The Indian retail market is literally on the go. The share of retail trade in the country's gross domestic product was between 8–10 per cent in 2007. It is currently around 12 per cent, and is likely to reach 22 per cent by 2010. The Indian retail market, which is the fifth largest retail destination globally, was ranked 2nd after Vietnam as the most attractive emerging market destination for investment in the retail sector, by AT Kearney's seventh annual Global Retail Development Index (GRDI), in 2008.

According to a study by ASSOCHAM, Indian retail will touch US$ 365 billion in 2008, against US$ 300 billion in 2007. With a year-on-year growth of 30–35 per cent, the sector is likely to touch US$ 440 billion by 2010. By 2015, the retail sector is projected to overtake the US$ 650 billion mark, and organised retail will cross the US$ 130 billion mark. The study also estimated that the organised retail segment would see an investment of US$ 25 billion–28 billion in 2008, which would touch US$ 70 billion by 2010. The organised segment will account for 25 per cent of the total sales by 2011.

Commercial real estate services company CB Richard Ellis' findings state that India's retail market, is currently valued at US$ 511 billion, and is poised to grow to US$ 833 billion by 2013. The report further stated that organised retail that currently accounts for less than 5 per cent of the total retail market is expected to register a compound annual growth rate (CAGR) of 40 per cent and swell to US$ 107 billion by 2013. A report by global consultancy AT Kearney said "The consumer spending in India has increased by an impressive 75 per cent in the last four years and will quadruple in the next 20 years."

Continuing the robust growth of the organised retail in India, according to the Credit Rating and Information Services of India, the industry raked in US$ 25.44 billion turnover in 2007–08, as against US$ 16.99 billion in 2006–07— a whopping growth rate of 49.73 per cent. India has one of the largest number of retail outlets in the world. Of the 12 million retail outlets present in the country, nearly five million sell food and related products. Thought the market has been dominated by unorganised players, the entry of domestic and international organised players is set to change the scenario.

Mall space, from a meagre one million square feet in 2002, is expected to touch an estimated 60 million square feet by end 2008, says Jones Lang LaSalle's third annual Retailer Sentiment Survey-Asia. A report by Images Retail estimates the number of operational malls to grow more than two-fold, to cross 412, with 205 million square feet by 2010, and a further 715 malls to be added by 2015, with major retail developments even in tier-II and tier-III cities in India. Even as the organised retail market is starting to take off, there is an associated surge in branded discount outlets in India. Top realtors and local retail chains are developing malls in regional boroughs, specifically to sell premium branded goods.

Rural Retail

Led by the rising purchasing power, changing consumption patterns, increased access to information and communication technology and improving infrastructure, rural retail market is estimated to cross US$ 45.32 billion mark by 2010 and US$ 60.43 billion by 2015, according to a study by Confederation of Indian Industry (CII) and YES Bank. The rural retail market in 2008 has grown at 25 per cent compared to the 7–10 per cent growth rate of the urban consumer retail market. With 87 per cent of rural markets not having access to any sort of organised marketing and distribution, this segment has tremendous potential for growth.

After ITC's ' Chaupal Sagar' (India's first rural mall), the DCM Shriram Group's Hariyali Bazaar', and Tata Chemicals' Tata Kisan Sansar, retail giants like Reliance, Spencer's and Subhiksha are also expanding in semi-urban and rural areas.

Luxury Retail

By the next four to five years, India is expected to become a manufacturing hub for global luxury brands, according to a FICCI-Yes Bank report on luxury brands. The report states that India has the most rapidly growing High-Networth Individuals (HNI) population in the world, and the income level of consumers is expected to grow three times by 2025. The active age group (25–45 years) is likely to rise to a third of the population.

The report further states that the manufacturing business of luxury items in India can cross US$ 500 million with global brands like Louis Vuitton and Frette looking at India as a manufacturing base. According to a survey done by AT Kearney, the Indian luxury retail market is estimated to touch US$ 30 billion by 2015. Estimated to be the 12th largest in the world, it has been growing at the rate of 25 per cent per annum. In the kids' retail sector, brands like Monalisa, Zapp, Disney, and Swiss kidswear brand Milou, are coming to India. French furniture brand Gautier and Marks & Spencer will be launching a special range for kids in India. According to research firm KSA Technopak, the branded segment comprises US$ 701.7 million of the total kids' apparel market-size of over US$ 3 billion. Industry experts say kids' retailing will touch annual growth of 30–35 per cent.

E-tailing

The increase in the personal computers (PC) and Internet penetration along with the growing preference of Indian consumers to shop online has given a tremendous boost to e-tailing the online version of retail shopping. An estimated 10 per cent of the total e-commerce market is accounted by e-tailing. Several online retailers are reporting good business in categories like travel, art, books and music. E-tailing in lingerie and fresh fruit businesses is also doing well.

