Size of Retail in India

The retail trade in India is highly fragmented in nature and it is often remarked that retail in India is nascent and mostly unorganized. While this may be the case viewed from, a mature developed world perspective, the reality is that not only agricultural produce but also manufactured goods such as toiletries, tobacco products and even basic electrical / electronic devices are available in the remotest corner of India.

What one sees of the retail sector in India is just the tip of the iceberg. As retail is not regarded as an industry in India, it is difficult to get a correct picture of the size of this sector. The local grocery store, the road side betel leaf (pan) stalls and the vegetable vendor who are much a part of the Indian retail, landscape are termed by many as the unorganized sector. While it is true that they do not use technology, they are well aware of the needs and wants of their customers, they know what and how much to stock and are aware of their likes and dislikes. Many of them would also know their customers by name and offer add on services like free home delivery and credit facilities.This is the traditional form of retail in India.

While it is true that traditional formats exist in all markets of the world, the level of maturity of the market determines the dependence on the formats — traditional or modern. In the year 2006, the Indian retail market was estimated at Rs 1,200,000 crores, of which the organized market is estimated to stand at Rs 55,000 crores. At this juncture, it needs to be noted that since the size of the unorganized trade is significantly larger than the size of the organized trade, it is difficult to get an exact picture of the true size of the business. Figures given by various agencies vary. Students need to remember that figures that have been taken into consideration have been used to illustrate the size of the sector and its significance in the trade today.

A large number of research houses, consultants and industry federations have speculated on the size that Indian retail is likely to touch in the years to come. A common refrain has been that organized retail in India is expected to grow at 25 – 30 per cent per annum in the next 5 – 6 years, while total retail as a sector would grow at the rate of 5% per annum.

In the following section, we analyze prominent sector in Indian retail with respect to the composition of the sector, key players and the estimated size of the market. As stated earlier, since exact figures from the industry and its various segments are not available, the size and projected growth of the sectors have been taken from various industry estimates and reports.

Segment 1: Food and Grocery

The Composition of the Sector>

Food as a sector has been defined to comprise of food and grocery and the food and beverages sector which would include catering services and restaurants, fast food centers etc. This would mean the providers of food and catering services like meals, snacks and or beverages by way of dine in or take away or delivery service.

The Indian food and groceries sector can be divided into fresh groceries, branded packaged foods, personal hygiene products and toiletries and dry unprocessed groceries.

The Size of the Sector:

The Food & grocery segment constitutes 62% of the Rs 1,200,000 crores Indian retail market. On the basis of the estimates given by the Central Statistical Organization, just 0.8 % of this retail segment is in the organized sector. At 2003-04 constant prices, the total market size of this retail segment is estimated at around Rs 642,200 crores. The organized segment is valued at Rs 5,000 crores.