The country presents retailers with growth opportunities, including some advantages that can’t be found in China
Lately there’s been much talk and worry about China’s long-term growth prospects and what that means for retailers counting on expanding in the country. Certainly, China seems to be in a time of transition, in which consumption seems destined to fall after years of strong and steady surges.
Meanwhile, India also presents retailers with growth opportunities, including some advantages that can’t be found in China.
Already, American brands constitute a large 35% of all foreign brands in India, followed by U.K. brands, at 12%, Italian and French brands at 8% each, and Japanese, Swiss, and German brands at 5% each, according to a 2015 Indian retail report from London-based real estate consultancy Knight Frank.
In fact, Apple Inc. just last week confirmed that it has applied to India’s Department of Industrial Policy and Promotion to open and run its own stores there, a sign that it sees potential in the country.
“I expect to see a lot of action in the next 10 years in India,” Venkat Viswanathan, founder-CEO of LatentView Analytics Corporation, told Retail Dive. “I believe we are still at a very early stage of realizing the potential of a market the size of India, and that it’s only a matter of time that India becomes an equally big part of the [business] ecosystem.”
Language, just the beginning
English is an official language in India, and serves as a common language for many of the sub-populations there. Therefore, language isn’t the barrier for businesses doing business there, including retailers selling to Indian consumers.
Furthermore, while in China there’s a Chinese equivalent to Facebook, Twitter, and other social media platforms, the most widely used ones in India are the very ones that are widely used in the U.S. India gives Facebook its second-largest membership base, after the U.S. That means brands have one less barrier to bust through when reaching Indian consumers.
And, while the Indian government’s official statistics aren’t quite as credible as those released by U.S. government agencies, says Viswanathan, they’re deemed by most as more solid than numbers released by the Chinese government, which are widely seen as untrustworthy and even confusing. (Something that has only served to increase the level of uncertainty and worry about China’s future.) India’s equivalent of the Federal Reserve is considered highly credible, says Viswanathan, and what he calls the “reasonably strong English press,” a strong judiciary, and the open and democratic parliamentary system that supports questioning and debate—plus the strength of the private sector—all help give companies doing business in India some solid ground to build on.
Growth potential
But above all, our experts say, India, with a population that includes a large young, mobile-first generation and a growing middle class, presents a lot of growth potential for retailers.
A study from the Internet and Mobile Association of India last year found that there were 52 million new internet users there in the first six months of 2015, bringing the country’s total user base to 352 million as of June. And of those, 213 million, more than 60% accessed the web through their mobile devices.
As internet and mobile use has exploded, not surprisingly, so has e-commerce. India’s top 25 retail websites took some 62% of all traffic there, according to digital market intelligence company SimilarWeb. While e-commerce is still a small fraction of retail in India—some 4% to 6%—it’s growing rapidly and expected to scale up exponentially in coming years.
How Amazon is changing the game
Amazon, as it has done here, is giving retailers in India fits. India’s best known online marketplace, Flipkart, looks like it’s being overtaken by Amazon, even though Amazon India wasn’t established there until two years ago. In December, for example, Amazon India registered 163.1 million monthly web visits (mobile plus desktop) compared to Flipkart’s 122.8 million, according to SimilarWeb. However, Flipkart still dominates via its mobile app, which is installed on 35% of mobile devices in India, according to SimilarWeb, at least for now.
“Amazon is giving all the India players a run for their money,” says Viswanathan. “Step by step they’ve introduced all the new concepts have in the U.S., including Prime, which this year is expected to change the way all these marketplaces operate.”
Challenges in India
While many startups in India have garnered attention and money, Viswanathan says that some of that will ease up as investors get pickier about where they put their money (a smaller version of the tech bubble that many expect will burst before long, or at least deflate).
But a more concrete challenge for retailers is the reality that, while mobile is well established and e-commerce is growing, the physical infrastructure needed to get goods from point A to point B is in need of further development, says Viswanathan.
While retailers are used to being able to offer two-day shipping to just about anywhere in the U.S. or Europe, he says, that’s just not possible in many parts of India.
“Many retailers assume such things exist in India and then have to completely reinvent their logistics,” he says. “Anyone with physical goods will encounter the real India, and have to adapt to the logistics realities in India.”
However, that could also mean that state-of-the-art fulfillment capabilities like drones could do well there, especially as demand for such goods heats up.