Retail Franchising

Along with e-tailing another perceptible trend in the growth of organised retail market has been the concept of retail franchising. According to industry estimates, retail franchising has been growing at the rate of 60 per cent in the last three years and is set to grow two-fold in the next five years. And with immense potential seen in this segment, the US$ 4 billion-franchising industry is likely to see almost two-fold rise in the number of franchisees (from 0.2 million) by 2010.

Innovative Retail Concepts

With the entry of new players and the market becoming increasingly competitive, retail players are using innovative retail concepts to attract consumers. With the US$ 6.31 billion pharma retailing becoming progressively more organised, players are now looking at newer formats to attract more people to their stores. Pharmacy chains like MedPlus and Goodlife have started providing health check-ups, diagnostic services, dental care and medical counselling to its patients, besides selling pharma and wellness products. Goodlife is tying up with the retail major Future group to set up these convenience clinics at malls and in the high streets. MedPlus operates 15 such integrated clinics, and is planning to open at least 50 such clinics by March 2009.

Innovative concepts in recreational retail are pulling people to malls, and big retail set-ups account for a small but rapidly growing part of a multi-million dollar industry. Indian consumers are improving their lifestyles and their recreational spend is growing rapidly. There are a variety of concepts like made-to-order pottery-painting, portrait-making, creating toons or casting gold and silver impressions that have proliferated in malls or exist as standalone ventures. In fact, a whole new concept of customised, leisure retail has opened up for the Indian consumer.

Investments on the anvil

India's vast middle class with its expanding purchasing power and its rapidly growing retail industry are key attractions for global retail giants wanting to enter newer markets.

• To expand its presence in the apparel sector in India, Koutons Retail will be investing US$ 70.79 million to open 200 large Koutons Family Stores and add another 1,400 stores in modern retail format to the existing 605 stores, within the next 18 months.
• Indian Oil Corporation (IOC) is planning to invest US$ 189.103 million in rural areas during the financial year 2009.
• Videocon Retail plans to invest US$ 168.45 million to expand its electronic retail format, Next Retail, and Planet M, the mobile, music, entertainment and lifestyle chain, in the next three years.
• Reliance Retail Ltd will start 50–60 'i stores' all over India, in the next 18 months, and also open 150 Reliance Digital stores by 2011–12. Reliance Retail Ltd (RRL) runs from over 600 stores in more than 57 cities, across 13 states.
• Inorbit Malls (India) Ltd. will be investing around US$ 294.79 million to build eight malls across the country within the next two years.
• Panasonic is planning a US$ 200 million investment in India, for setting up new units, brand positioning, and upgrading its facilities, by 2011.
• Retail major Subhiksha plans to open 1,000 more outlets by end-2008.
• Marks & Spencer plans to put in 51 per cent foreign direct investment in single- brand retail business.
• Giordano Fashions (India) will establish a chain of single-brand retail.
• Titan Industries will launch 'Titan Eye +' branded spectacles stores all over India with an investment of US$ 5.05 million for putting up 80 stores in the metro, tier-I and tier-II cities. The company has a plan to rollout 200 stores in three years.
• Reebok will open 230 stores in 2008-09 in India, touching the target of 850 by end of this fiscal. Besides consolidating its position in metros and tier-I cities, it is also going for a major expansion in tier-II and tier-III and lower-tier cities.
• Luxury watch brand, Rado, is planning a major expansion drive to double its exclusive stores to 15, covering new Tier-II cities like Jalandhar and Ludhiana.
• Religare Enterprises, the integrated financial services firm is planning to set up multi-product, multi-brand retail stores in the personal finance space under the brand name Finmart, with an investment of more than US$ 23.779 million to set up 200 such stores across the country.
• Singapore-based, US$ 5 billion worth OSIM International Ltd is planning to set up another 100 exclusive brand outlets in India.
• Esprit, a premium fashion brand plans to add 25 new outlets to its present network of 34 by 2008 with an investment of about US$ 12.63 million.
• Estee Lauder will be setting up 20 outlets over the next three years.
• Disney Consumers Products (DCP) is ramping up retail presence by launching several products - apparel accessories, cartoon, stationeries, kids section, food, health and beauty.

Government initiatives

The Government allows 100 per cent foreign direct investment (FDI) in cash and carry through the automatic route and 51 per cent in single brand. Besides, the franchise route is available for big operators. To further attract global retailers, the economic survey 2007–08 has suggested a share for foreign equity in all retail trade and 100 per cent in respect of luxury brands and other specialised retail chains.

However, the Indian tariff structure has to be streamlined as India levies one of the highest duties and taxes on imported luxury goods. This fuels the growth of the grey market and duty-free purchases, even as the stringent regulatory environment encumbers investment by foreign brands.