As you key in the words – History of Retail in India; google quickly reflects a link to Wikipedia highlighting the historical milestones on retail in the country. The intro states – Retailing in India is one of the pillars of its economy and accounts for 14 to 15 percent of its Gross Domestic Product (GDP) GDP. The Indian Retail Market is estimated to be US$450 billion and one of the top five retail markets in the world by economic value. India is one of the fastest growing retail markets in the world, with 1.2 billion.
Now that is the picture before us. But can you imagine that just four decades ago the total retail trade in the country was only Rs. 10,000 crores! In 1947, before the partition of India, the total branded FMCG items in India were in numbers that could be counted on our fingertips! In 1953, the total food grain production was in tune of just 53 million tons and now it accounts to 257 million tons! Well, the reason for this spurt in retail and food production / consumption has to do with the changing market dynamics which has its root in the consumer evolution and various reforms in policies undertaken by the Government at various levels.
Stepping back to yesteryears, it shall be of interest to you to learn about the handful of brands present in the country till the close of the 4th decade of the 20th Century. We Indians love our chai but you may be surprised to learn that when it came to branded tea – it was just Brooke Bond and Lipton that found place on the shelves of the kirana stores. Lux and Lifebuoy minus any of their existing SKUs where the only two bathing soap brands that the country had and for clothes it was Sunlight. Cooling / fairness talcum powders were not even thought of then as the only brand available was Himalaya Bouquet. Afghan Snow was used as an all purpose cream as obviously the concept of age defying and fairness cream was absent then. Colgate was the only toothpaste that consumers bought – be it to fight tooth decay / sensitivity or have a refreshing breath. 7’o clock blade was the only male grooming accessory which was used till its bluntness could no longer be sharpened and there was a need to replace it with a new fresh 7’ o clock blade! It was only the hair-oil category which had about 3-4 brands but then these brands were put to use only on special occasions. After reading about all this it should not come as any surprise to you when I say that the country got its first brand for slice bread in 1964! And yes, to share more – this brand originated from Orissa just in case you thought it was Mumbai, Delhi or Bangalore which took the lead for setting up the industry for slice breads in the country.
Till about 1950s the only major FMCG Companies in India were that of Colgate and HUL. No wonder then that till late 1950s the monthly consumption of an average Indian middle class household was just about Rs. 70. Till then, the level of aspiration he had was restricted to owning a fountain pen, a cycle and a watch! I missed mentioning here that India got its very own branded fountain pen only in 1955 and there are stories of how the body had to be usually masked with a sticking tape to avoid leakage of ink. 1969 saw the entry of Nestle in India. Coca Cola came in by 1957. The Indian FMCG companies till then who were fast filling the shelves of retailers with their brands were – Dabur (till a long time it was just into Ayurvedic products), Godrej and TOMCO which was later taken over by Hindustan Lever.
Means of communications were visibly absent. Radio wasn’t in the reach of a common man forget having a television at home. Till late 1970s Illustrated Weekly was the only magazine hence where and how would brands advertise then? Had it not been for Lal Bahadur Shastri’s intervention, perhaps we still would have just been tuning to Radio Cylon. It was he who under his reign launched Vividh Bharti. In 1972 Mumbai saw the launch of the television! The trend of owning a television set then mushroomed during the 1980s. That is when information explosion and information bombardment started happening and advertisers were there plenty many!
The advent of branded garments swept the wardrobes in the early 1980s and post that there has been no looking back in this category which witnesses the launch of a new clothing apparel brand almost on a daily basis. The MRP concept in the country came in mid 1980s. Till then it was just the concept of a 5 per cent mark-up. To mention about the concept of super markets, the country truly speaking didn’t have one as till mid 1960s, 99 per cent of the stores were less than 500 sq.ft. But it is of importance to mention that department stores as a concept existed in the country since the time of the British regime. 1962 saw the setting of a super market with Delhi Super Bazaar and it was in the 1970s that super-markets were to be seen but thanks to the Co-operatives who in all sense need to be credited to have launched and set the ball rolling for the concept of ‘modern retailing’ in India.
Now, after learning about all this, isn’t it an obvious question to ask that how and why would multi-nationals enter the country then and why then we didn’t have the concept of modern retail in India?
1970s saw the aspirational levels of an average Indian middle class graduating to owning a two wheeler and a refrigerator. It was a transition in 1990s with the same target audience now wanting a flat, a car and a foreign tour. Gradually we then saw the mindset being comfortable with spending rather than always wanting to save. Things changed largely with the then Finance Minister – Manmohan Singh opening the doors of India to Liberalization, Globalization and Industrialization. A lot of consumer goods importing began in the country and this was also with more and more Indians going abroad for work and study. Top industrial houses of the country jumped into retail – Tata’s, Birla’s. Goenka’s, Marico etc.
