Retail

Scenario in India

Dr. Jyoti Doval

 What We Are to Learn Today
•  History and Evolution of Retail in India
•  Understanding Indian Retail Industry
•  Few Statistics
•  Growth Drivers of Retail in India
•  Operating Environment
•  FDI in India
•  Trends and Changing CB
 Journey since Inception
•  Barter
•  Haat, Mandis, Melas
•  Post Offices (1858)
•  Public Distribution system (PDS)- 1945
•  Canteen Store Departments (CSD) - 1948
•  Khadi and Village Industries (KVIC)- 1957
•  First attempt in building organised retail in
India by Raymond
•  The first exclusive Raymond Retail
showroom King's Corner was opened in
1958 at Ballard Estate in Bombay
 Evolution of Organised
Retail in India

Source: Technopak Advisors Pvt Ltd, BCG

 Evolution Of Indian Retail Over
The Years
https://www.youtube.com/watch?
v=qtf5fHpLVWc

Source: Corporate Thrones

Understanding Indian Retail
Industry
 Indian Retail Industry…..
•  has more than 15 million retailers
•  largest source of employment after
agriculture, employs 40-50 million
–  modern trade- more than 6 million people
(12%)
•  contributes to approx. 40 per cent of India’s
consumption and 10 per cent to India’s GDP

Source: RAI, Apr 2020, Indian Retail Industry Report (November, 2020)
Division of Indian Retail Industry
•  Organised retailing- trading activities undertaken by
licensed retailers (registered for sales tax, income tax, etc),
includes the corporate-backed hypermarkets and retail
chains, and privately owned large retail businesses
•  Unorganised retailing (informal)- traditional formats of
low-cost retailing, examples: local kirana shops, owner
manned general stores, paan/beedi shops, convenience
stores, hand cart and pavement vendors, etc (as on 2020.
85% of toatal mkt share)
 Reasons for Dominance of
Unorganised Retail???
Minimal investment required,
•  The capital investment is very low
•  Less than 4% of retail shops> 500 square
feet
•  Mostly built in owner property, thus low
real estate cost
•  Low labour cost;
–  Family members
–  Child labour
 Unorganized Retail in India
•  Lack of standardization and low
productivity: Low levels of education, experience and
exposure
•  Source of livelihood- Not profit oriented
•  Customers in Tier II and smaller towns used
to the convenience of stores;
–  Variety in merchandise mix
–  Location
•  Population belonging to daily wagers buy
staples in small quantities and also get
credit (if required, due to seasonality in
employment)
 Organised Retail in Nascent Stage :
Significant Scope For Expansion
•  The organised retail in India- CAGR of 20-25% per year
•  Projection: by 2021 (prior to pandemic)
–  traditional retail (75%), organised retail share (18%), and
e-commerce retail (7 %)
Source: Technopak, 2019
(In percent)

Source: Technopak, 2019

•  Indian retail industry- dynamic, fast-paced
(entry of several new players)
•  India's retail market: 2025 estimate $1.1-1.3
trillion, from $0.7 trillion in 2019
•  India: 5th largest global destination in the
retail space

Sources: IBEF, Indian Retail Industry Report (November, 2020), *BCG, Feb 2020
India ranked….

•  73 in the UN Conference on Trade and

Development's B2C E-commerce Index
2019
•  63 in World Bank’s doing Business 2019
•  16 in FDI Confidence Index, India (after US,
Canada, Germany, United Kingdom, China, Japan, France,
Australia, Switzerland, and Italy)

Sources: IBEF, Indian Retail Industry Report (November, 2020), *BCG, Feb 2020
 Rural markets offer significant
growth potential
The rural markets offer a great scope for a
concentrated marketing effort because of the:
•  Increasing rural incomes (better production
and higher prices for agricultural commodities)
•  Market size (700 million potential consumers and
over 40 per cent of the Indian middle income)
 Growth Drivers of Retail in India
§  Favorable Demographics
§  Rise in income and purchasing power
§  Rise in nuclear families (& DINK)*
§  Easy consumer credit and increase in quality
products
§  Brand consciousness
§  Change in consumer mindset
Retail market distribution by category (FY 2019)

