Boosted by strong consumer spending, the future of Indian retail looks bright
Strong socio-demographic drivers and an enabling environment have led to India witnessing a steady consumption growth over the past few years. Even though the COVID-19 pandemic put a significant dent in consumption spending, the recovery has been strong and swift. Private consumption has been growing in double digits over the past two quarters, and this trend looks set to continue, according to economists.
Boston Consulting Group (BCG) now expects “India’s Retail Industry to continue to grow at 9–10% to reach approximately $2 trillion by 2032, a growth trajectory that remains intact, although delayed by ~2 years due to the pandemic.”
Image: Private consumption expenditure, India (in billion USD, constant prices); Source: Refinitiv Datastream
Growing trends in consumer preferences such as ‘seamless’ retail, personalisation, next-gen stores, the rise of mega ecosystems and emerging revenue models will likely shape the upcoming retail strategy in India. According to BCG, “while some of the preference shifts are short term in nature, several others are likely to have long-term implications for the supply side. Recognizing these trends and responding to them proactively and in an agile manner can help retailers create a winning strategy for the coming decade.”
Among the several reasons why consumer spending has been strong, increasing household income has been a primary driver of growth. Today, amidst increasing consumer confidence, higher internet penetration and access to increased avenues of expenditure such as shopping complexes, multiplexes and malls, spending is, and is set to stay, stronger than ever.
Growing trends in a shifting retail landscape
“While growth remains intact, the shape of this growth is currently in a state of flux. Over the last two years, consumer preferences, behaviours, and attitudes have changed precipitated by the COVID-19 pandemic. That has deep ramifications on how people can buy and consume goods and services. Inevitably, this engendered myriad challenges and opportunities for global retailers, many of whom are adopting innovative models to harness emerging opportunities in retail,” writes BCG.
Online channels have taken centre stage over the recent past, and are now generating a significantly higher share of revenue across sectors, especially among organised players. Here are some of the emerging trends to keep an eye on:
- Emerging revenue models: Retailers have started experimenting with different revenue models in order to enhance their value proposition, leveraging both traditional models and emerging e-commerce models.
- ‘Seamless’ retail: This is the era of seamless retail – there no longer remains a boundary between offline and online channels of retail consumption. Global players today are continuously innovating ways to create integrated retail channels.
- Era of personalisation retail: Large swathes of customer data – and willingness among consumers to share said data – have enabled retailers across the world to develop unique customer experiences.
- Rise of mega ecosystems: Increasing consumption levels and the need to continuously innovate has driven mega ecosystems through partnerships, acquisitions etc., which have led to increased benefit for both retail partners and shoppers.
- Next-gen stores: Brands today are experimenting with various novel approaches to connect shoppers through in-store experiential concepts using technology that blends digital concepts with the store environment.
While there is great future potential and multiple opportunities for Indian retailers, action needs to be taken on several fronts to guarantee sustainable and continued profitable growth. The primary step is to recognise that there are several factors that are likely to feature in the retail landscape in India, such as shifts in consumer preferences due to changing consumer behaviour: “convenience vs. gradual rise in sustainability, or hyper-personalization versus rising concerns around data and privacy”, according to BCG.
Whilst many factors such as renting over ownership; a shift towards experiences or brand affinity may be volatile, they’re more likely to be transitory and have minimal short-term impacts. Other factors may prove to be more enduring and have longer disruptive effects. The launch of Open Networks for digital commerce, leveraging consumer data to provide offerings beyond retail, supply-side innovations to create value etc. are all factors, which, as they play out, may translate into choices that retailers will have to make either with regard to their core value proposition or back-end operations.
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