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| Retail Sector |
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Overall Size of sector
Retail sales turnover is estimated at Rs. 9,300 billion in 2003-04 (Rs. 7,400 billion in 2002), with food & grocery accounting for more than two-thirds of the sales. The sector accounts for about 37% of India’s GDP and 55% of Private Final Consumption Expenditure.
The sector is highly fragmented, with over 12 million to 15 million outlets, dominated by small individually owned businesses. India has the highest number of outlets per capita in the world; but lowest per capita space @2sq.ft. per person (only 4% of retail outlets are larger than 500 sq.ft. in size) |
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| Retail sales
(Rs. billion) |
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Total retail |
Organised retail |
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Value |
Value |
Overall share |
Share within the sector |
| Clothing, Textiles & Fashion |
800 |
109 |
14% |
39% |
| Jewellery |
435 |
8.5 |
2% |
3% |
| Watches |
28 |
11.1 |
40% |
4% |
| Footwear |
100 |
25 |
25% |
9% |
| Health & Beauty care Services |
25 |
1.5 |
6% |
1% |
| Health & Beauty care Products (including Pharmaceuticals) |
300 |
5.5 |
2% |
2% |
| Consumer Durables |
320 |
25 |
8% |
9% |
| Mobile handsets and accessories |
130 |
8.4 |
6% |
3% |
| Furniture & Furnishings |
330 |
22 |
7% |
8% |
| Food & Grocery |
6150 |
29.5 |
0.5% |
11% |
| Catering Services (F & B) |
350 |
20 |
6% |
7% |
| Books, Music & Gifts |
82 |
8 |
10% |
3% |
| Entertainment |
250 |
6.5 |
3% |
2% |
| Total |
9300 |
280 |
3% |
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| Source: India Retail Report 2005 |
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Top 10 cities account for 96% of total organised retailing, while top 6 cities (Mumbai, Delhi NCR, Chennai, Bangalore, Hyderabad and Kolkata) account for nearly 86% of organized retail market. As per a study by PriceWaterHouse Coopers, by end 2005 the spread of organised retailing had increased, with the top 6 cities accounting for 66% of organised retailing.
Employment / Livelihood
Retail sector is the second largest source of employment in India, after agriculture. The sector provides direct/indirect employment to about 74 million people. As per a study, 78% of unorganised retail outlets are small family businesses, run by the family members themselves, which implies that nearly 10-12 million families derive employment as well as livelihood from retailing activity.
Organised Retail
Though still a small segment of the market, organised retailing in India has already witnessed emergence of a large number of formats, which are often overlapping in size, structure and value proposition. The various retail formats present in India are:
Malls: Large enclosures, with floor space leased out to individual shops, with the advantage of economies resulting from the sharing of costs (examples: Orbit Mall, Ansal Plaza, Spencer Plaza, Shoppers Stop). Presently, there are more than 40 malls operational, with a total 9.5 million sq.ft.retail space. More than 500 malls are coming up all over India.
Exclusive Brand Outlets: Exclusive stores owned/ operated/ franchised by a specific brand or company. Offer complete range under a specific brand with certified product quality. Can be stand-alone stores or located in a mall (examples: Raymond, Samsung, Tanishq….)
Multi-Brand Stores: Stores stocking merchandise of more than one brand. Direct purchase from manufacturers allows these stores to offer lower prices than Exclusive Brand outlets.
Department Stores: Multi-brand / Multi-product stores. Large stores organized into separate departments for different product categories. Offer convenience of one-stop shopping for various consumer needs. (examples: Shoppers Stop, Pantaloon, Trent, Westside).
Speciality Stores: Focus on a specific product category with multiple brands. Medium sized ut in a strategic location. Offers greater choice to consumer, with comparison between brands possible. (examples: Kids Kemp, Crossword, RPG's MusicWorld).
Supermarkets: Typically located in a busy market in metros and large cities, with self-service layout. (examples: Apna Bazar, FoodWorld…) |
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| Hypermarkets: Huge multi-divisional layout with a warehouse-like appearance and self service layout, generally located in remote parts of a city (example: Metro Cash & Carry, Big Bazar…). |
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5 companies with 20 outlets |
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total retail space 970,000 sq.ft. |
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Discount Stores: General merchandise retailer with wide variety of merchandise, limited service and low prices. (examples: Subhiksha and Margin Free Markets)
Convenience Stores: Medium to small retail outlets, in a convenient location for purchase of daily need products such as food, petrol etc. Usually open seven days a week for extended hours.
