Read Paper Details

Brick and mortar retail revenues set to spurt as e-retail stumbles on stricter FDI norms

  • 25/03/2019
  • The Department of Industrial Policy & Promotion’s recent clarification on the foreign direct investment (FDI) policy for e-retail has an unexpected beneficiary — brick and mortar (B&M) retail.
  • These changes come just as e-retail sales have seen phenomenal growth, averaging 40% a year between fiscals 2014 and 2018 and reaching the ₹1 lakh-crore mark. That’s thrice as fast as the B&M segment, which grew at a 13% clip to ₹3.2 lakh crore. Deeper market penetration and attractive price-tags — helped generously by foreign direct investments of over ₹95,000 crore in the past four fiscals — drove online sales.
  • As a result, the organised retail market expanded at a fast pace, with penetration improving enough to tap demand beyond Tier-1 cities, though the organised segment remains but a small part of the ₹60 lakh crore retail market in India.

Poor penetration

While near-term drags would ease gradually, the fact that India’s organised retail market is highly underpenetrated at just 7.8% compared with 85% in the U.S., 35% in Brazil, 30% in Indonesia and 20% in China, means there’s huge headroom for growth.

Brick and mortar (also bricks and mortar or B&M) refers to a physical presence of an organization or business in a building or other structure. The term brick-and-mortar business is often used to refer to a company that possesses or leases retail shops, factory production facilities, or warehouses for its operations.