Improved ease of doing business, and better clarity regarding foreign direct investment (FDI) regulations helped improve India’s ranking in the 2016 Global Retail Development Index™ (GRDI).
It is ranked second in GRDI 2016, up from 15th position in 2015.
“India’s strong ranking reflects foreigner retailers’ increased optimism in its retail market and its vast growth potential. India has relaxed several key FDI regulations in single-brand retail and this has paved the way for multinational firms to enter the market,” said Debashish Mukherjee, a partner with A.T. Kearney and co-head of the Consumer Industries & Retail Products Practice for India and Southeast Asia.
“Additionally, we expect to see e-commerce to propel India’s growth and make it a more attractive proposition,” said Mukherjee.
“However, there are some challenges as well. India remains a challenging and complex market for foreign retailers, where understanding dynamics at the state level is important,” he also pointed out.
“Meanwhile, infrastructure bottlenecks including labour laws, complex regulations, high labour attrition rates, and limited high-quality retail space remain areas of concerns for retailers,” he said.
India’s retail sector has expanded at a compound annual growth rate of 8.8 percent between 2013 and 2015, with annual sales crossing the USD1trillion mark, said A. T. Kearney, a London-based business consultancy.
India has also become the world’s fastest growing economy. That coupled with a large population base and the easing of Foreign Direct Investment (FDI) regulations in the sector has made it an even more attractive market, it said in the ranking.
India’s retail sector has also benefited from the rapid growth in e-commerce. India is the world’s second largest internet market and the increasing internet and smartphone penetration is contributing to the expansion of e-commerce.
As Indian consumers become more comfortable with shopping online, venture capital and private equity firms have boosted investment in the sector providing further momentum.
In the past year, several foreign retailers have entered India. In fashion, Aeropostale, The Gap and The Children’s Place entered in partnerships with Arvind Lifestyles Brands.
Topshop and Topman entered via e-commerce through Jabong.com, while H&M became the first international fashion retailer to enter alone after the government approved 100 percent FDI in single-brand retail.
Other sectors also saw multiple entrants including sports (Sonae, under the Sport Zone banner), restaurants (Wendy’s, Jamie’s Italian, Jamie’s Pizzeria, Barcelos, and Carl’s Jr.), and convenience stores (UAE-based Fmart). And among existing international retailers, Marks & Spencer, Burger King, Dunkin’ Donuts, Starbucks, and Nando’s undertook significant expansion programs.
In terms of formats, the cash-and-carry model is still thriving and seen as profitable. Existing players, Walmart and Metro, plan to expand their store bases, targeting 70 and 50 stores, respectively by 2020.
The GRDI ranks the top 30 developing countries for retail investment worldwide with China ranked number one this year.
The Index analyses 25 macroeconomic and retail-specific variables to help retailers devise successful global strategies to identify emerging market investment opportunities. The study is unique in that it not only identifies the markets that are most attractive today, but also those that offer future potential. fii-news.com
