The Indian retail market is expected to almost double its size to reach $2 trillion in the coming decade, stated a report released by the Boston Consulting Group (BCG) and Retailers Association of India (RAI) on Wednesday
The Indian retail market is expected to almost double its size to reach $2 trillion in the coming decade, stated a report released by the Boston Consulting Group (BCG) and Retailers Association of India (RAI) on Wednesday.
The report, titled Unlocking the $2 Tn retail opportunity in the next decade: An activist agenda, examines recent trends across sub-sectors, identifying the key themes shaping the future of retail in the country and their implications for retailers.
The market, valued between $820 – $840 billion in 2023, is expected to grow at 9-10 per cent in the coming decade. This pace of growth will be influenced by a steady growth in disposable incomes, a shift in spending on experiences and increased savings, and the return of store expansion momentum through small formats, said the report.
The report stated that organised retail in the country has consistently demonstrated faster growth, despite subdued performance in the recent quarters owing to potential headwinds.
While year-on-year growth is down 5-10 percentage points (Q3 FY 23-24 v/s Q3 FY 22-23), pointing towards potential short-term stress, “the industry participants continue to remain optimistic about the outlook and long-term structural tailwinds,” the report said, while adding, “profitability at the same time has generally remained consistent and largely in line with global peers.”
Apart from a steady growth in per capita income, the report also highlighted the shift to consumer spending on experiences. Between FY18 and FY23, while the goods sector recorded a compound annual growth rate of 8-9 per cent, the services sector grew faster – at a CAGR of 11-13 per cent.
Savings, too, have seen an increase. While contribution to SIPs has grown 28 per cent from 2021, there has been a 30 per cent increase in Demat accounts since December 2022 until December 2023, the report said. Health insurance penetration also grew by 3 percentage points from FY21 to FY23, it added.
A steady growth on the supply side too, will continue to influence this growth opportunity. According to the report, store addition momentum has returned, indexed on small format stores. “Store expansions continue to happen and with increasing urbanisation, there is more consumption expected to happen in tier 1 to tier-4 cities,” the report added.
Meanwhile, even as e-commerce continues to grow, net new user addition has seen a slower pace in the year. While active users for the top 20 online retailers grew 38 per cent in 2019 and 55 per cent in 2020 – largely impacted by Covid-related mobility restrictions, 2023 saw only a 10 per cent increase in active users, the report said.
However, e-commerce is forecasted to grow 20-25 per cent in the coming years to command a 13-15 per cent share in the retail market by 2028.
“The retail sector offers very significant opportunities, but at the same time we see very significant variation in performance across retailers. The key to standing out and achieving success lies in retailers’ commitment to sharpening their CVP and the delivery model, leveraging the transformative potential of AI and analytics, and aggressively managing costs,” said Namit Puri, managing director and senior partner, BCG.
The report identified five key considerations for retailers to drive growth in the coming decade, which include re-innovating business models, leverage Artificial Intelligence (AI) to provide a personalised experience to consumers, unlocking value chain efficiencies, leveraging partnerships to bolster revenue streams, and adapting localisation strategies to cater to a wider consumer base.
“As we stand at the cusp of a transformative retail era, it is crucial for Indian retailers to embrace the wave of constant innovation. By focusing on personalised customer experiences, exploring new collaborations, and leveraging AI for efficiency, we can propel India’s retail industry towards unprecedented growth and global competitiveness,” added Kumar Rajagopalan, Chief Executive Officer, Retailers Association of India (RAI).
First Published: Feb 28 2024 | 10:16 PM IST
