A successful retailer must not only have the right products at the right place and the right time but also at the right price. The India Retail industry is the 5th largest in the world. Comprising of organized and unorganized sectors, the industry is one of the fastest growing industry in India over the last few years. Initially the India retail industry was predominantly unorganized however with the change in taste and preference of the consumers in India the industry is getting more fashionable these days and getting organized as well. In 2010, the retail trade in India accounts for 12% of the country’s GDP. The present value of the industry is estimated to be around Rs. 12, 00,000 crore ($270 billion) and the annual growth rate is 5.7%. The organized retail sector accounts for close to 4% of the total retail market. According to ASSOCHAM "The organized retail sector with emergence of new store formats is recording phenomenal growth and will completely revolutionize retailing over next 3-4 years".
The Retail industry in India is ready to take on challenges from the international players like Wal-Mart & France’s Carrefour because contrasting to them they have a better idea about the Indian consumer’s understanding. To achieve success in India, any retail firm must be able to connect emotions, culture and values of the Indian environment rather than imposing alien values or concepts on the customers. Information Technology also plays an important role in running the retail business of high magnitude and India enjoys lofty IT base. Moreover only 4% of India’s retail market is organised and there is tremendous potential for growth in the retail sector. Almost all large companies worldwide are looking to establish a base or a stake in the Indian market. In this scenario, the Indian retail sector must take the initiative to realise the ideas of contributing to a prosperous and booming economy. In the near future India will see a phenomenal growth of shopping malls, speciality retail outlets and fashion stores for youth. Speciality retail outlets and malls are the future of Indian retail market.
Retail Industry is also facing some challenges. The industry is facing a severe shortage of talented professionals, especially at the middle management level because the professionals does not focus retail sector, as this sector is emerging now from its nascent phase. The tax structure in India favours small retail business and thus more and more of the market players prefer against non expansion and cost benefit. Though the government is going to implement uniform value added taxes across all the states, the system is beleaguered with differential tax rates which lead to increase in costs and complexities in establishing an efficient distribution network. Further finance minister Shri Pranab Mukherjee imposed 10% excise duty on all branded apparels in the union budget 2011-12. All the big retailers along with about 4000 small retailers keep their stores closed for a day against the protection of this duty as it adversely affect consumers, apparel makers and retailers and also the bandh for a day caused heavy loss of revenues to the firms as well as to the government in form of taxes. Again lack of adequate infrastructure facilities with respect to roads, electricity, road chains and ports has further led to the impediment to the network of suppliers. Henceforth, retail chains have to depend on multiple vendors for their requirements, thereby raising costs and prices. Most Indian retailers are now concentrating on making their supply chain more efficient so as to deliver high quality service according to the demand of consumers thereby the intermediation would increase the costs by 15%. The retail sector is not having the status of ‘industry’, thereby it is difficult to raise finance from banks to fund their expansion plans. In addition to this there is high stamp duty and lack of ownership titles due to which there is unorganised nature of transactions. Government restrictions on the Foreign Direct Investment lead to an absence of foreign players which results to limited exposure to best practises. In the long run it can lead to greater efficiency and improvement of living standards by both price reductions and improved selection brought about by the technology of the foreign players in the economy. This in turn can lead to increase in output and in domestic consumption. Moreover allowing greater FDI in retail will also help the government in meeting its foreign exchange requirements.
Opponents of the entry of FDI in retail trade generally point to its adverse impact on employment and certainly it is an important concern, as around 40 million people are engaged in retail trade in India and a small percentage loss of employment in this sector will make lakhs of unemployed. Entry of foreign players will also disrupt the current balance of the economy. However the government of India has a more liberal policy towards wholesale trade, franchising, and commission agents’ services, which ultimately prepares the ground for FDI in retail as well. Foreign retailers have already started operations in India through various routes like joint ventures, franchising (Nike), sourcing of supplies from small-scale sector, ‘cash and carry’ operations (Giant in Hyderabad, Metro in Bangalore) and non-store formats – direct marketing (Amway). In the year 2002, the world’s largest retailer, Wal-Mart, opened a global sourcing office in Bangalore and in 2006 it announced a joint venture with the Indian company ‘Bharti’ where the two firms will have an equal share in the business in wholesale, logistics, supply chain and sourcing activities.
The India Retail Industry also enjoys opportunities as well. In the organized sector, the Industry is least competitive and least saturated and therefore the global retailers have an opportunity to take advantage of the more favourable FDI rules that are likely be implemented in India and will enter in Indian market through partnerships with local retailers. As per the experts, good talent pool, huge markets and availability of raw materials at cheaper costs is expected to make India as the one of the world’s best retail economies. The industry will create huge employment opportunities as the organised retail is just over 4% of the total retail market in India thereby leaving a huge untouched opportunity. The retail industry in India is currently growing at a great pace and is expected to go up from US$833 billion in 2013 to US$ 1.3 trillion in the year 2018 at a CAGR of 10%. As the country has got a high growth rate, the consumer spending has also gone up and is also expected to go up further in the future. In the last four years, the consumer spending in India climbed up to 75%. By the year 2013, the organized sector is also expected to grow at a CAGR of 40%. Thus the retail industry in India can be considered to be highly prospective both in the short and the long run.
The India Retail industry is the 5th largest in the world. Comprising of organized and unorganized sectors, the industry is one of the fastest growing industry in India over the last few years. Will it continue its growth in the near future?
