Both unorganised and organised retail formats offer unique advantages, growing India’s retail sector, writes the author
The Indian retail landscape is multifaceted, with organised retail chains emerging as significant players. However, unorganised retail stores remain vital components of this industry. This analysis explores the dynamics of unorganised retail stores in fast fashion, across prominent Indian cities. The aim is to understand the market dynamics, price range and growth and what is driving these establishments.
Unorganised Retail
In most developing economies, the traditional form of retailing, where businesses operate on a small scale and are often run by individuals or families is considered as unorganised retail. In India, this segment continues to be a large part of the retail sector. More often than not, these businesses are not formally registered with government authorities and do not adhere to strict regulations or standardised practices.
Economy Building
Importance in the Economy
1. Accessibility: Present in remote or underserved areas where organised retail may not be present
2. Economic Contribution: Continued contribution to the GDP in developing economies
3. Employment: Create jobs, particularly in rural and semi-urban regions.
4. Consumer Choice: Offer varied options and personalised shopping experiences
5. Cultural Preservation: Help preserve traditional crafts and local products by providing a marketplace
Challenges Faced
1. Competition from Organised Retail: The growth of organised retail chains impacts the unorganised retailers’ business
2. Lack of Infrastructure: Poor infrastructure can limit growth and efficiency
3. Access to Finance: Limited access to formal credit restricts the ability to expand and improve operations
4. Regulatory Hurdles: In some cases, lack of formal recognition can lead to regulatory and legal challenges
5. Technological Advancements: Difficulty in adopting new technologies for inventory management, payment systems and customer relationship management
Dynamics Of Unorganised Retail Stores
Unorganised retail stores make up a substantial portion of India’s retail sector. These stores often operate with minimal regulation and lack formal business structures, yet provide a personalised shopping experience. Key aspects include:
1. Local Adaptation and Flexibility: These stores can quickly adapt to local tastes and preferences, stocking products that cater to the cultural and regional demands of their customers.
2. Cost-Effectiveness: With lower overheads and minimal regulatory compliance costs, unorganised retailers can offer products at competitive prices.
3. Customer Relationships: Personal relationships and trust are crucial for customer loyalty. Many customers prefer these stores due to established relationships with shop owners.
India’s Unorganised Retail – Prominent Street Fashion Hubs
A look at prominent street fashion hubs in various cities provides insights into the functioning and appeal of unorganised retail stores:
Mumbai: Fashion Street and Colaba Causeway are known for an eclectic mix of trendy apparel and unique accessories. The rapid turnover of styles here showcases the agility of unorganised retailers in catering to fast fashion trends.
Pune: Fergusson College Road and Tulsi Baug offer a variety of products, from clothes to jewellery, blending modern and traditional styles.
Delhi: Sarojini Nagar and Janpath are iconic for their vast selection of affordable fashion, often mimicking high-street brands and making trendy fashion accessible to the masses.
Kolkata: Gariahat Market and New Market are famous for their diverse range of ethnic wear and contemporary fashion, catering to a broad demographic.
Chennai: Pondy Bazaar and T Nagar provide a bustling market atmosphere with everything from traditional South Indian sarees to modern apparel, highlighting the versatility of unorganised retail.
Bangalore: Commercial Street and Brigade Road offer a mix of street fashion and branded stores, illustrating the dynamic interaction between organized and unorganised retail.
Hyderabad: Laad Bazaar and Koti Sultan Bazaar are renowned for their traditional jewellery and apparel, emphasising the cultural richness of unorganised retail.
Price Range, Designs, Patterns, Product Quality
The average pricing for unorganised retail in fast fashion is significantly lower than for organised retail. The average price point for unorganised retail is Rs 900. Recent data suggests a gradual increase in prices, reflecting inflation and increased demand. The average pricing for organised retail is higher due to better quality, brand value and the presence of physical stores with more overhead costs. The reported average price point ranges from Rs 2500-3000.
Unorganised Retail Price Trends Analysis
In 2020-2021, there was a 5 per cent increase in the prices of fast fashion brands due to disrupted supply chains, reduced inventory levels leading to price increases to manage limited stock and additional costs associated with implementing health and safety measures in stores came into play.
In 2021-2022, there was a 6 per cent increase seen in the recovery phase. This period also saw increased raw material costs and investments in adapting to new business models.
A bigger surge came in 2022-2023 with a nearly 8 per cent increase due to high demand, inflation and sourcing challenges.
