A

BRIEF REPORT
ON
RETAIL SECTOR IN INDIA
January 2015

A brief report on Retail sector in India

1. RETAIL SECTOR IN INDIA

1.1

Overview
The overall retail market in India is likely to reach Rs 47 trillion (US$ 792.84 billion) by FY
17, presenting a strong potential for foreign retailers planning to enter India. India is the 5th
most favourable destination for international retailers. Of the total Indian retail market, 8% is
made up by the organized retail segment. This segment is estimated to grow at a rate of
almost 30% by 2015, and hence at a much faster pace than the overall retail market which is
forecast to grow by 16% in the same period. Until 2011, the Indian Central Government did
not allow Foreign Direct Investment (FDI) in multi-brand retail. This prevented foreign
groups from any ownership in supermarkets, convenience stores or other retail outlets. In
late 2012, the Government of India introduced a Foreign Direct Investment policy which
allows foreign retailers to own up to 51 per cent in multi-brand retail and 100% in single
brand retail.
Retailing in India is one of the business enterprises of its economy and accounts for 14 to
15% of its GDP. The Indian retail market, currently estimated at around US$ 490 billion, is
project to grow at a compound annual growth rate (CAGR) of 6 per cent to reach US$ 865
billion by 2023. India's retailing industry is essentially owner manned small shops account for
more than 90%. In 2010, larger format convenience stores and supermarkets accounted for
about 4% of the industry, and these were present only in large urban centres.
The Indian retail industry is generally divided into organized and unorganized retailing:

Organized retailing - Organized retailing refers to trading activities undertaken by

licensed retailers, those who have registered for sales tax, income tax, etc. These include
corporate-backed hypermarkets and retail chains, and also privately-owned large retail
businesses. Various estimates put the share of organized retail to go up to 20 per cent by
2020.
Unorganized retailing - Unorganized retailing refers to the traditional forms of low-cost
retailing, for example, local kirana shops, owner-operated general stores, paan/beedi
shops, convenience stores, hand cart and street vendors, etc. The growth of unorganized
retail sector is pegged at 6 percent

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A brief report on Retail sector in India

1.2

Growth in Indian Retail

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A brief report on Retail sector in India

1.3

Major Indian Retailers

Brands

Stores

REI Agro Ltd Retail

Future Groups-Formats

6TEN and 6TEN kirana stores

Big Bazaar, Food Bazaar, Pantaloons, Central, Fashion
Station, Brand Factory, Depot, aLL, E-Zone etc.
Fabindia
Textiles, Home furnishings, handloom apparel, jewellery
RP-Sanjiv Goenka Group Retail-Formats
Spencers Hyper, Spencer's Daily, Music World, Au Bon
Pain (International bakery cafeteria), Beverly Hills Polo
Club
The Tata Group-Formats
Westside, Star India Bazaar, Steeljunction, Landmark,
Titan Industries with World of Titans showrooms,
Tanishq outlets, Croma.
Reliance Retail-Formats
Reliance MART, Reliance SUPER, Reliance FRESH,
Reliance Footprint, Reliance Living, Reliance Digital,
Reliance Jewellery, Reliance Trends, Reliance Autozone,
iStore
K Raheja Corp Group-Formats
Shoppers Stop, Crossword, Hyper City, Inorbit Mall
Lifestyle
International-Lifestyle, Home Centre, Max, Fun City
and International Franchise brand stores.
Aditya Birla Group
More Outlets
Gitanjali
Nakshatra, Gili, Asmi, D'damas, Gitanjali Jewels,
Giantti, Gitanjali Gifts, etc
Nmart Retails with 131 operating Stores till now and total 287 Stores in India and 1 to open in DUBAI
Shortly and many more in Process Globally (ZAMBIA, BANGLADESH, SRI LANKA etc.). (Expected
to be 500 by the end of 2012)

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A brief report on Retail sector in India

2. GOVERNMENT POLICIES
2.1

Background
India has liberalized its single brand retail industry to permit 100% foreign investment, with
regulatory issues and legal structures pertinent to establish operations in this new dynamic
market. Indias retail industry is estimated to be worth approximately US$411.28 billion and is
still growing, expected to reach US$804.06 billion in 2015. As part of the economic liberalization
process set in place by the Industrial Policy of 1991, the Indian government has opened the retail
sector to FDI slowly through a series of steps:

