Indian Retail Snowballing?: 5 Trends from BCG and RAI Report

Image Source: Raconteur

Image Source: Raconteur

Retail Industry of India has seen some ground breaking changes and development over the last two decades. As industry experts review the trends and developments, the fundamental strength of the India consumption story continues to surface. Rising income, urbanization and additional shifts validate this optimistic outlook, promising a certainty of growth in the future.

However, the future will have challenges and glitches along the way, forcing the players to reinvent. For instance, the digital revolution has arrived sooner than expected, which completely reshaped consumer behavior and expectation. In this highly dynamic retail landscape, the brick and mortar retailers will have to compete with an increasingly wider set of peers with diversified business models. This poses a challenge of capabilities. Players will need to evolve and adapt their offerings across the purchase pathway to provide a coherent omni-channel experience to the digitally savvy consumer. This also demands building capabilities in talent management and supply chain optimization.

As the industry grows, players will be required to recast their approach and mould it accordingly. Incremental changes will not suffice and a fundamental transformation will be necessary. Players will need to develop efficient and sustainable ways to generate adequate funds for this journey, in part as margin and cost pressures increase the importance of economics. In equal measure, the disruptive changes will require a set of measured bets to be taken even as organizations develop key enablers.

According to the report, there are five key trends identified that needs the maximum attention:

Certainty of growth:


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As per the recent BCG analysis, the Indian retail Industry is expected to double to $1 trillion by 2020 from $600 billion as of 2015 and the retail market is expected to grow at an aggressive rate of 12%.

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According to the report this rapid growth is fueled by the following 4 factors:

  • Income growth: 3 times increase in average household income from $6,393 in 2010 to $18,448 in 2020.
  • Urbanization: 40 percent population to live in urban cities by 2020, up from 31 percent in 2010.
  • Nuclearization: Over 200 million households to be nuclear by 2020—with 25-50 percent higher consumption per capita spend.
  • Attitudinal Shifts: 75 percent of population by 2020 will belong to Generation I1 with markedly higher consumption levels.

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The interesting factor to note here is that modern trade is expected to grow 3 times to $180 billion in 2020 from $60 billion in 2015, thus validating the much hyped migration to the super mall culture.

Reality of Digital

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The big ‘internet shift’ is no more a concept but a reality that’s fast gaining the spotlight. E-commerce market in India is expected to quadruple to $60-70 billion over the next five years, driven by faster growth in goods than services.

Quick Facts:

  • Internet users expected to grow 3 times from 200 million in 2014 to 600 million by 2020.
  • Increased proliferation of smartphones from 120-140 million in 2014 to 600 million by 2020
  • Lower cost of connectivity
  • Expanded reach in lower tier cities and rural areas; courtesy: investment in network infrastructure
  • Superior value proposition.

Challenge of Capabilities

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Due to the massive internet buzz and connectivity, an omni-channel presence is not only an advantage but a necessity for even the brick and mortar retailers.

Quick facts:

  • Customers expect a seamless buying experience be it online or physical.
  • Traditional strengths and expertise in retail insufficient to deliver quality omni-channel experience.
  • Well conceptualized talent management strategy critical to revitalize customer journey across channels
  • Limited capabilities in the middle and top management due to inadequate specialized training and depth of experience
  • Supply chain requires evolution as modern trade grows exponentially
  • Infrastructure Challenges make physical execution difficult
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Importance of Economics

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Several economic shortcomings are responsible for the hitches in Indian Modern Trade, both on demand side as well as supply side.

Quick Facts:

On the demand side

  • Throughputs still not high
  • Poor execution of pricing and promotions

On the supply side

  • Highly inflationary real estate costs
  • High COGS (Cost of Goods Sold)
  • Lack of a financially optimized supply chain
  • According to the report the problem that deserves most attention is the throughput problem, costs and margins can later be sorted.

Need for Transformation

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The market is booming and a lot of options to make money  are  available, but the need of the hour is, a fundamental transformation not incremental change.

Quick Suggestion curated from Industry Experts by the report:

  • Fund the journey: Generate fast cash by focusing at core business
  • Recognizing the most promising consumer proposition for next 6-8 years and aligning the operational model of the business with it.
  • Take measured bets, and invest in 2-3 emerging marketing trends
  • Enable the Transformation: Invest in people and infrastructure to have a holistic improvement of the business’ assets.
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