Photo: iStock
India Is the New American Retail Frontier
According to Insider Intelligence, “As sales slow in the U.S. and China faces an uncertain path to recovery, more retailers are turning to India for growth.” Additionally, the report expects “India to be the fastest-growing retail market this year, with retail sales increasing by 11.0% to $1.386 trillion.”
It’s no secret that India is steadily becoming the most populous country in the world, with an estimated 1.425 billion people and rising in 2023, per the United Nations in April, as China’s population of 1.426 billion has been on a decline since 2022.
Although there are extreme contrasts between poor and rich people, CTMfile reports that India is currently “the world’s fifth-largest economy, and is likely to overtake Germany and Japan to become the third biggest economy globally by 2030, as stated by both S&P Global and Morgan Stanley.” The International Monetary Fund (IMF) also projects India to be the fastest-growing economy in the world in 2023.
And retail brands have taken notice.
Apple has already proven its belief in the country by ramping up production of Apple products in India and opening up more Apple retail stores. Levi’s has chosen to open their largest store in Asia in Bengaluru, prioritizing India as their primary market for future growth. Luxury brands from Europe, like Christian Dior, are also keen on what’s going on and are choosing to hold runway shows in places like Mumbai.
Nonprofit Oxfam recently estimated that “the country minted 70 millionaires daily between 2018 and 2022.” L’Oréal’s products division president claimed that the “upper half of the Indian middle class” is responsible for 70% of their product sales. This market segment is expected to exponentially grow in the years to come.
In response, Walmart, Amazon, Meta, McLaren, Valentino, and Balenciaga have already taken root in India through various business means. Gap has also partnered with India’s largest retailer, Reliance Retail. As a result, 50 Gap brand stores are planned to be fully opened and operational across India before the end of 2023.
It doesn’t stop there. Dunhill, Roberto Cavalli, Lavazza, Armani Caffè, Foot Locker, Tim Hortons, Pottery Barn, and Uniqlo are all planning expansion into India.
Furthermore, India is poised to become the major manufacturing hub for the United States in all of Asia. According to Yahoo Finance, “India’s Prime Minister Narendra Modi believes that U.S. companies looking to move their global manufacturing supply chains to the South Asian country isn’t a conscious move to upend China but simply ‘India gaining its rightful position in the world.’”
Going beyond retail for a moment, the U.S. has already announced plans to “help India develop standards for goods and services and train workers in sectors of strategic interest such as semiconductor manufacturing,” according to Livemint.
As reported by CTMfile, the supply chain crisis has also led globalization efforts to focus on a new “China Plus One” business strategy that steers corporations away from investing only in China by diversifying their business operations and supply chains to multiple countries. And that’s most likely what’s at the forefront of every major business’s mind at the moment.
Discussion Questions
What are your thoughts on the future of companies expanding to India and continuing the globalization of retail? Should every business aim to take root in India as soon as possible to thrive and prosper beyond the ceiling of their current environment?
Poll
Loading …BrainTrust
Gene Detroyer
Professor, International Business, Guizhou University of Finance & Economics and University of Sanya, China.
Mark Self
President and CEO, Vector Textiles
India is a very lucrative market with enormous potential as a rising middle class and formalization of the retail sector generate growth. This is an opportunity for US retailers, especially big brands like Apple which opened its first store in the country earlier this year. Other brands like Foot Locker are looking for partnerships and Walmart has made extensive investments in Flipkart and other firms. The problem with India is challenging regulations over areas like ownership and imports. The country is not particularly liberal when it comes to trade and it takes time, effort and lobbying to find ways around the barriers. That said, the size of the prize is lucrative so most retailers will persevere.
Totally agree re the regulation comment. India is a very different market. As a result, it will be the big brands that make the move because they have the resources to navigate the market and forge partnerships where needed. It won’t make sense for a lot of smaller brands.
As a small publisher / toy manufacturer, the labyrinth of import controls, IP regulation, and product testing make the EU look like a walk in the park. Basically I’m cut off from that market, and even licensing our IP looks like a losing proposition. And then there are the human rights and discrimination pitfalls any US brand will have to really think hard about…
People, people, people. Of course India should be a target for retailers. The Indian middle class is about 450 million. Larger than the entire U.S. population, though half the size of the Chinese middle class.
Retailing in India is a challenge. Retailers are required to have Indian-based partners (sound familiar?) The infrastructure is a challenge, ranking 60th in the world compared to China’s top 10 ranking.
Manufacturing is also a challenge. India has been assembling low-end iPhones since 2017. As Foxconn (the Apple manufacturer) targeted India to supply 20% of the phone, they ran into quality problems, experiencing close to 50% rejection.
Tesla had a plan to build a factory in India. India would not let them sell Tesla before the factory was built. Tesla will be moving those building plans to Indonesia. Tesla had no such requirement in China and now has a 100% owned auto factory (larger than in the U.S.) and gigafactory.
Walmart, Starbucks, and McDonalds have been in India for over a decade with very little expansion.
Of course, international companies should take a hard look at India. But with great care and caution. They must understand the playing field.
