The following article is based on my own interpretation of the said events. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.
Sachin Mehta, MBA 2015-17, Vinod Gupta School of Management, IIT Kharagpur
In the last decade, many large international retailers are investing heavily in the emerging markets due to high growth potential. The developing countries have become one of the favourite destinations for parking their capital in form of investments. The main focus is on to create a diverse investment portfolio by including various countries with different levels of risks and diverse consumer profile.
The lucrative Indian markets have attracted number of global retailers to expand their customer base in India. The online retail in India has reached at its in-flexion point where the number of Indian retailers are competing with global retailers including the likes of Amazon and Alibaba. With the entry of Wal-Mart in the Indian market, the physical retail is also showing signs of tremendous expansion. Indian retail is expected to grow from $600 billion in 2015 to a market of $1000 billion in 2020.
The Indian retail landscape is going through strong evolutionary undercurrents that have completely redefined how the major players are operating in the market. The diverse potential consumer segments coupled with the increasing awareness provides a wider customer base for the companies. With number of companies coming up with their private labels, it has proved to be a win-win situation for both retailers as well as customers. The Indian customers are increasingly accepting the private labels providing a greater scope for companies to expand and grow. The recent clarifications related to FDI relaxation have provided an interesting dynamic to the Indian Landscape.
However, one of the biggest challenge the industry faces is the fragmented structure of Indian retail. Around 92% of the Indian retail comprises of fragmented unorganized sector which lack the scale to grow. The e-retail in India is relatively in its infancy as being one of the vibrant cash economy, the customers purchasing behavior involves an initial overall inspection of the product from different perspectives and paying subsequently. Poor supply chain network and the escalating real estate prices have only contributed to the challenges faced by the retail sector.
Despite of several teething issues the Indian retail sector is expected to grow in the coming years. The liberalization of FDI policy will help in freeing up the procedural bottlenecks which are almost hallmark of any foreign investment in India. Subsequently, many global companies are making a move to invest in India to leverage the strong demand potential contributing to the continuous expansion of retail sector in India and the generation of number of employment opportunities.