Why Traditional Trade Share in Grocery Retail is Expected to Fall by 20 pc in Next 5 Years

The share of traditional retail will decline from 85 percent now to 65-70 percent over the next four to five years, while other channels, including e-commerce and modern trade retailers, could corner 30 percent share
Why Traditional Trade Share in Grocery Retail is Expected to Fall by 20 pc in Next 5 Years

As India’s grocery retail market expands, the share of traditional trade will decline with modern trade formats and pure-play online sales capturing a bigger share by 2025.

Specifically, the share of traditional retail will decline from 85 percent now to 65-70 percent over the next four to five years, while other channels, including e-commerce and modern trade retailers, could corner 30 percent share, according to consulting firm McKinsey & Co.

Also, the overall grocery retail market is expected to grow 6-7 percent annually by 2025. 

“We expect the overall grocery retail market to grow in the next 10 years; it will only grow in size. So, in terms of size, traditional trade will still be bigger; but from a shared perspective, it will come down," said Abhishek Malhotra, Partner, McKinsey & Co. 

Experts believe that the segment will see a greater share of the grocery market tilt towards modern trade players such as Reliance Retail, DMart, and More, while also significantly benefiting online grocers such as BigBasket and Blinkit.

READ MORE: How this Online Grocery Start-up Working with Minimum Inventory System Grew from 400 to 23,000 Customers Within a Year

In the new market share equation, digital players are likely to capture a larger share. 

India’s grocery retail market is vastly unorganized and complex, comprising an estimated 12 million retail outlets, and over a million wholesalers and distributors of large FMCG companies delivering goods of daily use to end consumers.

However, the entry of cash-and-carry companies such as Walmart and Metro Cash & Carry over the last decade, the advent of e-commerce, and, more recently, the growth in new-age B2B providers has transformed this ecosystem, McKinsey’s report said.

Also, experts believe that as market dynamics shift, consumer product companies will have to work on strengthening their core distribution as well as work on new emerging channels amid a strong consumer shift in preferences as well as a slip in the dominance of traditional retailing.

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