The 2023-2024 period saw a drop in percentage change but a price increase nonetheless of 7 per cent. This was attributed to continued inflation and improved but volatile market conditions.
Organised Retail Price Trends Analysis
In 2020-2021, a 4 per cent increase in prices was seen due to efficient supply chain management, digital transformation costs coming into play and operational adjustments for safety measures for the pandemic.
In 2021-2022, a 5 per cent increase was seen due to rebounding demand, raw material price increases and enhanced shopping experience with footfalls increasing.
In 2022-2023, the surge continued with a 7 per cent increase in prices led by significant consumer demand, ongoing inflation, higher logistics costs and further investments in technology and innovative retail solutions.
In 2023-2024, a 6 per cent increase in prices was seen indicating the stable yet elevated costs, continued focus on sustainable and ethical sourcing practices, which generally come at a higher cost and enhanced consumer expectations of high-quality, sustainable and innovative products.
Zone-Wise Trends In Unorganised Retail
The following table presents the market share of unorganised retail in different regions over the past five years for women’s fast fashion brands.
Zone-wise Trends Analysis
North Zone – Gradual Decrease
Market Share: Dropped from 40 per cent in 2019 to 34 per cent in 2023
Reason: Increased penetration of organised retail, changing consumer preferences towards branded goods, and higher disposable incomes
South Zone – Steady Increase
Market Share: Increased from 30 per cent in 2019 to 36 per cent in 2023
Reason: Strong cultural affinity towards traditional shopping experiences, coupled with lower penetration of organised retail in semi-urban and rural areas
East Zone – Slight Decrease
Market Share: Decreased from 20 per cent in 2019 to 16 per cent in 2023
Reason: Rapid urbanisation and infrastructure development have led to a shift towards organised retail. Additionally, economic growth in this region has bolstered the purchasing power of consumers, encouraging them to opt for branded products.
West Zone – Steady Increase
Market Share: Increased from 10 per cent in 2019 to 14 per cent in 2023
Reason: The west zone has seen balanced growth due to its diverse demographic, with both high-end consumers favouring organised retail and a significant portion of the population still loyal to traditional unorganised retail methods.
Market Dynamics – Insights & Big Picture
India’s retail sector is complex with both organised and unorganised players but there is also a substantial portion of standalone stores that cannot be taken out from the mix in order to understand the complete picture. Standalone stores refer to independent retail outlets that are not part of a chain or franchise. They can be either organised or unorganised but are distinct in their standalone nature, focusing on a niche market or specific product range.
Unorganised & Standalone Stores Dynamics
Market Competition: While organised retail chains dominate in terms of scale and infrastructure, unorganised and standalone stores compete by offering localised products, personalised service and sometimes more competitive pricing.
Consumer Insights: Consumers often choose between these types of stores based on factors like convenience, product variety, pricing and shopping experience. Understanding consumer preferences can provide valuable insights for both types of retailers to enhance their offerings.
Opportunities for Organised Retail: Organised retail chains can learn from unorganised and standalone stores in terms of agility, customer engagement strategies, and niche market penetration. Insights gained from these smaller players can inform decisions on product assortment, pricing strategies and store operations.
Takeaways for Organised Retail Chains
The retail sector in India is characterised by the coexistence of both organised and unorganised segments. While organised retail is growing rapidly, unorganised retail continues to play a crucial role, especially in certain zones. There is much that organised retail players can take away from unorganised retail in India.
Organised retail chains can learn from unorganised retailers by
• Incorporating local preferences
• Offering a diverse product range
• Enhancing customer relationships with personalisation
• Agility and flexibility in operations
• On-ground adaptation & innovation to meet consumer demand
Conclusion
Both unorganised and organised retail formats offer unique advantages, growing India’s retail sector. As they face distinct challenges and are impacted by growing trends such as digitisation or changing consumer preferences, there is a lot that they can take away from each other but the urorganised sector has a pulse on the consumer and an expertise of local knowledge and competition that the organised sector can learn more from.
The author is Partner, Le Soleil Enterprises. She has graduated in Computer Application and has specialised in Marketing and quantitative and qualitative Market Research. She has gained vast knowledge of retail sector and market research during her tenure at senior levels in one of the top retail companies of India.
She branched out on her own in 2023 and has started market research and consultancy firm of her own named LSE headquartered in Mumbai. LSE is engaged in market research and consultancy in various fields such as apparel, retail sector, electronics and mobile phones and has top brands and companies as its clients.
