PricewaterhouseCoopers estimates suggest that the Indian retail sector is worth USD350 billion and is growing at over 20 percent per annum. India, as compared to other countries, has been relatively insulated from the global economic slowdown. This is apparent when looking at India’s consumer confidence levels, its GDP projections for the new fiscal year, investor confidence in response to recent election results, etc. While the retail sector will benefit from positive macroeconomic and microeconomic factors, it should be noted that retailers are not resting on their laurels. We discuss four strategies that retailers are using in this environment to increase growth and generate efficiencies,
Improving operational effectiveness
Retail & Consumer companies are focused on optimising operations, streamlining the movement of goods and increasing efficiencies.
o Supply Chain—Efficient sourcing practices, managing inventory turns and overall supply chain management are important measures to improve profitability. The ability to measure and manage supply chain risks is essential to the success of retail operations.
o Renegotiating rental rates—Retail rental rates have declined in most major urban cities by 20 to 40 per cent. As a result, several India-based retailers have embarked upon discussions to renegotiate rental agreements.
Focusing on rural India
Increasing rates of industrialisation, coupled with the Government’s decision to waive farm loan repayments, make rural India increasingly attractive. Companies looking to enter rural India are customising marketing messages, packaging sizes and price points to suit rural consumers. While there are challenges associated with serving rural India (such as inadequate distribution networks, misconceptions about rural Indian consumers, etc.), companies remain bullish on growth potential.
Launching private labels
Indian Retail & Consumer companies are increasingly launching private labels in a range of categories to appeal to value-conscious consumers. While private label products may have a “no frills” approach in their packaging and marketing, they aim to satisfy Indian consumers’ value preferences. India’s retailers view private labels as a robust value proposition and are also witnessing double-digit growth rates in the sales of these products.
Rationalising prices offering sales/promotions
Indian apparel retailers, for example, have been reducing prices on their merchandise in order to meet consumers’ expectations for better-priced products and to encourage volume-based sales. Other retailers are extending sales and other attractive promotional offers to move stock, increase footfalls and drive revenue. Sales, a main characteristic in retail in western markets, are increasingly being used in India since value-conscious consumers are demanding sales and prefer to wait for promotions before buying apparel, footwear, etc.