Source: Statista, June 2020


Source: indiaretailing.com, BMI Research, Consumer Leads report by FICCI and Deloitte -
October 2018
 Retailing GBO Company Shares: % Value 2015-2019

% retail value rsp excl sales tax

Company 2015 2016 2017 2018 2019

Walmart Inc - - - 1.8 2.1
Amazon.com Inc 0.5 0.8 1.2 1.4 1.7
Reliance Group 0.4 0.5 0.6 0.8 0.9
Future Group 0.6 0.6 0.6 0.7 0.7
Tata Group 0.5 0.5 0.5 0.5 0.5
Avenue Supermarts Ltd 0.3 0.3 0.4 0.4 0.5
Aditya Birla Group 0.2 0.2 0.2 0.2 0.2
One97 Communications Ltd - - 0.3 0.2 0.2
Landmark Group 0.2 0.2 0.2 0.2 0.2
K Raheja Corp 0.1 0.1 0.1 0.1 0.1
Dell Inc 0.1 0.1 0.1 0.1 0.1
Jasper Infotech Pvt Ltd 0.3 0.2 0.1 0.1 0.1
Amway Corp 0.1 0.1 0.1 0.0 0.0
LG Corp 0.1 0.1 0.0 0.0 0.0
Flipkart Online 0.7 1.0 1.5 - -
Services Pvt Ltd
Others 95.9 95.3 94.2 93.5 92.8
Total 100.0 100.0 100.0 100.0 100.0
Source: Euromonitor International from official statistics, trade associations, trade press, company research, trade interviews,
trade sources
 Non-Store Retailing GBN Brand Shares: % Value 2016-2019

% retail value rsp excl sales tax Brand Company (GBO) 2016 2017 2018 2019
3rd Party Merchants Walmart Inc - - 31.8 32.9
3rd Party Merchants Amazon.com Inc 25.9 28.3 30.7 32.5
Myntra Walmart Inc - - 5.8 6.2
Paytm Mall One97 Communications Ltd - 6.3 3.9 3.3
Dell Dell Inc 3.6 2.6 2.1 1.7
3rd Party Merchants Jasper Infotech Pvt Ltd 6.3 3.1 1.8 1.5
HomeShop18 Network18 Group 2.1 1.7 1.5 1.3
ShopCJ SHOP CJ Network Pvt Ltd 1.4 1.3 1.2 1.1
Jabong.com Walmart Inc - - 1.0 0.9
Amway Amway Corp 1.9 1.3 1.1 0.9
Herbalife Nutrition Herbalife Nutrition Ltd - - 1.0 0.9
Vestige Vestige Marketing Pvt Ltd 0.4 0.5 0.6 0.7
Eureka Forbes Eureka Forbes Ltd 1.0 0.8 0.7 0.6
Nykaa.com FNS E-Commerce Ventures 0.2 0.3 0.5 0.6
Pvt Ltd
Modicare 0.2 0.3 0.5 0.5
Modi Group KK
Oriflame Oriflame Cosmetics SA 0.8 0.5 0.4 0.3
Forever Living Forever Living Products 0.5 0.4 0.3 0.2
International LLC
Naaptol 0.2 0.2 0.2 0.2
Naaptol Online Shopping
Pvt Ltd
Purplle.com 0.1 0.2 0.2 0.2
Manash Lifestyle Pvt Ltd
App Store Apple Inc 0.2 0.2 0.2 0.2
3rd Party Merchants Flipkart Online 28.0 30.0 - -

Myntra Services Pvt Ltd Flipkart Online 4.0 4.9 - -

Services Pvt Ltd - -

Herbalife Nutrition 1.5 1.1
Herbalife Ltd
Jabong.com 1.1 1.0 - -
Flipkart Online Services Pvt Ltd 14.5 13.2
Others 20.6 15.0
Total 100.0 100.0 100.0 100.0
Source: Euromonitor International from official statistics, trade associations, trade press, company research, trade interviews, trade sources
Note: Vending data captures vending systems installed in public and semi-captive environments only. For further details refer to definitions.
 Grocery Retailers LBN Brand Shares: Outlets 2016-2019