1995 World Trade Organizations general agreement on trade in services, which include
both wholesale and retailing services, came into effect
1997 FDI in cash and carry (wholesale) with 100% rights allowed under the government
approval route
2006 FDI in cash and carry (wholesale) brought under the automatic route
Up-to 51% investment in a single- brand retail outlet permitted
2011 100% FDI in single brand retail permitted
2013 - India further eased foreign investment rules in retail on 1st August 2013 in a renewed
attempt to attract global supermarket chains. Foreign retailers have been keen to enter India's
$500 billion retail market since the country allowed overseas investment in its supermarket
sector in September 2012 but ambiguity around entry rules has kept them away.

a) FDI in single-brand retail - While the specific meaning of single-brand retail has not been
clearly defined in any Indian government circular or notification, single-brand retail generally
refers to the selling of goods under a single brand name. Up to 100% FDI is permissible in
single-brand retail, subject to the Foreign Investment Promotion Board (FIPB) sanctions and
conditions mentioned that are:

Only single-brand products are sold (i.e. sale of multi-brand goods is not allowed, even if
produced by the same manufacturer)
Products are sold under the same brand internationally
Single-brand products include only those identified during manufacturing
Any additional product categories to be sold under single-brand retail must first receive
additional government approval

FDI in single-brand retail implies that a retail store with foreign investment can only sell one
brand. For example, if Adidas were to obtain permission to retail its flagship brand in India,
those retail outlets could only sell products under the Adidas brand. For Adidas to sell products
under the Reebok brand, which it owns, separate government permission is required and (if
permission is granted) Reebok products must then be sold in separate retail outlets.
b) FDI in multi-brand retail - The government of India has also not clearly defined the term
multi-brand retail, FDI in multi-brand retail generally refers to selling multiple brands under
one roof. Currently, this sector is limited to a maximum of 49% foreign equity participation. On
July 2010, the Department of Industrial Policy and Promotion (DIPP) and the Ministry of
Commerce circulated a discussion paper on allowing FDI in multi-brand retail. The Committee
of Secretaries, led by Cabinet Secretary, recommended opening the retail sector for FDI with a
51% cap on FDI, minimum investment of US$100 million and a mandatory 50% capital

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A brief report on Retail sector in India

reinvestment into backend operations. Notably, the paper does not put forward any upper limit
on FDI in multi-brand retail
The long-awaited scheme has been sent to the Cabinet for approval, but no decision has yet been
made. There appears to be a broad consensus within the Committee of Secretaries that a 51%
cap on FDI in multi-brand retail is acceptable. Meanwhile the Department of Consumer Affairs
has supported the case for a 49% cap and the Small and Medium Enterprises Ministry has said
the government should limit FDI in multi-brand retail to 18%.
c)

Government safety valves on FDI - There is concern about the competition presented to
domestic competitors and the monopolization of the domestic market by large international
retail giants. The Indian government feels that FDI in multi-brand retailing must be dealt with
cautiously, given the large potential scale and social impact. As such, the government is
considering safety valves for standardize FDI in the sector.
For example:
A stipulated percentage of FDI in the sector could be required to be spent on building back-end
infrastructure, logistics or agro-processing units in order to ensure that the foreign investors
make a genuine contribution to the development of infrastructure and logistics. At least 50% of
the jobs in the retail outlet could be reserved for rural youth and a certain amount of farm
produce could be required to be procured from poor farmers. A minimum percentage of
manufactured products could be required to be sourced from the SME sector in India. To
ensure that the public distribution system and the Indian food security system, is not weakened,
the government may reserve the right to procure a certain amount of food grains. To protect the
interest of small retailers, an exclusive regulatory framework is made to ensure that the retailing
giants do not resort to predatory pricing or acquire monopolistic tendencies.

2.2

Benefits of FDI in multi-brand retail

Soaring inflation is one of the driving motives behind this move towards multi-brand retail.
Allowing international retailers such as Wal-Mart and Carrefour, which have already set up
wholesale operations in the country, to set up multi-brand retails stores will assist in keeping
food and commodity prices under control. Moreover, industry experts feel allowing FDI will cut
waste, as big players will build backend infrastructure. FDI in multi-brand retail would also help
narrow the current account deficit. Additional benefits include moving away from an industry
focus on intermediaries and job creation.

