India is standing at the threshold of a retail revolution. The country already has the largest retail outlet density in the world with around 12 million outlets; however, the unorganized retail market accounts for about 98 percent. Moreover, according to recent studies conducted by the National Council of Applied Economic Research (NCAER), half of India’s growing retail market lies in rural India, consisting of 720 million consumers across 627,000 villages. The second fastest growing economy in the world and the fourth largest economy in terms of purchasing power parity, the booming Indian economy has created a base of over 30 million affluent consumers, which is more than the entire population of many European nations, and more or less equivalent to the total population of Scandinavia. The vibrant Indian economy tops the list of emerging markets for global retailers, and with current economic indicators being favourable, this base will easily double to 60 million by 2010. Currently, the total private consumer spend is nearing US$46.5 billion at current prices, with spend in the domestic retail market at US$39.2 billion and growing 6 percent annually; out of this, organized retail, which accounts for about US$1.2 billion at present and is growing at over 36 percent annually, is expected to cross US$2.5 billion much earlier than 2010.

Traditionally, India’s retail business was run by small, convenient mom and pop stores where the shop was at the front and the house at the back. But times are changing, and post-liberalisation, with enhancements in income levels, there is change in the shopping pattern of Indians. Earlier, Indian consumers looked for value for money first with quality being secondary. But, of late, due to branding, the entry of international players, and exposure to media, consumers have started choosing quality of products over value for money. Thus, with markets largely saturated in the West, the retail business, allowing for big national and international vendors to provide branded goods, has great potential in future. Indian Retail is witnessing rapid transformation in many areas of business by setting scalable and profitable models across categories.

India represents an economic opportunity on a massive scale for foreign players in consumer retailing, and the opportunities that exist in this sector are enormous. The factors impacting growth of organized retail are mainly demographics and financial services. Growing consumer credit will also help boost consumer demand. The structure of retailing is also changing rapidly—now, shopping malls are becoming increasingly common in large cities and towns, and the announced development plans include at least 250 new shopping malls in the country by 2008.

Niche foreign retailers have made a beeline for the Indian market. Foreign niche segment retailers, such as Guess, Esprit, Chanel, Clarks, Mango, Aigner, Bvlgari, Hugo Boss, Mark & Spencer, Tommy Hilfiger, among others, have already built a retail presence in the country, while several more have charted out a strategy to enter the Indian market. Most of the brands entering the market are targeted at the premium end. According to estimates, the premium apparel segment in India is valued at about US$500 million and growing 20 percent annually. In addition, recent estimates show that the super premium market is growing at about 30 percent annually; for instance, the sale of diamonds in India is growing at about 26 percent per annum. Currently, India has approximately over 1,500 franchisers spread across business categories like education, retailing, professional services, F&B, healthcare, etc. These franchisers and franchisees together have invested over US$1.5 billion into their businesses and annual sales now exceed US$3 billion and growing at a healthy 25 percent per annum.

As mentioned earlier, rural India is home to 720 million consumers across 627,000 villages. 17 percent of these villages account for 50 percent of the rural population as well as 60 percent of rural wealth. This implies that by reaching out to almost 100,000 plus villages, retailers and entrepreneurs will be able to address the remaining 50 percent of this huge rural opportunity. The estimated US$350 billion total retail market is expected to grow 13 percent annually, and the top five retailers account for less than 2 percent of the modern retail market. Moving forward, organised retailing is projected to grow at the rate of nearly 37 percent per annum, and its contribution to total retail sales is likely to rise to 9 percent by the end of the decade. With a billion people, India has the second largest population in the world, and the opportunities that exist are immense.