Distribution

Retail is one of India’s fastest-growing industries.  According to Forrester Research, India’s retail sector was valued at $883 billion in 2020, and the retail market is expected to grow to $1.3 trillion by 2024.  There are approximately 12 million retail distribution outlets in the country, the majority of which are family owned.  The fast-moving consumer goods (FMCG) sector is expected to increase at a rate of 10-12 percent annually over the next 10 years.  According to Boston Consulting Group, India’s consumption will quadruple to $4 trillion by 2025 as rising wealth drives changes in consumer behavior and spending patterns.

India’s E-Commerce income is expected to rise from $46.2 billion in 2020 to $111.40 billion by 2025.  India is expected to become the world’s fastest-growing E-Commerce market, supported by strong investment and a rapid increase in the number of internet users.  The E-Commerce market is expected to generate $64 billion of India’s $2.6 trillion gross domestic product (GDP) in 2021, despite production and labor shortages, transportation disruptions, and other delays that have characterized one of the most difficult years for global supply chains.

Most Indian manufacturers use a three-tier selling and distribution structure that has evolved over years.  This structure involves distributors, wholesalers, and retailers.  As an example, an FMCG company operating on an all-India basis could have between 40 and 80 distributors.

Working with distribution logistics firms and clearing & forwarding agents

In recent years companies have become more focused on improving their distribution models to survive in a fiercely competitive market.  Independent distribution and logistics firms have sprung up to meet this need.  Marketers are increasingly turning to courier and logistics businesses to handle essential distribution and logistics duties, as well as looking for more effective ways to reach consumers.  India’s courier network has expanded to include smaller cities with populations of less than 50,000.

Due to the high cost of operating warehouses, most Indian companies use clearing and forwarding (C&F) agents for distribution.  C&F agencies typically handle inventories in a limited area (e.g., state).  Taxes varied by state until 2017, when India’s nationwide value-added tax, known as the General Service Tax (GST), was implemented.  As a result of the GST, retail pricing is now uniform throughout India.

India has 12 large ports under national government authority, and 205 minor ports under state and private control.  In terms of yearly gross weight tonnage, the largest ports in India are Mumbai and Marmagao on the west coast, and Vishakhapatnam and Chennai on the east coast.  Mumbai, the country’s financial capital, is the primary hub for international cargo.