Moving away from intermediary-only

Job creation
No threat to kiranas (mom-and-pop stores)

Several constituencies are positively impacted by modern trade

Farmers/producers
Consumers
Government
Inefficiencies in Indias
food supply chain

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Modern trade improves

the quality
of life

Increased tax inflows for the

government

Unorganised
trade
Kiranas as a
major
part of Indias
retail
sector

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Several layers of
intermediaries

Greater choice

Organised and unorganised

trade that is different in
structure, size and in terms of
taxes paid to the exchequer

High wastage levels (2440%)

More competitive
prices

Lower than fair market

value paid to farmers

Better quality of food

products for modern
trade players to transfer
best practices to
local farmers
Lifestyle parity where
Indian
products are similar to
those
available overseas

The challenge of revenue

collection from the
unorganised retail sector
Tax-compliant
modern trade
players who are
large taxpayers

High final prices for

consumers

Indias large
retail sector that
accommodates
both organised
and unorganised
trade

Agents controlling prices

Farmers benefit from
modern trade.

Consumers benefit from

modern trade

The government benefits

from modern trade.

Wastage is reduced

In a democracy,
fundamental
tenet of progressive policy
changes is that the main
beneficiary must be the
consumer.

State VAT revenues increase

as modern trade grows and
develops.

Income flow for farmers

is stabilised.

As economies evolve,
governments should
provide for inclusive
growth
and minimal displacement.

Modern trade helps develop

related sectors (supply chain,
logistics, cold chain, etc.).
Companies in these sectors
contribute to the exchequer
in terms of indirect taxes.

Unorganised
trade
benefit from
modern
trade.
Kiranas can
source food
and non-food
items, essential
for operations,
from cash-and
carry providers,
benefitting from
bulk discounts.
Kiranas can
become franchise
partners for
modern trade
players
neighbourhood
format.

The quality of fruits,

produce, dairy, poultry,
etc. is improved.
Farmers are integrated
into
modern trade

2.3

Reform in Retail Sector

November 2011 - India allowed foreign supermarket chains to enter the country and
own up to 51 percent in their Indian operations in an attempt to bring in much needed
capital from abroad and build its poor infrastructure supply chain. It also allowed single
brand retailers like Swedish furniture giant IKEA to own 100 percent of their business in
India.

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December 2011 - The government put the retail reform on hold, backtracking from its
boldest measures in years in the face of political backlash from allies and opposition
parties over worries that millions of small shopkeepers could go out of business.
January 2012 - India formally eliminated ownership restrictions on foreign investment in
single-brand retail but required that companies source 30 percent from small local firms.
June 2012 - New Delhi began clearing the ground for a new push to open up the
supermarket sector amid souring investor sentiment, double-digit food inflation and the
threat of a credit-ratings downgrade.
September 2012 - India revived the retail reform, allowing foreign supermarkets to buy
up to 51 percent in a local partner with restrictions around sourcing and investment in an
effort to appease political opposition. Local sourcing requirements for single brand
retailers were diluted.
June 2013 - The government issued a clarification and said global supermarket operators
cannot acquire existing assets of Indian companies and that the initial mandatory $100
million investment to set up supply chain infrastructure and stores must be in new assets.
August 2013 - India relaxed sourcing and investment rules for supermarkets. It allowed
retailers to meet 30 percent sourcing requirement over 5 years initially and said they only
have to invest 50 percent of an "initial" mandatory investment of $100 million in setting
up cold storages and warehouses.

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A brief report on Retail sector in India

3. MAJOR PLAYERS

3.1

Tesco
It is a British multinational grocery and general merchandise retailer headquartered in Cheshunt,
United Kingdom. It is the third-largest retailer in the world measured by revenues (after WalMart and Carrefour) and the second-largest measured by profits (after Wal-Mart). It has stores in
14 countries across Asia, Europe and North America and is the grocery market leader in the UK
(where it has a market share of around 30%), Malaysia, the Republic of Ireland and Thailand.

