A.T. Kearney’s Global Retail Development Index for 2013 views India favorably and realistically. It points to India’s large, young, increasingly brand- and fashion-conscious population. Retail growth of 14 to 15 percent per year is expected through 2015. “Modern retail” remains limited (7 percent in 2012), but it is expected to grow as the country urbanizes and retailers make new investments. The balance of 93% is made up of individually owned stores, typically with small square footage.
In 2012, India’s retail sector reached an important landmark: The government allowed 100 percent foreign direct investment in a single brand retailer for the first time. Kearny points out that several single-branded retailers entered India in many sectors: apparel and beauty (including Brooks Brothers, Kenneth Cole, Sephora via its Singapore franchisee, and Armani Junior), standalone boutiques (including Roberto Cavalli and Christian Louboutin), and food (including Starbucks in a partnership with Tata Beverages and Dunkin’ Donuts). Large retailers such as IKEA are finalizing their India entry strategies but it may be a couple of years before you can buy their furniture in Delhi or Mumbai.
In multi-brand retail, India nominally allowed 51 percent FDI starting in early 2013. However, there are preconditions about investment, sourcing, store locations, and state government approval. Although the government has received multiple investment proposals, many multi-brand players are taking a “wait-and-see” approach due to apprehensions about how the policy will be implemented. Retailers are expanding in tier 2 and 3 cities as real estate costs in major metro areas skyrocket. Carrefour, Metro, and Bharti-Walmart have increased their presence in these markets.
Online shopping is in the early stages, with e-commerce sales equal to less than 1 percent of all retail sales, but growth is expected as more people access the Internet. Mobile phones, electronic appliances, apparel, movies, music, and books are the fastest-growing categories. New entrants, new business models, and new niche categories have flooded the market, yet few players have turned profitable yet.
