Retailing India: Evolution and Growth

India's retail market has undergone a significant transformation over the years, growing from a modest 3% of the country's GDP in 2006 to a substantial 10% by 2020.

The Indian retail market is projected to reach $1.1 trillion by 2025, driven by increasing consumer spending power and a growing middle class.

The country's retail landscape has been shaped by the entry of international players, with companies like Walmart and Carrefour setting up operations in the country.

The Indian government's liberalization policies have also played a crucial role in the growth of the retail sector, allowing 100% foreign direct investment in single-brand retail and 51% in multi-brand retail.

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The history of retailing in India is a fascinating story that spans centuries. The first phase of organised retailing in India began in 1869 with the opening of the Mumbai Crawford Market.

The early years saw the establishment of markets like Hogg Market in Calcutta in 1874. This marked the beginning of a retail landscape that would eventually give rise to modern retail chains.

Organised retailing gained momentum in the 20th century with the opening of Bata stores in 1931, followed by DCM and Raymonds outlets.

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Over 1997–2010, the Indian retail market experienced significant growth. The government's economic liberalization policies led to increased foreign investment in the sector.

Retail chains like Shoppers Stop and Pantaloon Retail expanded rapidly during this period. They introduced modern retailing concepts to India.

The market size of the Indian retail industry grew from $16 billion in 1997 to $44 billion in 2010. This was a compound annual growth rate (CAGR) of 12%.

Department stores like Lifestyle and Westside became popular among the Indian middle class. They offered a wide range of products under one roof.

The Indian retail market became increasingly organized, with major players like Reliance Retail and Future Group entering the scene. They transformed the retail landscape with their innovative business models.

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The Indian retail industry has emerged as one of the fastest growing industries in the country. This growth can be attributed to the entry of new players in the market.

The Indian government's liberalization of the economy in the 1990s played a significant role in the growth of the retail industry. Many companies vertically integrated their operations to serve a larger customer base.

After 2005, large domestic corporations opened multiple stores, especially in the food and general merchandise category. This led to a significant growth in the retail industry.

The entry of international players into the Indian retail market further accelerated the industry's demand. India's status as one of the fastest growing economies in the world provides a strong platform for manufacturers, distributors, and customers.

Retailers in India are continuously trying to unlock the true potential of the industry by incorporating the latest technologies. This includes the use of Artificial Intelligence-based data analytics and CRM tools.

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The Indian retail market is a complex and vast landscape with a wide geographic spread and distinct consumer preferences varying by each region, necessitating a need for localization even within geographic zones.

India has the highest number of outlets per person, with 7 outlets per thousand people, and the lowest retail space per capita at 2 sq ft (0.19 m)/person in the world.

The organised retail market has a share of just 8% as of 2012, while over 90% of trade is conducted through independent local stores, presenting significant challenges in terms of geographically dispersed population, small ticket sizes, complex distribution network, and little use of IT systems.

The retail industry in India ranks 4th in the world in terms of size and accounts for 10% of the overall GDP of the country.

The industry's market size in 2020 was approximately INR 65.50 trillion and is expected to reach INR 96.43 trillion by 2024, growing at a CAGR of 10.15%.

The Indian retail market can be categorized into traditional outlets, established outlets, cooperative/government stores, and e-commerce, with traditional outlets generating 92% of the revenue.

The main segments of the overall retail industry are food and grocery (60 percent share), apparel (8 percent), telecom (6 percent), food service (5 percent), jewellery (4 percent), pharmacy (3 percent), consumer electronics (3 percent), and “others” (11 percent).

India is among the countries with the highest per capita availability of retail store space, with at least 11 retail shops for every 1,000 people in the country.

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India's retail sector has a long way to go in terms of productivity, with labour productivity in Indian retail being just 6% of the labour productivity in the United States in 2010.

A McKinsey study highlights the disparity, noting that India's labour productivity in food retailing is about 5% compared to Brazil's 14%, while India's labour productivity in non-food retailing is about 8% compared to Poland's 25%.

This low productivity is partly due to the large number of unorganised retail workers in India, which accounts for about 6% of the Indian labour workforce.

The Indian government's decision to open the retail market to foreign direct investment (FDI) in 2011 was a significant step towards increasing productivity and creating jobs.

However, the implementation of this policy has been met with resistance from some states, with Tamil Nadu becoming the first state to resist MNC invasion into the domestic retail sector in 2013.

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The states have the prerogative to accept or reject the policy, and some have chosen to do so, with Rajasthan reversing its earlier decision to allow FDI in retail in 2014.

