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International Journal on Emerging Technologies 5(1): 69-73(2014)

ISSN No. (Online) : 2249-3255

Retail Sector: Growth and challenges perspective in India

Kamal and Ashish Kumar
*Junior Research Fellow, MDU, Rohtak, (HR) India
**Junior Research Fellow, Haryana School of Business, GJUS & T, Hisar, (HR) India
(Corresponding author: Kamal)
(Received 05 January, 2014 Accepted 19 March, 2014)
ABSTRACT: The Indian Retail Industry having the fifth largest place in the world. It comprising organized
and unorganized sectors, Indian retail industry has one of the fastest growing industries in India. Indian
Retail Industry is growing from US$330 billion in 2007 to US$640 billion by 2015. The retail sector is one of
the fastest growing sector in India, having the world's second largest place in consumer market. Retailing has
the major business activities in India and leading sources of employment generation in India. Due to extreme
change in the behavior, taste and preferences of the consumer, and the growing economy, earning capacity,
less time and fast track life makes the emerging challenge in the retail sector of India.
Indian retail sector mainly divided into two parts unorganised and organised retail. Organizes retail has
limited market share in comparison of unorganized retail sector. Recently Indian Government allowed FDI
in single brand retailing and multi brand retail which comprises challenges for retail industry.
The purpose of this paper is to find out the growth and challenges in Indian retail industry and major
problems for Indian retailers and as well as for the foreign retailers. This paper shows the detailed
information about the growth and challenges of retail industry in India. The paper reveals that how since
past few years retailing has been an promising industry and opened door for the retailers and foreign
investors. Due to changing in the scenario of worlds economy retail sector attracts the attention of scholars to
make some efforts relating to study of growth and challenges. Since efforts have been made in this paper to
highlights the present status, growth, opportunities and problems of retail sector in India.
Keywords : Retailing, Organized and Unorganized sector, FDI, Worlds Economy.
INTRODUCTION
According to a definition the word "Retail" had
originates from a French-Italian word. Retailer is a
person who cuts off or sheds a small piece from
something. Retailing is the set of activities that markets
products or services to final consumers for their own
personal or household use. India having the 5th largest
place in the worlds retail market . The country gets
fourth rank among the survey of 30 countries in terms
of global retail development. The market size in 2010
was estimated at US$ 353 bn (Source: IBEF) which is
expected to reach US$ 543 bn by 2014 from current
growth rates. Retailing has played a important role in
the world to increasing the productivity across a wide
range of consumer goods and services. In the developed
countries, the organised retail sector having almost
80% of the total retail industry . But in contrast, India
organised retail sector having 8% of the total retail
industry. This highlights shows the terrific potential for
retail sector growth in India.
In India retail sector is one of the major pillars of
economy who comprises 14 to 15 percent of its GDP.

The Indian retail market is estimated to be US$ 450

billion and having fifth place in retail markets of the
world by economic value. India has one of the fastest
growing retail markets of the world in context of
customer, which having 1.2 billion customer. As of
2013, India's retailing industry was owner manned
small shops. In 2010, larger format like as convenience
stores and supermarkets having only 4 percent of the
industry, and these were presented only in large urban
centers. India's retail industry employs to the 40 million
Indians which is 3.3% of total population of India.
Usually Indian retail shops are very small in size. Out
of 14 million outlets situated in the country only 4% of
them having larger than 500 sq ft space. India has only
11 shops outlets for each 1000 people. A majority of
the unorganized retail shops in India employ by family
members, they do not have the scale to procure and
transport products at high volume wholesale level. They
have limited information related to quality control and
fake-versus-authentic product screening technology.
They have no training about safety and hygienic
storage, packaging or logistics of the product.

