Retailing accounts for around 10% of the Indian GDP and the Indian retail market is estimated to be worth around US $600 billion in 2015 and to reach US$1.3 trillion by 2020. It is also one of the fastest in the world in terms of growth and already consists of 1.2 billion people. In order to understand the standing of organized retailing in the rural Indian markets, one must first understand what is meant by organized retailing itself.
1.1 Organized Retailing
With more than 15 million owner manned mom-and-pop stores, India is often called a nation of shopkeepers. This is referred to as unorganized retailing and it refers to the traditional formats of low-cost retailing such as the local corner shops, owner manned general stores, paan/beedi shops, convenience stores, hand carts and pavement vendors, etc. On the other hand, organized retailing refers to trading activities undertaken by licensed retailers who are registered for sales tax, income tax, etc. These include the publicly traded supermarkets, corporate-backed hypermarkets and retail chains, and also the privately owned large retail businesses.
The face of retailing in India was changed by the emergence of organized retail formats along with a shift in the Indian consumer's attitude. The above figure shows the evolution of the Indian retail market. However, organized retailing in the Indian markets has mostly been in the urban regions and the overall Organized Retail Penetration (ORP) is low at 8% (in 2015) showing that a lot of potential still exists.
1.2 Organized Retailing in Rural Indian Markets
The unorganized retailers hold advantages such as being personal, strong relationships, serving as points of news, offering credit and helping the people in difficult times. Further, they understand the local requirements and offer low prices as they have low overheads. By 2012, urban Indian markets was where 85% of the organized retailing took place in India. However, with a lot of foreign players entering, limited and expensive desirable real estate and foreign investment restrictions have pushed the India's retail market closer to maturity.
The rural Indian market on the other hand, consists of 833,087,662 people (68.84% of total) living in around 6,40,867 villages. Development of the rural market began after the Green Revolution when the demand for farm inputs like hybrids seeds and fertilisers began rising. Yet only a small part of the vast rural market remains covered by organized retailers such as DCM Shriram's Hariyali, HUL's Project Shakti and ITC's e-Choupal. The following figure sh