STATE OF THE RETAIL IN INDIA: 2023 SURVEY REPORT

 

About India SME Forum (ISF)

Formed in May 2011, with the objective to propel a Small and Medium Business Movement across the country, India SME Forum is a non - governmental, non-political, not for profit organisation with 19 State Chapters across India. Starting out with 400 members in 2011, today we have over 97,200+ MSMEs as members (9400+ are women) and 12,36,000+ MSMEs as subscribers. India SME Forum has trained 7000+ high growth sustainable enterprises, ready for internationalization. India SME Forum is the member of India's National Board of MSME, the apex MSME Statutory Body, between 2015-2020, member of the 3-member Advisory Committee of the Ministry of MSME under the MSMED Act, member of the RBI's Standing Advisory Committee on Flow of Institutional Credit to MSME Sector, member of the Ministry of MSMEs International Co-operation Committee, member of the MSME Export Promotion and Development Task Force of the Government of India and member of the GMIS Task Force.

About Forum for Internet Sellers, Retailers & Traders (FIRST) India SME Forum, the voice of MSMEs in India, has taken the lead in forming the Forum for Internet Retailers, Sellers & Traders, (FIRST India) in order to support the entry of retailers, sellers and traders who have been inducted in the definition of micro small and medium enterprises under the MSMED Act 2006 on the advice of the Advisory Committee constituted under subsection (2) of section 7 of the MSMED Act 2006. In March 2023, FIRST was formally unveiled by the ­­then Hon'ble Union Minister Shri Narayan Tatu Rane, in the presence of dignitaries including Shri Bhanu Pratap Singh Verma, Hon'ble Minister of State for MSME, Shri Bidyut Swain, IAS, Secretary of the Ministry of MSME, and Ms. Mercy Epao, Joint Secretary - MSME. This launch followed an encouraging dialogue with Shri Piyush Goyal, Hon'ble Minister of Commerce and Industry, who acknowledged the pressing need for such an entity. The Indian retail, trade & commerce sector, representing enterprises based in India, which are in the business of wholesale & retail selling of goods and services, both, offline as well as online to consumers, are all eligible under this change notified on 2nd July 2021. India SME Forum serves as an exofficio member of the Advisory committee constituted by the Government of India, under subsection (2) of section 7 of the MSMED Act 2006 and has pushed for the inclusion of wholesale and retail trade as activities eligible under the MSMED Act with benefits restricted to priority sector lending, as of now. Together with Indian policymakers, FIRST India can work on a daily basis to create a conducive policy and ecosystem which will help remove, the biggest obstacles for online merchants to expand their business nationally as well as across-borders.

INTRODUCTION

Retail has played a significant role in India's economic narrative due to growing income levels, consumption and fast modernisation. Retail is India's third-largest economic sector, contributing more than 12% of the country's gross domestic product (GDP)*. Retail, which employs more than 5 crore people, also significantly influences allied industries like warehousing, shipping, construction, and packaging**.

According to the Ministry of MSME, 27 lakh retailers in the country are registered with Udyam registration portal as on October 2022, since the government revised the MSME classification in July, 2021, opening new doors for retailers and sellers through which they can now avail priority sector financing already available for MSMEs. The Government is taking efforts to provide the required support and policies for retail trade of the country to flourish.

In today's digital era many retailers have recognised the importance of going digital, especially during the pandemic and raised their capabilities in e-commerce and digital marketing to access local and global markets through digital channels.

Increasing Internet penetration and social media use have driven the growth of e-commerce in India. Indian Retail currently faces the problem in expanding their business due to exorbitant real estate prices, high operational cost and the lack of appropriate retail space, forcing the big as well as small retailers to turn towards e-commerce as a growth avenue in addition to their physical stores. E-commerce has attracted a new wave of consumers from Tier II and Tier III cities due to services like Cash on Delivery, free home delivery, deep discounts, flexible payment options and buyback policies and also the availability of variety of products, especially during the COVID pandemic.