The contribution from South India in setting the ball rolling for organized retail in the country has been significant with industry players there taking a lead to establish the first organized retail chains in the food and grocery segment in India with stores such as Nilgiri’s, FoodWorld, Margin Free etc. The Consumer Durables segment too has its root from down South with regional players like Vivek’s, Giria’s, Pai International etc. Additionaly, India saw its first mall in Chennai in 1997 – The Spencer Plaza. Mumbai saw the opening of Crossroads but eventually it had to shut shop as it went wrong on many aspects – the major being not adhering to following the basics of mall management which includes have 5 anchor tenants – each from the category of a hyper or a bigger super market, a successful / well established departmental store, a food court, a multiplex / entertainment zone and a well known food chain. But this failure was well taken note of the future malls setting themselves in the country and those which followed the basic principles succeeded whereas the rest had to change their strategy and have the property used for commercial office space.
Foreign Direct Investment in India in Cash and Carry Wholesale was allowed in 1997 but soon it faced a roadblock on its way to success when it required Government permission. Though, in 2006 the approval requirement was relaxed and automatic permission was granted. Between 2000 to 2010, Indian retail attracted about $1.8 billion in foreign direct investment but this was representing a very small 1.5 per cent of total investment flow into India.
Till date, India’s retailing industry is essentially owner manned small shops – the mom and pop stores that is. Considering the entire concept of modern retail in the country is relatively new, we shouldn’t feel ashamed to accept that larger format convenience stores and supermarkets account to just about 5 – 6 per cent of the industry today and majority of this are to be found in the urban centres. As for employment generation, with the industry maturing with each passing day, we shall see the figures rising high from the current figure of about 4 per cent of the Indian population. The Indian Central Government denied FDI in Multi-Brand Retail till 2011 forbidding foreign groups from any ownership in supermarkets, convenience stores or any retail outlets. Even single brand retail was limited to 52 per cent ownership and it involved a lengthy bureaucratic process. But as soon as the Government announced retail reforms in November 2011 for both multi-brand stores and single-brand stores, the entire industry saw high pitched activities taking place in various genres – from IT to Innovation to Customer Service Initiatives etc. This was primarily undertaken to prepare for competition that would arise from the entire of players like Walmart, Carrefour, Tesco, IKEA etc. But this excitement was short lived as the announcement met with strong opposition but the speculations continued hence the momentum as such was not lost. January 2012, we had the Government approving for reforms in Single-brand stores welcoming anyone in the world to innovate in Indian retail market with 100 per cent ownership provided that they should source 30 percent of its goods from India.
On 14 September 2012, the Government of India announced the opening of FDI in multi-brand retail, subject to approvals by individual states. This decision has been welcomed by economists and the markets, however has caused protests and an upheaval in India's central government's political coalition structure. On 20 September 2012, the Government of India formally notified the FDI reforms for single and multi brand retail, thereby making it effective under Indian law. On 7 December 2012, the Federal Government of India allowed 51 per cent FDI in multi-brand retail in India. They managed to get the approval of multi-brand retail in the Parliament despite heavy uproar from the opposition. Some states will allow foreign supermarkets like Walmart, Tesco and Carrefour to open while other states will not.
The Governments of some states, particularly Congress-ruled states have said they will allow Foreign supermarkets to open in their state. Andhra Pradesh, Assam, Delhi, Haryana, Maharashtra, Manipur, Rajasthan, Uttarakhand, Daman and Diu and Nagar Haveli would welcome the foreign retailers in their states. The states that have refused to open themselves for any international players are – West Bengal, Gujarat, Bihar, Karnataka, Kerala, Madhya Pradesh, Tripura and Orissa.
Supporters of retail reform who have voiced the need to promote organized retail include Chief Ministers of several states of India, several belonging to political parties that have no affiliation with Congress-led central government of India. The list includes the Chief Ministers of Maharashtra, Andhra Pradesh, Tamil Nadu and Gujarat. In a report submitted earlier in 2011, these Chief Ministers urged the Prime Minister to prioritize reforms to help promote organized retail, shorten the retail path from farm to consumer, allow organized retail to buy direct from farmers at remunerative produce prices, and reduce farm to retail costs. Similarly, the Chief Minister of Delhi has come out in support of the retail reform,] as have the Chief Ministers of the two farming states of Haryana and Punjab in North India. The Chief Ministers of Haryana and Punjab claim that the announced retail reforms will immensely benefit farmers in their states. The Chief Minister of the state of Maharashtra - the state with the biggest GDP in India and home to its financial capital Mumbai - has also welcomed the retail reform..
Tarun Gogoi, the Chief Minister of Assam, an eastern state in India, announcing his support to the retail reform, claimed "this will go a long way in bringing about a sea change in rural economy. The decision will boost agriculture and allied sectors, manufacturing, logistics, integrated cold chains, refrigerated transportation and food processing facilities in a big way."
Today, the organized retail market is growing at almost 35 per cent annually while growth of unorganized retail sector is pegged at 6 per cent. This shows the potential of the industry at large.
India as a country is an amalgamation of various communities and cultures. The potential of retail in the country is immense with the possibility of customizing retail options based on the area of operation and its catchment. Success in retail is no rocket science as long as the basics are adhered to.
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