach USD 1.7 billion, at a CAGR to 10 percent over the next few years.
5. Private Labels• Private label strategy is ready play a most important role in India. There is a huge scope for growth as, currently the share of private labels is only 6 percent as compared to 19 percent and 39 percent in US and UK, respectively.
6. Sourcing base
• India is poised to emerge as a sourcing hub for many globally reputed retail chains, given the rich supply of raw materials and cost competitiveness.
• In the last few years, many big names have established their completely owned subsidiaries to run their sourcing operations in India.
FDI Environment in Retail
The Opportunity for international retail chains
Huge relaxation by the government of FDI policy in retail sector providing an impetus to the entry of big international retail players. The first movers are expected to be international retailers in single brand retail across categories like fashion/apparel, watches, shoes, etc. followed by international multi-brand retailers in food and grocery, where there are large domestic players who will look at JVs and tie-ups.
Opportunity
• 100 % FDI in single brand retail
• 51 % FDI in multi brand retail
Key riders
• 30 % sourcing ‘preferably’ from SMEs (small scale enterprises)
• Out of the first USD 100 billion investment – 50 % should be utilized for backend infrastructure
Expected high growth categories
• Food and grocery retailing
• Apparel retailing
• Luxury retailing
Conclusion
A number of large international retailers are pondering to invest in India to control the strong demand potential of the commercial property in India. At present, a range of large retail chains are undergoing market evaluation studies to set up their business in top hot spot in Delhi NCR. So it is an opportunity for the beginners as well as investors to take full advantage of this upcoming boom.
