RETAILING IN INDIA - ANALYSIS

Country Report | Jan 2018

EXECUTIVE SUMMARY Market Sizes

A seamless shopping experience is the leading driver of growth in Sales of Retailing
retailing Retail Value RSP excl Sales Tax - INR million - Current - 2003-2022
Retailing registered steady growth in India in 2017. One of the key demands from
consumers in 2017 was seamlessness in their shopping experience. From 2015,
39,995,872 Forecast
omnichannel retailing became a common practice amongst most retailers. The primary 70,000,000
reason why omnichannel retailing became popular was consumers’ need to have the
convenience to choose the channel, irrespective of the retailer. In 2017, consumers 60,000,000
went one step further, whereby seamlessness in the entire shopping experience
became important. Consumers did not differentiate in terms of channel any longer, 50,000,000
since offline brands and retailers were present online, and vice versa. As a result, what
consumers started to seek was an end-to-end, completely seamless experience. For 40,000,000
instance, a product bought online could be picked up from a store, or repaired at a
physical store, or could be returned or exchanged at a store. Similarly, if a product was
30,000,000
bought offline and there were issues with it, consumers preferred to use the online
channel for complaints. Shopping was no longer about a retailer or a channel; it reached
a level where consumers preferred retailers which allowed them channels to interact 20,000,000
with them directly, both online and offline. This became even more prevalent due to
the rise of mobile internet retailing, which allowed consumers to constantly be in 10,000,000
touch with the retailer, from the point of research, to the acquisition of the product.
0
2003 2017 2022
Technology becomes an intrinsic part of retailing in 2017
Technology became an intrinsic part of retailing in 2017. From the consumer’s
perspective, the use of smartphones to research information about a product, find the Sales Performance of Retailing
best price offered by retailers and buy it became a very common practice. Even when it % Y-O-Y Retail Value RSP excl Sales Tax Growth 2003-2022
came to payments, due to demonetisation, the use of payment wallets and cards

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became a common phenomenon for most retailers. The use of smartphones was also a
common practice for offering discount coupons with QR codes. In general, with the
help of smartphones the entire retail experience went through phenomenal change.
11.5% Forecast
One of the most successful strategies employed by retailers was the use of social 20%
media to address consumer grievances. Irrespective of the retailer being online,
offline, mobile or omnipresent across all channels, retailers responded to any
complaints posted on social media immediately, within 24 hours. From the perspective
15%
of retailers, the use of technology was visible in terms of their product displays and
social media presence. Van Heusen set up a virtual mirror in one of its flagship stores in
Bangalore; consumers could stand in front of the mirror and try on clothes virtually,
without having to actually try them on. Similarly, Soch, an Indian clothing retailer, had 10%
videos of models exhibiting its latest collections right in front of the entrance of the
stores, generally on the store entry walls. These practices helped retailers attract
footfall to their physical stores, helping consumers to engage in the whole retail
experience. 5%

Convenience emerges as the strongest parameter when choosing a

retail channel 0%
2003 2017 2022
One of the key shifts in retailing practices in India was observed in the selection
criteria. Indians were driven more towards price than any other parameter when
making a decision regarding their retailing habits. However, over the course of 2017,
what emerged as a strong parameter for consumers in their selection process for Sales of Retailing by Category
products, channels and brands was convenience. Indian consumers, primarily Retail Value RSP excl Sales Tax - INR million - Current - 2017 Growth Performance
millennials with higher disposable incomes, did not mind paying more for a retailing
experience which was more convenient than the cheapest option. This was prevalent Store-based Retailing
across both grocery and non-grocery retailing. Consumers in metropolitan cities 37,838,513.3
preferred to order their groceries online, even if the price was marginally higher than Non-Store Retailing
kirana stores. This was driven by the convenience that the online channel offers, which 2,157,358.9
kirana stores do not. Similarly, for non-grocery products, consumers preferred retailers 0% 60% 115%
which had a presence across both online and offline channels, as it allowed them to
RETAILING 39,995,872.3 CURRENT % CAGR % CAGR
have a more seamless experience, and more options from which to choose in terms of YEAR % 2012-2017 2017-2022
delivery, products and payment. GROWTH

Second- and third-tier cities become the new target for expansion for
modern retailers
One of the primary challenges that retailers face in India is a lack of good real estate
locations at reasonable prices in urban areas of the country. The presence and
expansion of organised retailers is very dense in urban areas. Metropolitan cities such
as Delhi, Mumbai, Chennai, Kolkata, Hyderabad and Bangalore are amongst the most
sought-after for retail presence and location. However, real estate prices are

