India’s Booming Retail Sector Offers Tremendous Opportunities for Local & Global Business

Market Overview:

India’s retail sector is undergoing some remarkable growth due to its vast population and massive consumer base with diverse needs and preferences. The retail market size of India was valued at USD 1.2 trillion in 2023 and is expected to reach USD 1.8 trillion by 2030, growing at a CAGR of 5.9%. The market is poised to grow with the confluence of factors like growing middle class, urbanization, and a shift towards online and organized retail.

The Indian retail sector contributes over 10% to the GDP and is the fastest-growing market in the world. The segment includes various verticals, largest among them are Food & Grocery, Apparel & Footwear, Consumer Electronics, and E-commerce. The e-commerce market is projected to reach at USD 350 billion by 2030, growing at a CAGR of 18%.

Market Growth Drivers: 

• India’s young and vast population is a significant growth driver for the retail sector. India has a population of 1.3 billion out of which 77% are below the age of 44. This shows an increasingly tech-savvy and brand-conscious consumer base opening gateways for various retail segments.
  
  
• Urban population of the country has been constantly growing, reaching to 500 million. As more people migrate to cities, demand for organized retail formats like malls, supermarkets, and specialty stores has boosted.
  
  
• with over 650 million smartphone users and rise of e-commerce platforms, there has been a remarkable growth in consumer electronics vertical of the retail segment. India’s consumer electronics market is expected to reach USD 150 billion by 2033, showing the growing demand for latest gadgets and tech products.
  
  
• Rising disposable income and an increase in dual-income families are the key growth drivers for the retail sector. With a per capita income of USD 10,030 (PPP) consumers tend to have higher spending power, which presents various opportunities for retailers to tap into the market.
  
  
• Various government initiatives like ‘Digital India’ and ‘Make in India’ have been creating opportunities for Indian retailers to grow within the space. These initiatives promote domestic manufacturing and have been shaping the bright future of the Indian retail industry.

Challenges in the Segment:   

• Technological adaptions and a shortage of skilled workforce are hindering the growth trajectory of many Indian retailers. Most old-school retailers find it difficult to adopt the ongoing technology changes. Keeping up with complex IT systems, ensuring data security, and hiring tech-savvy employees can be costly and time-consuming.
  
  
• Tier 1 and Tier 2 cities have minimal retail spaces in prime locations & CBDs with very high rental costs, which becomes a barrier for the Indian retail segment. A large slot of retailers bid for the available spaces like malls and high streets making the market competitive.
  
  
• India’s complex regulatory compliances pose significant challenges for retailers. They go through multiple authorities and different state laws to comply with mandatory clearances and other regulations, making business operations difficult.
  
  
• The country’s complicated tax regime, import duties, and GST practices imply challenges for retailers. GST’s implementation requires various compliance efforts, these processes impact profitability for retailers.
  
  
  

Indian Retail Industry - Category-Wise Break-up:

Foreign Retailers Investing in India:

FDI inflows of USD 70 billion were recorded in India for FY 2023-24. This made India 5th largest global destination for FDI. 

There is cap of 51% FDI for multi-brand retail trading while 100% FDI is allowed for single-brand retail trading. 

The ongoing trends show India as an attractive destination for international retailers. For instance, 90% of the top 50 global brands are currently active in India. Growing demand for international brands and increased spending power of Indian consumers have made the market lucrative for international retailers. Additionally, simplified FDI norms have made it easier for brands to establish a strong foothold in the market. Malls also tend to build partnerships with international brands as it attracts more footfall and enhance their space.

Recently, consumers have preferred international brands over local ones as they offer quality and a sense of luxury. As a result, brands like Zara, H&M, GAP, Starbucks, Costa Coffee, Xiaomi, Oppo, Apple, Miniso, etc. have entered the Indian market.

Major international brands to enter India recently -

Clothing, apparel & Footwear:

Food Services:

Mobile & Consumer Electronics:

   

Beauty & Cosmetics:

Home & Interior:

Online Retail Outlook:

Indian e-commerce market will grow to a whopping USD 200 billion by 2026. The segment promises to be the fastest-growing market globally. Finding its position currently with a 3% share of the Asia Pacific’s retail market, it continues to grow at the greatest pace. The number of online shoppers is expected to grow by 60 million users by 2026.

This expanding market is fueled by several factors which include continuous acceleration of the internet, smartphone adoption as well as the population's earning capacity. In addition, the various government schemes such as Digital India, Startup India, and India Innovation Fund have further propelled the growth in e-commerce usage.

To improve the online shopping experience, great progress has been made in digital payment systems. The introduction of digital wallets and UPI has encouraged consumer confidence, easing payments, and the growth of e-commerce. Given the amount of growth that the Indian e-commerce market is expected to undergo, the market offers a wide range of opportunities for several domestic and international companies.

How The India Watch can Help? 

Retailers and businesses who are willing to grow & expand in India, requires access to valuable data, consumer insights, and research. India is no doubt a lucrative retail market. However, it is also competitive, price sensitive, multi-layered, and diverse. Hence retailers need to get access to the right information & data to make any risk-free decisions. This is where advisories like The India Watch comes into picture. It can offer a wide range of services that includes the following 

• Market research surveys including consumer behaviour research, competitive bench marking, customer loyalty study, etc.
  
  
• Feasibility studies and project reports.
  
  
• Business research and strategic insights
  
  
• Detailed market studies
  
  
• Thematic reports, white papers, capability decks, corporate decks, investor presentations, etc. 

For any further information, feel free to drop us a mail at info@theindiawatch.com

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