The report states that India’s retail ecosystem, expected to surpass USD 1.6 trillion consumption by 2030, is undergoing a transformative shift
Highlighting that fragmented segments together account for more than 75 per cent of the retail market, a report has revealed that the fragmentation is going nowhere. Supply in Indian retail is extremely fragmented, with unbranded products, regional and direct-to-consumer (D2C) brands.
In its report, Redseer Strategy Consultants stated that despite the ongoing brandification, this fragmentation is here to stay, and even by 2030, more than 70 per cent of the market is expected to remain fragmented, with unbranded products contributing more than 55 per cent of India retail.
India’s retail ecosystem, expected to surpass USD 1.6 trillion consumption by 2030, is undergoing a transformative shift. Both supply and distribution are changing rapidly to better serve the diverse and evolving consumer needs. “With the growing adoption of technology across the value chain and the advancements in infrastructure and logistics, the interplay of supply and distribution in India retail has never been more exciting,” as stated in the report.
As far as the factors driving this fragmentation are concerned, these include diverse regional preferences, high price sensitivity and complex supply chains. The report highlighted that India’s culture, language and tastes change every few kilometer, across the major consumption categories, making it difficult for brands to scale pan-India, while accounting for the complex regional and local needs.
The majority of India’s population has limited disposable income, leading to a prevalence of small ticket size transactions and high price elasticity. This limits the profit margins for brands and puts them under competitive pricing pressures from regional and unbranded products, as per the report.
India’s retail market has seen a surge in a huge number of stock keeping units (SKUs). The report added that this is attributed to considerable regional differential, need for customisation and personalisation, and variation in the requirement of different consumer cohorts.
The high degree of supply fragmentation has led to the creation and sustenance of general trade in India, accounting for around 80 per cent of India retail. This is contrary to the highly branded markets like the US, where around 80 per cent of the supply is large brands, and organised retail caters to around 80 per cent of consumption, as per the report.
The report added that organised retail, both offline and online, is addressing these inefficiencies and rapidly gaining market share. By 2030, it is expected to exceed USD 600 billion, capturing more than 35 per cent of the total retail market.
