An overview of the emergence of retailing in India

Retailing is one of the oldest professions in the world, and India’s retail space is becoming exceedingly interesting.

India embraced the policy of globalisation in 1991, but no Foreign Direct Investment (FDI) was allowed in retail till 1997. However, for the first time in 1997, 51 percent ownership was allowed in single brand retail by FDI route. But this did not result in a significant inflow of investments because government approvals were a mandatory precedent.

In 2006, India got away with the approval process and set-up clear guidelines for investing in retail in India. Between 2006 to 2010, India received 94 FDI proposals, of which 57 got implemented.

But this was nowhere significant for the world’s biggest democracy. One of the reasons for this lackluster response towards retailing was the fact that during the same time, China was brewing its own industrial revolution and allowed for 100 percent FDI in single brand retail.

In 2012, the country finally opened up the competition for Indian retailers by allowing 100 percent brand ownership in single brand retail (51 percent in multi brand retail).

Growth of retail sector

The easing of regulation, along with other macroeconomic factors like the increase in disposable income of the millennial population, had a magical impact over the retail sector in India.

And now, the size of Indian retail has tripled over the last ten years to $1.1 trillion (from $354 billion in 2010). Since the relaxing of FDI norms, organised brick and mortar retailing has been growing at more than 20 percent Y-o-Y. Contribution of organised B&M retailing in the overall retail sector has also shot up to 12 percent from 4 percent in 2009. However, this is still very less compared to developed economies, where the overall organised retailing is more than 80 percent.

India has now become a hotcake of retailing destination for local and foreign brands. A $21 billion retailing opportunity around transit touchpoints, i.e. airports, stations, bus-stops, etc., is to be realised in the next 10 years.

The country is set to receive 65 million sq. ft of retail space in the next three years. Modern retail story in India is getting written down in Tier-I cities where consumers are going out in the market not just for the necessity to dine and shop, but for the experience of it. The sector is expected to grow at a rate between 20 percent to 25 percent in the years to come, and there is a need for innovative solutions to maintain the pace.

Technology in retail

In recent times, technology has also started playing a critical role in driving consumer behaviour inside retail shops. All of McDonald’s menu boards in India have changed to digital display panels with centralised content management, a definitive upgrade from the static trans-lit panels which have been used previously. Augmented reality (AR) is coming up in a big way to craft the experience around retail touchpoints.

While Visa and Mastercard have launched Wi-Fi enabled debit and credit cards for easy payment, Amazon is taking the game ahead by finally opening up its proprietary smart check-out technology for retailers. Beacon sensors and IoT devices are making retail experience more contextual (think of an in-store display promoting hot-chocolate whenever it’s raining outside) alongside creating tremendous insights on customer behaviour.

While some of the biggest e-tailers, i.e. Amazon and Flipkart, are entering into strategic brick and mortar retailing model, the retail sector is poised for aggressive growth.

India definitely has a unique opportunity in this domain because consumerism in India has just started to take-off. While most entrepreneurs are trying to find their big break in the ecommerce and Internet domain, India’s retail sector is ripe for disruption.

There is an urgent need for radical solutions that can support the explosive growth this sector is geared up for.