4 factors that will make Indian retail a $1 trillion market by 2020

India's retail market that is currently pegged at $600 billion will almost double its worth to $1 trillion by the year 2020.
Retail 2020

A lot has been written about the transforming retail sector of the country. This is the only continuum of business that reverberates with a very popular saying… change is the only constant! Retail business has never been the same when it comes to mechanism and work models. Innovation, rising competition and increasing consumer demand has backed the varying nature of this industry. Today’s dynamic and fast-paced retail industry constitutes of more than 10 percent of country’s Gross Domestic Products (GDP) and around 8 percent of the employment.

In a recent report, jointly published by The Boston Consulting Group and RAI (Retailers Association of India) titled as Retail 2020: Retrospect, Reinvent, Rewrite’, it said that India’s retail market that is currently pegged at $600 billion will almost double its worth to $1 trillion by the year 2020. This whooping rise will be driven by likes of hike in disposable income, urbanisation and change in consumer behaviour towards modes of shopping.

Extending this research further, Retailer Media did a follow-up on the outlook of this exponential splurge and came up with 4 major factors that will supplement the growth of retail in the country in the coming years.

Market Accumulation
In their pursuit for growth, modern retailers (largely eCommerce) will join forces with many small medium enterprises (SMEs) as the synergy will strengthen both, extending a transformation rise in consumer base. The overall retail market in the country is expected to grow at 12 percent annually with modern retail expanding as high as 20 percent per annum. This hike will push SMEs to go online to sell their products on leading online marketplaces. The trend will largely be backed by changing consumer behaviour due to the availability of reasonable smartphones, faster and reliable telecom networks and quick adoption of online services with a wide array of products/ services as well as convenience. Further, India's e-commerce market is expected to reach US$ 220 billion in terms of gross merchandise value (GMV) and 530 million shoppers by 2025.

Government Regulations
With the rollout of Union Budget 2016 that was more focused on aiding startup businesses, the retail industry now has apparent amendments in policies such as GST and FDI. The approval of GST implementation and 100 percent FDI in processed food retailing etc. has open ways for easier and smoother movements of goods across the country which will surely enhance retail operational scenario. The government has also given a go to crumb different formats of overseas investment by shifting to a single composite limit. This means no approval is required upto 49 percent investment as long as it doesn’t include change in ownership or transfer of control entities. These moves will surely fuel foreign investments in the retail sector leading to growth in economy as well as employment opportunities.

Investment Circumstances
Looking at the potential of Indian retail horizon and the demand of consumer goods in sectors such as electronics, fashion & apparel, home appliances etc. many investments have been made lately. As per a report by DIPP (Department of Industrial Policies and Promotion), Indian retail industry in single-brand segment has accumulated a total inflow of $344.9 million equity in a span of 15 years. This is expected to increase more significantly when 51 percent FDI in multi-brand retail is approved and the limit in single-brand retail is raised to 100 percent.

India has now positioned itself in global retail ranking. With high market potential, low economic risks and moderate political barriers, the country has and is likely to attract maximum investments both from domestic as well as foreign investors.

Rising eminence of eCommerce
Online retail business is the gen-next format which has high potential for growth in the near future. After conquering physical retail system, businesses are now dramatically foraying into the domain of e-retailing. Ecommerce industry that currently holds an upper edge against the brick-and-mortar retailers is projected to nab a total of $100 billion by 2020. Currently the industry pegs around $22 million.

India’s young population aided by easier access to credit and payment options, increasing internet penetration and speed, 24-hour accessibility, and convenient and secured transactions are some of the factors that will drive online retail in the country. With lucrative discounts and promotions, eCommerce industry has successfully managed to lure customers and is likely to increase in the recent future. Option like cash-on-delivery, rewards points, cashbacks etc. has forced almost 30 percent of buyers to shift their preference towards online shopping.

These above mentioned factors will surely change various current and prognostic retail behaviours in the coming years. The systematic synergy between organised, unorganised and online retail is a must to enthrall new heights. One thing is for sure that this despite these vibrant opportunities and tremendous growth, a long term success (for every retail format) will always lie in consumer centricity. 

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