By Chethan Guduru Reddy
India has taken a step forward, surpassing China as the most attractive global retail market, according to A.T. Kearney’s annual Global Retail Development Index. The index rates a country’s attractiveness as a retail market based on four relevant factors, namely, market attractiveness, country risk, market saturation, and time pressure. This has resulted in over 50 global retailers planning to enter India within the next six months.
Making the growing retail market more attractive
Prime Minister Modi’s government has made it easier to do business in India by changing the rules surrounding Foreign Direct Investment (FDI) for single brand retail. Permission has also been granted for 100% foreign ownership in B2B e-commerce and for retailers who sell food products made in India. When companies are allowed to have higher ownership stakes in their overseas operations, markets become more enticing. This is because the company is entitled to a higher share of the profits it generates.
The Indian economy as a whole is expected to grow at 7.4 percent in 2017 and at 7.6 percent in 2018. This trend will help increase the size and disposable income of the middle class and encourage spending on non-essential items. Reports suggest that while the Indian retail market was worth $641 billion in 2016, it is expected to erupt to $1.6 trillion by 2026. These trends, combined with a very low market saturation in India, point to a huge potential for retailers in the Indian market.
Encouraging the potential of mobile shopping
Last year alone, mobile shopping grew by almost 121 percent, with 50 percent of online shoppers preferring mobile shopping. This is being supported by a rapid expansion in 3G and 4G coverage and drop in the prices of mobile devices and data plans. All this adds up to a huge increase in a brand’s exposure and engagement with individual consumers This fact will certainly drive up sales as brands are able to reach customers with unprecedented efficiency.
Despite the burst in mobile popularity and internet access, connectivity issues abound and hinder the efficiency and popularity of online transactions. Retailers are hence taking major steps to remedy the issue. In this regard, Amazon recently purchased the Indian online payment company, Emvantage, to streamline the payment process. Snapdeal has also taken steps to address connectivity issues by shortening the mobile buying process to three quick steps. These efforts have paid off in a big way with Snapdeal witnessing a rise in mobile sales by 55% in 14 months. Similarly, Flipkart has worked with browsers to make a ‘lite’ version of its mobile shopping site to deal with the poor connection.
As these online retailers gain power, it is also becoming easier for brands to enter the Indian market. This is because the mobile space bypasses the need for brick and mortar stores, joint ventures, franchise models, or training of associates. All these factors encourage brands that are looking to enter the Indian market.
The need for an internet boost
India is home to 1.3 billion people. Despite this, only 22 percent of Indian adults have obtained internet access in 2015. It must be kept in mind that all the facts that have been presented so far are despite this abysmal internet reach. Imagine what kind of sky-high potential will exist when India is a more connected nation. This is clearly reflected in Prime Minister Modi’s efforts to get all of India online. Through the Digital India Initiative, more than 40,000 villages are expected to be online by 2018. The initiative eventually aims to increase the availability of high-speed internet to include all citizens.
Smarter supplementary efforts are required
In light of all these factors, many global retailers are eager to enter the Indian market and establish a presence as quickly as possible. However, despite the potential, brands should remain cognizant that a favourable market is never enough to ensure success. Each brand must carefully consider its strategy for the Indian market and clearly understand its value proposition. It must accordingly tailor its approach to this market in order to reap the greatest financial benefits. A naive approach to entering India is sure to end in failure and financial loss.
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