As you delve into the annals of Indian retail history, a simple Google search on the “History of Retail in India” swiftly directs you to Wikipedia, where the milestones of retailing in the nation are vividly documented. The introduction succinctly encapsulates the significance of retail in India’s economic framework, asserting its position as a formidable pillar contributing 14 to 15 percent of the Gross Domestic Product (GDP). With an estimated market valuation of US$450 billion, India proudly stands among the top five global retail markets, underscored by its staggering population of 1.2 billion.
Quick snapshot
Reflecting on this snapshot, it’s remarkable to contemplate that just four decades ago, the entirety of retail trade in the country amounted to a mere Rs. 10,000 crores! Rewinding further, in 1947, prior to India’s partition, the availability of branded FMCG items was so scarce that they could be counted on our fingertips. Similarly, in 1953, the total food grain production hovered around a modest 53 million tons, a stark contrast to the current figure of 257 million tons. This dramatic transformation in retail and food production/consumption can be attributed to evolving market dynamics, rooted in the evolution of consumer behavior and various policy reforms implemented by the past and present Government of India across different levels.
The flashback
Taking a step back into the past, it’s fascinating to explore the limited array of brands that graced our shelves until the conclusion of the 1940s. Despite our deep affinity for chai, it might come as a surprise to learn that only Brooke Bond and Lipton adorned the aisles of our kirana stores as branded tea options. Lux and Lifebuoy stood as the sole bathing soap choices, devoid of the extensive range of SKUs we enjoy today. Sunlight was the go-to brand for clothes, while cooling/fairness talcum powders were virtually non-existent, save for Himalaya Bouquet. Afghan Snow served as a versatile all-purpose cream, predating the advent of age-defying and fairness creams. Colgate monopolized the toothpaste market, catering to all dental needs from decay prevention to breath freshening. The 7’o clock blade reigned supreme as the sole male grooming accessory until its dullness necessitated a replacement with a fresh one. The hair-oil category boasted a mere handful of brands, reserved for special occasions.
Given this historical context, it’s perhaps unsurprising that the country welcomed its first brand of sliced bread in 1964! Interestingly, this pioneering brand hailed from Orissa, challenging the assumption that metropolitan hubs like Mumbai, Delhi, or Bangalore spearheaded the sliced bread industry in India.
Until the 1950s, Colgate and HUL stood as the sole major FMCG companies in India, reflecting the limited scope of consumer goods available. It’s no surprise, then, that the monthly consumption of an average Indian middle-class household hovered around a modest Rs. 70 until the late 1950s. Aspirations during this period were modest, revolving around acquiring essentials like a fountain pen, a cycle, or a watch. It’s worth noting that India introduced its own branded fountain pen in 1955, albeit with tales of ink leakage issues, often requiring makeshift solutions like masking with tape.
Nestle made its foray into India in 1969, followed by Coca-Cola in 1957. Other Indian FMCG players such as Dabur, Godrej, and TOMCO (later acquired by Hindustan Lever) began proliferating the market with their offerings. However, communication channels were rudimentary, with radio being the primary medium inaccessible to the common man, let alone television ownership. Lal Bahadur Shastri’s intervention led to the launch of Vividh Bharti during his reign, heralding a new era in broadcasting. The introduction of television in Mumbai in 1972 marked a pivotal moment, catalyzing a surge in television ownership during the 1980s, accompanied by an explosion of information and advertising.
The early 1980s witnessed a wave of branded garments flooding the market, setting the stage for a continuous stream of new clothing brands. The introduction of the MRP concept in the mid-1980s marked a shift in pricing strategies, replacing the earlier practice of a fixed mark-up percentage. While supermarkets were virtually non-existent until the mid-1960s, the concept of department stores traces back to the British era. The emergence of supermarkets gained traction in the 1970s, thanks to cooperative efforts that laid the groundwork for modern retailing in India.
Entry of multinationals
Now, with this historical backdrop in mind, it’s natural to wonder: why did multinational corporations choose to enter the Indian market at that time, and why was the concept of modern retail not yet prevalent in India?
The 1970s marked a turning point in the aspirations of the average Indian middle class, transitioning from basic ownership desires like a two-wheeler and a refrigerator to more substantial goals such as owning a flat, a car, and even indulging in foreign travel by the 1990s. This shift reflected a broader societal trend towards increased consumer spending rather than solely prioritizing savings. The catalyst for this transformation came with the liberalization, globalization, and industrialization policies spearheaded by then-Finance Minister Manmohan Singh. These reforms opened India’s doors to foreign investment and trade, leading to a surge in consumer goods imports, fueled further by the growing number of Indians venturing abroad for work and education.
Prominent Indian industrial houses like Tata’s, Birla’s, Goenka’s, and Marico seized the opportunity and ventured into the retail sector. Notably, South India played a pivotal role in pioneering organized retail chains in the food and grocery segments, with establishments like Nilgiri’s, FoodWorld, and Margin Free leading the way. The consumer durables segment also flourished in the region, with regional players like Vivek’s, Giria’s, and Pai International making significant contributions.
Entry of the mall culture
In 1997, India witnessed a milestone with the inauguration of its first mall, Spencer Plaza, in Chennai. However, Mumbai’s Crossroads faced setbacks and eventually closed due to various operational issues, notably its failure to adhere to fundamental mall management principles. These principles include securing five anchor tenants spanning hypermarkets, department stores, food courts, multiplexes, and well-known food chains. The failure of Crossroads served as a lesson for future mall developments in the country, emphasizing the importance of following basic principles to ensure success. Subsequent malls that adhered to these principles thrived, while others had to pivot their strategies, repurposing their properties for commercial office space.
Fast forward today
As of today, the organized retail market continues to surge forward with an impressive annual growth rate of approximately 35 percent, contrasted with the more moderate 6 percent growth rate observed in the unorganized retail sector. This stark contrast underscores the significant potential inherent in the retail industry on a broader scale.
India, renowned for its diverse communities and cultures, presents an unparalleled landscape for retail innovation and customization. The immense potential of the retail sector lies in its ability to tailor offerings to specific geographical regions and their unique consumer demographics. By aligning with the preferences and needs of local communities, retailers can unlock substantial opportunities for growth and success.
In essence, achieving success in retail doesn’t require complex strategies or rocket science. Instead, it boils down to adhering to fundamental principles and understanding the pulse of the local market. By staying attuned to these basics, retailers can navigate the dynamic landscape of Indian retail with confidence and capitalize on its vast potential for growth and prosperity.
Zainab S. Kazi