The Indian retail market, currently estimated at $490 billion, is project to grow at a compound annual growth rate (CAGR) of six per cent to reach $865 billion by 2023. Electronic retail (e-tailing) will emerge as a key retail channel, which will drive the growth of corporatised retail.
The size of e-tailing is estimated to grow from the current $1 billion at 0.2 per cent of the retail market to $56 billion (in real terms) at 6.5 per cent of the total market by 2023, driven by an ecosystem favouring the e-tailing market.
The share of corporatised brick-and-mortar retail in total merchandise retail would at best grow from the current seven per cent to 17 per cent by 2023.
These were the key takeaways from Technopak’s 'Vision 2020 Emerging Consumer Trends and Retailer Responses', presented at a retail leaders' summit, which was titled 'Retail in Momentum, Being Change-ready' and held in Mumbai recently.
Ankur Bisen, vice-president, Technopak, said, “Despite the persistent economic pressures and slowdown in India’s economy, merchandise retail will continue to witness sustained growth.”
“An increasing share of incremental merchandise retail will come from the urban and semi-urban centres, which, in turn, is an outcome of rapid urbanisation experienced in India. Apart from these urban centres, the demand will also come from the emerging towns and clusters, where the primary source of livelihood has moved from agriculture to other professions,” he said.
“The retail chain will continue to face structural issues encompassing real estate, labour, sourcing and supply chain that will not allow corporatised brick-and-mortar retail to grow beyond the stated estimate,” Bisen said.
The panelists at the summit included Manish Tiwary, executive director, sales and customer development, Hindustan Unilever Ltd; Avani Davda, chief executive officer, Starbucks India; Tim Eynon, business head, Provogue; Govind Srikhande, customer care associate and managing director, Shoppers Stop; Sandeep Dhar, chief executive officer, Tesco HSC; Romie Dutt, executive director and chief executive officer, Sahara Q Shop; Himanshu Chakrawarti, chief executive officer, The MobileStore; Devendra Chawla, president, Food Bazaar, Future Group; Rahul Mehta, president, The Clothing Manufacturers' Association of India (CMAI); P K Sinha, professor of retailing, Indian Institute of Management, Ahmedabad (IIM A); Dinanath Dubhashi, managing director and chief executive officer, Larsen and Toubro (L&T) Finance; Mahesh Murthy, founder, Seedfund; Harish Bijoor, brand expert and chief executive officer, Harish Bijoor Consults Inc; Deepa Thomas, e-commerce evangelist, eBay India; Laurent Dhaeyer, president, E-Billing Solutions (EBS), and John Goldrick, global sales director, SAP, amongst others.
The strategic discussions amongst leaders and visionaries presented Indian and global industry barons and visionaries a single platform to put across their concerns to the policy-makers, discover new opportunities, create and expand into untapped markets and understand the existing lacunae and loopholes that impact profits and market shares, thus enriching the industry at large.
This conference saw participation from C+ level executives, business and functional heads from established as well as upcoming retail chains and focussed on bringing the greatest international minds and the industry on the same platform to discuss challenges, exchange ideas and networks.
“A visible conversion from saving to spending economy is taking place in India in recent times, following the emergence of a sizeable young generation in the society,” Sinha sad.
“Even people in the low-income category buy goods at retail outlets, although the majority of such a format is dominated by food and groceries. The demography in the retail consumer space is changing fast in India since the advent of technology, mainly online sales and mobile-based transactions. As competition and expansion grows and retail networks expand, the profitability among the large players would gradually taper,” he added, and suggested four As, namely ambience, accessibility, availability and affordability, to manage the customer expectations.
Shrikhande said, “In light of the challenging economic scenario, most retailers need to change their business practices for survival. What can international retailers contribute to Indian entrepreneurs? We need an Anand-type cooperative structure for the retail sector in India to sustain growth.”
C P Toshniwal, group chief financial officer, Future Group, said, “The real challenge faced by the retail industry is largely dependent on the categories of retail, such as grocery. The retail business has low margins and high volumes, whereas lifestyle retail is a high-margin, low-volume business. Foreign direct investment (FDI) will not help the fortunes of the Indian retail business.”
Mehta said, “Indian retailers would evolve their own strategy, and no amount of FDI will have any impact on the domestic industry.”
“In a slowdown, do what is right for the consumers. When the cycle turns, we shall be a far more consumer-centric company than we are today,” Tiwari said. The summit leaders concurred that continuing with planned investments is important for a long-term growth.
Chawla said when Food Bazaar clubbed several cleaning products, from toilet cleaners to floor cleaners and glass cleaners, into a single pack, it was an instant hit during its recent Independence week sales.
“It is akin to the Indian thali versus a la carte menu in a restaurant. Sometimes you want to order all dishes separately, and sometimes you want a thali with some dishes together. This saves the consumer's time, and due to great value, any one of the cleaners, which would not have been picked otherwise, gets into the home, helping to increase penetration and consumption,” he said.
Bijoor said he recently conducted a survey covering over 18,000 kirana stores that do not offer discounts and over 220 modern trade outlets that thrived on price-offs, he found out that 90 per cent of the customers were loyal to smaller shops, compared to around 40 per cent for modern stores.
“Yet, discounting merchandise contributed over 35 per cent of the leading food and grocery retailers' sales during the year ended March. For global players such as Starbucks, its value for money is what consumers are really seeking out,” he added.
“We don't see any pessimism, and Indian consumers spend when they see value in the brand,” Avani Davda said.