3.1.1 Tesco in India

Tesco has had a limited presence in India with a service centre in Bangalore, and outsourcing. In
2008 Tesco announced their intention to invest an initial 60m ($115m) to open a wholesale
cash-and-carry business based in Mumbai with the assistance of the Tata Group.
The global service operations of Tesco HSC are involved in creating and executing strategic
initiatives for Tesco retail stores worldwide. These strategic initiatives cover the IT, Business,
Financial, Commercial and Property aspects, among others, of Tesco operations. The operations
cover all internal and external platforms that drive Tesco's business, making it one of the world's
most preferred retail stores. Tesco is the first major international retailer to have a fully-owned
support centre in India. We are dedicated to make the Tesco experience better for over 60
million customers worldwide, simpler for over 500,000 employees and achieve cost-efficiencies.
3.2

IKEA
IKEA is a privately held, international home products company that designs and sells ready-toassemble furniture such as beds, chairs, desks, appliances and home accessories. The company is
the world's largest furniture retailer. Founded in Sweden in 1943 by 17-year-old Ingvar Kamprad,
The first IKA store was opened in lmhult, Smland in 1953, while the first stores outside
Sweden were opened in Norway (1963) and Denmark (1969). The stores spread to other parts of
Europe in the 1970s, with the first store outside Scandinavia opening in Switzerland (1973),
followed by Germany (1974). Things were going so well for the company, that in 1973, the
company's German executives accidentally opened a store in Konstanz when they had meant to
open one in Koblenz. Later that decade, stores opened in other parts of the world, including
Japan (1974), Australia and Hong Kong (1975), Canada (1976) and Singapore (1978). IKEA
further expanded in the 1980s, opening stores in France & Spain (1981), Belgium (1984), the
United States (1985), the United Kingdom (1987) and Italy (1989) among other areas. The
company expanded into more countries in the 1990s and 2000s. Germany, with 44 stores, is
IKEA's biggest market, followed by the United States, with 37. At the end of 2009 financial year,
the IKEA group had 267 stores in 25 countries.
Swedish furniture home accessories IKEA is planning to enter India with a Euros 1.5 billion
(around Rs 10,500 crores) investment in a single-brand retail venture. In the first phase it plans
to set up 25 stores with an investment of Euros 600 million (around Rs 4,200 crores) in opening
25 stores. The company has already sought government permission to set up a 100% Indian
venture and has also promised to increase its sourcing from the country. In these stores
companies are permitted to stock goods from one brand only. The entry also comes with the
stipulation that at least 30% of the products have to be sourced from Indian micro, small and
medium enterprises - a major area of concern for IKEA until recently.
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3.3

Future Group
Future Group is Indias largest retailer and one of the leading business houses with a strong
presence in retail. Future Group is established in 1994 by Mr. Kishore Biyani. Future Groups
products come under the category of durable as well as nondurable. It offers perishable
products, food items which are frequently approached by consumers. Also, offers Clothing,
Apparel, Home dcor items, Furniture which comes under the category of Nondurable. The
company owns a portfolio of 24 leading brands and covers more than 121 cities.
Future Group, India's largest retail chain in both value and lifestyle formats, is aiming to have
50,000 Big Bazaar direct franchisees by the end of this year. The company has already launched
the franchisee-based models in Mumbai, Hyderabad and Gujarat. It launched in Delhi on
January 11, 2014. The Future Group is providing its franchisees an electronic device, which
would have all the information about its products and offers. The franchisee employees would
visit the consumer's place and collect the orders.The company is targeting kirana shops, medical
stores, persons with consumer network, insurance agents and persons engaged in professional
services like payment of bills etc, as franchisees. Through this venture, the company would also
try to expand its base in the tier 2 and tier 3 cities, where the Future group still has no retail
store. In return, the Future group is paying a commission ranging from 3 per cent to 20 per cent,
depending on the kind of products sold.

