Indian Retail Industry

India is the fifth largest global destination in retail and is growing at a rate of 12% per annum. The retail industry is one of the fastest growing industries in the country because of the various benefits that are due to various factors. It’s contribution in the GDP is about 10% and around 8% in the employment. The retail industry has also considerably changed over the years and it can be classified in various ways. The two broad categories that it is divided into are organised and unorganised. The unorganised retail is a more traditional form of retail that is characterised by low rentals and low tax payouts. On the other hand, the organised retail is characterised by high investment, trained staff and registered to pay taxes to the government. At present, the organised retail holds only about 9% of the market whereas the unorganised sector holds the rest of the market. In India, the proportion is highly unfavourable compared to countries like the United States where the organised sector comprises of about 85% of the total market.

The retail industry has grown over the years and has helped in improving the state of the Indian economy. ‘Retail’, while the word has been derived from the French word ‘retailer’ which means to break bulk, it can be defined as a process of procuring different products in large quantities from multiple sources and selling them in small quantities for consumption by purchaser. The way in which the retail industry works has changed over years from Mandis and Melas, as it was initially in the traditional formats. Both monetary basis and the barter system were prevalent at that time and that formed the basis of the retail industry today.

The contemporary retail industry can be classified in four phases to study its evolution and what compelled people to join the industry and how it became one of the fastest growing in India. It can be traced back to the migration of people from the villages to urban areas and opening up of small stores for items that are necessary. The sellers acquired the advantage of multiple and repeated sales due to familiarity with customers but were limited within a certain locality or area. Few manufacturers decided to open their chains of retail to improve sales and increase customer base, it worked in their favour.

In the next phase, the growth in the retail format was commendable. It can be attributed to the entrance of corporates and entrepreneurs with the liberalisation policy and opening up of the economy. Many reputed brands entered the Indian economy during this period and helped in widening the reach of the retail industry and making it spread significantly. The next period was a period of expansion for the retail industry, as there were substantial investments in the sector and the organised sector was growing. The government also made the FDI policies more flexible by this time and as a result many more international brands entered the Indian retail.

The growth of the industry was at a steady rise since 2010 as there was intense competition in the urban areas and retailers started to set up chains of retail shops in different cities to increase customer base. Many online brands also came up by this time and were highly favoured by customers. E-commerce was an integral component in bringing about this change.

The retail chains started to spread further from 2010 onwards but the first retail chain can be traced back to the year 1980 by textile majors like Bombay Dyeing, Raymond’s etc. Initially, the concept of retail in the organised sector was new and the industry was just in the first phase. Over the years, many different concepts like supermarkets etc have also emerged that were not traditionally a part of the retail chains but have nevertheless, helped to improve the customer base. The size, scope and complexity of the retail business has increased over the years and advancement in the online process has accelerated the growth. The online retail accounts for 1.2% of the total market.

The industry is further expected to grow because of various strategies that retailers have come up with like home delivery, cash on delivery options, increase in number of stores and also the transition from offline to online stores has made it convenient more people. The standard of living has improved, incomes have increased and overall there is an expected shift from the unorganised sector to the organised retail sector. Even though the Indian retail is currently being dominated by the unorganised retail, the inclination towards the organised sector can be expected.

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