*National Accounts Statistics 2020, Ministry of Statistics and Programme Implementation, Government of India **https://www.kearney.com/consumer-retail/article/-/insights/national-retail-policy-to-enable-the-next-wave-of-retail-growth # th Source: Ministry of MSME, Government of India as on 18 October, 2022

OBJECTIVE

The survey was conducted with an aim to understand the adoption of digital technology by the retailers, as the digital era is taking over the business world. The pandemic has elucidated the importance of online shopping and the customers have become digital savvy and would prefer shopping with a single click on their phone, tablet or laptop, at any given point of time (24x7). Digitising retail business and sales operations was a survival move for the retailers. For a small retailer the major challenge is to acquire new digital savvy and loyal customers, as customer preferences and taste are ever changing and evolving. There lies a bigger opportunity for small retailers in adopting digital technologies and e-commerce models as digitization increases their credit worthiness, with the use of point of sale (POS) devices, digital payments generating data, which helps lenders in identifying the business cycles & extending credit. It's no secret now that the retail landscape is more competitive than ever. The customers are now in total control and only a personalized & unique retail experience will capture their attention. But despite this, many retailers are slower to adopt new technologies that can enable them to change – they must evolve with the customer, because the customer will not change for them. If they don't, they will soon be seen as irrelevant, which can become a mitigating factor for the retailers.

RESEARCH METHODOLOGY

The survey was constituted by India SME Forum, to study the state of business of retailers, sellers and traders, across industry sectors throughout India. 32,859 Retailers were selected for the survey from the verified retail MSME database of the members of the India SME Forum and its constituent supporting organisations and federations. In order to collect specific data points, a questionnaire was proposed, studied and discussed to arrive at a final format which enabled collation of primary data points besides easing the qualitative and quantitative analysis. The survey was rolled out in a phased manner which consisted of emailing the survey mailer in August 2022, followed by SMS and telephonic reminders. The survey initially received a total of 24,852 respondents. 22,761 responses were found to be fully complete in all respects while 2091 respondents had left the survey incomplete and as such were discarded and not considered for the purposes of this report. The survey encompasses responses of respondents from 13 states of India, which were chosen on the basis of various parameters including retail density. This National Report profiles the responses to the comprehensive survey conducted by India SME Forum and will be followed up by in-depth analysis of the responses, state-wise.

 

 

RESPONDENTS: STATEWISE DISTRIBUTION

HIGHLIGHTS

- Most of the MSMEs in India are start-ups and 56% are in the business for less than 5 years.

- Majority of the retail stores are run by sole proprietors followed by partnerships and partnership LLP.

- Most of the MSMEs primary retail sector is food & grocery followed by electronics & pharmaceuticals, dental & optical.

- Retail outlets in India are unaware about branding and prefer to sell third party brands or non-branded items as compared to in-house brands.

- Majority of the businesses in India fall under the Micro category while only a small portion fall under the Medium category.

- Omnichannel approach is the future of retail industry in India.

- Key top drivers for retail businesses in India are festive & occasion shopping, customer outreach, innovative marketing & customer experience (State-wise key top drivers explained in the report).

 - Despite the online boom, majority of the retailers still prefer taking order over the counter.

- COVID pandemic has given a major boost to the use of UPI based payments.

- There is an emergence of 3PL for delivery of goods amongst the retailers.

- Retail giants operating in the cities are the biggest competitors for the small retailers in India.

- COVID-19 has been a boost for the digital payments in the business ecosystem. Digital transformation is bringing a revolution in the retail industry.

- COVID-19 forced many retailers to adopt digitisation and it has in-turn helped them in running their business efficiently during the pandemic and Maharashtra being the state where most of the retailers have taken their business online in the past 3 years.

- Lack of investments & digital business skills are the biggest barriers for digital adoption.

