Industry Analysis of Retail Sector

INTERNAL ANALYSIS

SWOT

1. Increase in 1. Political
Weakness
Strength Purchasing Power of Uncertainty.
Individuals. 2. Regulatory
2. Increase in Working Requirements.
Population. 3. Poor Infrastructure
3. Relaxation in FDI & Supply Chain
norms. Management.

1. Technological
Investments. 1. High Rental Lands
2. Digital Strategy. and Real Estate.
3. Customer-centric 2. High Attrition Rate.
Approach.
Opportunity Threat

Indiaretailing Bureau. (2017, January 2). Indian Retail: Analysing the SWOT Matrix.
Retrieved from https://www.indiaretailing.com/2014/01/14/retail/indian-retail-analysing-the-
swot-matrix/

SWOT analysis of the Indian organized Retail industry. (n.d.). Retrieved from
https://www.12manage.com/myview.asp?KN=3375
GROWTH AND PERFORMANCE

 The retail industry of India is among one of the fastest growing industries in the
world. It reached to Rs 66.39 lakh crore (approx. US$ 950 billion) in 2018 at CAGR
of 13% and is expected to reach Rs 76.87 lakh crore (US$ 1.1 trillion) by the end of
2020. India stood at 77th position in World Bank’s Ease of Doing Business Index
2019, but jumped by 14 positions to be at 63 rd rank in 2020. India ranked 73 rd in
UNCTD’s Business – to – Consumer (B2C) E-Commerce Index in 2019.
 India is among the top 5 largest preferred retail destinations around the world. Also, in
terms of per capital availability of retail stores, India holds a strong position in the
world. The retail sector in India is experiencing exponential growth due to retail
development in, not only major metro cities, but also Tier-II and Tier-III cities.
 Indian population is shifting to online retail in a big way. Online retail sale is
estimated to grow by 31% in the following year. Revenue generated from online retail
is forecasted to grow to Rs. 4.19 lakh crore (approx. US$ 60 billion) by 2020.
Organized retail penetration is projected to increase from 9% in 2017 to 18% in 2021.
India is set to become the world’s 3 rd largest consumer economy, reaching up to Rs.
28 lakh crore in consumption by 2025. Revenue of offline retailers (brick and mortar
retailers) is estimated to increase by Rs. 10-12 thousand crore in FY2020.
 According to a study by BCG, increasing participation from private and foreign
players has given a huge boost to Indian retail sector. India’s price competitiveness
has attracted major retail companies to use it as a platform for sourcing. Global
retailers like GAP, Walmart, JC Penney and Tesco have been increasing their
sourcing from India and are shifting from third party buying offices to setting up their
own sourcing and buying offices. The investments in Indian retail sector doubled in
2018 to reach Rs. 1300 crore (US$ 180.18 million).

India Brand Equity Foundation. (2017, November 1). About Indian Retail Industry, Market
Size, Export & Investment Opportunity. Retrieved from
https://www.ibef.org/industry/indian-retail-industry-analysis-presentation
COMPETITIVE ANALYSIS THROUGH FIVE FORCES MODEL

1. Present Competition: The presence of different types of retailers in India, i.e. foreign
retailers and domestic organized and unorganized retailers, creates diversity in
competition. Foreign and domestic retailers in organized sector are competing on
large size, broad assortment, self-service format and pleasant store environment.
Smaller retailers are moving towards organized formats by including branded
merchandise in their offerings. Presence of foreign retailers and increased competition
create product diversity and innovation in the market.
2. Threat of New Entrants: The Indian retail market is very attractive for new entrants
because of it, offering prominent growth opportunities. Various digital channels have
emerged to assist growth and development. Also, the barriers have been relaxed by
the government to attract foreign investors. Thus, there is a high threat of entry of new
players in this sector.
3. Threat of Substitutes: The threat of substitute product can be evaluated in terms of
availability and performance of substitutes, switching cost incurred by the customers
and propensity of consumer to consume. There is a high threat of substitution in the
Indian retail market due to its unique market structure. Indian consumer have an array
of options to choose from, including small unorganised retailers and large organised
retailers for domestic and foreign brands. Retailers offering products that are unique
have a distinct or absolute advantage over their competitors.
4. Bargaining Power of Customers: The Indian retail sector is characterized by high
buyer – to – supplier ratio with highest density of retail outlets in the world, making
the country a supplier’s market. With FDI coming in, the bargaining power of the
customers will increase further.
5. Bargaining Power of Suppliers: The bargaining power of suppliers varies from
product to product. However, at an overall level, one can say that the bargaining
power of suppliers in India is low because there are a large number of potential
suppliers in the market. There are a few players who have a slight edge over others on
account of being established players and enjoying brand distinction.

