New Market Research Report: BMI India Retail Report Q2 2016

The Indian retail market benefits from a number of factors that will increase opportunities for retailers in the medium and long term. The size of the population is one key attribute, creating a large pool of potential customers, while the key 20-39 year old demographic is also large, creating good opportunities for retailers to establish brand loyalty among young urban dwellers who are keen for an aspirational retail experience. The main urban centres already benefit from shopping malls and Western retail outlets, and the market for luxury goods is significant.

However, most Indians are still rural dwellers, and the agriculture sector is a major employer. As agricultural incomes are typically low, and workers in the sector are affected by unstable weather patterns as well as underemployment, this limits the participation a large majority of the population can have in the modern retail sector. Indeed, while incomes are rising, they will remain small, with low, with only 10% of Indian households forecast to have a net income of USD10,000 or over by 2020. This means that retail spending will continue to be skewed in favour of essential purchases and non-organised retail, while rural dwellers, and retailers seeking to access this market, are hampered by poor transport infrastructure, which raises costs dramatically.

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While essentials, notably food and drink, transport and housing and utilities, will still account for the lion's share of retail spending in India over our forecast period, non-essential spending such as on restaurants and hotels is growing rapidly from a low base, and spending on areas such as health and education is also growing rapidly.

Key Views And Developments

In November 2015 the regulations surrounding foreign direct investment in retail were relaxed, with foreign retailers now allowed to set up online sites to complement physical stores.

GAP and H&M, two international fashion retailers, both entered the market in 2015.

Online retailers have been setting up m-commerce websites to take advantage of the growing m-commerce market. Sites include Flipkart Lite and Snap-Lite, while Amazon also has a mobile site.

Amazon claims to be the market leader in Indian online retail in terms of site visits

India's population is set to reach 1.39bn in 2020, while the urban population is also growing, and is set to reach 34.8% of the total by 2020.

Unemployment is set to remain low, at 3.2% over our forecast period.

The percentage of households earning a net income of USD5,000 and over is set to rise significantly over our forecast period, from 20.8% in 2015 to 49.4% in 2020.

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