The table below shows the expected benefits of the FDI policy:

The opening of the retail market to global competition has the potential to transform not only the retailing landscape but also the nation's ailing infrastructure.

The retail sector in India faces significant challenges. Labour productivity in Indian retail was just 6% of the labour productivity in the United States in 2010.

India's labour productivity in food retailing is about 5% compared to Brazil's 14%, while its labour productivity in non-food retailing is about 8% compared to Poland's 25%. This highlights a major gap in productivity.

Total retail employment in India accounts for about 6% of the Indian labour workforce, most of which is unorganised. This is a third of levels in the United States and Europe, and about half of levels in other emerging economies.

A complete expansion of the retail sector to levels and productivity similar to other emerging economies and developed economies would create over 50 million jobs in India.

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The Indian government's retail reforms were a significant step towards opening up the country's retail market to global competition. In 2011, the government announced that foreign groups could own up to 51% of multi-brand retailers, and single-brand retailers could own 100% of their Indian stores.

The reforms also included a requirement that multi-brand and single-brand stores source nearly a third of their goods from small and medium-sized Indian suppliers. This was expected to benefit local businesses and farmers.

The reforms were expected to spur a retail rush to India, with the potential to generate 10 million new jobs between 2012 and 2014, including 5-6 million in logistics alone. However, the reforms were put on hold in 2011 after opposition from some state governments and coalition partners.

The state of West Bengal, led by Chief Minister Mamata Banerjee, was one of the first to resist the reforms, claiming that they would harm local businesses. Other states, including Tamil Nadu and Rajasthan, also opposed the reforms, with Tamil Nadu becoming the first state to resist MNC invasion into the domestic retail sector in 2013.

In 2014, the newly elected government in Rajasthan reversed the earlier decision to allow FDI in retail, citing concerns about the impact on domestic manufacturing and employment opportunities.

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The festive season is bringing a welcome boost to small businesses in the toy, textile, and footwear sectors. Industry bodies are reporting positive initial feedback, anticipating sustained growth beyond Diwali due to increased consumer spending.

Festive cheer is indeed shining bright in these sectors, thanks to GST rate cuts. This revised tax structure is making goods more affordable for consumers.

Small businesses are experiencing a significant increase in demand, driven by the festive season and GST rate cuts. Industry bodies are optimistic about sustained growth beyond Diwali.

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The November 2011 retail reforms in India have sparked intense activism, both in opposition and in support of the reforms. Over 90 per cent of consumers said FDI in retail will bring down prices and offer a wider choice of goods.

A pan-Indian survey conducted over the weekend of 3 December 2011 found that nearly 78 per cent of farmers said they will get better prices for their produce from multi-format stores. This suggests that farmers see the benefits of retail reforms.

However, some concerns remain, such as the potential for predatory pricing and anti-competitive practices by international retailers. A study on Foreign Direct Investment In Indian Retail Sector: Drawing lessons from the international experience, concluded that proper safeguards are needed to prevent this.

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The November 2011 retail reforms in India sparked intense activism, both in opposition and in support of the reforms. This controversy was fueled by the potential impact on local businesses and farmers.

Over 90 per cent of consumers believed that FDI in retail would bring down prices and offer a wider choice of goods. This is a significant shift in consumer behavior, with many people eager to take advantage of lower prices and greater variety.

However, nearly 78 per cent of farmers were concerned that they would get better prices for their produce from multi-format stores. This highlights the potential for retailers to disrupt traditional supply chains and affect the livelihoods of farmers.

A study on Foreign Direct Investment in the Indian Retail Sector found that FDI can be growth-enhancing if proper safeguards are in place. This suggests that with careful regulation, the benefits of FDI can be harnessed while minimizing its negative impacts.

The study recommended that the number of big retail outlets in a city be decided based on population and employment levels. This approach aims to balance the need for economic growth with the need to protect local businesses and communities.

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As a result of increased literacy levels in the country, exposure to the western culture, foreign magazines, newspapers and other factors, there has been an increasing customer awareness among Indians. Today's customers are more selective over the brand and quality of the products they purchase.

This shift in consumer behavior has led to a more discerning market, where customers are no longer satisfied with just any product, but rather demand high-quality goods that meet their needs.

Increased exposure to global trends and values has also led to a greater appreciation for social and environmental responsibility in the products they buy.

The Indian retail market is a significant contributor to the country's economy, generating sales of about $470 billion a year. Organised retail, which includes supermarkets and chain stores, accounts for a minuscule $27 billion of this amount.

Spencer's Retail, with 200 stores in India, claims that retail reform is a win-win situation, as they already procure farm products directly from growers, eliminating the need for middlemen. They expect to expand their footprint in terms of store location and procurement.

