For long, the analysts have been betting on strong retail and financial services sector performances to help and power India – Asia’s third-largest economy. Such expectations further get a boost as more and more Indians move towards western-style consumer spending patterns. And, while Fitch, the global ratings agency, has recently opined that Indian consumer spending is at its weakest in seven years, we at FICCI, believe that India’s retail sector will become a USD 1.3 trillion opportunity by 2020. By that time, there will be close to 200 cities with population of over 0.5 million that will fuel retail growth
The estimated value of the Indian retail sector is about USD 500 billion presently. Further, modern retail, which currently stands at 5 percent, will grow about six times from the current USD 27 billion to USD 220 Billion in the next 8 years. We believe that integrated multi-channel retailing will drive consumption in India. Modern retailers have in the past tried to capitalise on this opportunity by increasing their store presence across major cities. Fast moving consumer goods (FMCG) majors, have on the other hand, have tried to enhance distribution reach.
However, achieving these robust growth projections requires the industry to look beyond the conventional brick-and-mortar stores, and consider other avenues like digital and mobile sales. This is because expensive real estate costs are already playing spoilsport for retailers. Real estate costs, especially, high rentals that are in range of 10 – 15% of revenue, render breaking even a daunting task. Retailers need to rethink their business plans and shift a chunk of their sales from stores to alternate low-cost channels. Digital sales points are increasingly becoming a preferred option for retailers. Sales through digital channels, notably websites and mobile applications, which at present are miniscule, will increase to 6-8 % of the total modern retail, by amounting to about USD 13.3-17.6 Billion by 2020.
Time has also come for a more robust and symbiotic relationship between retailers and FMCG companies. FMCG firms have a lot to gain with the advent of multi-channel retailing. However, the depth of retail FMCG collaboration will be one of the key success factors for multi-channel retailing. It is imperative for retailers and FMCG majors to collaborate for assortment planning, replenishment, space planning and promotion as they have a lot to gain.
FICCI Retail & FMCG Committee has recently organized Massmerize 2012, India’s premier conference on retail and FMCG sector in Mumbai. The event registered intense deliberations amongst 50 renowned speakers like Shantanu Khosla, CEO, P&G; Devendra Chawla, President, Future Group; Rakshit Hargave, MD, Nivea; Harkirat Singh, MD, Woodland; William Pinckney, MD, Amway; Mohit Anand, VP, HUL; K. Radhkrishnan, President, Future Fresh Foods; Krishnamohan, CEO, Emami; H.G. Raghunath, COO, Titan, etc. FICCI also released a white paper on “Driving consumption through integrated multi-channel retailing” in association with TCS