Desai, K. (2013, March 27). Retail in India: Porter's 5 forces & SWOT. Retrieved from
https://www.slideshare.net/kandarp09/retail-in-india-porters-5-forces-swot
CHANGING MARKET TRENDS IN THE INDIAN RETAIL MARKET

Historically, Indians have been conservative spenders, thus food forms a huge chunk of
India’s consumption needs. In the retail sector, food dominates market consumption followed
by fashion. The relatively low contribution of other categories indicates opportunity for
organized retail growth in these segments, especially with India being one of the world’s
youngest markets.

Transition from traditional retail to organized retailing is taking place due to changing
consumer expectations, demographic mix, etc. With the revival in consumer spending,
expansion plans of retailers are back in full swing. Many international brands have entered
the market. With FDI coming in, the bargaining power of the customers will increase further.

Desai, K. (2013, March 27). Retail in India : Porter's 5 forces & SWOT. Retrieved from
https://www.slideshare.net/kandarp09/retail-in-india-porters-5-forces-swot

GROWTH DRIVERS OF THE RETAIL

The retail sector in India is experiencing exponential growth due to retail development in, not
only major metro cities, but also Tier-II and Tier-III cities. Other factors driving growth in
retail sector in India are as follows:

 Changing consumer tastes and preferences

 Urbanisation
 Increasing disposable incomes
 Changing demographic profile
 Healthy economic growth.
 Increasing internet penetration.
 Growing number of smartphone users and online shoppers.

India Brand Equity Foundation. (2017, November 1). About Indian Retail Industry, Market
Size, Export & Investment Opportunity. Retrieved from
https://www.ibef.org/industry/indian-retail-industry-analysis-presentation
FDI POLICY IN RETAIL SECTOR

The Indian government introduced reforms to attract FDI in the retail sector. The relaxation
in FDI norms will attract more foreign investors. Greater interest will be generated in the
Indian retail sector.

The government approved 51% FDI in multi brand retail and 100% FDI in single brand retail.
This is expected to give an immense push to ease of doing business in India and ‘Make In
India’ and plans to allow 100% FDI in e-commerce. The retail sector attracted around US$
970 million from multiple private equity funds in the year 2019. Cumulative FDI inflow in
retail stood at US$ 2 billion in the period from April 2000 to December 2019.

All this will lead India to become a favourable market for fashion retailers on the back of
increasing disposable incomes, large young-adult consumer base, and relaxed FDI norms.

India Brand Equity Foundation. (2017, November 1). About Indian Retail Industry, Market
Size, Export & Investment Opportunity. Retrieved from
https://www.ibef.org/industry/indian-retail-industry-analysis-presentation

IMPACT OF GST ON RETAIL SECTOR

GST (Goods and Service Tax) was introduced as a form of single unified tax system. Its
impact on retail industry has been on the positive side, such as

 Reduced Indirect Taxes

 Increased Supply Chain Efficiency
 Taxes on Gifts and Promotional Items
 Seamless Input Tax Credit
 Better Opportunities and Growth of Retail Market

5 ways GST will impact retail sector. (2020, February 24). Retrieved from
https://holisollogistics.com/how-significant-will-be-the-impact-of-gst-on-retail/
FURTHER OPPORTUNITIES IN THE INDIAN RETAIL SECTOR

Indian consumers have evolved a great deal and they expect their shopping experience to be
seamless across all channels, whether it is a brick and mortar shop, an e-commerce website or
a mobile application. With these changing consumer demands and expectations, retailers are
required to work on gaining a competitive advantage continuously. This can be accomplished
through the use of innovative retail formats and next-gen methods to yield growth across
different distribution channels.

The demands from a modern retail store have completely transformed, as consumers no
longer visit these stores simply to buy the products, but to experience a journey from a
soothing entry up to a satisfying exit. The idea here is not only to maximize the experience
but also the opportunity to provide feedback by projecting an awareness of the consumer
profile toward the right buying decision.

The impact of digitization on retail has already started where it is predicted that futuristic
retail outlets will be digital kiosks with virtual test rooms allowed by augmented reality. The
opportunity to break through the status quo with new creative solutions is where the future of
retail is headed.

Retailers are required to take proactive steps to fine-tune their day-to-day operations to
achieve enhanced customer value after realizing the scope of retail ecosystem mass
digitization. Retailers therefore need to spend funds to revitalize customer service by offering
individualized on-scale experiences to create loyalty and curb churn.

Naqvi, B. (2019, September 3). The rise and growth of the Indian retail industry. Retrieved
from https://www.indiaretailing.com/2019/08/29/retail/the-rise-and-growth-of-the-indian-
retail-industry/