As per reports, Indians splurged big during the festive season . Malls and other departmental stores that sell clothes, accessories, jewellery, footwear, electronic and electrical goods, mobile phones etc witnessed record-breaking sales. And why not, as per reports published by the RAI(Retailers Association of India) retail sales in September 2023 alone, increased by 9% compared to the same period in 2022.After the lull experienced during the COVID phase, the resurgence of the retail sector in India is a classic example of the Phoenix rising from the ashes! Contributing significantly, about 10% to the nation’s GDP (Gross Domestic Product), the Indian retail sector accounts for over 8% of the workforce which is around 50 million jobs.
In this edition of “The People Weekly”, we will explore the retail landscape of India, the prevalent trends and the prospects. Remaining finely tuned to industry trends and the most recent advancements, a key strength of PeopleLogic, we continuously strive to give our readers valuable insights on the latest trends, and technologies.
Retail Landscape: A Snapshot
The Indian retail industry can be divided into the Unorganised and Organised sectors. The “Unorganised Retail Sector”, representing approximately 81% of the total retail industry, includes local Kirana shops, independently operated general stores, convenience stores, and paan/beedi shops. On the other hand, the “Organised Retail Sector” which accounts for 18% of the total retail industry, encompasses retail chains, corporate-supported hypermarkets, privately owned large retail establishments and online e-commerce.
It is interesting to note that the organised retail sector is growing faster than the unorganised sector and is expected to account for over 30% of the total retail market in the next 5 years. By 2030, India is projected to secure the third spot in the list of the world’s largest online retail markets, boasting an anticipated annual gross merchandise value of $350 billion.
The Indian retail industry is indeed undergoing a rapid transformation, driven by factors such as increasing urbanisation, rising disposable incomes, and the growth of e-commerce. A substantial increase in per capita income has profoundly impacted consumer behaviour and preferences. As a result, consumers now place a higher priority on quality, convenience, and a more enriching shopping experience. Moreover, India is witnessing a remarkable demographic shift characterised by a substantial rise in the urban youth population. This shift is primarily propelled by Millennials and Generation Z, who actively seek value-added services and are willing to pay a premium for them. All these reasons and more are shaping the retail industry making it one of the attractive markets for businesses around the world.
Trends shaping the retail industry
Digital Transformation
The retail sector in India is experiencing a substantial digital revolution. The COVID-19 lockdowns and the closure of physical stores have prompted both retailers and consumers to expedite their embrace of digital technologies. Retailers are using digital technologies to transform their businesses in several ways
- Developing mobile apps and e-commerce platforms
- Investing in CRM tools and data analytics tools to understand consumer behaviour and preferences
- Using AI to personalise the shopping experience and automate tasks
The “Scan and Go” facility in select stores of Decathlon where customers can go for completely contactless shopping and pay via smartphones is one great example of digital transformation.
Another example is the use of big data analytics by Reliance Retail, to understand customer preferences and behaviour, to later use this information to recommend products, offer targeted promotions, and provide personalised customer service.
2) Omnichannel Retail
Omnichannel retail gives customers a seamless experience by allowing them via multiple channels, online and offline touchpoints like physical stores, websites, mobile apps, social media and more. The idea of omnichannel retail is gaining momentum in India. As per the latest reports, 77% of the customers prefer to shop from an omnichannel brand. Retailers are harnessing technology to provide customers with seamless and consistent experiences across various interaction points, allowing customers to switch effortlessly between online and offline channels.
Myntra, Nykaa, Pepperfry, Mamaearth and Lenskart are some of the top omnichannel retail brands in India
3) Rise of D2C Brands
Direct-to-consumer (D2C) brands are witnessing swift expansion in India. These brands bypass conventional distribution channels and directly offer their products to consumers via their online platforms. The D2C approach enables enhanced control over product quality, customer interactions, and data analysis. As per reports, the D2C brands have been witnessing exponential growth . Currently, India is home to 600 or more direct-to-consumer brands with estimated market size of over 66 billion U.S. dollars in 2023
4) Digital Payments
Covid has redefined and disrupted how things are done including payment for services or good purchases. Contactless payments have become very popular amongst both big and small retailers including Kirana shops. As per a report by PwC, almost 90% of retail transactions will be done via UPI by the year 2026- 27.
5) Focus on Hyperlocal and Kirana Stores
Hyperlocal delivery services and neighbourhood Kirana stores have become more significant players in India’s retail industry. These smaller, community-based stores are experiencing a surge in demand as consumers prioritise convenience and proximity. Retailers are actively considering partnerships and collaborations with Kirana stores to tap into their distribution network and improve last-mile delivery services.
PeopleLogic Opinion
The Indian retail sector stands as one of the world’s largest and most rapidly expanding industries, currently ranking as the fourth largest retail market globally. Despite encountering various challenges such as competition from both new entrants and established players, intricate regulatory frameworks, and the considerable cost of infrastructure, the retail sector continues to make remarkable strides, swiftly adapting to evolving consumer preferences and market dynamics. Factors contributing to this growth include the burgeoning middle class, the proliferation of e-commerce, government initiatives, and increased foreign direct investment (FDI). As it has in recent years, the Indian retail industry is poised for further expansion in the years ahead, driven by these very same catalysts. Retailers who can pivot to accommodate changing consumer demands and invest in appropriate technologies are positioned favourably for success in this burgeoning market.
