Indian retail industry: past, present and future

By on December 18, 2012

Indian retail industry: past, present and futureIndia has been ranked as the fifth most preferred destinations for retail investments. The growing urbanization, changing demographics, increasing per capita and disposable incomes, liberal regulatory norms and improved technological environment in the country have contributed significantly to making India as one of the most lucrative retail markets. However, it was not always the same and the sector has witnessed a complete revival in recent decades.

Indian retail scenario in the past

Traditionally, only the unorganized retailing was practiced in the country and retailing was somehow synonymous to the local grocery shops commonly known as ‘kirana’ stores. Apart from these stores, the other shopping destinations for consumers were the local fairs, hawkers, and pavement vendors. No standard patterns for selling were followed in the past and retailing was mostly considered to be an occupation for those who are either not educated or meagerly educated. The only purpose that attracted consumers to these retailers was to meet out daily necessities. Consumer awareness levels were quite low along with their spending powers. The family sizes were large and the earners were only males in most of the families. The females and kids usually did not have any say in the family purchases and the market was controlled by the retailers. Consumers had no choice but to buy whatever was sold to them.

Indian retail scenario at present

The Indian retail industry at present is marked by the co-existence of both organized and unorganized retailers. Though even till today the industry is strongly dominated by unorganized retailers with more than 90% market share, the sector has started facing stiff competition from the organized sector. The organized sector includes various retail formats like supermarkets, hyper-stores, chain stores, departmental stores which may be selling a single brand or multiple brands. The organized players follow well-defined selling and supply chain models and employ not only the meagerly educated workforce but the highly skilled and well-trained as well. The overall retail industry is currently valued at US$ 450 billion (The Times of India, 2012) and its contribution to GDP and employment cannot be ignored. The consumers’ perspective towards retailing has changed and shopping from retail stores is no more restricted to necessity shopping; it is rather a means of recreation as well. The demographics have changed largely and there has been a significant increase in the consumers’ disposable incomes. Females contribute equally to the incomes as well as buying decisions and kids also influence the family purchases.

Expected retail scenario for the future

The Indian retail industry is expected to reach US$ 1.3 trillion by 2020 (IBEF, 2012). The promising sectors that are likely to grow in near future include fashion and lifestyle, food and grocery, and electronics. With the approval of 100% FDI in the single-brand retail and 51% in multi-brand retail, the sector is expected to project an even better growth in the future, but the competition will also get a hike. Though this competition would benefit the consumers, it may increase the problems for the unorganized retailers in India. The sector will no more be looking for employees who are good in arranging shelves and attending customers; the future belongs to those with leadership skills, detailed understanding of CRM and supply chain concepts and an ability to communicate with the global customers. There is a greater interaction with the outside world and therefore the future consumers will be highly aware and demanding. The retailers will have to shift their focus from selling a product to delivering an individualized store experience. Growth would be achieved by expansion (increasing the market size) and diversification (increasing the firm’s offerings) strategies. Environmental concerns and corporate social responsibility will occupy a significant place in the retailers’ decisions and the rural consumers would have a better control on the market.