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How to Start a Retail Business in India?

Updated on :  

08 min read.

A retail business is where finished goods are purchased from manufacturers and sold to retail customers. The wholesale and retail business is the largest industry in India and contributes to nearly 23% of the total Indian GDP.

According to the Department of Promotion of Industry and Internal Trade (DPIIT) data, the Indian retail sector received a Foreign Direct Investment (FDI) of UDS 2.12 billion between March and April 2020. 

According to the ‘India-The Top Retail Destination’ report published by Invest India, a National Investment Promotion and Facilitation Agency, the Indian retail market has changed and witnessed remarkable growth in the past ten years. Thus, the overall retail market is expected to exceed the threshold of USD 1.75 trillion mark by the end of 2026 from the USD 795 billion in 2017.

Retail Business Types

Below are the popular types of retail business in India:

Grocery Stores

In India, a grocery store is the most popular type of retail business. Grocery retailing involves selling various food and non-food products, such as cereals, meat produce, rice, spices, dairy products, health care products, beauty aids and cleaning products. A grocery store could be an online grocery store or can be set up in a physical location.

General Merchandise Stores

General merchandise stores are large grocery stores that sell a variety of products. A general merchandise store typically sells furniture, clothing, kitchenware, sporting goods, fruits and vegetables, etc. 

Speciality Stores

Speciality stores are retail stores that specialise in or sell a specific product. Many retail businesses fall under this category. A speciality store can be an electrical accessories store, auto parts store, computer store, cell phone shop, home furnishing store, clothing store, etc.

Departmental Stores

Departmental stores are stores that provide a variety of products to the consumers under one roof. They act as the one-stop destination for all shopping needs. The term variety of products includes apparel, electronic appliances, toiletries, jewellery, footwear, cosmetics, toys, sportswear, DVDs, CDs and books.

Discount Stores

Discount stores offer consumers an extensive range of items and products at a discounted rate. However, there are chances that the quality of products in discount stores may be inferior compared to the departmental stores.

Advantages of Starting A Retail Business In India

The huge market share and size of the Indian retail sector indicate that starting such a business can benefit business owners. The advantages of opening a retail business in India are as follows:

  • A direct connection with customers can help analyse future trends and market conditions, thereby helping in efficient business planning.
  • It is easy to expand the customer base without changing the business location.
  • A retail business can sell more varied products compared to wholesalers and manufacturers.
  • It reduces input costs as there is no inventory for retailers. They also do not have intermediaries, thus saving the commission cost. 
  • They have a potential for rapid and steep growth as they provide more options to customers.
  • Retail business owners can also manufacture their goods, thereby reducing the cost of the supply chain and controlling the quality and price of products. 
  • Retail businesses influence the products’ marketing aspect and the industry’s competition.

Things to Consider For Starting a Retail Business in India

Choose the industry

The retail owner should decide the type of retail business and the variety of products to sell before setting up the business. The retail owners should choose the industry they want to establish their business based on the competitiveness in the market, demand in the local market, cost of accessing a supply chain, and the scope for building a unique business.

Analysis of location

The retail business owner should choose a location of the retail store keeping in mind the customer requirements. If the owner wants to sell stationery items and edibles, then they should choose the retail shop’s location near colleges, schools, residential societies, etc. When the retail owner plans to establish an online retail shop, they must keep the residential address as the business address.

Choose the name

The retail store should have a name. If the business is proposed to be set up as a proprietorship, then the proprietor’s name can be kept for the store. However, the retail owner should check if the proposed name is already trademarked. In such a case, the same name cannot be kept as it will amount to infringement under the trademark law. 

Contact vendors

It is significant to contact suppliers and vendors to obtain the products and items for the retail business. A retail owner should choose a vendor or supplier who offers quality products at an affordable and reasonable price. The suppliers and vendors are usually wholesalers or manufacturers. A relationship with local and small vendors will also help to grow the business.

Determine store policies

Formulating the right in-house store policies will act as the base of the retail store and make it a successful retail business. Further, the in-house store policies will help the retail owner manage the day-to-day affairs of the hired staff, daily operations, and warehousing.

Formulate marketing strategy

A marketing strategy plays a significant part in spreading awareness about the retail store and its products. Publishing pamphlets and newspaper advertisements will help market the store and attract customers. Creating a website and social media accounts on Facebook, Instagram, and YouTube showcasing the products offered in the store with prices will also help to reach customers quickly.

Hire a team

Running a retail store by a single person can be challenging. Hiring a team of professionals or employees will help to run the retail business efficiently. A retail owner will need a cashier, sales staff, accountant, manager and cleaners to run the store. The retail owner should also ensure that the employees are properly trained to handle all future customer-related issues after hiring them.

Get the required registrations and licenses

There are certain mandatory licenses and registration that a retail business requires without which it cannot operate. The retail business will require a business certificate, tax registration and license from local authorities to run the business.

Registrations Required for a Retail Business

Following are the mandatory registrations and licenses required to start a retail business:

Business Entity Registration

A retail business can be established as a sole proprietorship firm, partnership firm, Limited Liability Partnership (LLP) or a company. A retail owner should decide on the business structure for their retail business and obtain the registration for the business. When a business owner decides to start the business as a partnership firm in partnership with other people, they must get it registered with the Registrar of Firms. When a retail owner decides to start the retail shop as a company or LLP, they must register it with the Registrar of Companies.

GST Registration

A retail business involves the sale of products and goods. When the retail business has a turnover of over Rs.40 lakhs or Rs.20 lakhs in special states, it must obtain the GST registration. All e-commerce operators should obtain GST registration irrespective of the business turnover.

Shop and Establishment Act License

A retail business should also mandatorily obtain the shop and establishment act license. The labour department of the respective state in which the retail shop is established issues this license. The shop and establishment act license governs the shops and their working. Since a retail business is a shop where goods are sold to consumers, it must obtain this license even when it operates entirely online. 

Starting Retail Business Online

Since many people prefer to shop online due to low prices and ease of shopping, online retailing is prominent in India. The e-commerce platforms such as Snapdeal, Flipkart, FirstCry, etc., have gained popularity and made online retailing a successful business.

Online retailing can be divided into two parts, i.e., becoming a retailer on an e-commerce platform or setting up a new -commerce website. It is easy to become a retailer on an established e-commerce platform like Flipkart, Amazon, etc., than to start a new e-commerce website. An established e-commerce platform takes care of logistics, marketing, and technology development.

Starting a retail business in India can be quick with a low-cost, especially when the business owner has the necessary knowledge and experience. Additionally, having unique ideas is key to the retail business’s success, as retailers with a niche usually perform better in the market. Market analysis and understanding the consumer demand trends are also significant aspects of establishing and running retail business operations in India. 

Disclaimer: The materials provided herein are solely for information purposes. No attorney-client relationship is created when you access or use the site or the materials. The information presented on this site does not constitute legal or professional advice and should not be relied upon for such purposes or used as a substitute for legal advice from an attorney licensed in your state.

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