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As a part of any global expansion strategy, retailers based in the Western Hemisphere should be closely observing the market dynamics of the world’s fastest growing – yet most challenging – emerging market.

The fifth largest retail market on earth, India is rapidly becoming one of the most attractive emerging opportunities for Western-based retailers to grow their brand and reach. Within India, the consumer industry is growing exponentially, estimated to reach $450B US by year 2015. The Indian government has sweetened the deal even further, offering multiple initiatives for new entrants to the retail game; the goal is to make the overall retail sector, which is still very much in disarray across this massive country (90% is currently categorized as unorganized retail), far more organized and consistent with Western Retailing standards.

The numbers tell it all: with 1.21 billion consumers to target (the second largest population in the world), a Western Retailer would be foolish to overlook the potential in India. Unlike China, whose population is still predominantly spread across rural areas, 80% of India’s population is already concentrated in large cities. Such concentration makes a Western Retailer’s objectives much more feasible. Y

et today, the Indian retail sector remains quite scattered. Apart from various hyper markets, large format stores and shopping malls, the majority of existing retail transpires in very different formats than what most Westerners are accustomed to. The following are a few examples of those formats, as well as how each targets customers from a particular economic class.

Individual Door-to-Door Sales

Salespeople carry their specific products (as specific as the incense salesman, or the pickle vendor)in various bags and baskets. They sell their wares from household to household. However, in the past couple of years, this type of retail is on sharp decline.

Push-through Carts (And Tricycles)

These human-powered retail stores carry a limited assortment of fruits, vegetables, ice cream, footwear, casual apparel – even cosmetics. Most such retailersaverage a US equivalent of $40 to $100 a day.

Buffalo Carts & Mini-Trucks

Farmers and vendors from the outskirts of the city bring limited varieties of fruits and vegetables to sell in a particular section of town. Their averagesales per day will be between US $75 and $200. However, this type of retailing is more opportunistic (for example, at harvest time) than a highly-repeatablemodel.

Wholesale Fruits & Vegetables (Sabzi Mandi)

Comprised of wholesale and individual miniscule vendors selling fruits, vegetables, herbs and spices, these markets start as early as 5 AM and typicallyrun until noon. Some of the vendors will also elect to open their stores again in the evening, usually between 4 PM and 9 PM.

Mom & Pop Stores (Kirana Stores)

These are primarily small-scale independent convenient stores located throughout urban streets. About 90% of these retailers have an operating space rangingfrom 80-500 sq.ft., selling such staples such as soap, shampoo, detergent, biscuits, newspapers, and tobacco. Their daily sales range from $50-$200. Thereare currently over 12 million Kirana retailers in India. While organized large format retailers are struggling to sell their private label goods, Kiranaretailers procure numerous non-branded / locally manufactured products (approx. 60% of the merchandise). These products sell without much difficulty, asin-store merchandise mixes are often determined by the preference of local, loyal consumers.

Pharmacies

In India, most pharmacies are owned and operated by a single pharmacist who has been certified by the government. Many are located next to a particular health clinic, and mainly sell the medicines most frequently prescribed by the doctors next door. Not even 1% of this particular segment is currently owned by retail chains. Further, no pharmacies exist inside of super-markets or hyper-markets as they do in Western countries.

Next week, we will look at the regional challenges and consumption patterns of retail in India.