STATE OF THE BUSINESS

NEW AGE RETAIL START-UPS ON THE RISE

The survey was conducted nationally among a total of 32,859 select retailers, with only 22,761 complete responses from 13 states being considered for analysis. The findings suggest 56% of the retailers are in business for less than 5 years, which indicates that retail start-ups are on the rise, whereas 76% of the retailers are in business for a decade, while only 24% of the retail businesses surveyed PAN-India were more than 10 years old. India has ample opportunities in the Indian Retail Industry and is the fifth-largest preferred retail destination globally. The Indian Retail market is estimated to grow at 9-11% CAGR and is expected to reach $1.1-1.3 Tn by 2025 on the back of multiple structural, socio-demographic and economic drivers to boost consumption*. This sector is experiencing exponential growth, with retail development taking place not just in major cities and metros, but also in tier II & tier III cities. India's long term consumption and retail growth drivers are expected to provide a strong foundation for future growth as the Indian consumption is likely to outperform developed countries. There has been increasing demand in the Retail Industry in India and forces that could further shape the retail industry are; consumer shifts, supply side innovations, data & technology driven disruptions, new competitive forces and changes in regulations. Retail Start-ups have started using a flexible workforce, as B2C retailers have started smaller store formats as well as online stores, as the consumers now prefer more convenience/ ease of access, personalization, multi-channel engagement, healthy living, and being able to shop 24*7, etc. Private labels have also gained prominence in a few categories, both offline and online.

*https://web-assets.bcg.com/img-src/BCG-RAI-Report-2022_tcm9-239844.pdf

RETAIL BUSINESS MAJORLY RUN BY SOLE PROPRIETOR

The survey reported that 74.61% of the respondents are running their business as a proprietary concern, followed by 16.97% as a partnership firm. 4.20% of the respondents are private limited companies and 2.98% of the respondents are LLPs, whereas the rest 1.05% are classified as HUF. A very negligible 0.20% of the respondents are Public limited companies.

Enterprise Constitution

In the recent report released by Goods & Service Tax Network*, the number of GST registered businesses as proprietorship are 80.20%, which reflects a similar pattern.

In India, entrepreneurs wishing to start a retail business from home or on a commercial premises usually opt for sole proprietorship. The data correlates that most of the businesses like kirana stores (grocery stores), beauty parlours & boutiques, etc., are established as proprietary firms in India.

India's unorganised retail that stands at 90% is the key towards digitising and providing an access to new products and shopping experiences. New tech solutions are needed to create new models of commerce that can enable Indians to have a digital shopping experience with the best of both the online and offline worlds. Vertical solutions like ONDC, that give rise to new models of commerce will be the game changer. While helping keep a tab of accounts better, the question is, can a vertical solution leverage unorganised retail to deliver a 20X increase in per-store sales. Models that can organise millions of unorganised retailers to expand and create new markets.

 

*https://tutorial.gst.gov.in/offlineutilities/gst_statistics/5YearReport.pdf

SMALL RETAILERS OBLIVIOUS OF BRANDING BENEFITS

 

 

The survey reported that 88.19% of the respondents sold third party brands at their retail outlets, which mostly included items of consumer electronics & pharma sector while 82.30% of the respondents also sold non-branded items which mostly included items from food & grocery sector which constituted of dal, rice, wheat, cereals & spices, etc. On the other hand, only 10.44% of the respondents sold in-house brands, which mostly refers to the jewellery, fashion & apparels & other lifestyle sectors.

Majority of the retailers may not understand the benefits of brand creation, whether that is branding of their business, the items that they sell or long term value creation through brands. It is pertinent to note here that a majority of the enterprises who have in-house brands have turnovers higher than Rs. 5 Crores.

BASIC NEEDS COMPRISE MAJOR RETAIL

 

The survey reported that “Food & Grocery” emerged as the major sector in the respondents retail business with 23%, followed by 18% in “Electronics” and 14% in “Pharmaceutical, Dental & Optical” sector.

Retail for personal basic needs has ample growth opportunities in the Tier I as well as Tier II and Tier III cities. It has also been observed in this survey that the majority of the new entrants and start-ups in the retail industry belong to the above three sectors.

