Indian retail industry - Challenges and Opportunities

India occupies a remarkable position in global retail industry. The country has emerged as a dynamic player in every industry vertical primarily because of frequent new entries of enterprises and startups in business on a daily basis.
Indian Retail Landscape

India occupies a remarkable position in global retail industry. The country has emerged as a dynamic player in every industry vertical primarily because of frequent new entries of enterprises and startups in business on a daily basis. India is one of the fastest growing retail markets in the world placed as world’s fifth-largest global destination in the retail space. According to a report by Wall Street Journal the retail industry contributes nearly 22% of the country’s GDP. Growing purchasing power, public consumption, burgeoning expenditure, rapid urbanization as well as entry of foreign players into the domestic market are the key growth enablers for the sector.
Indian retailing sector is now perforated by availability of international brands, emerging number of shopping malls and hypermarkets and extensive proliferation of e Commerce. The end benefactors of these developments are of course the general consumers, who are the target audience of retail businesses. The progressing retail industry has impacted Indian consumers in a number of ways. Improvement of lifestyle and raised standard of living are the direct impact of retail developments on consumers. Burgeoning international presence in India retail industry is increasing exposure of Indian consumers to international brands. In a similar fashion, the industry has helped a lot to boost the general awareness of consumers.
Although the retail industry of the country is growing by leaps and bounds, it is difficult for emergent enterprises to sustain in this domain. The reasons being several challenges in the long term run, the sector is an unpredictable market. The Indian Retail Industry is expected to grow from US$330 billion in 2007 to US$640 billion by 2015. According to the 10th Annual Global Retail Development Index (GRDI) of A.T. Kearney, India is having a very strong growth fundamental base. This is the reason why the present times the perfect to foray into Indian Retail Market.
Indian Retail Market contributes to 8% of the total employment. The total retail spending is estimated to double in the next five years. Of this, spending on organized retail is estimated to be 21% of total expenditure. The unorganized retail sector, on the other hand, was expected to grow at about 10% per annum with sales valuation amounting to $309 billion in 2006-07 to $496 billion in 2011-12.
In India, the impetus of government in developing the retail sector is massive. The government is allowing foreign direct investment in multi brand retailing as a measure to make India more attractive to overseas investors. The proposal was piloted by the Department of Industrial Policy and Promotion (DIPP). Liberalization of FDI in multi brand retail is a boost to the retail sector. It is with a phased liberalization approach with a number of conditions laid down for foreign retailers to enter India. The conditions while laying the foundation for FDI in retail was intended to assure the opposition parties, the local retailer lobbies, the farmer and trade union etc. The government adopted a balanced midway kind of approach after due consideration of the views of all stakeholders involved.
Though Indian retail industry has enough potential, a number of challenges loom over the sector. Of this, the lack of quality human resources and inability of domestic manufacturers to meet international requirements are the major ones. Manpower source have never been an issue in India but retailing industry requires trained manpower. It is very difficult to find skilled human resource for the sector as skill development in India is still on a nascent stage. Recently government has taken massive initiative to skill the youth populace of the country through the flagship program called Skill India. The program is rolled out keeping in view the massive requirements of skilled workers in niches such as retail, manufacturing, customer services and other such trades.
The competition from the unorganized sector is another threat to retail segment in the country. There has been a stiff competition between unorganized and organized retail sector of the country. A report by D&B indicated that unorganized retail sector in the country constitutes of 94% of the total retail sector. There has been a lack of recognition of retail segment as an industry from government fronts. However, the recent landscape has changed massively with many initiatives directed towards reforming the sector in the country. The financial infrastructure of the nation is inadequate to support massive growth of organized retailing. Apart from these reasons, lack of adequate infrastructure and high cost of commercial real estate has been the major lacunas for the sector. Furthermore, the nexus of these factors materialize poor standard retail brands, which cannot compete with their international counterparts.
India is growing to be an economically developed nation with high purchasing power, leaving aside the poverty of a segment of its populace. Economic diversity of the nation is massive. Against such backdrop, the retail industry has been flourishing throughout the nations with many newly introduced enterprises in the sector. Retail, comprising of both organized and unorganized sector, is an easy industry to foray into and is always open for public ventures. The new policies of the government are presenting a fillip in the landscape only to boost the sector.

The article has been authored by Sunil Jindal, Managing Director, SRS Value Bazaar (SRS Group).

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