The Indian retail market has grown at a double-digit compound annual growth rate over the last five years and was worth an estimated $554bn in 2011. The Indian economy grew throughout the global downturn, with increasing consumer purchasing power bolstering the retail sector. Retailing is now the second highest contributor to India’s gross domestic product. Confusion reigns over India's FDI policy. Currently international food and grocery retailers are prohibited from entering the Indian market, except through cash and carry wholesale trading, but the government announced plans to lift restrictions in 2011, but then committed an embarrassing u-turn just weeks later. The emergence of modern retail started in the major cities of Delhi, Mumbai, and Bangalore, and the satellite towns which have developed around them due to the huge influx of young professionals. Modern retail is concentrated in just a few cities, and premium locations there have already become saturated. Employing 8% of the total work force, retail is the second largest employer in the country. The majority of these workers are self-employed, as India has a huge base of traditional retail outlets which are often family-owned. At present, modern retail represents only 5–7% of total retail in India.

1. Retailing in India
Case study: A passage to India –
major retailers and potential
new entrants
Find out which global retail players are entering
the fast-growing India retail market – and which
are tipped to be next
November 2012
www.verdict.co.uk

2. Retailing in India
Case study: Major retailers in the country and potential new entrants
The Indian retail market growth spurt makes
more room for international players
Retail is now the second largest contributor to India’s GDP. The market is growing fast, with Verdict
forecasting its value to more than double in 2015 from 2006, to hit more than $764.7 billion. This,
along with the recent relaxation of investment rules for multi-brand retail, and changing consumer
behaviours, makes India an attractive prospect for many international players.
Retailing market in India ($bn)
800
700
600
500
400
300
200
100
0
2006 2007 2008 2009 2010 2011 2012(f) 2013(f) 2014(f) 2015(f)
Source: Verdict Research
Traditional retailing – mostly made up of family-owned small businesses – is still the dominant
force in India’s retail landscape. Modern retail is worth only between 5-7% of the total market, but
a growing population of young, more affluent consumers, a gradual shift towards shopping mall
culture and the wave of international players means modern outlets are growing, and consumers
increasingly want them.
Despite this, conservatism will not be completely stamped out. Consumers will shop at a mixture
of traditional and modern outlets, gravitating more towards modern outlets for planned trips
such as the monthly food shop. But they will still hold a candle for neighbourhood shops for more
spontaneous buys, such as personal care products.
The latest reforms in foreign direct investment mean that single brand retailers can own 100%
of their Indian operations (up from a maximum of 51%), and multi-brand operators such as
supermarkets, which were previously restricted to cash and carry and wholesaling, are now allowed
to open their own stores and own up to 51% of the business.
2 www.verdict.co.uk

3. Retailing in India
Case study: Major retailers in the country and potential new entrants
There are still some major restrictions for multi-brand retailers:
• India’s individual state governments will decide if international retailers can come in
• Retailers will only be allowed into cities with a population of more than 1 million. A state with no
city this large will be able to choose where to let a foreign retailer open its doors
• Almost a third of a retailer’s goods are to be sourced from small businesses
• Retailers need to invest a minimum of $100m within three years of entry.
The minimum investment rule insures only very large global retailers will make the jump, but
perhaps even more difficult is the 30% local sourcing rule which will involve retailers having to find
a large number of smaller businesses (defined as those with investment of less than $1m in plant
and machinery) to supply goods. Having become a supplier to foreign retailers, if it then wants
to expand and invest more than $1m in plant and machinery, its sales will no longer count as part
of its customers’ 30% quotas. This catch-22 situation does not seem to serve the longer interests
of small businesses in India, or the realities of global retailer sourcing strategies. The Indian
government has changed its mind many times before on FDI rules, and no doubt it will be under
pressure to change this onerous rule.
India’s major cities – such as Delhi, Mumbai and Bangalore – and those close to them have been
the main stomping ground for modern retailers, but this concentration means that the areas are
already saturated. Emerging cities (known as tier II and tier III), such as Chandigarh, Nagpur, Kochi
and Meerut, are being increasingly targeted as IT, telecoms and automotive businesses move in,
and they are expected to see the highest growth levels over the next two decades.
Some established international retailers have already taken advantage. Samsung embarks on
road shows to show case products in tier II cities. Meanwhile The Body Shop has branched out
into cities such as Ludhiana, Jaipur and Mangalore, while L’Occitane is considering moves into
tier II cities.
3 www.verdict.co.uk