Franchise Stores: Economic liberalisation, competition and foreign investment in manufacturing, have red to a proliferation of strong Indian and foreign brands in India. With this, franchising has emerged as a retail format. There were over 5000 franchised outlets in 2002. (examples: Pizza Hut, Nike, Lacoste, Arrow)
Non-store formats (direct marketing, TV-marketing, e-marketing): Direct marketing was the first form of non-store retailing in India, starting with consumables like washing powder etc., followed by consumer durables, cosmetics, fashion and lifestyle products. Several players have now entered the TV-marketing and e-marketing space. (examples: Eureka Forbes, Amway, Asian Sky Shop, Tele-Brands, Rediff Shopping etc.)
The present share of organised2 retail is estimated to be only around 3% of total retail, as against up to 80% in developed countries like USA. |
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| The growth in organised retail in India is being led by the entry of some of the biggest Indian corporates into the sector. Some of the notable new entrants are: |
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Reliance Group, the largest conglomerate in India with highest market capitalization, is diversifying from its main activity in petro-chemicals into retail sector. The Rs. 250 billion (Euro 4 billion) retail venture of the group was launched with the opening of the first set of 11 stores in Hyderabad, with plans to cover 70 cities in 24 months and another 784 towns as well as 6,000 rural areas by 2011, with a total retail space of 10 million sq. m., employing about 500,000 persons. |
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The Bharti Group, which runs the country's largest private telecom network, is believed to be in talks for a joint venture with Tesco, the world's largest grocery retailer and a Fortune 500 company, to enter the food retail segment in India, with an initial combined investment of about $100 million, going up to about $1 billion. The group is also reported to have talks with US based Wal-Mart and French retailer Carrefour over their retail plans The group already has a tie up with the EL Rothschild group-owned ELRO Holdings India to export fresh agriculture products to Europe and the US. |
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ITC Ltd., a highly diversified group, plans to launch its fresh food retail chain in mid-2007, as a part of Rs. 12.50 billion (Euro 210 million) investment plan. Initially, the retail outlets will be launched in and around Kolkata as a pilot project, involving both B2B and B2C businesses. ITC’s International Business Division is one of India’s largest exporters of agricultural commodities, and operates e-Choupal, India’s largest Internet-based intervention in rural India, to set up an efficient supply chain, reaching out to more than 2 million farmers in some 36000 villages through almost 6000 kiosks across four states (Madhya Pradesh, Karnataka, Andhra Pradesh and Uttar Pradesh). |
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Government Policies
Foreign direct investment (FDI) in retail has been a highly contentious issue, with several groups lobbying against it on the premise that if and when permitted to enter the market, the foreign retail players, with huge financial resources, could displace the unorganized and even the medium sized organised retailers.
In April 2006, the Government of India made a major policy shift, opening the retail sector for FDI), albeit only for Single Brand Retail, with a cap of 51% foreign ownership. The provision also requires the products to be same as sold by the company in the international market.
This is widely seen as a first step in the Government’s policy of ‘calibrated’/ gradual opening of retail sector to FDI.
However, 100% FDI is allowed in Cash & Carry wholesale trading under automatic route.
Entry of Foreign/Multinational Retail Chains
Improved investment climate and a more liberal FDI regime have already heightened interest of several major global retail companies like Wal-Mart, Benetton and Tesco. The Global Retail Development Index 2005 (released by AT Kearney3 recently) indicates that India has displaced Russia as the country with the fastest growing retail sector.
Wal-Mart is already procuring products from India and is reported to have sourced over Rs. 23 billion (Euro 400 million) worth of goods (pharmaceuticals, foods, apparel, home furnishings, textiles, hard goods metals, jewellery, leather shoes and jackets) through its Bangalore-based buying arm. It is expected that Wal-Mart is likely to increase its sourcing of Indian products like to about Euro 1.5 billion in the near future. Wal-Mart has appointed a CEO for its India operations based in Delhi, and has signed up with Bharti Enterprises for franchising retail operations.
The world's biggest furniture retailer, Sweden's IKEA, who has also started sourcing from India, recently announced that expansion into South Korea and India would be logical steps after it opens its first stores in Japan in late 2005.
Tesco already has a support centre and non-food (apparel accounting for 90% of total) sourcing operations based in Bangalore. Tesco had sourced goods worth Euro 65 million from India last year and plans to enhance it to Euro 140 million this year. Tesco has signed up with Trent, the retail arm of the Tata group, to set up a multi city retail chain.
Future Outlook
Organised retail presently has a small share in the market, but is projected to grow at 30-35% per annum as compared to 5% per annum growth of the overall retail sector. Accordingly, the share of organised retail is likely to reach 8% by the year 2010. More than 7 million square metres of retail space is under construction in the top metro cities. By 2010, the number of malls / supermarkets is expected to increase to about 600, from the present figure of about 40. Investment of over S 300 billion is expected to flow into the retail sector during the next few years. |
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ICREON