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It has moved out of the comfort of offline stores to meet the challenge of entering e-commerce platforms. The Indian retail sector is scaling heights at a speed like never before, attracting a huge number of investors.
Through omni-channel retailing and many other business strategies, the sector has drawn the attention of international brands to invest in Indian retail real estate.
As per media reports, over 20 international brands entered the country this year, mainly through the National Capital Region Market as part of its Glocal approach.
Adding to that, the sector has received over $0.7 billion investments from PE firms/wealth funds.
As per IndiaRetailing.com, the private equity investment into the segment is expected to increase as much as 20 per cent in 2017, signaling that the overall market dynamics will continue to be positive.
Indian Retailers Have Put European and American Behind
India tops the list of countries gaining substantial investments in the retail sector as per the recent report of Fibre2Fashion.com. The report revealed that the sector is expected to touch $1150 billion by 2020.
The market segment, which is globally dominated by big European and American retailers, has seen a drastic change recently.
AT Kearney’s Global Retail Development Index (GRDI) titled ‘The Age of Focus’ has revealed that global retailers were facing uncertainty amid changing geopolitical environment and increasing nationalist sentiments expressed by Brexit and Donald Trump’s ‘America First’ campaign.
India Surpassed China in the Global Retail Index
The relaxation in FDI regulations, rising economic growth, including factors like rise in demand, high per capita income have pushed India to the number one position among 30 developing countries with regard to ease of doing business.
The 16th edition of GRDI showed that India had surpassed China with the retail sector growing at the rate of 20 per cent annually.
The Index analyzed that 25 macro-economic and retail-specific variables are devising global strategies to identify emerging market investment opportunities and help the retailers.
Record Low Retail Inflation
The fall in retail inflation from 2.99 per cent to 2.18 per cent following the plunge in food prices can partially work in favor of the industry players, but would not be advantageous for economy, causing an imbalance in market.
On if it is a positive sign for the industry’s growth, Economic Analyst and Writer Pranjal Sharma told Entrepreneur India, “With respect to the record low retail inflation, the economy needs higher industrial output and growth. The real challenge is that the private investment cycle is yet to take off. Much of the investment is being channelized by the government.”
“Low inflation could be of partial help. But, if the low inflation is fuelled by low demand, this would hurt the industry. The key issue is to revive consumer demand to counter low inflation. Higher demand in turn will spur high investment once capacity utilization improves,” said Sharma regarding the overall impact of inflation on retail industry.
Sharma also said this could be a good time for RBI to consider rate cuts. “However, there aren't enough good borrowers in the market. The overall situation of NPAs has to be eased before credit take-off rises significantly,” he added.