*Notes about Indian retail sector

Definition of retail business

Retail shop is a place of business usually owned and operated by a retailer but sometimes owned and operated by a manufacturer or by someone other than a retailer in which merchandise is sold primarily to ultimate consumers. Retail is the process of selling consumer goods to customers through multiple channels of distribution to earn profit. Retail is the sale of products to consumers in relatively small quantities. The consumers do not then sell on what they bought. In other words, the buyer does not resell. The buyer, in the retail sector, is the end of the line of the product. Put simply; the purchaser is the ultimate consumer.

There are many types of retail businesses in world, like

    • Discount stores
    • Department stores
    • Super markets
    • Warehouse stores
    • Convenience stores
    • Hyper markets...

Retail industry in India

          

In the case of Indian economy, retail is the one of the pillars of the Indian economy with the sector contributing to about 10%of the GDP. In this sector organised sector is merely 9% and the unorganised sector dominates. The maximum no of retailers operates out of less than 500 sq. feet of retail space.

Unorganised retail, which forms the bulk of the retail industry in India, is composed of local Kirana stores, owner-managed single general stores, beedi/pan shops, convenience stores, hawkers and pavement vendors, etc.

 Organised sector comprises of corporate-backed retail chains, supermarkets, and department stores that can sell only under a license and are liable to huge volumes of sales and taxes.

Indian retail industry is one of the fastest growing in the world. As per Forrester Research in 2020, India's retail sector was estimated at USD $883 billion, with grocery retail accounting for USD $608 billion. The market is projected to each USD $1.3 trillion by 2024, By 2024, India's e-commerce industry is expected to increase by 84% to US$ 111 billion, driven by mobile shopping, which is projected to grow at 21% annually over the next four years. In 2020, the most common payment methods online were digital wallets (40%), followed by credit cards (15%) and debit cards (15%). Online penetration of retail is expected to reach 10.7% by 2024 versus 4.7% in 2019.

Increasing participation from foreign and private players has given a boost to Indian retail industry making India the fifth largest and preferred retail destination globally. India's price competitiveness also attracts large retail players to use it as a sourcing base. Global retailers are increasing their sourcing from India and are moving from third-party buying offices to establishing their own wholly owned/wholly managed sourcing and buying offices in India.


Government Initiatives

The Government of India has taken various initiatives to improve the retail industry in India. Some of them are listed below:

  • Government may change Foreign Direct Investment (FDI) rules in food processing in a bid to permit E-commerce companies and foreign retailers to sell Made in India consumer products.
  • Government of India has allowed 100% FDI in online retail of goods and services through the automatic route, thereby providing clarity on the existing businesses of E-commerce companies operating in India.
  • The government’s focus to improve digital infrastructure in Tier 2 and Tier 3 markets would be favorable to the sector.
  • The Minister of MSME announced inclusion of retail and wholesale trades as MSMEs. Retail and wholesale trade will now get the benefit of priority sector lending under the RBI guidelines.

 ONLINE RETAILING 

  1. Online retail or e-tail is growing at a fast rate in India. The online consumer electronics and appliances market in India was valued at approximately INR 100Kcrore in FY2019 and the market is expected to register a CAGR of 24.5% from FY 2019 to FY 2025, as per a recent study conducted by Frost & Sullivan. Online retailing is primarily driven by internet proliferation in India, which is growing year-on-year. The global telecom industry body Global System for Mobile Communications (GSMA) expects that by 2025, the total number of internet users will reach 92 crore, creating an e-Commerce and m-Commerce boost. Also, due to increased penetration of electronic gadgets, digital payments in India are on the rise, which account for 80% of online transactions. Other key drivers include rising disposable income and an upsurge in the Gen Y population.

    Online retailing is more convenient for consumers and sellers. Time to market, cost-savings and scale are the major advantages of online sales.

  2. A type of electronic commerce used for business-to- consumer (B2C) transactions and mail order, are forms of non-shop retailing. Divided in to 2 parts: 1. B2C 2. B2B 
  • B2C -Business to consumer Business that sells products or provides services to end-user consumers. Business-to-consumer activity exists both online and offline, the acronym B2C has primarily been used to describe the online variety.
  • B2B- Business-to-business (B2B) describes commerce transactions between businesses, such as between a manufacturer and a wholesaler, or between a wholesaler and a retailer.  While almost any B2C product or service could also be a B2B product, very few B2B products or services will be used by consumers.

Future of Indian online retail industry

The future of retailing is heavily dependent on online platforms. Apart from the metros in the urban market, Tier II and Tier III cities have the maximum penetration potential for online consumer products. The total online retailing market is dominated by the consumer electronics and appliances segment. More users are expected to participate in online shopping in the coming years, especially in this segment. After-sales service is considered to be a key differentiator for online sales in India. Companies should provide easy and safe financing options for online purchases through secure payment gateways, payment through eWallets, EMIs, and cash on delivery, which will encourage online purchases. Companies must focus on targeted and personalized digital and social media marketing to acquire new and repeat customers by integrating the seller’s mobile application with the consumer’s social media profile.

The future of Indian retail industry

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.

Advantages of FDI in Retail in India 

  • Growth in economy
  • Job opportunities
  • Benefit to farmers
  • Benefit to consumers
  • Availability of new technology
  • Long term cash liquidity
  • FDI open new avenue for franchising
  • Conductive for country's economic growth
  • Cheaper production facilities
  • Consumer Retention and loyalty
  • Reduced cost of sales
  • Helps to maximizing profit
  • Helpful for new Start-ups

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