changing retail scenario B Com Hons III

The structure of the retail industry is changing at a rapid pace as we can see that the online space is collaborating with the offline space. Many e-commerce companies had to shut their shop, while some opted for restructuring or mergers.

In offline space too, we saw many interesting takeovers. We also witnessed an interesting shift in customer buying patterns due to increase in digital payments. Retail industry has been able to overcome quickly from the confusion during the initial phase of GST implementation as compared to other sectors.

With Government working continuously on reviewing the slabs on the products will surely benefit the industry in the long run. Along with this, the Government is also working on various policies such as tax cuts, health care, housing, and finance, and this would increase consumer spending.

Disposable income has also gone up by 3.4 per cent because of which hourly earnings have started to grow, as a result of which, consumers are indulging themselves in more and more buying activities.

Talking about competition, we can see that retail’s biggest competition is not only coming from big retail stores, but also from small and nimble players in the current market.

Future of Retail – 2018 Looks Promising

India is all set to gain from the latest FDI policy in retail.

There has been an increase in purchasing power of the consumer due to easy availability of credit which has given a push to higher value items and encouraged repeated purchases. There has been a clear shift in consumer mindset when it comes to buying. They are more educated and well informed. They have become more experimenting and are willing to try and buy products which they haven’t used till now. The expansion of middle class has led to higher purchases of luxury products and brand consciousness.

Significant growth in discretionary income and changing lifestyle are among the major growth drivers of Indian retail industry. With GST taking its shape, it has helped the retailers simplify its tax structure. This will lead to better supply chain structure, better cash flows, pricing, and profitability.

Rural markets show high growth potential if tapped with the right set of products and pricing. With increasing investments in infrastructure, connectivity to such towns is now becoming easier. This helps the retailer to increase reach in such high potential markets.

We can expect social networks to soon evolve as retail channels. This is because companies are investing heavily in providing services to customers directly, this trend will evolve and will transform the current shopping session into a well-known retailing session. New players, new business models, rising customer expectations will all likely change retail’s future landscape.

Retailing is more than brick-and-mortar, and retailers who are agile enough to adapt and innovate their way through changes continue to grow and thrive in new and unexpected ways. The future of the retail industry looks promising, as more and more Government policies have come into play, making it favorable to do business.

India has been ranked number one in A.T. Kearney’s 2017 Global Retail Development Index,which ranks the top 30 developing countries for retail investment worldwide.

There are three key factors that are triggering this change.

Foreign Direct Investment

The Indian government has been opening up the retail sector to foreign investors. The Narendra Modi-led government has allowed 100 percent foreign direct investment (FDI) in multi-brand retail for food products. However, what is more important are the small tweaks to the overall conditions for FDI in the sector, which will make these investments financially feasible for companies.

For example, initially the government had stipulated that any foreign multi-brand outlet operating in India needed to source 30 percent of all products from local MSME suppliers in India. That had seen many leading companies delay their investments as they concluded that this mix was difficult to work with. This has now been changed and foreign owned outlets retailing Food, now need to have 30 percent of goods ‘manufactured in India’. This means they can still choose the product range, and the brands, they want to carry as long as they are being manufactured in India. Further, it appears that some amount of household items may be allowed to be retailed in this format (to be confirmed by the Govt.), which we believe will make this format economically feasible.

This is likely to ease concerns of those who were sitting on the side lines and result in an increase in foreign investment in the sector. This is a game changer as food and grocery account for around a third of India’s consumption basket.

Valuing quality and service

There is a slow but sure change in the “value equation” taking place amongst the masses: there is a growing trend among Indian consumers to “uptrade” to branded products from those sold “loose”, paying for service (look at how the salon or local grocer market has transformed) and paying more for value (split AC share in is 90%+ of the market) and for more premium brands. This is being driven by a variety of factors including urbanization, increased awareness about global trends, quest for better products and focus on healthier living and valuing one’s own time.

India’s urban population has expanded from 340 million in 2006 to 430 million in 2016, according to the United Nations’ World Cities report. India’s leading cities, as well as tier 2 and tier 3 cities, have also seen a big increase in media and internet penetration. That has made consumers more aware of global fashion and food trends, driving up demand for packaged products, premium brands.

All of this is eventually being underpinned by the ability of customers to afford premium products & services, across all categories – from food to fashion.

India’s economic expansion over the past few years has resulted in higher income levels. Per capita income in India has nearly quadrupled since the start of the century, rising from US$452.4 in 2000 to US$1593.3 in 2015, according to the World Bank. This has put more disposable cash in pockets of consumers who are not shy of spending it. The growing consumption power of Indian urban consumers backed by a consistently growing economy should create a “deeper” market across categories and set the foundation for further modernising Retail

Skilling & Employing India

The retail sector is among the top three employers in India. The government’s move to allow FDI in various forms, coupled with the growing consumer demand, is expected to see it create even more jobs in the coming years.

According to the National Skill Development Corporation, India’s retail sector will need around a workforce of around 56 million. The sector will have one of the highest incremental human resource requirements - of 17.35 million till the year 2022.

These jobs are likely to be created at all levels. With companies looking to open up more stores, there were will be need for staff at the customer service level. Meanwhile, as companies look to make the most of the digital evolution and launch their e-commerce offering, high-end jobs will also be in demand. As multinational companies enter the country post the easing of FDI regulations they are likely to invest in back-end infrastructure such as warehouses, logistics, accounting, customer services etc. creating ancillary jobs across the country.

With more people employed, they are likely to see their income levels go up, which in turn will give them more cash to spend, which will create even more jobs. It’s the vicious cycle many economies across the globe can only hope for.

Before we know, the most used phrase to describe India’s retail sector could well be: Top performer.