Retail in India, though a very old industry, has seen rapid changes over the last 20 years. Circa 1992 – Shoppers Stop set up a modern department store with the intention of becoming a national retail chain. And over the last 20 years, many others have followed suit which has helped develop a modern retail industry which today contributes to approx 7% of India’s retail market. This does not take away from the many local retailers operating at a city level and many others who have progressed to a State or Regional level. While the South has pioneered this concept with the establishment and expansion of several apparel, food and jewellery retailers; the other regions have not been slow in catching up. Retail enterprise exists in India and it has not been the exclusive preserve of multinational retailers or domestic business houses. Which is why, despite the good intentions and best efforts of all modern retailers, the Industry has still not made sizeable headway and is a small contributor to India’s retail business but a large contributor to visibility.
Since retail distribution is expensive in India, multi-level and direct marketing companies have found the peer review and sale culture of India, a good opportunity to sell their wares. Many multinational direct marketing companies have created their own personal distribution systems and penetrated categories such as personal or home products. In the last 5 years, online retail has emerged as a vibrant channel of sale and many fashion, lifestyle, electronic e-commerce players have emerged. But despite their best efforts, their penetration remains less than 1% of India’s retail market.
So what does all this leave us with? Choice or Confusion?
As a consumer, our thought is what do I buy and from whom? Reflect on the shopping basket of the average Indian consumer. As per the NSSO survey 2012, 60% of the shopping basket is Food & Grocery (F&G). All other categories, with Apparel being the next largest at 8%, are in single digits. Reflect on our consumer. 70% of them (850 mn) live in villages and 30% in the 5200 cities and towns in India. In terms of targeting, 450 cities (>1 lakh population) which contribute to approx 65% of Urban population would be priority. What we are thereby targeting is 20% of India’s population or 250 mn consumers. To whom, Food & Grocery is the single largest consumption need.
Having now re-defined the market, we are clear that these 250 mn consumers are most likely to be attracted by different channels for different categories. Since a large proportion of our population is vegetarian, the likelihood of them buying fresh fruits and vegetables from an e-commerce player is quite slim and the chances of a food & grocery e-commerce player creating a significant dent in this category would be limited. This however, does not take away from the opportunity to create scale with niche consumers in the F&G space. Hence, this category would continue to be dominated for a very long time by the millions of small, independent F&G retailers who dot the landscape of every city, town and village in this country. Apparel, footwear, electronics, mobiles, books, music, movies and other such categories which are brand dominated and form defined would present an opportunity for penetration by modern retail and e-commerce players. Here again, apparel and footwear are touch & feel categories where self trial and peer review are important, and only those brands/products which are well defined in sizing and fit or where fit can be sacrificed for price/choice, do offer an opportunity for being sold on an e-commerce platform.
As a consumer, the options may seem like many but in reality are quite limited, on account of access, purchase lead times, choice and shopping basket size. Would I choose a 3% saving if I have to wait 2 days for delivery? Would I travel distances for a mere 5% saving in my shopping basket of Rs.1000? In a brand undifferentiated market, what would my shopping behaviour be? These are the points we need to ponder on when we consider the question – Online or Off-line, what would the future be?
Bijou has about 31 years of experience in Indian Industry and has been closely associated with marquee brands in the Fast moving consumer products and retail industry such as Hindustan Unilever Limited, Titan Industries Limited. He helped build powerful brands in the Watch and Jewellery Industry like Titan, Fastrack, Sonata, Tanishq. He joined Reliance Industries in their newly created Retail division and heads the Lifestyle vertical in this retail initiative. His association with the development of Indian retail is over 25 years. Bijou is a prolific speaker on behavioral insights and retail. Bijou is Chairman of the FICCI National Retail Committee, member of the CII National Retail Committee and on the Advisory Board and Grand Jury of the World Retail Congress.
Meet Bijou Kurien at Internet Retail Expo 2013