sites/outlets
Brand (GBO) Company (NBO) 2016 2017 2018 2019
Easy Day (Future Future Retail Ltd 500 650 900 1,100
Group)
More (Aditya Birla Aditya Birla Retail Ltd 506 523 543 555
Group)
Reliance (Reliance Reliance Retail Ltd 450 423 430 445
Group)
Big Bazaar (Future Future Retail Ltd 231 259 290 315
Group)
D-Mart Avenue Supermarts Ltd 110 141 170 195
Reliance Smart Reliance Retail Ltd 70 79 127 150
(Reliance Group)
Spencer's (RPG Group) Spencer's Retail Ltd 129 123 122 123
Big Bazaar (Future Future Value Retail Ltd - - - -
Group)
Others Others 1,26,28,229 12,699, 12,775, 12,838,
718 114 349
Total Total 1,26,30,225 12,701, 12,777, 12,841,
916 696 232
Source: Euromonitor International from official statistics, trade associations, trade press, company
research, trade interviews, trade sources
 Rising prominence of online retail
•  E-commerce segment in India: 3.4% of the overall
retail market, 100-110 million users, and an online
GMV of around $30 billion (2020)
•  By 2025, India's e-commerce market projected at
$100-120 billion in GMV and 300-350 million
shoppers

Source: Bain and Co. Report, 2020

 Sales in Retailing by Store-based vs Non-
Store: Value 2014-2019

(INR bn) 2014 2015 2016 2017 2018 2019

Store-based Retailing 27,889.10 30,918.60 34,228.60 37,763.00 41,410.60 45,115.80

Non-Store Retailing 562.1 769 1,122.50 1,601.60 2,005.30 2,486.00

Retailing 28,451.20 31,687.60 35,351.00 39,364.60 43,415.90 47,601.70

Source: Euromonitor International from official statistics, trade associations, trade press,
company research, trade interviews, trade sources
 Sales in Non-Store Retailing by
Channel: Value 2014-2019
INR bn 2014 2015 2016 2017 2018 2019

Direct Selling 97.9 108.4 119.7 128.8 140.4 152.3

Homeshopping 28.6 34.7 45.1 55.5 64.9 74.7

Vending - - - - - -

E-Commerce 435.6 625.9 957.7 1417.3 1800 2259

Non-Store
562.1 769 1122.5 1601.6 2005.3 2486
Retailing

Source: Euromonitor International from official statistics, trade associations, trade press,
company research, trade interviews, trade sources
Operating Environment
 Informal Retailing
•  Informal retailing continue to flourish
•  Considerable share of retailing in India in
terms of value sales (availability and low
prices)
•  Primarily, consumers from the lower
economic strata (both price and the quality
are low)

Euromonitor International 2019

 Informal Retailing contd.
•  The concept popular in rural population
•  Products include fake products, grey market products
and black market products
•  Consumers buy for aspirational desires and low price
•  Non-grocery specialists to suffer the most from
informal retailing
–  electronics and appliance
–  apparel and footwear
–  health and beauty

Source: Euromonitor International 2019

 Physical Retail Landscape
•  Physical stores: still predominant
•  Urban consumers-high streets and shopping centres,
common phenomenon
•  Rural areas- smaller stores, focus on product categories
than brands
•  Consumers in metropolitan do not travel to city centres or
out of town to shop (generally)
•  Organised vs Unorganised (informal) retailing allows all
budgets

Source: Euromonitor International 2019

•  Retailers focus on first and second-tier cities,
tapping semi-urban consumer base (urbanisation
of shopping habits)
•  Rising real estate and rental costs across the
country, and lack of high street real estate
locations
–  shifted focus to shopping centres (vs. stand-alone)
–  Retail outlets in India are generally smaller than those of
their international counterparts
•  Shopping centres are popular shopping destinations:
–  option of shopping for both grocery and non-
grocery products under the same roof,
–  clean and air-conditioned atmosphere
–  have cinemas, restaurants and other entertainment
venues
•  Stand-alone retail outlets are preferred for premium
and luxury brands
–  stand-alone stores located in high-end high streets
are used for exclusive brand outlets, having
premium designs