Foodworld, with over 60 stores, plans to ramp up its presence to more than 200 locations, with the help of its global partner Dairy Farm International. The relaxation in international investments in Indian retail is expected to strengthen their global relationships.

The Indian retail market has a long way to go in terms of organised retail, with a 31% share in clothing and apparel, and a growth rate of 20-30% per year in home supplies retail.

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The Indian retail market was a vastly different place before 2011. In fact, the organised retail sector accounted for a minuscule $27 billion out of the total $470 billion generated by the retail market that year.

India's persistently high inflation was partly attributed to the lack of infrastructure and competitive retail industry. Several studies pointed to the unorganised retail sector as a key cause of this issue.

The opening of the retail industry to free market competition in 2011 was expected to bring about rapid growth in the retail sector of the Indian economy. This move was seen as a game-changer for the industry.

The Economist forecasted that Indian retail would nearly double in economic value, expanding by about $850 billion by 2020. This projected increase alone was equivalent to the current retail market size of France.

In 2011, food accounted for 70% of Indian retail, but was under-represented by organised retail. A significant portion of food staples and perishable goods produced in India spoiled due to poor infrastructure and small retail outlets.

Current supermarkets in India are already preparing for the impact of retail reform. Spencer's Retail, with 200 stores, considers retail reform a win-win situation.

Existing Indian retail firms such as Spencer's, Foodworld Supermarkets Ltd, Nilgiri's and ShopRite support retail reform. They expect a flurry of joint ventures with global majors for expansion capital and opportunity to gain expertise in supply chain management.

Spencer's Retail already procures 55% of its business from fresh vegetables and fruits, directly from growers, eliminating the involvement of middlemen or traders. This direct procurement allows Spencer's to expand its footprint in terms of store location as well as procuring farm products.

Foodworld, which operates over 60 stores, plans to ramp up its presence to more than 200 locations. It has already tied up with Hong Kong-based Dairy Farm International, strengthening its global relationship.

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Myntra extends 30-minute delivery to Pune.

Myntra has expanded its "hyper-speed" delivery service, M-Now, to Pune, offering fashion, beauty, and lifestyle products in as little as 30 minutes.

The service covers over 20,000 styles across 600 brands, supported by eight dark stores in the city.

This expansion is a significant move for Myntra, aiming to provide customers with fast and convenient shopping experiences.

Myntra's M-Now service is a testament to the growing demand for hyper-local delivery, where customers expect quick and efficient delivery of their purchases.

Eight dark stores in Pune will be the backbone of M-Now's operations, ensuring that customers receive their orders on time.

Myntra's focus on hyper-speed delivery is a key differentiator in the market, setting it apart from competitors.

By expanding M-Now to Pune, Myntra is poised to capture a larger share of the market and further solidify its position as a leading e-commerce player.

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Karwa Chauth week saw a 40% jump in D2C sales, according to a GoKwik report. This significant surge in direct-to-consumer sales is a testament to the growing popularity of this once-regional North Indian ritual.

Cities like Bengaluru and Chennai are now seeing a significant surge in D2C sales, with Karnataka and Tamil Nadu emerging as key markets. Karwa Chauth has become a nationwide phenomenon, no longer limited to its regional roots.

Bollywood and social media have played a crucial role in this expansion, helping to spread the cultural significance of Karwa Chauth across the country.

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E-commerce in India is a growing market, but it faces several hurdles, including high service costs for cash-on-delivery transactions and a high rejection rate of goods sold under this system.

In 2020, e-commerce accounted for around 5 percent of the total Indian retail market. Online travel bookings make up 70 percent of the e-commerce market.

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Despite these challenges, e-commerce is expected to gain traction due to its reach and ease of use, with companies like Amazon, Flipkart, and Snapdeal delivering to most areas covered under the 19,000 PIN codes.

Amazon and Flipkart plan to invest $370 million in India, indicating a significant commitment to the e-commerce market.

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E-commerce is on the rise in India, with 5 percent of the total retail market accounted for in 2020. Online travel bookings comprise 70 percent of the e-commerce market.

High service costs and rejection rates of goods sold under cash-on-delivery transactions are major hurdles for e-commerce in India. Free shipping, low Internet use, and low e-commerce adoption by those with Internet access also pose challenges.

Despite these hurdles, e-commerce companies like Amazon, Flipkart, and Snapdeal have made significant strides, delivering to most areas covered under the 19,000 PIN codes. Amazon and Flipkart are investing $370 million in India to further boost their presence.

