RETAILING IN INDIA - ANALYSIS

Country Report | Feb 2020

EXECUTIVE SUMMARY Market Sizes

Changing consumer trends reshape grocery shopping trends Sales of Retailing
Retail Value RSP excl Sales Tax - INR million - Current - 2005-2024
While both store-based and e-commerce retailing continued to see strong current
value growth in 2019, behavioural changes are impacting retailing in the country. For
instance, many urban households are adopting modern lifestyles, especially in large 47,601,726 Forecast
cities such as Bangalore, Mumbai, Pune, Delhi and Hyderabad. Hectic lifestyles and 80,000,000
busy schedules of working adults mean many urban dwellers prefer to make their
monthly purchases in modern grocery retailers instead of traditional grocery retailers.
Not only does this save time, these outlets also offer a wider range of products from
which to choose and thereby cater to a wider range of socioeconomic groups. Modern 60,000,000
grocery retailers are capitalising on this trend by developing new marketing schemes
and strategies to attract these households to their stores. Some are launching
interesting payment schemes and methods, whilst others are developing effective
pricing strategies to propel sales. For example, Future Group launched its payment 40,000,000
wallet Future Pay, which can be used in all its retail outlets. Some modern grocery
retailers are also focusing on pricing strategies, by launching new private label
products. This is mainly in certain categories, such as packaged food, non-alcoholic 20,000,000
drinks, beauty and personal care and home care. However, in 2019 convenience stores
began creating strong competition for hypermarkets, with many busy consumers
shifting from large weekly shops to top-up shops on a more frequent basis. This is
because some busy consumers resent spending their precious weekend leisure time at 0
supermarkets or hypermarkets, stimulating more frequent, smaller shopping 2005 2019 2024
excursions to local convenience stores. This trend is also encouraged by the ongoing
proliferation of these stores in residential neighbourhoods, with high rental costs in
prime locations making it unprofitable for some retailers to open large format stores. Sales Performance of Retailing
% Y-O-Y Retail Value RSP excl Sales Tax Growth 2005-2024
Growing integration of e-commerce and bricks and mortar stores,
though new FDI rules could prove challenging to e-commerce players 9.6% Forecast
The leading store-based retailers are increasingly deploying a multi-channel presence 20%
and are investing heavily in developing e-commerce platforms that are also
smartphone- and tablet-compatible to drive e-commerce sales. As a result, most are
seeking to offer their customers a shopping experience which provides the benefits of 15%
bricks-and-mortar outlets along with e-commerce sales, efficient logistics networks,
strong customer service and prompt delivery. The integration of multi-channel retailing
means customers can make purchases via a variety of electronic gadgets and to choose 10%
between home delivery, drive-in pick-up, pick-up at a railway station or retrieving
purchases from the store itself or from a dedicated collection point. By contrast, pure e-
commerce retailers expanded into the store-based channel by opening bricks-and- 5%
mortar stores.
However, new FDI rules for companies operating in e-commerce in place since the 0%
beginning of 2019 are likely to have an impact on the growth of e-commerce over the
forecast period. The government’s new FDI rules limit ownership on inventory for
foreign companies. As such, they will no longer be allowed to have more than 25% of -5%
2005 2019 2024
the sale from any one of their suppliers or subsidiaries in this marketplace model.
These new rules have stimulated industry players such as Walmart Inc-owned Flipkart
and Amazon.com Inc’s Indian unit to rejig ownership structures and rework some key
vendor relationships in a bid to comply with these new restrictions.
Sales of Retailing by Category
Retail Value RSP excl Sales Tax - INR million - Current - 2019 Growth Performance
Changing shopping habits fuel the growth of modern retailers
Store-based Retailing
There are several factors propelling the expansion of modern retailing in India, 45,115,769.9
including the improving infrastructure, a move away from the socialistic pattern of
Non-Store Retailing
economy, better educational opportunities and rising Westernisation and 2,485,956.1
consumerism. Changing lifestyles and purchasing habits are also important growth
0% 20% 40%
drivers for modern retailing in India, with a growing number of people engaging in
weekly shopping trips to hypermarkets and supermarkets. This has encouraged many RETAILING 47,601,726.0 CURRENT % CAGR % CAGR
retailers to focus on expanding their sales areas and offer new products to attract a YEAR % 2014-2019 2019-2024
GROWTH
wider customer base. However, while smaller retailers, both grocery and non-grocery
specialists, continued to characterise the landscape in 2019, they will continue to face
growing competition from modern outlets, especially in lower tier cities.