ADVANTAGE INDIA
Sector’s high growth potential,
attracting investors
 Innovations in Financing
•  Collective efforts of financial houses &
banks with retailers are enabling consumers
to go for durable products with easy credit

Private Label Opportunities

The organised Indian retail industry has
begun experiencing an increased level of
activity in the private label space
 Sourcing base
•  India‘s price competitiveness attracts large
retail players to use it as a sourcing base
–  (Walmart, GAP, Tesco and JC Penney)
–  India may emerge as alternate global sourcing base to China

Luxury Retailing
•  Luxury retailing is growing in India (includes fragrances,
gourmet retailing, accessories and jewellery among many
others)
•  Projected Revenue- US$ 8,417 mil by 2021, expected CAGR
2021-2025- 7.7% * *Source: Statista Market
Forecast July 2020)
 FDI in India
•  FDI: major non-debt financial resource for the
economic development of India
•  Foreign companies invest due to
–  relatively lower wages,
–  favourable government policy regime and positive
business environment
–  special investment privileges like tax exemptions, etc
 Benefits of FDI in Retail
•  Growth in the economy
•  Investment in infrastructure
•  Sectors like real estate and banking will see growth
•  More employment
•  Organized retail stores
•  Availability of quality products at a better and cheaper
price
•  Increased market growth and further expansion
•  More taxes available to the Indian government (from
MNCs) for development
•  Development of retail supply chain system
Sector’s High Growth Potential is Attracting
Investors
•  India has occupied a remarkable position in global retail
rankings; the country has high market potential, low economic
risk and moderate political risk
•  India is expected to become the world's third-largest consumer
economy, reaching US$ 400 billion in consumption by 2025,
•  In FDI Confidence Index, India ranks 11th (after U.S., Canada,
Germany, United Kingdom, China, Japan, France, Australia,
Switzerland and Italy)
•  India is ranked second in the Global Retail Development Index
2019, (rising middle class and rapidly growing consumer
spending)

Source: AT Kearney 2019 FDI Confidence Index, Boston Consulting Group
FDI Policy Details on Single and
Multi-brand Retail in India
 Kinds of retail trade in India
•  Single Brand-foreign companies would be allowed to sell
goods sold internationally under a single brand, example-
Apple, Samsung, Adidas. (example: Volkswagen, Audi, BMW)
•  Multi Brand-retail store with a foreign investment can sell
multiple brands under one roof, (example-Wal-Mart,
Carrefour and Tesco can open stores offering a range of
household and grocery items in the same way as the ‟kirana”
store
 51 per cent FDI in multi -brand retail

•  Minimum investment cap: US$ 100 million
•  30 per cent procurement of manufactured or processed
products must be from SMEs
•  Minimum 50 per cent of total FDI must be invested in backend
infrastructure (logistics, cold storage, soil testing labs, seed
farming and agro-processing units)

Source: India Consolidated FDI Policy, 2020

100 per cent FDI in single brand retail
•  100 per cent FDI allowed in single-brand retail under the
automatic route
•  Single brand retail entities have been allowed to set off
their incremental sourcing of goods from India for global
operations during the initial five years starting from the
1st April of the year of the opening of first store, as against
the compulsory sourcing requirement of 30 per cent of
purchases from India
•  100 per cent FDI in retail trading of food products
manufactured or produced in India
Source: India Consolidated FDI Policy, 2020
 Market size
•  FDI equity inflow in India stood at US$ 49.97 billion in
2019-20.
•  During 2019-20, India received the maximum FDI equity
inflow from
–  Singapore (US$ 14.67 billion),
–  Mauritius (US$ 8.24 billion),
–  Netherlands (US$ 6.50 billion),
–  USA (US$ 4.22 billion) and
–  Japan (US$ 3.22 billion)

Source: Department for Promotion of Industry and Internal Trade (DPIIT), 2020
 Significant FDI announcements made recently

•  On September 08, 2020, Byju’s (education technology firm)

raised US$ 500 million in a new round of funding led by Silver
Lake (US-based private equity company); (now company’s
valuation- US$ 10.8 billion)
•  On September 2020, Unacademy, (Edu-tech platform), raised US$
150 million from SoftBank Group (Japanese conglomerate), now
valuation- US$ 1.45 billion