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consistently high, which is a major cause of concern for retailers. As a result, retailers Competitive Landscape
started to look at second- and third-tier cities. Apart from real estate prices, another
reason why second- and third-tier cities have become lucrative for expansion is the
rising demand from semi-urban consumers for brands. The lack of presence of most Company Shares of Retailing
international brands and a major proportion of national brands in these areas led % Share (NBO) - Retail Value RSP excl Sales Tax - 2017
consumers to resort to the online channel. Retailers have realised this new market, and
3rd Party Merchants 1.6%
naturally plan to tap into it. A few retailers who have already expanded in these areas
are D-Mart, one of the fastest growing hypermarkets in India, which opened a new Flipkart Online Services... 1.2%
store in Zirakpur, a satellite town in Mohali, Punjab. Similarly, BigBasket.com, a leading Reliance Retail Ltd 0.5%
online grocery retailer, delivers to Huskur Village, which is outside Bangalore, and H&M
opened a store in Mohali, Punjab. Future Retail Ltd 0.5%
Avenue Supermarts Ltd 0.3%
Private label becomes a major source of income for retailers
Titan Co Ltd 0.3%
Grocery, non-grocery and internet retailers focused heavily on private label brands in Myntra.com 0.3%
2017. Consumers were no longer only price-specific, they cared more about the quality
of products. As a result, brand loyalty witnessed a dip amongst consumers, which led to Shoppers Stop Ltd 0.1%
an increase in private label consumption, as consumers were more interested in the Aditya Birla Fashion & R... 0.1%
product than the brand. Furthermore, private label products are often priced marginally
Lifestyle International ... 0.1%
lower than national brands, and the quality is similar in both cases, thereby giving more
incentive to consumers to buy private label. BigBasket.com’s Fresho brand in fresh food Aditya Birla Retail Ltd 0.1%
and vegetables has been a success for the retailer; similarly, it is now common for Dell India Pvt Ltd 0.1%
consumers to buy Spar’s private label groceries. This is also visible in non-groceries,
whereby Shoppers Stop, one of the leading department stores, has 16 private label Amway India Enterprises ... 0.1%
apparel brands. Spencer's Retail Ltd 0.1%
LG Electronics India Pvt... 0.0%
OPERATING ENVIRONMENT
Pantaloon Retail India L... 0.0%
Informal retailing Others 94.5%

Informal retailing continued to be dominant and flourished in India in 2017. Informal

retailing continued to account for a considerable proportion of retailing in India in
terms of value sales, because of its easy availability and the low prices offered by
such retailers.
Non-grocery retailers, especially electronics and appliance specialist retailers,
apparel and footwear specialist retailers and health and beauty specialist retailers,
are the most affected by informal retailing. The products available range from fake
products, to grey market products to black market products. Consumers who cannot
afford to buy original brands, e.g. Nike, Reebok, adidas, Zara, Forever 21 and many
others, prefer to buy them from an informal retailer due to their aspirational
desires. This has led non-grocery specialists to suffer the most from informal

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 retailing. Brand Shares of Retailing
% Share (LBN) - Retail Value RSP excl Sales Tax - 2017
The concept of informal retailing is popular in India because of the large rural
population. The majority of the rural population in India continues to live under poor 3rd Party Merchants 1.3%
economic conditions, as a result of which informal retailing is preferred, purely due
Flipkart 1.2%
to the low prices.
Big Bazaar 0.4%
Informal retailing primarily attracts consumers from the lower economic strata, as
generally the price and the quality are both low. Middle-income and affluent D-Mart 0.3%
consumers do not tend to use informal retailing. Myntra 0.3%
Reliance Digital 0.3%
Opening hours
Tanishq 0.2%
Retail opening hours in India tend to vary between rural and urban areas of the
3rd Party Merchants 0.2%
country. In India’s rural areas, opening hours for retail outlets are generally between
07.00hrs and 19.00hrs. However, in urban areas retail outlets are generally open for 3rd Party Merchants 0.1%
longer. Retail outlets in India’s major metropolitan cities tend to be open between Lifestyle 0.1%
08.00hrs and 22.00hrs. These times, however, vary from city to city, and depend to a
substantial degree on the commercial laws of the state in which the city is located. More 0.1%
However, in smaller Indian cities, such as second- and third-tier cities, retail outlets Dell 0.1%
are generally open between 08.00hrs and 20.00hrs.
Shoppers Stop 0.1%
On national holidays, including Republic Day on 26 January, Independence Day on 15 Amway 0.1%
August and Gandhi Jayanti on 2 October, retail outlets are usually closed until
16.30hrs, at which point they generally open as normal. However, there are no strict Reliance Footprint 0.1%
laws in place in India governing the number of days per year that retail outlets can Reliance 0.1%
remain open.
Spencer's 0.1%
In India, 24-hour retailing is common mainly amongst chemists/pharmacies, LG Shoppe 0.0%
although this is generally limited to major cities and metropolitan cities. A limited
number of convenience stores in India are open 24 hours a day; however, the Others 94.9%
number of such stores remains quite low, and again, the spread of these outlets is
restricted to India’s major cities. This is likely to change during the forecast period, Increasing share Decreasing share No change
however, as increasing numbers of Indian retailers, especially modern grocery
retailers, are expected to remain open 24 hours a day, as changing lifestyles and
more intense and irregular working schedules are creating demand for 24-hour
retailers in the country.

