India ready for 2nd phase of organised retail revolution with global players

Organised retailing in India has reached its next level with many global brands entering the market. While a decade back, as the retail revolution began in India, major fast fashion brands had ventured into the country, however, in the second phase few other brands have made their presence felt. Brands like Zara and Mango almost changed the fashion perspective of Indian youth and now with the entry of brands like GAP, Hennes and Mauritz AB (H&M), Japanese retail brand Muji, the dynamics of fashion retailing has got an interesting twist.

With growth in per capita expenditure and increasing disposable income of new generation urban population, India has become a lucrative market for global brands. Also, internet penetration and high literacy has fuelled the e-com boom, thus opening the sector to fashion brands from all over the globe. The new FDI rule for retaining industry has been a major catalyst. With relaxations by the government in FDI upto 51 percent for multi-brand and 100 percent for single-brand, the arena couldn’t be more enticing.

The market having become more competitive with global brands entering, Indian brands are also not shying away from giving their best shot to get benefit from the momentum. From launching products to aggressive marketing, homegrown brands are also not far behind.

Changing retail experience for Indian consumers

With the entry of global retail giants, the landscape of retail business has clearly changed in India. As experts point out now, the Indian consumer is becoming more fashion conscious. In October last year, when H&M opened its first store in Delhi’s Select CityWalk Mall, it clocked in more than Rs 1.75 crore in sales on day one, an amount almost the double that of what Zara managed correspondingly a couple of years back at the same mall.

IKEA India, which laid its foundation stone in August, and H&M, which opened doors to its fifth store in New Delhi at Connaught Place, entered India after the government approval for 100 percent single-brand retail trade. Both believe that with the world’s youngest population and a favourable economic environment, it’s a great time to be in India.

Challenges on the way

Indeed there is a huge potential in the Indian retail market but there are quite a few roadblocks on the way which are deterrents for the growth of organised retail. Inadequate retail real estate infrastructure, complex supply chain processes and regulatory framework and also lack of world-class retail professionals are the three major challenges for the sector. Moreover, multiple taxation was a major hassle for most foreign brands, which now has been eased out with GST. Also India is a country of diverse ethnicity and culture hence understanding of the Indian consumer and the major and minor nuances with regard to Indian consumption and shopping patterns, remains a task too for the global brands.

Experts believe that any international player which can offer fashion and variety at an affordable price and sees itself as more of a national brand rather than a metro-centric one, will perhaps take the lead in the Indian retail game.