88% MICRO, 11.48% SMALL ENTERPRISES

 

 

A significant 72.07% of the retailers have annual revenues of less than Rs. 1 Crore and 16.22% of the respondents have annual revenues between Rs. 1-5 crores, which implies that more than 88% of the retailers belong to the micro category as per the current MSME classification.*

Around 7.42% of the respondents had annual revenues in the range of Rs. 5-20 Crores and more than 4% had annual revenues of Rs. 20-50 Crores, both totalling and classifying 11.48% of the respondents as Small as per the current MSME classification.* Only 0.23% of the respondents had annual revenues of more than Rs. 50 Crores which can be classified as Medium Enterprises.*

*https://msme.gov.in/know-about-msme

RETAILERS ADOPTING OMNICHANNEL APPROACH

The survey reported that 2% had no physical retail space while 98% have on-ground retail presence.

On the other hand 64% of the retailers have online presence, whereas, 36% of the respondents have still not gone online and are still operating purely in brick & mortar stores.

With the economy opening up, it seems imperative for a retailer to have an on-ground store as well as online presence, as customers prefer an omnichannel approach to have an enhanced experience of shopping. Selling online can help the retailers increase their reach and acceptance among a larger customer base across the country, ultimately leading to greater profits.

Having online presence in the market has brought many benefits to the retailers and has helped most of them ride the covid wave. Some of the key driving factors for the young demography are increasing internet and smartphone penetration.

The Indian e-commerce industry has been on an upward growth trajectory, especially after the covid-19 pandemic, a surge in digital adoption was seen. The Indian e-commerce market was estimated to be worth over $55 bn in Gross Merchandise Value in 2021. *

*https://www.investindia.gov.in/sector/retail-e-commerce/e-commerce#:~:text=The%20Indian%20e%2Dcommerce%20industry,merchandise%20value%20of%20%24350%20bn.

OUTREACH, MARKETING & CUSTOMER EXPERIENCE IS THE KEY

The festive season, sees usually higher sales than the rest of the year, mainly due to the offers & discounts given by the stores, which enables the customers to loosen their purse strings. Most of the retailers offer some or the other discount and many customers prefer making purchases during these times.

The survey reported that the top driver as per 17.84% of the respondents is festive & occasion shopping, while an overwhelming 30.50% considered customer outreach and innovative marketing as the key driver for the retail business. 21.26% retailers felt that customer experience & customer loyalty is the top driver of their business while 14.86% of the retailers reported that less competition in their area is their top driver of their business. 12.91% of the retailers reported that the top driver of their business is cost competitiveness and on the other hand, 2.31% of the enterprises reported survival instinct as the major factors influencing their retail business.

STATE-WISE PERSPECTIVE OF RETAILERS AT A GLANCE

 

 

 

 

OMNICHANNEL GAINS OVER OTC

The survey reported that despite the online boom, almost 57% of the retailers were still taking orders over the counter, which mainly belong to the food & grocery, consumer electronics & pharmaceuticals category.

26% of the retailers take orders through digital platforms using third-party e-commerce, WhatsApp, online website and mobile applications, which states that the majority portion of the retailers are still taking orders through offline channels and are slowly moving towards digital.

 

 

MASSIVE GROWTH IN UPI BASED PAYMENTS

UPI based payments have become the most popular way, as customers transact online. The survey reported that though 69% of the retailers prefer UPI based payment gateways for transactions, 97.24% of the retailers still accept payments in cash while 7.22% of the retailers accept payments through debit & credit cards, etc. Mass retail payments platform Unified Payments Interface, popularly known as UPI, posted yet another life high in August 2022. The platform processed 6.57 billion (657 crore) transactions, totalling 10.73 trillion, according to the data released by the National Payments Corporation of India (NPCI).

UPI transactions by volume rose 85% on year, while it was up nearly 68% by value as compared to last year. In fiscal 2022, the platform processed 45 billion transactions worth Rs. 77.91 trillion. In the current year, UPI has recorded over 30 billion transactions worth Rs. 51.74 trillion so far. The next target for UPI is to process a billion transactions a day in the next 3-5 years.

The Covid-19 pandemic has accelerated the pace of digital payments with UPI becoming the biggest beneficiary. Recently, RBI released a discussion paper on all charges levied on various payment systems, asking all payment system stakeholders to submit feedback on whether it should introduce charges on UPI or it should be market determined. Currently, there are no transaction charges on UPI.

