J.K. Dadoo, MBA, IIMA and IAS Retd. writes for BW Retail World as he delves into factors driving India’s retail expansion
India has six megacities with over 10 million population and 13 cities with over four million population. 46 cities have a population of over a million and may grow by 50 per cent by 2030 when about 100 million households become middle-class. India is the fourth largest retail destination globally.
Retail business gets generated from our 1.4 billion people and identified key drivers of the Indian retail industry are known to all especially the desire to hold more luxury goods, preference for branded products and easy availability of all types of goods domestically, which hitherto, had to be imported.
Food and grocery items account for nearly 55 per cent of India’s total retail market which is nearly 1 trillion USD.
Organised retail accounts for just 10 per cent, but it is estimated that it can rise by 20-30 per cent by 2030. The total retail market size may come close to 2 trillion USD by then. Organised retail occupied about five million square feet of space 10 years ago, today it is 82 million square feet. The unorganised sector is estimated to have nearly 15 million retail outlets, responsible for roughly 90 per cent of the total retail business.
In terms of purchasing power parity, India is the fourth largest economy after the US, China and Japan. All channels coexist in the country including mom & pop stores, ‘kirana’ in the local language. Omni-channel shopping is a norm in India as effortless movement across channels is resorted to get all that is wanted.
Barcoding and scanning have expanded organised retail trade substantially. Few modern stores deploy tunnel scanning, where the entire shopping cart passes through an electronic sensor and is hit by laser beams which then produce invoices and debit cell phones in a trice.
ApplePay and GooglePay have created their own pay platforms, which facilitate quick and easy payment obviating the need for debit/credit cards. Cash and carry shopping experience has catapulted so extensively, that tier-two and tier-three cities of India are lapping up these seamless transactions.
Deloitte did a study of 250 largest retailers worldwide, 10 years ago and listed trends that are visible in India too. Airports and railway stations have capitalised on converting internal space into retail destinations, by tapping the huge footfall that naturally emerges. Orders through cell phones have become the norm, with more than half the global population using them. E-commerce has penetrated all major countries and the global e-commerce market is valued at 9 trillion USD today. New technologies pervade the retail sector and Amazon provides AI-created stores, where you walk in and walk out with your basket of goods and automatically total billing is done. The use of social media for purchasing goods is a pervasive development, especially among Gen-Z and capturing consumer feedback has become imperative for retail trade to enable correct critical decisions about storage, sizes, colours, types and variety of merchandise.
Robin Lewis and Michael Dart in their book ‘New Rules of Retail’, propounded that successful retailers have complete control of their value chain, from creation to consumption. Top 10 global retailers today, namely Walmart, Amazon, Schwarz, Aldi, Costco, Ahold Belhaize, Carrefour, Seven and I Holdings, Home Depot and Ikea, are in complete control of the value chain.
Among the 250 largest retailers surveyed by Deloitte, about 90 each came from North America and the EU, with Carrefour as the largest European retailer and Walmart. Metro was the largest diversified retailer. Most retailers are engaged in e-commerce and Amazon topped the list, while Alibaba was the king in China. For India, Deloitte found that digital trading had 150 million shoppers today.
FICCI and PHD estimates indicate retail trade in India, accounts for 20 per cent of GDP and 8 per cent of total employment. More than 100 international brands are available here, either as joint ventures or on a stand-alone basis. 500 brands showed their presence at the phygital retail convention occupying one lakh square feet of space.
Biometric technologies like facial, voice, iris and retinal scanning are deployed in modern stores globally, including India. Sensitivity to environmental concerns and organically produced food has a strong preference by educated consumers worldwide. Infinite choices and customised products are being reflected in buyer behaviour today. Hence, segmentation is becoming imperative for most commodities. Customisation is also becoming a reality, as the customer wants to be a co-creator, desiring to adapt, mix and re-fix, what the seller has to offer, to suit his personalised needs.
Asia is expanding rapidly in retail, with sustained growth rates in China and India. Total retail sales in Asia touched 7 trillion USD in 2014 and exceed 11 trillion USD now. India and China constitute the largest market for clothing and footwear, which has reached 1 trillion USD.
Boston Consulting Group (BCG) and Retailers Association of India identified a need to develop front-end talent, for faster progression of organised retailing. TCS in its study, concluded that a uniform pricing policy is necessary over channels and cross-channel unified marketing and promotion is imperative. It also found that less than 20 per cent of retailers have completely integrated technologies across the different channels. TCS survey highlighted that customers at physical stores were more loyal than digital customers.
The government of India permits Foreign Direct Investment in single brand retailing up to 49 per cent under the automatic route and 100 per cent with government approval. Single-brand product retailing, defined as products branded during manufacturing excludes those which get branded during distribution channels. If FDI is required beyond 51 per cent, then 30 per cent of the goods purchased must be done locally, preferably from MSME, village and cottage industries, artisans and craftsmen.