Source: Department for Promotion of Industry and Internal Trade (DPIIT), 2020
 Significant FDI announcements made recently
Contd.
•  On 21st August 2020, the Government of Singapore announced
investment of Rs 4.5 billion (US$ 63.84 million) in the qualified
institutional placement (QIP) offering of Phoenix Mills Ltd. (India's
leading retail mall developer)

•  From January 2020 to July 2020, US FDI in India crossed US$ 40 billion,
reflecting the high level of confidence of American corporations on the
country. India witnessed an 18% increase in FDI from April 2020 to
June 2020 (during COVID-19 pandemic)

Source: Department for Promotion of Industry and Internal Trade (DPIIT), 2020
Behavioural changes in Indian Consumers
(Pre-Pandemic Trends) 2019
 Modern Vs. Traditional grocery stores
•  Many urban dwellers preferring modern grocery
stores instead of traditional to save time, and access
wider range of products (for monthly purchases)
•  Modern grocery retailers developing new marketing
schemes and strategies:
–  interesting payment schemes and methods (Future
Group launched its payment wallet Future Pay)
–  effective pricing strategies to propel sales
–  launching new private label products
 Convenience Stores Vs. Hypermarkets
Convenience stores creating strong competition for
hypermarkets
–  busy consumers shifting from large weekly
shops to top-up shops on a more frequent basis
–  Saving weekend leisure time
–  high rental costs in prime locations unprofitable
for large format stores
 Growing Integration of E-commerce and
Bricks Mortar Stores
•  The leading store-based retailers- are increasingly
deploying a multi-channel presence and are investing
heavily in developing e-commerce platforms
•  Pure e-commerce retailers expanded into the store-
based channel by opening bricks-and-mortar stores
 Mobile E -commerce

•  Whilst e-commerce continues to grow mkt share-

mobile e-commerce(smartphones and tablets)
driving force
•  The growth of mobile e-commerce brings
opportunities and challenges (product discovery
and speed, to remote payment)
•  Smartphones- ever-present, hence mobile e-
commerce is expected to be a strong force in near
future
 Pandemic Impact
•  The Covid-19 pandemic has permanently altered
consumer behaviour in India and nearly 90 per cent
of those surveyed are making lasting changes to how
they live, work and shop, and there is no going back
to the pre-pandemic world for consumer brands, a
new report said on Monday
•  According to Accenture's 'Covid-19 Consumer Pulse
Research' that surveyed 2,500 consumers in India
between March and June (among 45,000 globally),
85 per cent of consumers in the country said they
shopped more health-consciously while 85 per cent
said they were focused more on limiting food waste
•  Covid-19 recession: developing countries
and emerging markets worse hit financially
•  Advanced economies: fiscal deficits to
prevent significant losses to GDP, EMs
cannot provide same level of support

KPMG Retail Sector Report, Apr 2020

The lockdown: greatly affected retail business
•  Most stores, except stores selling essential food
& grocery, were shut across the country
•  Garments, saris, electronics, mobile phones,
furniture, hardware etc. almost all stores were
closed
•  Non-Grocery/food retailers are reported 80
per cent to 100 per cent reduction in sales
•  Even retailers of essential items reported
losses as they could not sell non-essential
items with higher margins

KPMG Retail Sector Report, Apr 2020

 Consumer Behaviour Change

•  Shift to online (even people who were

previously averse)
•  Millennials choose to purchase only what
they really require and hence buy less than
earlier
•  Big-ticket purchases are pushed back
•  Increase in small-ticket spending (symbolic
buying)

KPMG Retail Sector Report, Apr 2020

Retail and Marketing trends for
2021


Emerging Business Models

Subscription-based retailing
•  Subscription-based retailing practices picked
up in 2020
•  Still niche, and limited only to urban India (in
metropolitan cities)
•  Subsidised price promoted trial of the
concept
•  Primarily available via e-commerce retailers
•  Tapping into the growing online consumer
base

