Challenges:

A long way to meet international standards

Lack of efficient supply-chain management
Lack of required retail space
No fixed consumption pattern
Shortage of trained manpower
Lack of proper infrastructure and distribution channels

Trends:
Indias large and aspiring middle class of 75 million households or 300 million individuals want products that
are value-driven. The countrys 500 million people under the age of 25 have access to more money that has
additionally resulted in independence, aspirations and a demand for products.
Reality check:
The Indian retail sector accounts for over 20% of the countrys gross domestic product (GDP) and contributes
8% to total employment. The cumulative foreign direct investment (FDI) inflows in single-brand retail
trading, during April 2000 to June 2011, stood at 69.26 million USD.
Studies like the MasterCard Worldwide Index of Consumer Confidence have ranked Indian consumers as
some of the most confident in the world. The more confident the consumers are about the strength of the
economy, their personal finances, their career growth, etc., the more they tend to increase their consumption,
purchase non-essential products, experiment with products, brands, categories, etc. Besides, the countrys
rural population of 700 million presents an opportunity for retail and consumer companies that cannot be
ignored.
The current estimated value of the Indian retail sector is about 500 billion USD and is pegged to reach 1.3
trillion USD by 2020. The penetration level of modern retail (currently 5%) will increase six-fold from the
current 27 billion USD to 220 billion USD in 2020. The Indian retail sector is expected to grow at a CAGR of
15to 20%.


Online Retail
Indias urban population has contributed immensely to the growth of the online market in the country. Around
3040 per cent of the total retail in Indias top 75 cities is expected to be carried out online in the next 710
years, as per Mr Arvind Singhal, Chairman and Founder, Technopak Advisors.
With rural India getting increasingly empowered with all forms of technology, online portals are going to be
vital for companies trying to access these markets. Of the total online market products, consumer durables
account for 34 per cent, apparel and accessories 30 per cent, books 15 per cent, beauty and personal care 10
per cent, and home and furnishing 6 per cent. Over 50 per cent of sales in these product categories take place
in non-metro cities.
The growing online retail market has become a very lucrative business for international majors as well.
Amazon, the worlds biggest internet retail company, has seen potential in the Indian market. In June 2013,
India became only the tenth market where Amazon has established a country-specific retail website.
Moreover, online fashion retailer Jabong has an exclusive partnership with Spanish casual clothing brand
Desigual. Many offline brands are also launching their new products first on the online portals, as in the case
of Lee Cooper which placed its Originals Frames and Sunglasses range on the online portal Snapdeal earlier
this year.

Road Ahead: Opportunities:

The upcoming years of Indian retail industry are highly favourable for luxury goods. The overall Indian retail
sector is expected to grow 9 per cent during 201216, with organised retail growing at 24 per cent or three
times the pace of traditional retail (which is expected to expand at 8 per cent), according to a report by Booz
& Co and RAI.
While most retailers have been rushing to capture opportunities in the quickly crowding Indian metros, some
have been focusing their expansion plans in the non-metros. In the next few years, modern retail is expected
to grow 5060 percent annually in tier II and tier III cities, compared to only around 30 percent in the metros.
According to a recent Technopak report, e-tailing has the potential to grow more than hundred-fold in the next
nine years, to reach US$ 76 billion by 2021. This growth will be driven by the country's growing Internet-
habituated consumer base, which will comprise 180 million broadband users by 2020, and a burgeoning class
of mobile internet users.