FDI in multi-brand retailing has been permitted provided agricultural produce may be unbranded and the minimum amount of FDI should be 100 million USD. The first tranche of 100 million USD must be invested in back-end infrastructure, within three years of investment. For e-commerce, FDI up to 100 per cent under the automatic routes is permitted in B2B activities only and not in B2C, though China and Japan have allowed this.
Retail trends are throwing up metamorphic shifts. virtual marketing is progressing towards interactive marketing, with technology and marketing, getting seamlessly integrated.
Simplicity in retail operations and total customer satisfaction are today’s mantras Artificial intelligence provides a personal marketing assistant, to analyse requirements, anticipate demands and create a special shopping experience to delight the customer. UPI in India and other payment mediums worldwide, ensure instantaneous transactions. Blinkit, assures delivery within 10-15 minutes. Social media platforms are becoming marketplaces and influencers are becoming shopping guides.
Eight global trends are shaping how the future of retail will look and its impact on India, spatial reach is paramount today as players like Apple and Amazon want to touch every corner of the globe. Spatial reach is also getting measured in multiple inputs making the final product, like the cell phone having a US processor, circuit board from China, chips from Taiwan, colour display from South Korea and lens from Germany. Also reflected in the electronic movement of trillions of dollars, at breakneck speeds, from nation to nation, bank to bank and person to person.
Nano age is a new age, as radical miniaturisation is taking place, with nanotechnology, which is jolting the planet and its people, causing ‘spatial turbulence’. GPS satellites are enabling nanosecond-level timing for ATM withdrawals. The transportation and food industry is getting drastically altered with embedded chips allowing continuous tracking of package movement, in transit.
The obsoledge trap is making knowledge obsolete, at a mindless pace today. Marketers’ world over realise that change is the only constant and the greater its speed of acceleration, the faster the need to respond. Building brands and brand names is the only effective, enduring and competitive tool, to remain in the public eye. Strong brand capability succeeds, while others lag. Marketers create 3D experiences around their goods and services through immersive VR. Daily disruptions through new products and services, by startups, are causing the mightiest obsoledge trap. Autonomous cars are also becoming a reality, thanks to Tesla.
Prosumer is coined to describe an individual or a group, who can produce and consume its own output. 3D printing is enabling the prosumer to prosper like no parallel. In fact, some progressive economists believe that GDP is ignoring the prosumer, saying the total prosuming economy is no less than the money economy. This suggests the stark reality, that half the world is non-monetised. One of the best examples of this is cited as the computer gaming industry, where structure and content of the demand, decides how, when and where the gaming industry supplies the required configuration. In fact, billions of websites are products of prosuming, of which, Whatsapp is one of the best examples. No wonder, Alvin Toffler, says that ‘prosumers are the unsung heroes of the future economy’.
Flash markets are a term coined by those marketers who find that the lifecycle of several products getting compressed severely. Today, customers are in a hurry and revolt against any time-consuming complexity. Unbundling of unwanted functions is the consequence and customisation is rampant. Flying cars are on display on LinkedIn, including one devised by IIT Chennai. No wonder, marketing gurus believe that any developed market today has two basic processes at work, demarketisation which makes a product or service disappear like the laundry stores and marketisation which produces a wonderful convenient substitute, like the washing machine. Time is not far when ‘Do It Yourself’ kits, will be available to every prosumer and economically valuable knowledge will flash non-stop, across millions of screens and monitors, from Manhattan to Mumbai.
The mall wave has spread at a blistering pace with each big city adorning them. While Covid did give malls a hit worldwide, they are back in action, with tier-2, 3 and 4 cities in India, constructing multiple malls, exploiting cheaper real estate prices and large coverage needs of India.
Mastercard AI chief says data is of three kinds, ‘…if you restrict yourself to descriptive, you are living in the past’. Predictive is better but the best is ‘GPS-driven prescriptive data’, which takes to you to your destination, through all the twists and turns.
Other trends clearly visible include massive discounting done by giant e-commerce players like Amazon, working on high volumes and low margins. Youth is the most happening segment in retail and all five senses of visual, auditory, touch, taste and smell are demanded by the modern consumer, hence whetted by suppliers. While brand loyalty is found highest in beverages, cosmetics, health, beauty aids and snacks, free samples in India are stimulating Intention to try and Intention to buy. Celebrity influencers and live fashion shows catch the impulse buying instincts of the consumer. Touchscreens enable discerning consumers, to get a feel of what they want and facilitate correct decision-making.
According to a retail expert on Linkedin, experiential retail is all about four e’s – experience, entertainment, engagement and execution. This sums up the future of retailing, containing a healthy balance between technology, innovation and human engagement.