I won’t say your wrong, Gene – I would never do that! – but I believe “middle class” is defined quite differently in India than here in the U.S. https://www.asianstudies.org/publications/eaa/archives/the-middle-class-in-india-from-1947-to-the-present-and-beyond/
If only it were as simple as lots of potential new customers equals growth as low hanging fruit. Apple is at the top of its game and no doubt will find India to be a very lucrative market. Gap is not exactly at the top of its game and I suspect will struggle. I lived in China for a year plus and my visit to Gap stores there were always a disappointment. They would have been a disappointment in the USA, but they were more so in China. Brands that have figured out how to localize assortments in their home continent will do much better than those who are still struggling at home.
No business move should be made “as soon as possible.” This includes key decisions on brand expansion and retail locations. India is, however, a logical market for both manufacturing and sales growth. Like most second and third world countries, once the population is given access to better products, more diverse choices and increased employment opportunities, retail pollination into India could be mutually beneficial.
Seller Beware! Setting up a (someday) profitable business in foreign countries is not for the faint of heart. The Retail/distribution model in India is not particularly similar to North America and the pitfalls for a foreign Retailer (even for a CPG Brand company alone) are numerous.
Peter, your comment is an understatement, particularly for entering India.
India is a market that is ready for retailers that cater to millennials and Gen Z. Levi Strauss & Co. is a great example. The 170 year old company is innovating in India and connecting with consumers through experiential and disruptive retail formats that include Levi’s fashion trucks, partnerships with Lollapalooza India 2023 and integrating online experiences into offline stores. Embracing cultural norms and sustainability are important factors as a company expands globally, and I like Levi’s approach here, too.
There is a clear attraction for retailers and brands to enter the Indian market. Retail is the third largest sector in the Indian economy, with more than 12% contribution to the GDP. The rising Indian middle-class segment and the Chinese economic challenges have caught the attention of retailers and brands as they build out their global diversification strategies.
However, as we have seen with failed Canadian retail expansion strategies, every country requires significant due diligence, patience, and an understanding of the local market, cultural differences, consumer behaviors, and local laws and regulations. India is no exception and will require a crawl, walk, run approach, even for the most iconic retailers such as Apple, Walmart, and Amazon.
The appeal to expand to India is real, and several factors will drive this business growth over the next ten years.
I was excited for this thread to come across my email inbox this morning. In 2006 I was a consultant for what became Reliance Digital (India’s largest electronics retailer) and shortly thereafter for Aditya Birla retail (sold to Amazon and VC). It was an exciting time back then and the country has evolved in many ways since and many of the setbacks remain. It would be worth a trip by executives to visit and start to learn the market. As for expanding, it depends on the brand. Western brands like Levi’s, Apple, etc can do well because India is a highly status driven culture, at all levels. Lesser knowns brands will have a hard time unless they have a unique value proposition for the Indian consumer. As for known brands that are struggling state side, seems like getting their houses in order here would be best.
Nothing moves fast in India so ‘as soon as possible’ could be years away. Most of the entrants (even if laws were more flexible), will end up partnering with a known entity in India, the market is complex, the country is vast, it varies culturally by region, by state, even within cities. First step, visit the country with your team. Understand the richness of the culture, then determine your goals and potential entry points.
Big market with potential big revenue increases or even bigger operating losses….Beware of trying to get in there quickly.
Although there are extreme contrasts between poor and rich people
Those final seven words – if they don’t encourage “no comment” altogether – ought to give us pause. I’ll be blunt here: I’m one of the ~one fifth who voted “no”…and without hesitation. I think, as has been the case over and over, the size of the market will be grossly overestimated because of naive reasoning (that’s based on simple population figures , rather than per-capita income). And I think many of the retailers who do enter – or try to – will make the same kind of blunders we’ve seen elsewhere (think Target Canada, only worse)
So I’m not going to say “No!” but I am going to say pause, and think about it carefully…and maybe pause over and over again.
Here is an interesting comment that just came across Bloomberg!
Say My (Country’s) Name
As the Group of 20 summit in New Delhi gets underway, there’s some confusion over how the host would like to be addressed: Is Narendra Modi the leader of India, or of Bharat? Although both names are in the constitution under which he governs, convention favors the former. On the eve of the gathering, however, his government indicated it would prefer the latter.
India is a huge market for brands looking to grow and expand their business. The Indian retail sector is growing at an exponential rate, creating numerous opportunities for merchants. India has a large middle-class population, with a significant young generation that has traveled across the globe and are familiar with international brands. These customers eventually become unofficial brand ambassadors for brands by bringing fashion and style from all around the world to India.
In my opinion, international brands should fully commit to establishing partnerships in India, as they could benefit from selling to a wide demographic with diverse perspectives. This can also assist them in bringing new ideas and trends to the market; for instance, fashion retailers can create a fusion of offerings inspired by Indian culture and exhibit it to the rest of the world. Bringing “newness” to the fashion industry is the most difficult problem, therefore showcasing Indian designs to global customers can help a brand create a unique personality.