Retailing Industry in India


Also see:

India's Consumer Market

India's Middle Classes

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Compiled by Saby Ganguly

  • Even though India has well over 5 million retail outlets of all sizes and styles (or non-styles), the country sorely lacks anything that can resemble a retailing industry in the modern sense of the term. This presents international retailing specialists with a great opportunity.

  • It was only in the year 2000 that the global management consultancy AT Kearney put a figure to it: Rs. 400,000 crore (1 crore = 10 million) which will increase to Rs. 800,000 crore by the year 2005 – an annual increase of 20 per cent.

  • Retailing in India is thoroughly unorganised. There is no supply chain management perspective. According to a survey b y AT Kearney,  an overwhelming proportion of the Rs. 400,000 crore retail market is UNORGANISED. In fact, only a Rs. 20,000 crore segment of the market is organised.

  • As much as 96 per cent of the 5 million-plus outlets are smaller than 500 square feet in area. This means that India per capita retailing space is about 2 square feet (compared to 16 square feet in the United States). India's per capita retailing space is thus the lowest in the world (source: KSA Technopak (I) Pvt Ltd, the India operation of the US-based Kurt Salmon Associates).

  • Just over 8 per cent of India's population is engaged in retailing (compared to 20 per cent in the United States). There is no data on this sector's contribution to the GDP.

  • From a size of only Rs.20,000 crore, the ORGANISED retail industry will grow to Rs. 160,000 crore by 2005. The TOTAL retail market, however, as indicated above will grow 20 per cent annually from Rs. 400,000 crore in 2000 to Rs. 800,000 crore by 2005 (source: survey by AT Kearney)

  • Given the size, and the geographical, cultural and socio-economic diversity of India, there is no role model for Indian suppliers and retailers to adapt or expand in the Indian context.

  • The first challenge facing the organised retail industry in India is: competition from the unorganised sector. Traditional retailing has established in India for some centuries. It is a low cost structure, mostly owner-operated, has negligible real estate and labour costs and little or no taxes to pay. Consumer familiarity that runs from generation to generation is one big advantage for the traditional retailing sector.

  • In contrast, players in the organised sector have big expenses to meet, and yet have to keep prices low enough to be able to compete with the traditional sector. High costs for the organised sector arises from: higher labour costs, social security to employees, high quality real estate, much bigger premises, comfort facilities such as air-conditioning, back-up power supply, taxes etc. Organised retailing also has to cope with the middle class psychology that the bigger and brighter a sales outlet is, the more expensive it will be.

  • The above should not be seen as a gloomy foreboding from global retail operators. International retail majors such as Benetton, Dairy Farm and Levis have already entered the market. Lifestyles in India are changing and the concept of "value for money" is picking up.

  • India's first true shopping mall – complete with food courts, recreation facilities and large car parking space – was inaugurated as lately as in 1999 in Mumbai. (this mall is called "Crossroads").

  • Local companies and local-foreign joint ventures are expected to more advantageously positioned than the purely foreign ones in the fledgling organised India's retailing industry.

  • These drawbacks present opportunity to international and/or professionally managed Indian corporations to pioneer a modern retailing industry in India and benefit from it.

  • The prospects are very encouraging. The first steps towards sophisticated retailing are being taken, and "Crossroads" is the best example of this awakening. More such malls have been planned in the other big cities of India.