Key Licenses required to Start a Retail Business in India

The term “Retail Business” denotes the purchase of finished goods from the producers or manufacturers and selling them further to customers. Further, India ranks at the top position in the world in terms of retail and wholesale trade and contributes around 23% and 8% to India’s total GDP (Gross Domestic Product) and employment, respectively. However, if an individual wants to start a retail shop in India, then, in that case, he/she needs to first consider the factors involved and the licenses required.

In this blog, we will discuss the factors and licenses required to start a Retail Shop in India.

Benefits of starting a business in the retail industry

• Easy passage to market, making things simple to analyse
• Reduced costs
• Potential for rapid growth
• Widen your market/export ideas and reach.
• Customer intelligence

Growth of Retail Sector in India

The Growth of the Indian Retail Sector can be summarised as:

• According to an article published by Live Mint on 26.02.2020, the Indian Retail Market is projected to reach the US $1.1 – 1.3 trillion by the end of the year 2025, from the US $0.7 trillion in 2019, as the same is growing at a CAGR (Compound Annual Growth Rate) of 9 to 11%;
• As per a report published by the Boston Consulting Group in association with the Retailer Association of India, the Indian Retail Sector is likely to exceed the trillion-dollar mark;
• According to the report named “Retail Industry in India”, published by the India Brand Equity Foundation (IBEF) on 04.12.2020, the Indian Retail Industry is projected to cross the US $1 trillion by the end of the year 2020;
• As per the details provided by the Department of Promotion of Industry & Internal Trade (DPIIT[1]), the Indian Retail Sector has received an FDI (Foreign Direct Investment) of the US $2.12 billion during April 2000 and March 2020;
• According to a report published by Statista on 16.10.2020, the market size of the Indian Retail Sector is expected to reach the amount of the US $1.7 trillion by the end of the year 2026, up from the US $950 billion in 2018;
• As per a report named “India- The Top Retail Destination”, published by the Invest India (National Investment Promotion and Facilitation Agency), the Indian Retail Market has undergone a major change and has witnessed incredible growth in the past ten years. As a result, the overall retail market is set to exceed the threshold of the US $1.75 trillion marks by the end of 2026 from the US $795 billion in 2017;

Different Ideas to Start a Retail Shop in India

The different ideas to start a Retail Shop in India are as follows:

1. Grocery Stores: In India, one of the most popular types of retail business is Grocery Store. This type of business comprises of selling of a variety of food and non-food items, such as follows:

• Cereal;
• Meat;
• Dairy Products;
• Health;
• Cleaning Products, etc.;

2. General Merchandise Stores

The term “General Merchandise Stores” denotes the large-format grocery stores that are involved in selling a variety of items, such as follows:

• Clothing;
• Furniture;
• Sporting Goods;
• Kitchenware, etc.,

Example: Big Bazaar, TATA, Croma

3. Speciality Stores:
   As the name suggests, the term “Specialty Stores” means a store that is specialized in a particular product or item. That means it will not sell anything other than the range of products of a particular brand.
   Example: Reebok Merchandise at Reebok Store

4. Departmental Stores

The term “Departmental Stores” denotes a setup that provides a variety of products to the consumers under one roof. That means it acts as the one stop destination for meeting all the shopping needs. The term variety of products includes the following:

• Electronic Appliances;
• Apparels;
• Jewellery;
• Toiletries;
• Cosmetics;
• Footwear;
• Sportswear;
• Toys;
• Books;
• CDs, DVDs;

Example: Shoppers Stop and Pantaloons

Discount Stores

The term Discount Stores also refer to the stores that offer a large range of products and items to the consumers but at a discounted rate. However, there are chances that the quality offered for the products in discount stores might be a little inferior or low-grade as compared to the department stores.

Example: Vishal Mega Mart

5. Mom and Pop Store (Local Kirana Stores)

The term “Mom and Pop Stores” denotes the small stores run by the local vendors in nearby locality and neighbourhood to cater to all the daily needs of the consumers residing in the vicinity. However, it shall be considerate to note that theses retail stores do not offer any high-end or luxurious products. 

Licenses Required to Start a Retail Shop in India

The licenses required to start a Retail Shop in India are as follows:

• Business Registration: If an individual wants to start a Retail Shop in India, he/she must go for obtaining Private Limited Company Registration. The reason behind the same is that a retail business involves huge annual business turnovers than service-based businesses.

• GST Registration: Out of all the licenses required to start a retail shop in India, another significant one is the GST Registration. The proposed owner requires to apply for registration under GST if the aggregate business turnover exceeds the threshold of Rs 40 lakhs and Rs 20 lakhs in the special states.

• Shop and Establishment License: The main reason behind the need for Shop License or the Shop and Establishment License is to defend and protect the rights and interests of the workers employed.

Factors to Consider before starting the retail business

This requires all the qualities of an entrepreneur. And you need to learn about your customers. Consumers at the moment have become very sensitive, health conscious and very protective. So you will have to proceed accordingly.

• Launching your business: If it is a small business it will have to stand out from other business as you cannot expect people to run into your store if you have nothing new to offer. Market is always looking for new business that have something to focus on and something catchy. Your startup will have to work on getting customers and provide benefits so you can find more buyers. This will help your store create a niche in the market.

• The right location: While deciding on the business that you want to take up, deciding the location for your retail business is also very important. You cannot open a retail store for expensive clothing in a neighbourhood who only go to local stores for purchasing their clothing. Make sure your store is in demand in the area you want to open your business. You don”™t need a supermarket in a area where there are already 4 to 5 supermarkets. Start it somewhere near a residential area and it will be helpful for the customers and bring you good profit.

• Working from home: Working from home is easy and simple. You can have your own time and work easily with not having to interact with too many people . But this brings limitations for your business. As there will be less buyers and you will not be able to advertise your business properly. Therefore it is always better for you to come out of your comfort zone and start a business.

• Commercial locations:
  While selecting a city for your retail store keep the following in the mind:

1. Size of the trading area of the city
2. Customer trends and size of the population
3. Purchasing power of the customers
4. Retail trade potential
5. Number and size of competition
6. Quality of competition

• Choosing the location in the city:

1. Nature of competition
2. Traffic
3. Appearance of the area
4. Geographically suitable
5. Neighbourhood
6. Accessibility

• Landlords
Make sure the landlord of your store is adjustable and flexible. Most of the times the landlords might cause trouble and hinder your business from functioning properly. You cannot risk your business to your landlord hence make sure you have a landlord who understands the importance of your business.

• Marketing
  Opening any sort of business calls for marketing. You can use any form of marketing that is affordable and effective for your store. Give out pamphlets and any sort of print media so the word gets out.

• Hire the Right Team
  As it is a proven fact that no one can run an entire business on his/ her own, therefore, hiring the right team of professionals or employees plays a crucial part. Further, it is advised to every proposed retail shop owner to properly train his/her employees after hiring them so that they are able to handle all the future customer related issues.

• Legal documents
  Before opening your store there are certain formalities that you will have to fill. Like getting permission from the area police and other forms and agreements. Failing of which will not announce your store as legal.

Conclusion

In a nutshell, if an individual wants to start a retail shop in India, then, in that case, he/she requires to firstly narrow down his/her target audience. After that, the proposed owner needs to decide on the factors, such as, types of goods that he/she wants to sell, perfect location, required cost, growth aspect, hiring of staff, marketing strategy, and last but not the least, the legal and financial requirements.

After ticking off all the requirements and factors to consider, just plan a grand opening, and start your retail business operation.