Summary 1 Standard Opening Hours by Channel Type 2017

Channel 24-hour Monday- Friday Saturday Sunday

opening? Thursday
Convenience stores No 07.00hrs - 07.00hrs - 07.00hrs - 07.00hrs -
02.00hrs 02.00hrs 02.00hrs 02.00hrs

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 Channel 24-hour Monday- Friday Saturday Sunday
opening? Thursday
Forecourt retailers No 10.00hrs - 10.00hrs - 10.00hrs - 10.00hrs -
22.00hrs 22.00hrs 21.00hrs 21.00hrs
Hypermarkets No 10.00hrs - 10.00hrs - 10.00hrs - 10.00hrs -
22.00hrs 22.00hrs 21.00hrs 21.00hrs
Supermarkets No 10.00hrs - 10.00hrs - 10.00hrs - 10.00hrs -
22.00hrs 22.00hrs 21.00hrs 21.00hrs
Food/drink/tobacco No 10.00hrs - 10.00hrs - 10.00hrs - 10.00hrs -
specialists 22.00hrs 22.00hrs 22.00hrs 22.00hrs
Independent small No 11.00hrs - 11.00hrs - 11.00hrs - 11.00hrs -
grocers 22.00hrs 22.00hrs 22.00hrs 22.00hrs
Other grocery No 09.00hrs - 09.00hrs - 09.00hrs - 09.00hrs -
retailers 19.00hrs 19.00hrs 19.00hrs 19.00hrs

Source: Euromonitor Interna tiona l

Physical retail landscape

Retailing in India still predominantly takes place in physical stores. The retailing
practices between urban and rural consumers are vastly different. For urban
consumers, shopping in high streets and shopping centres is a common
phenomenon, in both specialists and department stores. Meanwhile in rural areas,
consumers primarily shop in smaller stores, which are more focused on product
categories than brands.
Consumers in metropolitan, first-tier and second-tier cities, and to a certain extent,
third-tier cities, do not travel to city centres or out of town to shop. Since informal
retailing is quite prevalent in India, consumers more often than not find an option to
buy within their budget. However, due to rising stagnation in urban areas, retailers
have slowly started to focus on first-tier and second-tier cities, in order to tap into
the semi-urban consumer base. This has resulted in the slow and steady
urbanisation of shopping styles amongst semi-urban consumers.
Real estate is a major concern for retailers, due to rising rental prices across the
country. The lack of high street real estate locations led retailers to start to focus on
shopping centres. Because of high rental costs, retail outlets in India are generally
smaller in size compared with their international counterparts. On average, the sizes
of stores are relatively smaller in all channels, including hypermarkets,
supermarkets, convenience stores and non-grocery specialists.
Shopping centres are popular destinations for shopping, as they provide consumers
with the option of shopping for both grocery and non-grocery products under the
same roof, in a clean and air-conditioned atmosphere. In addition, shopping centres
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 also have cinemas, restaurants and other entertainment venues, which helps to
attract consumers.
Stand-alone retail outlets are preferred for premium and luxury brands. This is
observed as stand-alone stores are always used for exclusive brand outlets, which
have premium designs and are located in premium high streets.

Cash and carry

The presence of cash and carry remains limited in India, with most companies
involved in the channel engaging mainly in business-to-business sales. Metro Cash
and Carry had outlets in Delhi-NCR and Bangalore, and these continue to cater
exclusively for commercial and institutional customers. These outlets hence still do
not cover business-to-consumer retailing in India.
Cash and carry companies operating in India generally operate purely as business-to-
business entities, positioning themselves as inexpensive mass retailers through
which businesses can purchase stock in bulk, and save substantial sums of money in
the process.
Metro Cash and Carry continued to enjoy first-mover advantage, and the expansion
of the number of outlets in the Metro chain has helped the company to enjoy strong
sales for many years.
Access to membership is given to the card holder on the account. Whoever has the
card can walk in and shop in any cash and carry store under the same brand in India.

