The Evolving World of Indian Retail Business

The Retail sector has witnessed a roller coaster performance post the 1991 liberalization. The developments have been chaotic as the Organized sector went through a learning phase, simultaneously with the Government coming to grips with the regulatory challenges.

A. SIZE

Two economic metrics that attract the large Corporates within the Country and abroad are:

  1. Trade: The business is expected to touch USD2T in 2030, making it the third largest market in the world
  2. Per capita GDP projected at USD 4470 in 2030 would still be a fourth of Chinas, indicating the head room available for growth. As Chinas population steeply falls in this century, India would be the biggest market in the world.

Top-5 Countries in Retail Segment 2025 ($Bn)

Per Capita GDP 2025 ($’000)

B. DIVERSITY

In keeping with the diversity of the country a number of formats are prevalent and all of them with growth potential

No Format Items Brands The Buyers
1 Kirana (13Mn stores) Daily essentials, Beverages LIG/ MIG/Daily needs/ local
2 Supermarket Groceries, Dairies, Cleaning Reliance Fresh Weekly Shoppers
3 Department Store Apparels, Cosmetics, Home Decor Lifestyle, Shoppers Stop Affluent/ Aspirational/ Urban
4 Hypermarket Food, Apparel, Electronics, Home Goods Best Price, Lulu, Reliance Mart MIG/Planned/Value Conscious
5 Discount General merchandise, off season items D’Mart MIG/Value Conscious / Monthly purchases
6 Specialty Apparel, Books, Electronics Croma, Fabindia, Decathlon, Ikea HIG/Urban
7 Warehouse Club Bulk Groceries, Appliances, Furniture Metro B2B
8 E-Commerce/ Q-Commerce Amazon, Flipkart/ Blinkit/ Zapto/ Instamart MIG, Urban/ HIG, Urban, SECA

C. E-COMMERCE

In spite of the rapid growth of e Commerce both in rural and urban areas, it is expected to still remain a minor player even in 2030. There are a number of reasons for this situation.

Why the brick and Mortar dominate?

  • Offline continues to dominate because of:
    • Large consumer base in rural and semi-urban areas,
    • Continued consumer trust in brick-and-mortar stores,
    • A strong preference for in-person shopping experiences,
    • The dominance of traditional retail formats like Kirana
  • Kirana’s would continue to dominate because of
    • Community ties
    • Hyper-local proximity
    • Availability of “Micro” SKU’s relevant to the rural and “migrant” urban market
    • Informal credit

D. A LARGE BUT COMPLEX MARKET

A market this big is an obvious one for the large MNCs.  However, it is also a complex one and one is reminded of the early years in the automobile sector when two large US MNCs, entered India and left thereafter, failing to understand the market dynamics. Likewise in the retail sector too, there have been failures, with the reasons being other than lack of demand.

E. GOVERNMENT REGULATIONS

The Government has put in place guidelines for foreign entities both with respect to online (e-Commerce) and offline- brick and mortar outlets, with a view to support for the local traders. A distinction has been made between Single Branded Retail Outlets (SBRO) and the Multi Branded Retail Outlets (MBRO), setting minimum Investment and Deployment norms. There is a pause in new entrants, and in the interim a few large players from the corporate sector have consolidated operations attempting to gain leadership positions in specific geographies/formats. The market, however, is big enough to accommodate a few more MNCs

F. CRITICIAL SUCCESS FACTORS

The Kirana (Mom and Pop) format which is totally in the unorganized sector is still ranks first with respect to sales across all Formats. It dominates in the hyperlocal buyer category requiring staple groceries, vegetables and PBC. It is the first choice for the lower income group for whom need overshadows aspirations and “value” and “amount” of spend is critical.

Outside of this category as income levels and disposable income increases through the population, the other Formats are witnessing growth in volumes across both urban and rural segments with some states growing at an above average rate.

No Format Challenges Opportunities
1 Supermarket
  • Q-Commerce
  • Availability of reasonably priced infrastructure near demand centers
  • Maintaining efficient operations in a limited customer base
  • The “aspirational” segment is a growth market
2 Department Stores
  • Competition from the specialty stores
  • The “aspirational” segment is a growth market
3 Hypermarket

Competitive with the presence of large corporations including:

  • Multinationals
  • Need to identify the right product market segment
  • Growing market across the country
4 Discount
  • Presence of a number of small players and seasonality in demand
  • The Indian market is highly value conscious market
5 Speciality
  • Competition from the Departmental Stores
  • This segment for premium products is growing
6 Warehouse Club
  • Competition from the Hypermarket
  • Growing rural market

 

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