EMERGENCE OF 3PL

98.08% of the respondents delivered the goods at their shops, or over the counter, while 44.85% were those retailers who have employed a dedicated delivery staff to deliver the goods to their customers. 29.53% of the retailers use third party delivery and logistics partners helping them to scale up & mainly because of an increase in customer base across India. 3PL or third party logistics is the new way forward in the business of retail in India.

A third-party logistics (3PL) provider is an outsourced partner who manages all or a portion of your order fulfilment procedures. Once you receive a new online order, you send it to a 3PL for picking, packaging, and shipping. Most of the time, they are also invisible to your customers, and you can brand the package.

Consumers today have high shipping expectations, however they are willing to shop around and spend their money with those that can satisfy them. Most online vendors are unable to easily and quickly create complete logistic networks capable of meeting those high demands. Implementing programmes like same-day shipping requires the use of automated workflows and technology, as well as efficient picking and packaging services and strategically situated warehouses close to clients.

Most retailers use 3PLs for their basic inventory storage, picking and packing orders, and handling returns. However, when they collaborate with the right 3PL, they then become a part of their team. 3PLs can leverage relationships and volume discounts that retailers could not otherwise achieve by themselves and with access to these cost savings and more, they can calculate an easy ROI of partnering with 3PL. A 3PL can eliminate shipping to wrong addresses, stockouts, delayed shipments, etc. The retailer's shipping strategies directly impacts consumer satisfaction and their decision to purchase again in the future and is a powerful tool for converting one-time buyers into long-term customers.

RETAIL GIANTS - BIGGEST COMPETITORS

 

The survey reported that 60.73% of the retailers are facing a major challenge & competition from offline multi brand / chain stores and are unable to compete with big retail giants due to limited capital & resources.

The second most challenging factor for 48.74% of retailers is fulfilling compliance & taxation, followed by 47.18% retailer find it difficult to keep pace with changing customer expectations and are unable to retain customers, given the options offered by current market.

39.95% of the retailers say that they are facing competition from online portals & stores as thousands of retailers have adopted an omnichannel approach stepping into newer markets and segments of other retailers. There is no doubt, now is the time retailers must embrace a digital first, adapt to AI enabled strategies to combat competition or perish.

Opinions of most of the retailers focuses on the threat that they are facing from major organized retail outlets, or the emergence of organized retailing being a threat to their business. Most of them compare the growth of their business before the emergence of the organized retailers and after the emergence of the organized retail outlets. Unorganized retail electronic outlets have faced deep decline in their sales due to the emergence of malls when compared to other product categories like clothing, groceries etc. The Indian consumer is gradually moving from the local “kirana” shopping to “Mall Hopping”.

With a number of domestic and international brands available in stores in metros and smaller cities and with a wide range of product offerings from food and grocery to furniture and fixtures, the Indian consumer is fast embracing modern retail. Indian unorganized retailers aiming to grow, have to pay more attention to the brand building process. The emphasis here is on retail as a brand rather than retailers selling brands. The focus should be on branding the retail business itself. In their preparation to face fierce competitive pressure, Indian retailers must come to recognize the value of building their own stores as brands to reinforce their marketing positioning, to communicate quality as well as value for money.

The biggest competition for small retailers are malls and other big retailers operating in the city.*

*Competitive Strategies for Unorganised Retail Business: Understanding Structure, Operations, and Profitability of Small Mom and Pop Stores in India - Balkrishan Sangvikar, Ashutosh Kolte and Avinash Pawa

DIGITAL PAYMENTS ECOSYSTEM BIGGEST BOOSTER

India has been making giant strides towards promoting digital payments transaction with its Unified Payments Interface. Access to real time secure online payments has become an imperative for any business in the digital society. Initiatives like UPI, BHIM have pushed the digital payments ecosystem in India, far ahead of other economies and constitute an essential aspect of the digital India programme.

Furthermore, the survey reported that 21.15% of the retailers feel the inclusion of retailers in the definition of MSMEs is an important measure for access to finance under priority sector lending schemes available for MSMEs.

