Inside the economics of the Retail Industry in India

Every brand and retailer is clamoring for customer attention and retention making unique product and brand differentiators the need of the hour.

The retail industry in India has undergone a paradigm shift in the past decade and if predictions are anything to go by, it is set to become a force to reckon with in the next. It is growing at an unprecedented rate projected to grow to $1.3 trillion by 2020 from the level of $672 billion in 2017. While traditional retail and unorganized trade still rules, organized retail penetration is growing at 25% and is expected to be over 10 per cent of the total Indian retail market by 2020. This is especially fantastic news for new brands and start-ups.


Traditional retail, especially in large cities has always been a capital-intensive affair which resulted in there being an entry barrier.


Positive policy frameworks introduced by the ruling government with liberalization of FDI as well as uniform taxation through GST has offered a level playing field. It has firmly put India on the global map as the emerging market of the future. IKEA has already set up store and is working on expanding its national footprint. Walmart is soon to follow suit. The stakes have gotten higher. This is indeed an exciting time for Indian retail.


Today, old-school retail stores have given way to multi-brand outlets as the Indian consumer is making his preference for brands more apparent. New aspirations and lifestyle changes has made buyers more brand conscious. Glitzy malls have mushroomed even in remote satellite towns promising to offer a global experience, transforming the way India shops.


What makes all this possible is that consumer expenditure has been on an upward swing and is set to double in the next couple of years. This is the result of the new middle class emerging not just in cities but also in small towns. These are the educated and aware, given their exposure to the internet and trends at large, making them tough-to-please customers. Even in a price-sensitive country like India, while competitive pricing continues to govern all pricing strategy, there has been a marked transition from value retailing to lifestyle retailing. Retailers have had to up their game focusing not just on product quality but also giving consumers a memorable shopping experience. This need for superior customer ‘experience' has pushed the retail design and VM envelope in a big way. 


What has further added a new dimension as India inches towards becoming a digital economy and young consumers become more internet-savvy is the highly tech-driven e-commerce model that offers everything from massive discounts, same-day delivery to try-before-you-buy. Social media too is boosting online sales both for home-grown and established brands as well as retailers who are staking claim to their share of the consumer pie.


Every brand and retailer is clamoring for customer attention and retention making unique product and brand differentiators the need of the hour.


After-sales service and a review strategy have become critical to the survival of a retailer, especially since word of mouth now determines credibility.


Entry of large companies and international players in the space with massive budgets and cutting-edge strategies will ensure competition further intensifies. As the stakes get higher, everyone is likely to benefit and while the industry is riding the growth wave, the real winner is the consumer, who is truly and thoroughly spoilt for choice.


( The article has been penned down by YogeshKabra, Founder of XYXX)


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