Seasonality
Diwali

Shopping season: October-Diwali.

Primary products bought: Consumer electronics and appliances, apparel and
footwear and leisure and personal goods are the leading consumer durables
purchased during the Diwali season sale. Specialist retailers and internet retailers
earn the majority of their year’s sales during these two months.
Retailer strategy: Retailers generally offer big discounts and cash back in order to
attract consumers to their outlets during this season. Almost every retailer and
manufacturer slashes prices during Diwali season, and they advertise heavily via
every media possible.

End of season sale

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 Shopping season: June to July.
Primary products bought: Apparel and footwear, personal accessories, eyewear and
bags and luggage are the most sought-after consumer products during this season.
Retailer strategy: Specialist retailers and mixed retailers both enjoy strong sales
during this season, as retailers tend to slash prices by up to 70% to clear their
inventory, so that they can replenish stocks before the Diwali season.

Payments and delivery

Cash continues to be the primary method of payment at the checkouts of most
retailers in India. This is observed as the majority of retailers still do not accept
cards, and do not have card-accepting machines. Furthermore, consumers consider
cash a safer method of payment over card. However, post-demonetisation there was
a definite increase in the use of payment wallets and cards. Once the economy
returned to normal, consumers returned to cash.
The preference for cash in India is mainly due to familiarity with this payment
method; hence it has a higher level of comfort and trust. Secondly, acceptance of
cards is still low in the country, as informal retailing is relatively high, and these
retailers continue to prefer cash in order to avoid paying taxes.
Mobile payment picked up significantly post-demonetisation. However, once the
liquid cash was back in the economy consumers returned to cash. A successful result
of demonetisation was rising awareness of mobile wallets, which witnessed a
distinct increase post-demonetisation.
Shipping in India is dominated by logistics companies and retailers themselves,
which have their own delivery staff. Generally, consumers do not select the
company for shipping; the retailer already has a tie-up with a shipping company, and
also takes care of the cost of delivery.
The primary method of payment for goods online continues to be cash on delivery.
Shipping is always taken care of by the retailer; hence does not have a strong effect
on payment or e-commerce.

Emerging business models

Subscription-based retailing practices started to pick up in 2017. Although still
relatively niche, and limited only to urban India, the subscription-based model for
beauty and personal care and consumer health became quite popular in
metropolitan cities. Retailers allowed consumers to pay for a 6-month subscription
at a subsidised price, which led consumers to try out the concept.

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 These models are primarily available via online retailers. Since internet penetration
has increased across the country, and online shopping both via desktop and mobile
is becoming a more common phenomenon, the subscription model was able to tap
into the growing online consumer base.

DEFINITIONS
Explanations of words and/or terminology used in this report are as follows:
Kirana stores: Independent small grocers.
Other terminology:
GBO refers to global brand owner, which is the ultimate owner of a brand.
NBO refers to national brand owner, which is the company licensed to distribute a
brand on behalf of a GBO. The NBO may be a subsidiary of a GBO or it may be a
completely separate company. Share tables at both GBO and at NBO level are
provided in the report. Reference to shares in the report analysis is at NBO level.

SOURCES
Sources used during the research included the following:

Summary 2 Research Sources

Official Sources Ministry of Statistics & Programme Implementation

Trade Associations Clothing Ma nufa cturers ' As s ocia tion of India , The
India n Direct Selling As s ocia tion
Internet & Mobile As s ocia tion of India (IAMAI)
Reta il As s ocia tion of India
Reta ilers As s ocia tion of India
Trade Press Bus ines s Sta nda rd
Doma in B
E Reta il Biz
Economic Times , The
Equity Ma s ter, The
Fina ncia l Expres s
Food & Bevera ge News

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 Official Sources Ministry of Statistics & Programme Implementation
Hindu Bus ines s Line
ICICI Direct
IIFL
Ima ges Reta il
India Reta il News
India Reta iling
India Reta ilBiz
Ins ide Fra nchis ing
Money Control
Na m News
News 4 s ites
News vis ion
Pitch
Reta il Angle
Reta il Ya tra
Reta ilbiz
Reta iling 360
Telegra ph
The Economic Time

Source: Euromonitor Interna tiona l

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