Emerging Business Models
Omnichannel retailing
•  Omnichannel retailing: became more common
phenomenon (though existed since 2013), the concept of
pick- up stores from e-commerce retailers became quite
common in 2019
•  Flipkart and Amazon.in started to either develop their
own pick-up stores or cooperated with kirana stores
•  BOPIS: GAP, Shoppers Stop, Decathlon
•  Apollo Hospitals Enterprises Ltd launched its first
vending machine in Hyderabad, India in 2019, becaming
the first pharma company in India to launch a vending
machine format (OTC and wellness pdts)
 Blurred lines between online and
offline commerce
•  According to a survey, over 50% of customers who
purchased from a retailer online also had an in-store
experience in that same period; and 82% of
smartphone users turn to their phone while inside a
store to make purchase decisions
•  Brands are rightly making a shift to omnichannel
marketing, creating a consistent user experience
across channels and devices
•  Amazon runs 6 different kinds of physical stores
selling almost anything from books and devices to
grocery and merchandise
 More payments options
• 
Payments have undergone significant changes over the past
years, Cash to cards (from magnetic strip to chips and now
contactless) cards as well as contactless mobile payments
•  In 2021 and beyond, biometrics payments will gain much wider
acceptance
–  Denmark student canteen- pay with their finger,
–  Amazon’s new palm scanner to be used at its physical stores
•  Biometrics is coming to remote payments as well, projected that
mobile biometrics will authenticate over $2 trillion of sales by
2023, and 57% of biometric transactions to be remote by then
 Voice search comes to stay
• 
Voice - next generation of search
•  In 2018, 27% of the global online population used
voice search on mobile
•  Consumers using voice search in shopping-
researching products to making actual purchases
•  Connection between voice searches and local retail,
consumers used voice search to find local
businesses
 Brands and social issues
(taking a stand)
•  Customers expect brands to be vocal on social issues
•  Customer expectations from brands now reflect
relationship dynamics (need for loyalty, trust, care and
concern for practical social issues)
•  Younger generation customers- belief-driven and
conscientious, and would only buy from brands they
consider allies as far as social issues
•  Example: Dove’s continuous ‘Real Beauty campaign’,
promoting diversity and acceptance in an industry
infamous for reinforcing stereotypes
More AR-Powered Shopping Experiences
•  Augmented reality (AR), machine learning, and artificial
intelligence (AI) are here to stay
•  Consumers listed Augmented and Virtual Reality as the top
technologies they’re seeking to assist them in their daily
lives, with 51% saying they would be willing to use AR
technology to assess products*
•  During pandemic, retailers leveraged AR technology to
bridge the gap between the digital and the physical
•  Brands like IKEA, Home Depot, and Target all have
proprietary AR shopping experiences
•  Shopify AR (toolkit for businesses to create their own AR
experiences), products having AR- 94% higher conversion
rate than products without AR

Source: Nielsen global survey, 2019*

 Social Commerce
•  The use of videos on social media platforms such
as Instagram and Snapchat is driving massive
growth of social commerce, especially among
millennials
•  India, leading Asian market for social commerce
and is projected to become a $100 billion vertical
of e-commerce by 2025
–  reasons for this massive success s-com is the strong
regional connect and the role of a personal referral

Source: PayPal survey, 2020

 Same-Day (or Faster) Delivery
•  Same-day shipping pioneer: Amazon (in 2018)
•  Customer expectations for shipping times only
increasing;
–  First came 2-day via the rise of Amazon Prime, then next-day,
then same-day
–  From Amazon’s Prime Air — which uses drone technology to
deliver shopper’s orders in 30 minutes or less — to the rise
of delivery robot startups, delivery is only getting faster
•  88% of consumers are willing to pay for same-day or
faster delivery*
•  While same-day shipping: likely to become the norm

*Source: PwC reports, 2020

 Retailer's going to consumers
•  Bazaar Kolkata introduces its first fashion retail truck ‘Baazar On Wheels
•  Bakery on Wheels
•  Apparels and groceries in societies
•  Fab India, Pantaloon

Assignment

5 Marks
 In due time….
•  Visit DLF Emporio and go and check the
merchandise in as many stores as you can.
•  Do not spend money
•  Make careful observations and mail your
insights
•  Keep a record for self as we will be using
them at a later date as well
Thank you!