Mobile e-commerce remains the driving force behind e-commerce

expansion
Whilst e-commerce continues to take share from bricks-and-mortar retailing, a growing

© Euromonitor Interna onal 2020 Page 1 of 5

share of e-commerce is composed of mobile e-commerce, especially from Competitive Landscape
smartphones and tablets. The growth of mobile e-commerce is important, in that it
brings several opportunities and challenges, from product discovery and speed, to
remote payment. Given that smartphones are already ubiquitous and play a major role Company Shares of Retailing
in the lives of consumers, mobile e-commerce is expected to be a strong force in the % Share (NBO) - Retail Value RSP excl Sales Tax - 2019
forecast period.
3rd Party Merchants 3.5%

Positive outlook for retailing over the forecast period Reliance Retail Ltd 0.9%
Future Retail Ltd 0.5%
While the Indian economy is expected to continue growing over the forecast period,
with low unemployment and strong private consumption, it is unlikely to achieve the Avenue Supermarts Ltd 0.5%
same rate of growth as that seen over the review period. However, retailing will Myntra.com 0.4%
continue to offer interesting potential for grocery retailers, a channel that is expected
to continue progressing over the forecast period. However, the growth of non-grocery Titan Co Ltd 0.3%
specialists is likely to be negatively impacted by e-commerce, which is expected to One97 Communications Ltd 0.2%
continue its strong development, at the expense of store-based retailers and other
non-store channels. Convenience channels such as convenience stores and forecourt Aditya Birla Fashion & R... 0.1%
retailers are likely to continue to see healthy growth rates, as these formats can meet Future Lifestyle Fashion... 0.1%
the demand arising from changing lifestyles by offering more convenient shopping
Aditya Birla Retail Ltd 0.1%
solutions in terms of location, business hours and product range. Moreover, lower tier
cities will offer considerable new opportunities for retailers as high rental costs and Shoppers Stop Ltd 0.1%
lack of space will force many to rethink their expansion strategies and seek out areas Dell India Pvt Ltd 0.1%
that are currently not well penetrated.
Amway India Enterprises ... 0.0%

OPERATING ENVIRONMENT LG Electronics India Pvt... 0.0%

Pantaloon Retail India L... 0.0%
Informal retailing
Others 93.1%
Informal retailing continued to flourish in India in 2019. It continued to account for a
considerable share of retailing in India in terms of value sales because of its easy
availability and the low prices offered by such retailers.
Non-grocery specialists, especially electronics and appliance specialist retailers, Brand Shares of Retailing
apparel and footwear specialist retailers and health and beauty specialist retailers, % Share (LBN) - Retail Value RSP excl Sales Tax - 2019
are the most affected by informal retailing. The products available include fake
products, grey market products and black market products. Consumers who cannot 3rd Party Merchants 1.7%
afford to buy original brands, such as Nike, Reebok, adidas, Zara, Forever 21 and 3rd Party Merchants 1.7%
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 Reliance Digital 0.6%
retailing. D-Mart 0.5%

The concept of informal retailing is popular in India because of the large rural Big Bazaar 0.4%
population. Most of the rural population in India continues to live in poor economic Myntra 0.3%
conditions, which is why informal retailing is preferred – purely due to the low
prices. Tanishq 0.3%
Paytm Mall 0.2%
Informal retailing primarily attracts consumers from the lower economic strata, as
generally the price and the quality are both low. Middle-income and affluent Reliance Trends 0.1%
consumers do not tend to use informal retailing. More 0.1%
Reliance Smart 0.1%
Opening hours
Shoppers Stop 0.1%
Retail opening hours in India tend to vary between rural and urban areas of the
Dell 0.1%
country. In India’s rural areas, the opening hours for retail outlets are generally
between 07.00hrs and 19.00hrs. However, in urban areas, retail outlets are generally 3rd Party Merchants 0.1%
open for longer. Retail outlets in India’s major metropolitan cities tend to be open
Reliance 0.1%
between 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 Amway 0.0%
is located. However, in smaller Indian cities, such as second- and third-tier cities, Others 93.6%
retail outlets are generally open between 08.00hrs and 20.00hrs.
5-Year Trend
On national holidays, including Republic Day on 26 January, Independence Day on 15 Increasing share Decreasing share No change
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
laws in place in India governing the number of days per year that retail outlets can
remain open.
In India, 24-hour retailing is common mainly amongst chemists/pharmacies,
although this is generally limited to major cities and metropolitan cities. A limited
number of convenience stores in India are also open 24 hours a day; however, the
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,
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 2019

Channel 24-hour Monday- Friday Saturday Sunday

opening? Thursday
Supermarkets No 08.00-23.00hrs 06.00- 08.00- 11.00-
23.00hrs 22.00hrs 17.00hrs

