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« More Than a Mall: A Collection of Experiences | Main | Visualizing a New Life for the Retail Center: Transforming Assets with Virtual Reality »

Retail in India: Complex, Contradictory and Full of Opportunity

Mumbai coastline. Photo: Dhurandar.

In 2017, retailers in Europe are focusing on accelerating change in the business, while a major retail restructuring has been gathering momentum on the American horizon. If you look halfway around the world, a steady rise in consumption has been underway, and is being projected for the next decade in the higher growth economies of China and India (Source: OECD Interim Economic Outlook March 2017).

These Asian dynamos tend to be pooled together in global business narratives, but the two most populous countries of the world could not be more different from each other. India’s once protectionist economic regulations have morphed into a free-market system thanks to prescient liberalization policies launched by the Indian government in the 1990s. After a few course corrections, the democratic republic remains the fastest growing G20 economy (Source: OECD Economic Forecast Summary November 2016). Today, India offers global businesses a very large opportunity for longer term value creation in a growing market, although it is not without its challenges.

For retailers, the scale of this business opportunity is as massive as India’s consumer base is complex and contradictory. Although the market is high on consumer aspiration and consumer confidence, Indian consumers constantly benchmark what they see new with what they have been used to. This demands native customization, and unique ‘made for India’ retail propositions.

Fashion Street was an early local experiment in unregulated fast-fashion selling export surplus from Gap brands to college graduates in Mumbai, right on the street under the shade of coconut palms and rain trees. Fast forward to 20 years later, when Zara entered the India market in 2010, and young shoppers queued up to buy fresh off the runway looks at reasonable prices in a conditioned environment at newly designed mall stores.

Connaught Place, New Delhi. Photo: Vasuki Rao.

Infrastructure improvements do not quite keep up with the pace of India’s market growth so there is a shortage of vacancies in quality malls in prime cities such as Kolkata and Chennai impeding retail expansion (Source: The Retail Index 4Q 2016 JLL India). Thus, Zara is piloting a high-street model and will open doors in May to its first 50,000 square foot flagship in South Mumbai. The annual rent is USD $1.6 million in purchasing power parity rates, which is an astonishing sum for a 21-year lease that contains a five-year lock in period. Its joint venture partner Trent, a TATA company, operates one of India’s fastest growing brick-and-mortar retail chains called Westside. This popular lifestyle-driven retailer has a multi-brand fleet door situated five blocks south from the soon to launch full building Zara flagship.

Let’s take a closer look at who will shop there. The urban Gen Y (Millennial) shopper is a free-spirited, yet discerning consumer, having come of age with mobile phones, high-speed Internet and a profusion of domestic and international social networks. This is our young, connected consumer who values luxury as well as accessibility; who seeks out both home-grown and international brands; and is looking for customization, choice, convenience and care across all touch points of the shopping experience, in store and online.

Raymond Ready to Wear in Bangalore. Photo: Praveen Sundaram Photography.

Fittingly, India’s top e-commerce group Flipkart, which was recently valued at USD $5.5 billion, has attracted a majority of this urban young adult cohort by offering its customers unique ways to enhance their purchase journey on mobile and desktop. Investing in machine learning and AI, Flipkart intends to use collected customer data to create tailored stores on its fashion lifestyle portal Myntra, and is expected to launch mobile app-based chat support services for even greater customized user-brand interactions. Myntra also hosts an exclusive online store for FabIndia, the largest private retailer of craft-based products and a favorite expat brand. Meanwhile FabIndia’s original brick and mortar store in the Fort area of Mumbai will compete for footfalls with the new ‘house of Zara,’ which happens to be steps away.

Flipkart’s other e-tail marketplace, Jabong.com, which brought Topshop and Topman to India, sells fashion and home products and is improving customer experience with COD (‘cash on delivery’ is a payment model where the buyer provides a cash payment only upon the seller’s delivery of item in purchase) and localized market customization that blurs the lines between retailer and local manufacturer. Flipkart’s most recent acquisition—eBay India—shows the e-commerce giant is gearing up for access to the lucrative export market, and now poses a direct challenge to Amazon. As a few industry articles reported, Amazon, which has upped its investment in India to USD $5 billion, is aiming to expand Prime membership, service communities of online shoppers and sellers, and succeed at last-mile deliveries.

An increasing number of prominent retailers from Europe and the United States, including H&M, Marks & Spencer and Gap, are entering India because of the tremendous opportunities in the sector. Retailers that develop a customized strategy for their ‘target India’ and build an omni-channel approach by establishing online portals and developing a customer-centered network of physical environments can thrive in the dynamic retail landscape. It is a long-haul market. Slow and steady will win the race.

Ruju Jasani is a design manager in Gensler’s San Francisco office, immersed in the business of design, technology and retail. Contact her at Ruju_Jasani@gensler.com.