The overall retail market has potential to grow from ~630 Bn USD in 2015 to 1100-1200 Bn USD in 2020, suggests a CII-BCG report on “Retail transformation: Changing your performance trajectory”.
Organised retail and ecommerce will grow rapidly to be 140-160 Bn USD and 45-50 Bn USD respectively by 2020. Retail sector will reap the benefits of a large, young population adding to the workforce, 70 percent increase in income levels, nuclearisation of families and increasing urbanisation.
The report also highlights the challenges faced by Indian organised retailers in terms of value conscious and digitally connected consumers, lower bargaining power against suppliers, strong competition from traditional retailers & 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. The report highlights that a transformation effort that can change the performance trajectory of a company can be undertaken. Senior leadership needs to therefore 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 estimates that by 2020, 350-400 million retail consumers would be digitally influenced i.e. their decision making process would be influenced by digital. These consumers would have retail spend of USD 240-250 Bn. In this context, retail companies would need to examine how they can use digital 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. Whilst omni-channel and digital marketing being 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 characterised by rapid, extensive change and unpredictability. It will, therefore, become imperative for retail companies to commit themselves for a long-term transformation journey.
Shashwat Goenka, Chairman, CII National Committee on Retail 2015-16 & Sector Head, Spencer’s Retail, RP Sanjiv Goenka Group, says, “With the expected exponential increase in digitally savvy consumers over the next decade, technology will play a key role in the development of the Indian retail sector. Retailers will have to adopt technology in both back-end and front-end, to bring the digitally savvy consumer into the mainstream retail fold.”
Abheek Singhi, Senior Partner and Director, The Boston Consulting Group, India, feels, “Indian retail sector has potential to be USD 1100-1200 Bn by 2020, with organised retail having potential to be close to 12-15 percent of the opportunity and e-commerce being USD 45-50Bn and potentially higher. Whilst the opportunity is massive, Indian retailers would need to transform themselves to win.”
Chandrajit Banerjee, Director General, CII, is of the view that “The retail sector is on the path of a transformational journey. Such a path would require arduous and strategic planning of the future by both stakeholders and government, keeping in mind the changing patterns in consumer behaviour, the galloping pace of e-commerce and omni-channel shopping which is redefining the ecosystem, and the critical need to expand the base of organised retail. It is imperative that all stakeholders put in the right effort, resources and skills to reorient themselves.”