4. Retailing in India
Case study: Major retailers in the country and potential new entrants
Entry into India: Grocery makes up
majority of retail, but many sectors can
tap into India’s potential
Food and grocery is India’s biggest segment for organised retail, with around a 65% slice of the
total market. Behind that, clothing, accessories and luxury goods accounts for 13% of share.
Electricals and electronics is forecast to see an annual compound growth rate of 13.1% between
2010 and 2015, but clothing, accessories and luxuries is expected to accelerate fastest over the
next four years. The sector’s international brands are moving in faster than some others, and
fashion houses are also becoming widespread, while luxuries are more in demand.
ESTABLISHED CONSIDERING ENTRY
Debenhams – 2 stores opened, Ikea – considering €1.5bn
with plans for 30 in 13 cities investment for 25 stores
Lush – 16 stores opened, Tesco – no physical presence
mainly in shopping malls but runs infrastructure for joint
venture partner Trent’s Star
L’Occitane – 3 stores in Delhi Bazaar chain
and 3 shop-in-shops (Shoppers
Stop) outlets
M&S – 25th store opened
in April 2012, with plans for
around 60 outlets by 2014
The Body Shop – 80+ stores in
malls, airports and standalone
outlets
Walmart – 5 cash and carry
stores with local joint venture
partner Bharti Retail
Zara – 8 outlets opened with
parent Inditex keen to enter
with more of its brands
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5. Retailing in India
Case study: Major retailers in the country and potential new entrants
Some of the UK’s national retail treasures have already made strong in-roads into the India market,
and other global players are established presences.
M&S marked a rite of passage to India with the opening of its 25th store in Bangalore in April 2012.
M&S owns 51% of a joint venture with Indian brand Reliance Retail, and its brand, Marks & Spencer
Reliance India, offers clothing, home decor, kitchenware, toiletries and toys and books. Its stores
are in most major cities, with one at Indira Gandhi International Airport.
Zara’s parent company Inditex Group formed a joint venture with Trent, and now operates four
Zara stores in Delhi and Mumbai. It plans to open around 8 to 10 stores a year, and introduce some
of its other brands.
Lush’s agreement with owner and operator Amaltas Retail has been in place since 2004. Meanwhile
competitor The Body Shop entered into the market in 2006 in partnership with India’s Planet Retail
subsidiary Quest Retail. It plans to reach 150 stores by 2014, with one initiative being to reduce
prices on 200 major lines permanently in the wake of the economic downturn in 2009.
Strong electrical brands have made the push into retailing. Samsung’s revenue from India was
worth 3% of the company’s total in 2010, with the company expecting to reach 5% by 2013.
Meanwhile Sony and Panasonic both have branded outlets in the triple digits across the country.
But the latest big development comes from Ikea, which has long yo-yoed in its plans for entry into
the country amid the confusion surrounding foreign direct investment rules, but is one of the latest
to have got on board. The Swedish home retailer has applied to the Indian government to set up
its stores in the country, and is reported to be looking at a €1.5bn investment of 25 stores.
Clothing retailers keen to make the leap include Topshop, Uniqlo and luxury brand Max Mara.
5 www.verdict.co.uk

6. Retailing in India
Case study: Major retailers in the country and potential new entrants
Retailers partnering with local presence
International retailers have entered India primarily in four ways:
• Joint venture
• Franchising
• Strategic license agreement
• Cash and carry wholesale trading.
Clothing and health and beauty retailers have been the major takers of joint ventures with a local
partner. But Tesco’s partnership with Trent has meant that the UK’s biggest supermarket chain can
integrate its supply chain operations with its partner’s Star Bazaar brand, which buys more than 70% of
its products from Tesco’s wholesale arm.
Perfect partners – retail joint ventures in india
Local Partner International Partner
Reliance Retail M&S, Diesel
Planet Retail Debenhams*, The Body Shop
(Through Quest Retail)
Trent Tesco, Zara
Beauty Concepts L’occitane
Bharti Retail Walmart
*Arvind Has Since Acquired Business Operations From Planet Retail
Cash and carry trading has been a main route for supermarket chains because it allows for 100% FDI.
German grocery firm Metro was one of the first to set up in India using cash and carry stores, but
Walmart, Carrefour and Tesco have followed suit. The developments around FDI means that these
retailers can set up shop in their own right, assuming individual states will allow it.
6 www.verdict.co.uk

7. Retailing in India
Case study: Major retailers in the country and potential new entrants
This case study was taken from Retailing in India – a Verdict Channel Strategy Report
For more information on this report please email information@verdict.co.uk, http://bit.ly/Prjcnd
or call +44 (0)20 7551 9664
Retailing in India
Introduction
The Indian retail market has grown at a double-digit compound annual growth rate over the last
five years and was worth an estimated $554bn in 2011. The Indian economy grew throughout
the global downturn, with increasing consumer purchasing power bolstering the retail sector.
Retailing is now the second highest contributor to India’s gross domestic product.
Features and benefits
• Uncover the main opportunities available in the Indian retail market across Clothing, Grocery,
Electricals, Health and Beauty and Homewares
• Understand the size of the Indian market by sector and the growth forecasts to 2015
• Understand the key financial, cultural, political and logistical reasons that has so far held back
the development of modern retail in India
• Discover which retailers are operating in India and with which local partners.
Highlights
Confusion reigns over India’s FDI policy. Currently international food and grocery retailers are
prohibited from entering the Indian market, except through cash and carry wholesale trading,
but the government announced plans to lift restrictions in 2011, but then committed an
embarrassing u-turn just weeks later.
The emergence of modern retail started in the major cities of Delhi, Mumbai, and Bangalore,
and the satellite towns which have developed around them due to the huge influx of young
professionals. Modern retail is concentrated in just a few cities, and premium locations there
have already become saturated.
Employing 8% of the total work force, retail is the second largest employer in the country.
The majority of these workers are self-employed, as India has a huge base of traditional retail
outlets which are often family-owned. At present, modern retail represents only 5–7% of total
retail in India.
Your key questions answered
• Why has India’s organised retail sector taken so long to develop, and what is continuing to
hold it back?
• How large is the retail opportunity in India, and which sectors are most amenable to entry by
foreign retailers?
• Which international players are operating in India and who do they partner with?
7 www.verdict.co.uk

8. Retailing in India
Case study: Major retailers in the country and potential new entrants
About Verdict
Verdict is a retail information specialist within the Informa Group. With almost 30 years’
experience, Verdict publishes unrivalled independent analysis. We provide a complete picture
of the UK and increasingly the international retail arena, helping retailers, manufacturers, service
suppliers, analysts and consultants to fully exploit opportunities within the industry.
www.verdict.co.uk
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