India is adding about 12 million people to the working population each year, a significant increase in the working-age population. The rising internet & smartphone penetration among the middle class people has led them to shop online, this transition took place especially during the COVID. Changes in consumer habits post the pandemic forced brands towards digital innovation and most of the traditional offline retail enterprises felt the need for a strong digital presence in order to stay relevant to new-age online shoppers. The COVID-19 pandemic has boosted India's adoption of digital payments and the country benefited from having a robust payments system that could handle the high demand from consumers and businesses. India is one of the most efficient digital payments market in the world, with lowest pricing offered to merchants.

India's digital payments industry is nascent, dynamic and growing rapidly. As per the Reserve Bank of India (RBI) statistics, digital retail payments worth $4.9 trillion in value and 44 billion in volumes were processed in FY21. Out of this, P2M retail payments accounted for approximately $800 billion in value and 22 billion in volumes. India has established a truly open payments system that is accessible, with several businesses competing for success and the adoption as well as the growth of UPI is a strong indicator of this.

As per RBI's detailed benchmarking report, India is a 'leader' in this metric compared to 21 other developed and emerging markets. While India has reached a sweet spot in developing digital payments solutions, with minimal entry barriers and a strong regulatory framework, the market for payment aggregators is still expanding.

DIGITALISATION & DIGITISATION

The survey reported that 72% of retailers have shown high acceptability for adoption of digital tools & for using them more to improve store operations & offerings. There is an immense opportunity for digital platforms to step in & consolidate parts of a highly desegregated retail market while tackling the operational pain points that Indian small retailers face. The survey also reported that 35% of the retailers have adopted a digital business program for more than a year, whereas 21% of the retailers have had an exposure to a digital business program for less than a year. On the other hand, 16% of the retailers are currently working to launch a digital business program in the next 6 months while on the contrary, 22% of the retailers still have no plans to engage in digital business in the next 6 months and apparently they are very comfortable with the offline physical store model.

E-commerce players & retail brands have been quick to meet new consumer demands using online shopping technology advances, as well as supply chain optimization. As Indian retail is heading towards pre-pandemic normalcy levels, the industry has come a long way from its pre-pandemic approach to digital adoption. The faster growth of Gross Merchandise Value (GMV) in FY 2022 has led to a 2.5% YoY growth in average order value*.

Many first-time online shoppers who started their digital commerce journey in 2021 continued to shop online even after the lockdown. Companies were able to build confidence amongst first-time online shoppers, which enabled the sales of higher value products. With the onset of the digital revolution, it is imperative for retailers to embrace data and technology to shape consumer shopping preferences and minimize costs – prompting retailers to up their game.

*https://infowordpress.s3.ap-south-1.amazonaws.com/wp-content/uploads/2022/08/01122926/Unicommerce_and_Wazir_Advisors_Report_2022.pd

STATE-WISE DISTRIBUTION OF DIGITAL ADOPTION IN RETAIL SECTOR

 

The graphs show progressive retailers in states who have opted digital business programme in 5 different time periods.

Retailers in Andhra Pradesh lead with most retailers surveyed, having adopted a digital business program for 2 years or more.

Majority of the retailers in Maharashtra have adopted a digital business program for more than a year, followed by Gujarat. Also, the states of Tamil Nadu, Andhra Pradesh, Telangana & Uttar Pradesh have a very strong digital presence in the retail sector for more than a year.

Majority of the retailers in Madhya Pradesh have digital business program for less than a year followed by Delhi NCR & Uttar Pradesh.

Most of the retailers in India have understood the importance of digitization and a vast majority from states of Delhi NCR, Haryana & West Bengal, etc. are ready to adopt digital tools, apps and websites to purchase inventory and messaging apps to communicate with suppliers and/or customers in the next 6 months, as they believe these digital tools can bring business efficiencies.

BARRIERS TO DIGITAL ADOPTION

What are (or have been) the BIGGEST barriers to adoption of digital business in your organization (select any 2)

While retailers are rapidly intensifying their digital transformation efforts to stay ahead of the change in customer behaviour, there are several barriers still obstruct the digital adoption.

