International Retailers Savour India’s Retail Dream

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British retailer Marks and Spencer Group Plc (M&S), which operates in India through a joint venture with MukeshAmbani-promoted Reliance Retail Ltd, is developing an alternative model for expansion in India. The company has opened five pilot standalone beauty and lingerie stores in India and plans to open one more in March.

#DigitalErra Thought Corner

India’s retail market is expected to grow to $1.1 trillion by 2020 on the back of income growth, urbanization and attitudinal shifts. The organized retail sector which is estimated to reach approx.18-20% of the total sector, by 2020, is growing at a rate of 20%-25% p.a.

M&S have five standalone beauty and lingerie stores and it is a special format which they are trying out only in India.

“India will continue to be a big and one of the most important markets for us. India has the highest number of stores outside the UK. With India growing at close to 7%, a population of 1-1.2 billion, a sizeable chunk of consumers under the age of 35 years and the disposable income continuously growing, we expect to grow at a similar pace. India is one of the top five sourcing hubs for us globally. 30% of M&S clothing products sold in India is sourced from India. Plus, India is the only country where we have airport stores,”Venu Nair, MD, Marks & Spencer Reliance India said.

The sentiment in India’s retail market remains optimistic witnessing growth not only in the major metropolitan cities, but also spanning across numerous tier 2 and tier 3 locations, providing enhanced business opportunities for retailers.

Global Retail Brands Foraying India

Retailers, especially from US and Europe, have been showing increasing interest in the India market, due to the growing opportunities in this sector. This is highlighted by the fact that more than 40 major international brands have entered the country in the last two years.

Around a decade ago, government relaxed norms restricting foreign investment into retail. Sensing the opportunity, European biggies such as Marks and Spencer And Benetton, which already had stores in India through franchise and licensing agreements, were joined by Mango, Next and Debenhams as well as big Spanish fashion group Inditex, the owner of the Zara and Massimo Dutti brands.

H&M, Gap and Adidas followed them after further reforms in 2012 that allowed international retailers to trade under their own names provided they sourced 30 per cent of their materials locally.

Seeing Rise In Sales

Inditex Trent Retail India, the joint venture between Zara’s owner and the retail arm of the Indian conglomerate Tata, recorded a rise in sales of 16.9 per cent to $125m for the year to March 31st 2016. H&M reported sales of $68m in the year to the end of November, only a year after its launch in the country. Also, things changed for M&S after it partnered with Reliance Retail, a unit of the Indian conglomerate Reliance Industries, and developed a domestic supply chain. Last year (FY16), their sales were up by 17% and this year (FY17), the sales grew by 21% in the first half.

“Through our local sourcing of around 60 per cent of which is from south Asia, we are competitively priced in India,” says Venu Nair, managing director for Marks and Spencer Reliance India.

Conclusion

Foreign retailers are embarking on ambitious expansion plans in India, where regulatory reform, the rise of e-commerce and shifting attitudes towards female clothing are finally widening access to a challenging market.India remains a highly competitive market for pricing. Understanding the consumer psyche would be the key to succeed for global retailers in India.

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