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India 2016 |Market Intelligence| Retail

Modern retail and e-commerce
grow, but shops predominate
 
Indian retail is distinctive. It traditionally has been based around small neighborhood shops that most Indian consumers still patronize. Modern retail – hypermarkets, supermarkets and category superstores – account for an estimated 7-to- 8 percent of sales.
 
For years, inadequate infrastructure and regulations restricting the entrance of foreign retailers slowed the development of modern retail. Then the rapid expansion of e-commerce and the penetration of mobile phones – now over a billion – added complication.
 
Recent government liberalization of Foreign Direct Investment in retail may help accelerate the growth of modern retail in India. But by combining the advantages of e-commerce and traditional retail India is in some ways is beginning to leapfrog to a post-modern stage.
 
To order online, Indian consumers visit both global marketplaces and Indian brands, such as Flipkart or Snapdeal. For delivery, consumers recently have relied on a hybrid system, developed by Amazon, in which the e-commerce brand ships merchandise to traditional bricks-and-mortar, mom-and-pop retailers that become local pick-up and delivery centers.
 
This collaborative solution to the last-mile delivery challenge illustrates jugaad, an Indian “can-do” attitude of resourcefulness and innovation. It is also an apt metaphor for the way progress in India wavers in the tension between the traditional and modern. Most Indians prefer to see merchandise before they pay for it; consequently, online transactions are paid COD, often with one of the many Indian mobile wallet brands, such as Mobikwik and Paytm.
 
Indian retail can be roughly divided into three broad classifications: FMCG and grocery, fashion and lifestyle, and technology. Each is shaped by consumer attitudes and the structure of Indian retail.
 
FMCG Grocery is still dominated by traditional shops, but online shopping for grocery is growing rapidly. Several Indian online brands serve the market. For major weekly or biweekly grocery shopping, consumers also visit modern retail outlets, supermarkets or hypermarkets, because of the extensive product range and the shopping experience they offer.
 
Lifestyle Fashion in India divides into two parts: Western apparel for men and women; and traditional Indian apparel, which is primarily for women. Modern retail typically focuses on Western styles, although the range of traditional or fusion apparel is increasing. Traditional retail, such as boutiques and tailor shops, continue to be the primary destination for Indian wear. 
 
Because traditional clothing is customized to fit, and customers desire to touch and feel the fabric, they resist making these purchases online. Brands are experimenting with tactics to address this shopper resistance. At least one brand offers the option of purchasing a garment in several sizes and returning those that do not fit. Apparel brands also are attempting to cross-merchandise, moving shoppers to apparel sites from sites featuring jewelry or cosmetics, categories that are more frequently purchased online.
 
Typically, Indians purchase apparel several times a year around major festivals like Diwali. Purchasing frequency has increased over the past few years, however, because of the online behavior of young people who often browse every day.
 
Technology Technology moves primarily through two channels: traditional retailers and modern superstores, both of which may carry a wide range of products that include household appliances, home entertainment, computers and phones. Changing shopper behavior has negatively impacted the superstores, often making them showrooms for browsing. Typically, older consumers then visit a traditional outlet to get personalized service and negotiate a better price; younger consumers buy online.