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India is one of the fastest-growing retail & consumer goods markets in the world. The sector has been growing steadily on the back of an expansive middle class, rise in disposable income, and evolution in consumer lifestyle. The overall retail sector is valued at USD 1 trillion and is expected to grow by 75% in the next 6 years. A large population and growth in household income will result in a substantive rise in aggregate wealth, thereby fuelling growth in the industry.
Currently, the percentage of organized retail is relatively less at around 12%. However, it is the fastest-growing segment complimenting young demographics and lifestyle changes.
Interestingly modern retail is not just limited to larger cities and metros but also rapidly penetrating tier 2 & 3 cities. Lifestyle and consumer behaviours are also transforming in Indian small towns, which make a conducive environment for the retail industry to grow and flourish.
E-commerce is also on a rise in India and is expected to contribute 11% of the total retail consumption by 2024. The recent COVID crisis has further accelerated digital commerce in India. Indigenous grocery retailers such as Groffers, Big Basket, & Milk Basket registered a massive jump in sales during the lockdown period. Large Indian conglomerates like TATA & Reliance have also made a grand entry in the thriving Indian e-commerce space, which already has international heavyweights such as Amazon & Flipkart (backed by Walmart). The Indian e-commerce space is going to be interesting to watch out.
Retail & Consumer Goods
Industry Analysis
- India is one of the fastest-growing retail markets in the world, with an estimated value of ~ USD 1 trillion. It is counted amongst one of the most attractive retail markets. Under the sustained period of economic growth, there has been unprecedented demand for FMCG products, packaged food items, clothes & apparels, fashion items, electronic appliances etc. Other socioeconomic factors such as a change in lifestyle, rise in nuclear families, & a hugely attractive demographic dividend are also supporting the uptrend.
- Indian modern retail comprising of malls, hypermarkets, and high street etc. was one of the fastest-growing retail sub-segments in India before the COVID outbreak. Due to nationwide lockdown, modern retail has suffered a slump in activities. Now with the reopening of malls, slowly and gradually the sector is recovering.
- Accelerated growth in e-commerce is expected in the times to come, with the sector expected to contribute 11% of the overall retail sales by 2024. The recent lockdown has expedited the growth of e-commerce by inducing a widescale change in consumer behaviour. Numerous categories such as grocery, apparel, electronic appliances, food items, pharma, etc. have witnessed a steep jump in digital commerce activities.
- Indian rural economy will play a much larger role in driving growth in the FMCG market. Currently, ~ 40% of the overall FMCG consumption is driven by rural India. However, their rate of growth outperforms urban peers. Consumption of numerous sub-categories such as toiletries, detergents, personal care, cosmetics, bakeries, dairy products, etc. is rising steeply in rural India.
- Rural India will also play a major role in fuelling growth in Appliances & Consumer Electronics (ACE) segment. In near future, a sizable growth in refrigerators, ACs & Fans, and kitchen appliances will be driven by Rural India. Growth in the rural economy, rise in disposable income and massive rural electrification drive by the government will drive the market. In 2019, around ~ 90% of the villages have been electrified, a massive rise compared to 2011 when the number was pegged at 55%.
Growth Drivers of Retail and
Consumer Goods Industry
- In the last two decades, there has been significant growth in the Indian middle class. The annual growth rate of the Indian middle class is over 19%, more than other emerging economies such as China & Brazil. A rapidly growing middle class has resulted in enhanced demand for numerous consumer goods including food items, fashion & apparels, consumer electronics, personal care, etc.
- India has formulated a conducive FDI policy in the retail sector. Global retailers also understand the attractiveness of the Indian market. 100% FDI is allowed in Single Brand Retail Trade (SBRT), wholesale cash & carry, and e-commerce. 51% FDI is allowed in the Multi Brand Retail Trade (MBRT) under the automatic route.
- India’s attractive demographic profile gives it a great advantage. Around 2/3rd of the Indian population is aged less than 35.
- Internet penetration has soared in recent years and has also reached to the rural parts of the country. Government programs like Digital India have also underlined policies to boost digital education. Events such as COVID has also made millions of Indian comfortable with digital commerce. India is touted as one of the largest internet markets in the world, which also implies windfall for online commerce companies.
- As India will be an attractive retail destination, increasingly international brands will like to set up and expand in the country. In 2019, more than 300 international retailers were set to enter the country (This is a before COVID analysis, and the numbers will alter.)Meanwhile, domestic brands will also expand and grow their market aggressively
How India Watch can Help
The India Watch is an India focused market research & information advisory. Through tailor-made market research services, we can help international and domestic consumer goods companies to make informed business decisions and gain a competitive edge.
- We know the Indian culture & consumer very well and hence can design a highly effective customized research solution attuned to local dynamics.
- We can conduct market surveys (online, telephonic, face to face), qualitative interviews, triangulation-based research services to offer valuable consumer behaviour insights. Our research can help in identifying target customers and study their behaviours and examine how their expectations can be met.
- We can design and implement customer satisfaction surveys to measure how satisfied customers are and what are their further recommendation.
- We can render valuable insights on optimal product pricing that can help in maximizing ROIs.
- Through our exhaustive research, we can offer valuable insights on market sizing, market trends, distribution structure, competition, regulatory framework etc.
- We offer mystery shopper services for brands to learn more about their products.