Myntra has expanded its "hyper-speed" delivery service, M-Now, to Pune, offering fashion, beauty, and lifestyle products in as little as 30 minutes. The service covers over 20,000 styles across 600 brands.

YouTube is expanding its Shopping Affiliate program in India, adding Nykaa and Purplle to its merchant partners. This move follows a 250% surge in shopping-related watch time, with over 200 million users engaging in shopping searches.

The Tata group has shown continued investor confidence in e-commerce, injecting ₹4,000 crore into its e-commerce arm, Tata Digital, despite accumulated losses of ₹16,958.3 crore.

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Retailers are struggling to keep up with the latest technology trends, which is hindering their ability to provide a seamless shopping experience for customers.

The lack of technology adoption is a major challenge in the retail industry, with many retailers still relying on outdated systems for tasks like payments and product scanning.

The scope of technology adoption in retail is wider than just payments and scanning, with opportunities to use software that understands customer preferences based on their buying habits.

Retailers need to adopt CRM tools and other software to efficiently manage their retail outlets and stay competitive in the market.

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Reliance Retail is rapidly expanding its quick commerce reach by operationalizing over 600 dark stores nationwide, aiming for under 30-minute deliveries.

This strategic move has fueled impressive growth in daily orders and customer acquisition, positioning Reliance Retail as a dominant player in the hyper-local delivery market. Reliance Retail Ventures Limited reported robust double-digit growth across its grocery, consumer electronics, and fashion segments.

JioMart has achieved remarkable growth in Quick Hyper-Local deliveries, surging over 200% year-on-year. The platform welcomed 5.8 million new customers in the second quarter.

Reliance Retail's expansion of dark stores is supported by JioMart's extensive physical store network, which has strengthened its market presence. The company's focus on quick commerce has driven growth in daily orders and customer acquisition.

Myntra has also expanded its hyper-speed delivery service, M-Now, to Pune, offering fashion, beauty, and lifestyle products in as little as 30 minutes. The service covers over 20,000 styles across 600 brands, supported by eight dark stores in the city.

Quick commerce is booming in India, with 10-minute deliveries becoming common in cities. Investors are pouring money into companies like Blinkit, Instamart, and Zepto, driving up valuations.

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We help clients in various ways to achieve their e-commerce goals. Our team is skilled in conducting thorough Market Assessments to identify opportunities and challenges.

We also assist in developing products that meet the needs of the target market. This includes creating a Product Development strategy that takes into account consumer preferences and market trends.

Our Brand Strategy services help clients establish a strong online presence and differentiate themselves from competitors. We work with clients to develop a unique brand identity that resonates with their target audience.

To succeed in the e-commerce space, a well-executed Go-to-Market Strategy is essential. We help clients develop a plan that outlines their sales and marketing approach.

Digital Marketing is a crucial aspect of e-commerce, and we offer services to help clients reach their target audience online. This includes creating engaging content, running targeted ads, and optimizing website user experience.

We also provide guidance on building a Marketing & Sales Organization that is equipped to handle the demands of e-commerce. This includes setting up systems and processes that enable efficient sales and marketing operations.

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In the Indian retail landscape, players are diversifying their offerings to cater to the country's growing middle class.

Flipkart, one of the leading e-commerce players, has expanded its services to include logistics and payment solutions.

The Indian retail market is expected to reach $1.1 trillion by 2025, driven by the growth of e-commerce and changing consumer behavior.

The retail industry in India is highly competitive, with approximately 13 million kirana stores and neighbourhood stores selling food & groceries. These small retailers dominate the market, making it tough for larger players to compete.

Reliance Retail Limited leads the retail industry in India with over 12,000 stores offering various products. It's a massive presence, to say the least.

Unorganized retail, which includes small retailers like mom-and-pop and kirana stores, poses a significant challenge for retail outlets in India. These stores don't pay taxes and have negligible real estate & human labour costs, giving them a significant advantage.

These small retailers often operate near residential areas and offer free home deliveries to attract customers, making them a major threat to larger retail players. It's a clever strategy that's hard to compete with.

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The single-brand retail reforms in India have been a game-changer for the industry. On 11 January 2012, the government approved increased competition and innovation in single-brand retail, aiming to attract investments and improve the availability of goods for consumers.

This reform requires single-brand retailers with over 51% foreign ownership to source at least 30% of their products from Indian small industries, village and cottage industries, artisans, and craftsmen. IKEA, for instance, has postponed its plans to open stores in India due to this requirement, as it would take time to develop reliable supply chains inside the country.

IKEA plans to focus on expansion in China and Russia instead, where such restrictions don't exist. However, the company has announced that it will double its sourcing from India to over $1 billion a year within three years.

