Global Retailers in India: Moves, leaps & hurdles

Destination India – Why the rush?

Several of the world’s largest retail companies are already present in India, such as Inditex Group, Nike, VF, PVH, H&M, GAP, L Brands, Swatch Group, Tesco and Metro Group among others. However, the influx of foreign brands/retailers into the country’s market is becoming stronger and stronger of late. The rush to set up shop in India is an acknowledgement of its thriving retail climate and enormous potential. A massive market with 135 billion people, positive macro-economics, favourable government policies, socio-cultural shifts, rising incomes and growing consumer aspirations et al are some of the compelling drivers buttressing entry of foreign companies in the Indian retail. One defining factor that has further cemented India’s stature as a promising investment hotspot lately has been the buoyancy and sturdiness exhibited by it during the recent global economic meltdown of 2008. With the world’s major consumer hubs – the developed economies – adversely impacted, the marketers were forced to look out for greener pastures i.e. budding Asian economies such as India and China. No doubt, the troubled US brands Aeropostale, BCBG Max Azria and Toys R Us are betting on India to recover their fortunes.

The global economy is on a rebound now. The phase, nevertheless, has clearly amplified the interest of global marketers in India. There are several indicators and developments that bolster their belief in India growth saga. In 2017, India surpassed China to top global retail index (GRI) for 30 developing nations, a GRDI study. The country’s retail market is pegged to surge over 60 percent to reach US$ 1.1 trillion by 2020, says an Assocham and MRRSIndia.com report. India’s per capita gross domestic product (GDP) is roughly $1,800. Analyst firm Jefferies observes that the $2,000 level is a crucial threshold and discretionary spends go up considerably once GDP per capita exceeds this threshold. Countries like China, Russia and Brazil are an example.

Further, one of the prime concerns of global retailers entering India is the availability of quality retail real estate. While there are not many high streets, mall supply is heartening, at least in metros and large urban centres. As per property consultant JLL India, retail space leasing in shopping malls increased by close to 80 percent in the first half of 2018 at 1.94 million sq. ft. in the top seven cities. Both global and homegrown brands are driving the demand.

Significantly, e-commerce has also played an important role in acquainting Indian consumers with global trends and enhancing global brands’ outreach to them. Over 50 percent of the populace is under the age of 25 and over 65 percent under the age of 35. This internet-savvy, aspirational youth inclined to global lifestyle presents a massive opportunity that every brand/retailer would like to tap into. Analyst firm Crisil estimates the Indian e-commerce to grow over 2.5X to about Rs 1.8 trillion by FY2020. Not to disregard, India has made great strides in liberalizing in foreign direct investment (FDI) policy for both single-brand retail trade (SBRT) and multi-brand retail trade (MBRT) aspirants.

FDI Confidence Index 2018

Source: AT Kearny

Significantly, e-commerce has also played an important role in acquainting Indian consumers with global trends and enhancing global brands’ outreach to them. Over 50 percent of the populace is under the age of 25 and over 65 percent under the age of 35. This internet-savvy, aspirational youth inclined to global lifestyle presents a massive opportunity that every brand/retailer would like to tap into. Analyst firm Crisil estimates the Indian e-commerce to grow over 2.5X to about Rs 1.8 trillion by FY2020. Not to disregard, India has made great strides in liberalizing in foreign direct investment (FDI) policy for both single-brand retail trade (SBRT) and multi-brand retail trade (MBRT) aspirants.

Global Brands’ Indian presence

Source: Internet *Store count may include COCO, franchisee, SIS