3.4

Shoppers Stop Limited

Shoppers Stop Ltd is a professionally managed and systems driven organisation promoted by the
K Raheja Corp Group (Chandru L Raheja Group), one of the leading players in the country in
the business of real estate development and hotels.
Since its inception in 1991, Shoppers Stop Ltd has introduced various retail formats in India.
The chain has become the highest benchmark for the Indian retail industry. Apart from the
flagship business of department stores, there are also specialty stores for books, home decor and
maternity care & infant care.
Symbolizing the era of global recognition for Indian retailers, Shoppers Stop Ltd is the only
Indian retailer to be shortlisted in the Retail Advertising Award category for its in-store
marketing at the retail industrys globally recognized event World Retail Congress. Shoppers
Stop had been named the merging Market Retailer of the Year at the prestigious World Retail
Awards, which took place on 10th April '08, in Barcelona. The World Retail Congress is the most
influential and highest profile gathering of the retail industry across all retail segments across the
globe.
Shoppers Stop
Shoppers Stop is Indias largest retail chain of large format department stores with 172 stores in
25 cities across the country occupying an aggregate area of over 4.81 million square feet with an
offering of more than 400 finest international and national brands.
Indias premier fashion and lifestyle destination, Shoppers Stop currently has stores in
Ahmedabad, Aurangabad, Amritsar, Bangalore, Bhopal, Chennai, Delhi, Durgapur, Gurgaon,
Ghaziabad, Hyderabad, Indore, Jaipur, Kolkata, Latur, Lucknow, Mumbai, Mysore, Noida, Pune,
Siliguri and Vijayawada.
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Shoppers Stop is also the only Indian member of the Inter Continental Group of Department
Stores (IGDS) along with 29 other experienced retailers from all over the world. This has helped
the company gain insight into the new and emerging practices followed internationally.
HomeStop
HomeStop is the first-of-its-kind premium home concept store at Bengaluru Magrath road and
Royal Meenakshi Mall, Mumbai Malad, Vashi and R-City Mall, New Delhi, Pune, Lucknow,
Ahmedabad and Vijayawada offering a wide range of products and some of the most reputed
national and international brands.
It is a one-stop-shop for all home needs ranging from home dcor to furniture, bath accessories
to bedroom furnishings, mattresses to draperies, carpets to modular kitchens & health
equipment all under one roof.
Crossword Book Store
Spacious, well laid out bookstores that feature methodical classifications, clear signages,
dedicated enquiry /orders desks and attractive displays along with cafs, reading tables and chairs
within the store make Crossword the leader in the lifestyle bookstore category. It currently has
86 stores.
Its unique product mix of books, magazines, CD-ROMs, music, stationery and toys is further
enhanced with services like Dial-a-book and Email-a-book and facilities like gift vouchers and
Return, Exchange & Refunds policy.
Mothercare & Early Learning Centre (ELC)
Shoppers Stop Ltd. has an exclusive retail arrangement (for the department store segment) with
Mothercare PLC of UK to open & operate shop-in-shops of Mothercare and ELC stores in
India within Shoppers Stop stores. Mothercare is UK's premium international brand for
maternity, infant and childcare products. Currently there are 38 stores of Mothercare (including 6
standalone stores) with a presence in 11 cities.
Estee Lauder group
Shoppers Stop Limited has entered into non exclusive retail agreement with world-renowned
cosmetics major Estee Lauder to open M.A.C, Clinique and Estee Lauder stores in India. M.A.C
(Makeup-Art Cosmetics) the professional brand of choice is the first brand under the Estee
Lauder Group of Companies' portfolio to enter the Indian retail market. Currently, with
Shoppers Stop Ltd. there are 20 M.A.C. stores operating in Mumbai, Bengaluru, Delhi, Amritsar,
Chennai, Hyderabad, Pune, Kolkata and Ludhiana. Clinique currently has 10 stores/doors
(including 2 standalone stores) and Estee Lauder has 5 stores/doors including 3 standalone
stores, one each in Mumbai, Bengaluru and Delhi.
HyperCity
Shoppers Stop Limited has acquired a majority stake of 51% equity share capital in Hypercity
Retail (India) Ltd, thus making it a subsidiary of Shoppers Stop Ltd. HyperCity operates 12
stores one store each in Ahmedabad, Pune, Ludhiana ,Amritsar, Bhopal, Jaipur, Navi Mumbai
and Hyderabad and 2 stores each in Mumbai and Bengaluru.

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HyperCity has redefined the experience of the Indian consumer in the big store format. Its
offering includes food and grocery, general merchandise and apparel. The business operates a
More to Discover by-line and delivers quality product at great value in a bright, spacious,
modern environment.
Airport Retailing
Currently, it has 1 store in Hyderabad domestic airport and 2 stores in Bengaluru domestic
airport. 4 duty free stores are run by the JV Company in the international airport at Bengaluru.
TimeZone Entertainment
Shoppers Stop Ltd. believes that the Indian consumers are looking for multiple options to
entertain themselves and their families. It has forayed into the Entertainment sector by acquiring
a 45% stake in Time Zone Entertainment Private Limited which is in the business of operating
Family Entertainment Centres (FECs). TimeZone currently has 17 doors in key cities in India.

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