The domestic retail players in India, such as Future Retail, Avenues Supermarket, and Aditya Birla Fashion and Retail, have been flourishing and challenging the entry of multinational corporations like Walmart and Carrefour.

The Indian government has since eased local sourcing norms for single-brand retailers, making it easier for companies to operate in the country. This change was approved by the Indian union cabinet on 28 August 2019.

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Gen Z is driving a revolution in the retail industry, pushing businesses to adapt and innovate. This demographic is known for being tech-savvy and diverse, with clear expectations for engaging, personalized experiences.

Gen Z wants retailers to deliver seamless, true omnichannel experiences that merge the digital and physical realms. This means internet marketplaces and experiential stores are becoming increasingly important.

To meet these expectations, retailers are investing in technology and workforce development. Generative AI is a key technology in creating personalized experiences, allowing retailers to craft tailor-made content that caters to individual preferences.

By leveraging Generative AI, retailers can boost engagement and set themselves apart in a crowded market. This is crucial for businesses that want to establish and maintain a competitive edge in the retail market.

Gen Z's influence in the retail market is growing, and retailers must adapt to stay ahead. Those who fail to innovate and cater to these evolving needs will struggle to remain relevant.

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ASICS has launched its first company-owned store in India at DLF Mall of India, Noida.

This store offers an immersive experience across ASICS' diverse product categories, giving customers a hands-on look at their products.

The store is located at DLF Mall of India, Noida, a prime location for reaching a wide audience.

ASICS plans to grow its store count to 200 by 2026, indicating their commitment to the Indian market.

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Reliance Retail reported a remarkable 19% year-on-year sales growth in Q2 2025-26, reaching a staggering Rs 79,128 crore.

This growth is a testament to the company's ability to adapt to changing consumer behaviors and preferences. The company highlighted that GST rate changes are expected to further boost consumption, benefiting from lower consumer prices.

Reliance Retail's success is also a reflection of the broader economic trends in India, where the festive season and wedding period are projected to generate a substantial turnover exceeding Rs 7 lakh crore. This robust economic activity is driven by high consumer sentiment and a preference for local products.

The company's net profit also saw a significant jump of 22%, indicating a strong financial performance. This growth is expected to continue, driven by the company's focus on providing affordable and quality products to its customers.

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Galeries Lafayette is set to open its first Indian store in Mumbai's historic Turner Morrison Building, marking a significant entry into India's growing luxury market.

The Parisian department store is partnering with Aditya Birla Fashion and Retail Ltd for operations, which will likely bring a touch of French elegance to India's fashion scene.

A second store is planned for New Delhi, indicating Galeries Lafayette's confidence in the Indian market's potential for growth.

India's retail market is growing rapidly, with the e-commerce segment expected to reach $200 billion by 2026.

The COVID-19 pandemic has accelerated the shift to online shopping, with online sales growing from 2% of total retail sales in 2016 to 14% in 2020.

Flipkart and Amazon are the two largest e-commerce players in India, with Flipkart accounting for 45% of the market share.

The retail landscape is also witnessing a rise in omnichannel retailing, with many retailers offering seamless shopping experiences across online and offline platforms.

According to a report, 75% of Indian consumers prefer to shop online, citing convenience and faster delivery as key reasons.

E-commerce players are also investing heavily in logistics and supply chain infrastructure to ensure timely delivery of products.

Grocery e-commerce is another area of growth, with players like Bigbasket and Grofers offering same-day or next-day delivery services.

The Indian government has also introduced policies to support the growth of e-commerce, including the creation of a national digital payments platform.

India's retail sector is poised for growth, thanks to the expansion of organised retail to Tier-2 and Tier-3 cities. This shift is expected to change the country's position in the Global Retail Development Index.

The government's reforms to attract foreign direct investment (FDI) in the retail industry have helped make India an attractive investment destination. The government has allowed 51 per cent FDI in multibrand retail and increased the FDI limit to 100 per cent in single-brand retail.

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Foreign investors are taking notice, with the Foreign Investment Promotion Board clearing investment proposals worth $100 million, including those from Puma, Bestseller, and Flamingo. IKEA has also entered into an agreement with the Telangana Government to open its first store in India in Hyderabad.

The Indian consumer is driving this growth, with young professionals earning good starting salaries and a growing demand for luxury goods. Affluent customers are no longer hesitant to splurge on luxury items, with many having regular "shop till you drop" outings.

However, Indian retail also presents challenges for global investors, including FDI regulations, competition from the unorganised sector, and a lack of infrastructure.

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