Rise of Modern Retail Formats
The retail sector in India has witnessed a massive transformation over the past decade with the emergence of organized retail. Earlier, the country’s retail landscape was dominated by small Kirana stores and traditional family-run shops. However, with rising income levels and changing consumer preferences, modern retail formats such as supermarkets, hypermarkets, discount stores, and specialty stores started gaining popularity since 2000.
One of the first retail chains that revolutionized supermarket shopping in India was Reliance Fresh launched by Reliance Retail in 2006. It introduced self-service formats and offered consumers lower prices and a wide variety of products under one roof. Around the same time, future group launched Big Bazaar – a large format hypermarket store offering everything from groceries to garments and home appliances. Other players like Spencer’s, More, Food Bazaar also entered the supermarket segment.
These Organized Retail adopted international best practices to provide a convenient and comfortable shopping experience to consumers. Features like air-conditioned aisles, organized product display, trained store staff and hygienic conditions were some of their unique selling propositions which appealed tremendously to the Indian middle class. Their vision was to make quality products available to the masses and replace the traditional mom-pop stores.
Rapid Store Network Expansion
Encouraged by the success of pioneer retailers, many domestic and foreign entities joined the organized retail bandwagon in India during the late 2000s. Over the years, companies laid a strong foundation by aggressively expanding their store footprint across major cities and tier I/II towns. Reliance Retail currently operates over 11,000 stores under different retail formats covering millions of customers in India.
Similarly, DMART by Avenue Supermarts owns and operates over 250 stores in various cities. D-Mart is recognized for pioneering the discounter retail segment in India by offering an impressive portfolio of private labels at extremely competitive prices. Premium retailer Shoppers Stop too has created a nationwide network of over 80 stores catering to the upwardly mobile, quality-conscious customers.
Foreign giants Walmart, Metro Cash & Carry, and Carrefour also entered the country through wholesale cash-and-carry stores to tap into the fast-growing retail sector. Their stores primarily served corporate customers, kirana shops, and hotels/restaurants. Multinational lingerie brand Zivame invested in having 250+ exclusive brand outlets across India within five years of launching.
Rise of E-commerce Giant Flipkart
With increasing internet and smartphone usage, online shopping entered the Indian retail space in the late 2000s. One of the pioneers, Flipkart started as an online book retailer in 2007 and transformed into a full-scale e-commerce marketplace within a few years. Aggressive discounts and cashbacks helped Flipkart acquire millions of customers rapidly.
By 2012, Flipkart became the country’s largest online shopping platform offering over 80 million products across 80+ categories. It also debuted app-based services like mobile shopping, payment wallet, quick delivery to enhance consumer experience. Seeing its success, several other players like Amazon India, Snapdeal, and Paytm Mall entered the burgeoning e-tail market, giving tough competition to Flipkart.
In 2018, Walmart acquired a 77% controlling stake in Flipkart for $16 billion – at the time one of the largest deals in the Indian startup space. With this investment, Walmart aims to position Flipkart as its official online retail presence in India while exploring synergies in the supply chain and logistics networks of both entities. Today, e-commerce accounts for 3-4% of India’s $700 billion retail sector and is expected to grow rapidly within the organized retail sphere.
Rapid Growth and Investments
With positive reforms by the government and rising purchasing power, India’s retail industry is slated to become a $1.3 trillion opportunity by 2025. Consumer demand across segments like food & grocery, consumer electronics and fashion is all set to increase manifold. Recognizing the potential, several retailers are now expanding aggressively through investing billions into store networks, private labels, supply chain infrastructure and technology.
Reliance Retail raised over $6.4 billion through stakes from global investors last year, valuing it at $57 billion. This will be utilized to launch 10,000 new stores by 2024. Similarly, Avenue Supermarts plans to invest $500 million for opening 300+ D-Mart stores. Future Group signed a merger deal worth $3.4 billion with Reliance to transfer its retail, wholesale and logistics infrastructure. International players like IKEA, Costco have shared plans for a pan-India presence.
With the proliferation of smartphones, organized retailers are heavily focusing on omnichannel retailing through leveraging their mobile apps and websites. Many grocery chains launched quick commerce services for 10-30 minute deliveries to stay ahead in the emerging hyperlocal retail space. As unorganized retailers make way, India is witnessing a structural shift towards modern trade channels which is expected to provide livelihood to millions while making consumer experiences more seamless and hassle-free.
*Note:
- Source: CoherentMI, Public sources, Desk research
- We have leveraged AI tools to mine information and compile it