Kamal and Kumar

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The unorganized retail shops purchase their products

from middlemen who spot up the product as it moves
from farmer or producer to the consumer. The
unorganized retail shops not offer after-sales support or
service to their customers. Most of the transactions at
unorganized retail shops are done with cash.
Types of Retailing: In India there are mainly two types
of retailing sector one is organised and another one
unorganised. In India Organised retailing refers to
trading activities undertaken by licensed retailers, those

who are registered for sales tax, income tax, etc. These
include the publicly traded supermarkets, corporatebacked hypermarkets and retail chains, and also the
privately owned large retail businesses.
On the other hand Unorganised retailing refers to the
traditional formats of low-cost retailing. For example,
the local corner shops, owner manned general stores,
paan/beedi shops, convenience stores, hand cart and
pavement vendors, etc.

Currently India having only 8% of organized retail

sector and remaining 92% is captured by unorganized,
which may grow much faster than traditional or
unorganised retail sector . It is expected to gain a large
share in the growing retail market in India. Various
estimates states that the share of organized retail will
increases as 20% by 2020.
The growth pattern of the organised retail sector and the
consumption made by the Indian population may follow
a rising trend which helps the new businessmen to enter
the Indian Retail sector.
The traditional or unorganised retail industry is
expected to grow at an average rate of 5% annually
over the next year, while the organised retail is
estimated to grow a rate of around 25% annually during
the same period.

and more social activities. Indian retail sector has

opening new doors for the foreign retailers. Indian
government also allowing foreign investors in retail
sector which makes threat for Indian retailers.
According to Sunita sikri and Dipti wadhwa the Indian
Retail sector having the fifth largest place in the world
retailing sector. There are mainly two types of retail
sector organized and unorganized. Indian retail industry
is growing rapidly over the last few years. Though the
retail market in India is mostly captured by unorganized
retail sector, however with the change of taste and
preferences of consumers, the organised Industry is
getting more popular in these days and the share of this
sector is growing.
Sanjay Manocha and Anoop Pandey states that the
retail market is changing rapidly in India and a large
scale investments made by foreign and domestic
players in India. Market liberalization and changing
consumer taste, preferences and behaviour have shown
the retail transformation. India is witnessing changing
life styles, increased incomes, the demographic
variabilitys and energetic democracy. Indian retailing
is expanding the area and is expected to reach at
US$637 billions by 2015. Finally he concluded that
Retailing provides a important link between producers
and consumers in modern market economy.

II. REVIEW OF LITERATURE

According to Haritima Negi Rawat Retail industry is
the most growing sector in current scenario of Indian
market. It will provide more opportunities for retailers
and investors in near future. The growth of the
organized retail industry in the country will generate
thousands of new jobs, which increases the income
levels and living standards of people and make better
products, and services, a better shopping experience,

Kamal and Kumar

Retailing in India is most dynamic industry and provide
a huge opportunity for domestic and international
retailers.
According to Pawan kumar in the era of globalization
economy has changes rapidly in which retail sector also
changing from traditional or unorganised to organized
retailing. Due to changing in the scenario of world,s
economy the retail sector attracts attention of scholars
to make some efforts relating to study of opportunities
and challenges. The changes in the retail sector make
the contribution in the growth of GDP of the country.
On the basis of above review literature many challenges
and problem comes out. Retail sector is growing rapidly
but in comparison of organised and unorganised retail
sector the most of the market is captured by
unorganised retailing. Organised retailing is growing
but not according to expectation of the retailers.
III. CHALLENGES IN RETAIL SECTOR

Retail productivity in India is very low

comparison to international. Total retail
employment in India from organized and
unorganized is 3.3% of Indian labor work
force out of which mostly related to the
unorganised retail sector.
Indian retailing is still dominated by the
unorganized sector in comparison of organised
sector. There is still a lack of efficient supply
chain management in retail sector.
Most of the retail outlets in India are having
less than 500 square feet in size.
Many political parties in India have opposed
FDI in retail sector. A political change in state
and central governments can puts a lot of
political risk on investment in retail sector.
Trained manpower is a challenge for the
organized retail sector in India. The Indian
retailers have difficulty to finding the trained
manpower and also have to pay more to retain
them.
The lack of proper infrastructure and
distribution channels in the country results in
inefficient processes in retailing. This is a
major problem for retailers as a non-efficient
distribution channel is very difficult to handle
and can result in huge losses for them.
Different structure of sales tax in different
states. Taxation laws that does not favor small
retailers.

