Indian retail set to grow to $200 bn by 2020
The overall retail market in India has potential to grow from $630 billion in 2015 to $1100-1200 billion in 2020, while the organized retail will grow rapidly to be $ 140-160 billion during the period, says a new report by the Boston Consulting group (BCG) and Confederation of Indian Industry (CII).
According to the CII-BCG report “Retail transformation: Changing your performance trajectory” released at the CII National Retail Summit today, the retail sector will reap the benefits of a large, young population adding to the workforce, 70% increase in income levels, nuclearization of families and increasing urbanization said the report assessing the impact of retail trends and imperatives for retailers to win in this emerging landscape.
The Report also highlights the challenges faced by Indian organized retailers in terms of value conscious and digitally connected consumers, lower bargaining power against suppliers, strong competition from traditional retailers and ecommerce as well as regulatory barriers. These factors result in lower profitability and return on capital for India retailers in comparison with other sectors and global retailers.
Suggesting that a transformation effort that can change the performance trajectory of a company, it said the senior leadership needs to craft a large-scale transformation agenda based on three priorities – Winning in the medium term to establish competitive advantage through strategic/ structural moves, rapid cash release in the short term from current business to fund the journey and building capabilities to be future ready.
There is a lot of excitement about ecommerce today and the sector is attracting a lot of PE/ VC capital as new business models continue to evolve. However, most brick and mortar retailers are somewhat unclear on the opportunity and the stance to take.
The CII BCG report estimated that by 2020, 350-400 million retail consumers would be digitally influenced i.e. their decision making process would be influenced by digital sources such as computers, mobiles, televisions, etc. These consumers would have a spending capacity of $ 240-250 billion. Thus, retail companies would need to examine how they can use the digital medium to disrupt the way they do business. Companies would need to build capabilities in omni-channel retailing, big data & analytics, agile IT and supply chain. While omni-channel and digital marketing are buzzwords today, retailers need to take a strategic view of the opportunity and be clear on their aspiration.
The opportunity size is massive but the business environment is characterized by rapid, extensive change and unpredictability. It will, therefore, become imperative for retail companies to commit themselves for a long-term transformation journey.