Indias retail sector is arguably one of the biggest success stories of the last decade. Fast emerging as a large and prominent sector of the economy, it accounts for more than 10% of the countrys GDP and around 8% of employment. The country was also ranked first in the Global Retail Development Rankings 2017, an achievement that pundits hailed as the the first of many.
The great Indian e-commerce juggernaut has had a massive role to play in this success story. The furious bidding war between two of the biggest retail giants in the world, Walmart and Amazon, that resulted in Walmart acquiring 77% stake in Indian e-commerce powerhouse Flipkart is a testament to Indias growing significance in retail. According to a study by the Boston Consulting Group, India is expected to become the worlds third largest consumer economy with $400 billion in consumption by 2025. Growing disposable income, expanding middle class and rapid digitisation through increasing smartphone and internet penetration have significantly bolstered optimism about Indias e-retail performance.
The retail market in India is expected to register a 60% growth to reach a size of $1.1 trillion by 2020. This growth comprises both Organised Retail Market, which is valued at $60 billion and accounts for 8 per cent of the total sector, and the Unorganised Retail Market, which constitutes the remaining 92 per cent. Online retail activity currently lags behind consumption in physical retail stores. However, it is expected to match physical stores consumption value in the next five years as online retail grew at 23 per cent in 2017 to $17.8 billion and is expected to reach $700 billion by 2020 through B2B e-commerce alone.
Rapid advancements in digital technology have blurred the prominent divide between online and offline retail to create a unique omni-channel platform by integrating physical and digital experiences. The entire retail space has been redefined as businesses, both online or offline, collaborate. Shopping is no longer just transactional, but also experiential. To cater to this expectation, brands now look for subtle integration through product placement across popular and quality content to market their products and themselves instead of pushing the products features through traditional standalone marketing campaigns. The emergence of retail-tainment, that is, clubbing different activities such as gaming parlours, sports contests, movie tickets, etc. with the act of shopping has also contributed to the growth of the retail sector. Family Entertainment Centres (FEC) have grown more attractive as visitors wish to partake in different experiences in the same location.
Healthcare, real estate, public transport, food and beverage not a single industry has been left untouched by the e-commerces pixie dust. Office retail complexes have evolved into co-working spaces as Ayurvedic medicinal plants are delivered through e-commerce sites. In short, thanks to technology, everything is on sale in India.
The future appears even brighter. Export growth of retail and lifestyle products at a CAGR of 10% year-on-year, 100% foreign FDI in retail, and introduction of tax mechanisms such as GST are expected to further boost the growth of this sector. Foreign investment has brought in price parity in the sector, and kept Indian start-ups and e-commerce firms on their toes. The government is trying to balance offline and online retailing by putting checks and balances to prevent online marketplaces from offering exorbitant discounts and completely destroying the market framework.
With AI, machine learning and other transformative technological tools in the offing, now is the time to focus on constant innovation, adoption of technology and identification of consumer base pressure points to create micro-targeted marketing strategies to expand the consumer base. E-commerce is creating the biggest revolution in the retail industry and, aided by the cutting-edge technology of the future, it will likely script a story that may seem like a tall tale, but is just waiting to be re(tail)alised.
Ankit Garg is the co-founder and CEO of Wakefit.co.