The survey reported that 92% of the retailers believe that lack of investment is the biggest barrier for digitisation.

As retailers are embracing digital technology, they struggle with omnichannel execution and their efforts in cross-channel fulfilment hasn't taken off in a big way. Complexity and fragmentation are barriers that hold back the retail industry from achieving the agility needed to scale up digital transformation initiatives, such as embedding AI and machine learning (ML) into core processes.

Several other barriers they face are; the inability to experiment quickly, insufficient budget, risk-averse culture, inadequate collaboration between IT & lines of business, lack of talent or skills required, cyber security, etc*.

Digital transformation journeys can only be successful when individuals from all departments of the enterprise step outside of their comfort zones and collaborate across boundaries for the benefit of the entire enterprise.

*https://www.infosys.com/iki/research/retail-industry.html

DIGITAL CAN TRANSFORM THE RETAIL LANDSCAPE

What are (or have been) the BIGGEST barriers to adoption of digital business in your organization? (select any 2)

Digital technologies are enabling radically new ways to deliver value to customers as well as it has helped the retailers become more innovative and has increased the agility. By going digital, it will help the retail business to move towards cashless economy and will eventually help to reach a bigger market. Indeed, the digital technologies have altered the competitive landscape.

The survey reported that majority of the retailers believe that going digital will help them inculcate culture of innovation in their enterprise & improve their businesses, followed by improved services for building new customer experiences. 72% of the retailers believe that going digital will solve the issue of increased agility & 53% of them believe that it will improve collaboration across departments while 29% believe that it will increase revenue. Further, the survey reported that 25% of the retailers feel that Digital adoption will enable a more adaptive culture & 18% believe that it will reduce non-value-added work, whereas 16% of the retailers believe it will lead to increased profitability.

The technological revolution like mobile computing and data analytics have made it easier for retailers to communicate with and also understand the customers better than ever before. Prior to the pandemic, the e-commerce channel witnessed continuous evolution and growth. The pandemic significantly changed customer behaviour and accelerated e-commerce adoption, which changed the composition of India's retail industry. Leading FMCG brands such as HUL, Emami, ITC, and Marico built extensive digital presences to capture newer opportunities. The online sales channels of these industry leaders cater successfully to the needs of new-age online shoppers.

Unicommerce data suggests that the e-commerce industry reported a 69.4% order volume growth YoY in FY 2022. In comparison, FY 2021 witnessed a YoY order volume growth to the tune of 44.9%*. The pandemic provided an opportunity to re-strategize and evaluate retail operations. Businesses were quick to realise that the right technology and effective supply chain solutions are essential to ensure customer satisfaction and boost sales. Its sustained impact is visible in the continuous growth of ecommerce despite the regular operation of physical stores and decline in COVID cases. Digital-first players were able to address the industry gap, and offer new products at attractive price points to attract young online buyers.

With the onset of the digital revolution, it is imperative for the retailers to embrace the digital tools which will help them increase their reach as well as sales & ultimately increase their profits.

*https://infowordpress.s3.ap-south-1.amazonaws.com/wp-content/uploads/2022/08/01122926/Unicommerce_and_Wazir_Advisors_Report_2022.pdf

 

HEADING TOWARDS THE NEXT WAVE OF RETAIL

RETAIL TRENDS SHAPING THE FUTURE

 

INTERPLAY OF SEVERAL FACTORS WILL SHAPE THE CONTOURS OF RETAIL IN INDIA

 

 

 

TOWARDS THE NEXT WAVE OF RETAIL IN INDIA

 

WAY FORWARD

The retail sector in India is largely unorganized and predominantly consists of small, independent and owner managed shops. India has a large number of people engaged in retail trade for their livelihood.

The traditional grocery shops (mom and pop stores) are the most affected by the introduction of the shopping mall culture in India. The traditional grocery shops are trying to compete and improve their sales by the better display of products, providing credit facility, free home delivery service and capitalising on their long term relationships with the customers.

It is visible that unorganised retailers are making efforts to compete with organised retailers by reaching out to the customers residing around their retail store and improving their service quality.

