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Unorganized retail in India currently dwarfs the organized retail channel

Indian apparel retail is divided between two sectors: organized and unorganized. Organized retail involves the sale of merchandise by licensed retailers. The unorganized retail sector in India refers to the traditional retailing formats of pavement vendors, mobile vendors, and traditional local kirana shops. Unorganized retail generally involves the sale of unbranded merchandise.

Sales through the unorganized retail sector are predominant in India with the organized retail sector being a lot smaller. It is estimated that over 95% of retail in India is done through the unorganized channel. However, as the employment rate and disposable income levels have risen over the years, consumers in India have begun to turn increasingly towards branded products and there has been a shift towards the organized retail channel.

The entry of multinational companies and other organized retailers is impacting the structure of the retail industry in the country. There are various extremes of retail outlet with small local kirana stores being located in convenient locations, offering local produce and merchandise and a personalized service. At the other end of the spectrum there are large hypermarkets and megastores offering a range of products, often at a lower price, with a less personalized service.

The potential for huge growth in the organized retail sector leaves a big potential market for players to access. This could lead to a situation where the retail landscape in India changes considerably. However, with the continued dominance of unorganized retail in India, it remains to be seen whether organized retail will become the norm for the majority of Indian consumers.

For more information about the Indian retail industry take a look at our Apparel Retail in India profile and our Food retail in India profile

Posted in Consumer, Retail.

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