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IV. GROWTH TRENDS IN INDIAN RETAIL

INDUSTRY

Retail industry has been on a growth trend

over the past few years. With the growth of
economy back on track, retailers are making
their expansion plans. The retail industry is
expected to grow at a rate of 12% per annum
for the next 5 years.
The Indian retail industry has growth of
10.6% between 2010 and 2012 and is expected
to increase to US$ 750-850 billion by 2015.
The current sign of Government to initiate
Foreign Direct Investment (FDI) in various
sectors is bringing a new interest to the
investment climate in India and more and
more foreign marketers attracting towards
Indian retail market.
Higher incomes motivating the purchase of
essential and nonessential products which
contributing in the growth of the retail sector.

Consumption patterns of Indian customers are

changing.
Increase in easy access to credit and consumer
awareness.
New technology and lifestyle trends creating
replacement demand.
Increase in rural income as well as
urbanization of the population.
Objective of the study
This research Paper is prepared for the purpose of find
out growth and challenges of retail sector in India. At
the end paper will cover each objective comfortably
followed by conclusion.
Research methodology
This paper is based on secondary data and Information
has been sourced from various books, trade journals,
government publications, newspapers etc. and research
is descriptive in nature.
V. FUTURE
SECTOR

SCOPE

IN

INDIAN

RETAIL

Organized retail is a new phenomenon in India and the

market is growing very rapidly. The middle class
growing very rapidly that is important factor which
contributing in the growth of Indian retail sector.
According to a report up to 2030, it is estimated that
currently 21 million household converted into 91
million households who are middle class.

Kamal and Kumar

India's modern consumption level is leads to double

within five years to US$ 1.5 trillion from the present
level of US$ 750 billion. India is set for high growth in
consumer expenditure. With India's large young
population and high domestic consumption, the trends
for the retail sector look favorable and expandable.
Online retail business is also an important format which
has high potential for growth in the near future. The
online retail segment in India is growing at an annual
rate of 35 per cent, which would take its value from Rs
2,000 crore (US$ 429.5 million) in 2011 to Rs 7,000
crore (US$ 1.5 billion) by 2015.These days most of the
companies want to sell their products online because it
attract a mass number of customers.
VI. CONCLUSION
The Indian retail sector has experienced high growth
rate over the last decade with a visible shift towards
unorganised retailing to organized retailing formats.
The retailing industry is moving towards a modern
concept. The size of India's retail market was estimated
at US$ 435 billion in 2010. Out of which, 92% of the
market was traditional or unorganised retail and 8% of
the market was organized retail. India's retail market is
expected to grow at 7% over the next 10 years, reaching
a size of US$ 850 billion by 2020. Traditional retail is
probable to grow at 5% and reach a size of US$ 650
billion while organized retail is probable to grow at
25% and reach a size of US$ 200 billion by 2020.
Modern retail sector in India could be worth US$ 175200 billion by 2016. The Food Retail Industry in India
also growing rapidly. The Mobile phone Retail Industry
in India has already a US$ 16.7 billion business,
growing from rate of 20 per cent annually.

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The future of the India Retail Industry shows potential

with the growing of the market, government policies
becoming more favorable and the emerging
technologies make facilitating to retailing.
Young Indians are purchases mobile phones, fashion,
accessories, food and beverages, quick service
restaurants, etc who makes the contribution in growth
of retail sector. Young Indians have spending more
money than before and they have independence,
aspirations and a lot of demand for products. The Indian
retail sector is developing rapidly and those who want
to enter in the market now can learn about local
dynamics, develop market insights and establish
leadership positions. Online retail business is another
format which has high potential for growth in the near
future.
So finally we conclude that retail sector is grooming
with rapidly and also shifting from unorganised sector
to organised sector retailing.
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