The pandemic has changed the retail landscape in a big way. Businesses have dealt with more changes in the past two years than in the previous two decades. In the last two years, the retail industry has undergone tremendous changes in operations, customer retention, supply change and payment services, to name a few.
Post pandemic, the stores are opening and people are ready to shop again. Foot traffic is on the rise again. But there is a radical change in consumer behaviour. People are willing to buy from the brands which resonate with them because of geography, values, and sustainability. Brands from different niches have handled these challenges in their way.
Let us get an insight into how the retail industry is becoming more customer-centric and resilient.
India’s Retail Business
Let’s dive into statistics regarding India’s retail market.
- India’s retail market is the fifth largest globally.
- We expect India’s retail industry to grow at 9-10% to reach approximately $2 Tn by 2032, which remains intact, although delayed by around two years due to the pandemic.
- India’s retail industry projects to grow at a slower pace of 9% over 2019-2030, from US$ 779 billion in 2019 to US$ 1407 billion by 2026 and more than US$ 1.8 trillion by 2030, as per research conducted by Kearney.
- The retail industry in India achieved 93% of pre-Covid sales in February 2021, and consumer durables and quick service restaurants increased by 15% and 18%, respectively.
Pre-Pandemic History of Retail Business in India
The Indian retail industry is one of the essential pillars of its economy and accounts for over 10 percent of the country’s gross domestic product (GDP) and around 8 percent of employment.
- In 2003, India’s retailing industry was mainly small shops called Kirana Dukan.
- In 2010, supermarkets and convenience stores came into the picture and accounted for 4 percent of the industry.
- Until 2011, direct investment in multi-brand was not allowed by GOI, and this restriction forbade any foreign company from owning any supermarkets or retail outlets.
- In November 2011, GOI allowed foreign ownership of any retail outlet for a single brand, but multi-brand was opposed. This step paves the way for brands like Walmart, Apple, Nike and IKEA.
- In January 2012, India welcomed foreign single-brand stores with the condition to source 30 percent of its goods from India.
- In September 2012, GOI opened FDI in multi-store brands subject to approval by concerned states. In December 2012, GOI allowed 51 percent FDI in multi-brand retail in India.
Factors Affecting Retail Business Post Pandemic
It is probably an understatement to the online industry if we were to conclude that they had a minor success during the pandemic. As facts state, the pandemic had little effect on online businesses. However, the retail industry underwent a detour in many departments by implementing factors such as:
- Macro-economic factors of Covid-19 such as store closure, decrease in demand, health concerns, supply chain disruptions and climate change
- Political factors like trade war, increase in wages, and outsourcing
- Data and cybersecurity factors like identity theft, Morden payment gateways, AI, advanced data analytics
- Demographic factors like change in population, diversity, Gen Z and millennials and WFH job profile
- Changed customer aspirations include more personalised products and experiences and better after-service. Using personalised methods has shown a 10 percent increase in rental value and a 40 percent increase in average order value.
- Brand product factors like product transparency, brand value and sustainability
- Globalisation factors include global platforms and ecosystem, the impact of tech giants, the Internet of Things (IoT), and the sharing economy.
India has a substantial growth opportunity. The size of the retail market is -0.7 $Tn. Historical growth (CAGR) is > 10 percent, and the top 5 players’ market share is 5-7 percent, giving significant market players the potential to enhance their total market share. CAGR from 2010-2019.
Source: Euromonitor, BCG analysis
Recent Trends in Retail Business 2022
Here are a few emerging trends that will shape the future of the retail business in India.
- Smooth buying experience: There should be a perfect integration of online and offline channels for buying any product — an omnichannel approach to enhance shopping experiences.
- Experimenting with different revenue models and enhancing customer value proposition through influencer marketing, reseller program, and live short videos.
- Mega ecosystem through acquisition and partnership that serves all customer needs. The alliance will help to stay competitive, decrease the cost of competitiveness, and increase market share.
- Personalisation is the key: Providing a unique in-store experience for the purchase and providing a curated and personalised product with the help of a customer profile for customer satisfaction and retention.
- Next-Gen Store: including tech innovation, reconfigured store to enhance convenience, increasing visits by the customer and consistent touchpoint helps make the customer aware of the product.
- Hiring the right kind of employee: The primary step is to provide better customer service; retail businesses will have to attract, train, and retain the correct staff. Providing more specialised roles and increased compensation, a healthy work environment, and life flexibility is an excellent way to maintain a good team.
The retail business has undergone a 360-degree shift from an unorganised sector to a systematised one, from product-centric to customer-centric, using high-end technology to leverage modern shoppers. The use of hyper localisation and personalisation will be the future of retail business.