There is an influence of shopping malls on unorganised retail stores (mom and pop or kirana stores). The unorganised retail stores view big shopping malls as the most significant threat to their existence.

On the other hand the consumer's traditional idea of a retail purchase has undergone a significant transformation leading into hybrid experiences. The upwardly mobile consumer sees adoption of smart technology and business models as an essential requirement in the digital world.

To keep up with the transitioning retail market, a race has begun toward digital intimacy with the consumer. The momentum has shifted from brick-and-mortar forms to digital channels thereby broadening the scope of interaction in this customer-obsessed environment, increasing engagement and leading to conversion.

Reacting fast and maintaining an advantage over the competition is made possible by digital merchandising, demand sensing, watchful replenishments and multi channel online platforms. Traditional retail focussed brands have implemented omnichannel mechanisms to affect consumer purchasing patterns in order to maintain and grow their business in the current dynamic market environment, with almost every industry sector having adopted digital transformation to enhance their offerings and facilities in order to stay competitive.

In the retail sector, digital transformation can be a driving force behind an omnichannel experience that meets customer needs and expectations through instant gratification, personalised push notifications, tailored recommendations based on market trends, strategic analysis, location-based marketing and anticipatory shipping for fulfilment conveniences, albeit, with an integrated view of consumer behaviour. All of these, together with the requirement to adopt ground-breaking business models and finding innovative ways to generate revenues, are important reasons to integrate emerging technologies into a retail enterprise's digital transformation process.

The retail industry must align loyalty programmes with consumer expectations, acquire precise data, and use it wisely to provide highly customised experiences. The requirement for the retailer to have a robust network and maintain constant communication with the network of suppliers, staff, and consumers is crucial given the fast-growing level of competition. To make this happen, digitization is essential.

Digital transformation entails using data intelligence, working towards customer centricity, being nimble, creating new value propositions, and being innovative. Let us not forget that it is also about lowering costs, streamlining processes, and increasing efficiencies. Big data, clever algorithms, analytics, mobile apps, location-based services, the internet of things, and blockchain have all brought about considerable change. Every component of the business, including strategic sourcing and procurement, supply chain and logistics, staff management, training, and customer experience management, plays a significant part in aiding retailers to grow profitability and keep up with demand.

Retailers aren't exactly enamoured with the idea that online channels and digital players that only operate online are posing a challenge to their business models and eroding their profit margins. However, they have unwillingly come to the conclusion that if they want to remain in business, they must provide the online channel as a hygiene component. Retailers should concentrate far more on their clients and their specific needs if they want to take advantage of the potential offered by digitization. In more concrete words, this implies customising the buying process or the sales conversation rather than just blindly adopting other retailers' strategies. A good click and collect solution is needed if the customer base chooses to shop online but drives to the store to pick up the items (such as fresh groceries or take-out meals). On the other side, click & collect is irrelevant if customers desire the appearance and feel of things in stores (such as consumer electronics or apparel) but subsequently want to have products delivered to their homes; a good ship-to-home process is needed.

Instead of duplicating a heavy communications strategy that bombards customers with hundreds of newsletters, luxury businesses should invite VIPs to private shopping events. Not to mention, curated shopping services make a lot of sense for customers who are invested in their purchases and interested in a community, but not so much for those looking to buy soap and laundry detergent. Digitalization in the form of automatic shopping reminders or buy buttons is more beneficial in this situation.

It is vital to identify relevant shopping baskets, themes, and communication touchpoints for each individual customer. Numerous retailers already have loyalty programmes that produce a

tonne of data; they "only" need to make wise use of them and connect them with other digital options.

The Government has made a lot of our work easier by pushing for Digital India and Digital payments. With the Open Network Digital Commerce (ONDC) coming in, it is also expected to boost small online retailers by ushering in inclusivity, discoverability and interoperability. It will empower suppliers and consumers, by allowing everyone to participate as a seller, even the smallest sellers in the most rural areas.

*Open Network Digital Commerce (ONDC) was not added as one of the options in the survey because ONDC had not been rolled out when the survey was conducted.