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 Channel 24-hour Monday- Friday Saturday Sunday
opening? Thursday
Convenience stores No 07.00-02.00hrs 07.00- 07.00- 07.00-
02.00hrs 02.00hrs 02.00hrs
Forecourt retailers No 10.00-22.00hrs 10.00- 10.00- 10.00-
22.00hrs 21.00hrs 21.00hrs
Hypermarkets No 10.00-22.00hrs 10.00- 10.00- 10.00-
22.00hrs 21.00hrs 21.00hrs
Food and drink No 10.00-22.00hrs 10.00- 10.00- 10.00-
retailers 22.00hrs 22.00hrs 22.00hrs
Traditional grocery No 11.00-22.00hrs 11.00- 11.00- 11.00-
retailers 22.00hrs 22.00hrs 22.00hrs

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. As informal
retailing is prevalent in India, consumers often 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, tapping into the semi-urban
consumer base. This has resulted in the slow and steady urbanisation of shopping
habits amongst semi-urban consumers.
Real estate is a major concern for retailers, due to rising rental costs across the
country. The lack of high street real estate locations has also led retailers to start to
focus on shopping centres. Due to high rental costs, retail outlets in India are
generally smaller than those of 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
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 high-end 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 &
Carry has outlets in Delhi-NCR and Bangalore, and these continue to cater
exclusively for commercial and institutional customers. These outlets 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 significant 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. The company also entered a partnership with fintech start-up
ePayLater to help kirana shops digitise the business operations of the latter’s small
retailing outlets using smartphones. This involved the creation of an application
called Digital shop, which digitises the business of kirana outlets enabling kirana
shop owners to digitally track their monthly sales, manage inventory, place orders
and pay digitally. Reliance Retail Limited, which is a leading store-based retailer in
the country, also has a cash and carry brand Reliance Market, on which it is
increasingly focusing.
Access to membership is given to the cardholder on the account. Whoever has the
card can shop in any cash and carry store under the same brand in India.

Table 1 Cash and Carry Sales: Value 2014-2019

INR million, current prices 2014 2015 2016 2017 2018 2019
Cash and carry 12% 15% 13% 10% 14% 11%
% growth

Source: Euromonitor Interna tiona l from officia l s ta tis tics , tra de a s s ocia tions , tra de pres s , compa ny
res ea rch, tra de interviews , tra de s ources

© Euromonitor Interna onal 2020 Page 3 of 5

Note: Va lue s a les exclude VAT s a les ta x

Seasonality
Diwali

Shopping season: November (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 sales. Specialist retailers and internet retailers
earn most of their year’s sales during these two months.
Retailer strategy: Retailers generally offer big discounts and cash back to attract
consumers to their outlets during this season. Almost every retailer and
manufacturer slashes prices during the Diwali season, and they advertise heavily via
every media possible.

End of season sale

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 most retailers still do not accept cards, as they
do not have card-accepting machines. Furthermore, consumers consider cash a safer
method of payment than 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. Also, acceptance of cards is
still low in the country, as informal retailing is relatively high, and these retailers
continue to prefer cash to avoid paying taxes.
Mobile payment picked up significantly post-demonetisation. However, once 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
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.
With leading retailers focusing on e-commerce for grocery home delivery options,
the recent shift in the behaviour of urban consumers is likely to gather momentum
with more people ordering online or opting for home delivery options.

Emerging business models

Subscription-based retailing practices started to pick up in 2019. 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.
These models are primarily available via e-commerce 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.
Omnichannel retailing became a more common phenomenon towards the end of
the review period. Even though it had existed in the country since just prior to 2014,
the concept of pick-up stores from e-commerce retailers became quite common in
2019. Flipkart Online, Actoserba Active Wholesale and Amazon.in started to either
develop their own pick-up stores or cooperated with kirana stores, so that
consumers who are not at home or in an office to accept a delivery can pick it up
from a physical store located near them.
Apollo Hospitals Enterprises Ltd launched its first vending machine in Hyderabad,
India in 2018/2019. With this launch, it became the first pharma company in India to
launch a vending machine format. Through these, the company sells products

© Euromonitor Interna onal 2020 Page 4 of 5

 including but not limited to health and wellness beverages and OTC products.

CORONAVIRUS (COVID-19)
The analysis in this report was written before the known outbreak of Coronavirus
(COVID-19) on 31 December 2019. Accordant industry data were also built and
published prior to this date, and before the virus started to spread and export
internationally. Euromonitor International has therefore not included analysis relating
to COVID-19 in this report, and its potential influence is not factored into forecast data.
Given its early stage of development, the scale and impact of COVID-19, both at global
and national levels, remains uncertain, but is evolving fast. For the latest insight on
COVID-19 and how it can be expected to impact demand across fmcg industries, readers
can access strategic analysis and regular updates on www.euromonitor.com and via the
Passport system, where new content is being added on a systematic basis as the
situation develops.

DEFINITIONS
Explanations of words and/or terminology used in this report are as follows:
Kirana stores: Traditional grocery retailers
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
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

© Euromonitor Interna onal 2020 Page 5 of 5