From re-invention of brick and mortar stores to tech-driven sales, retail gears up for a makeover

Published: January 9, 2020 4:07:56 PM

Consumer behaviour has been undergoing a complete makeover. Receiving groceries at doorstep, booking a ride from the comfort of couch are just some of the luxuries that India's digital transformation has made possible for consumers.

real estate, real estate in India, real estate outlook for 2020, retail, commercial property, Pradhan Mantri Awas Yojana, PMAY, NCRFavourable government regulations and demographics among other drivers, has attracted deep-pocketed international players to the country. (Representative Image)
  • By Harsha Razdan

Consumer behaviour in India has been undergoing a complete makeover. Receiving groceries at your doorstep, booking a four-wheeler ride from the comfort of your couch and checking out an entire catalogue of a plethora of brands, from a mere swipe on the mobile screen, are just some of the luxuries that the country’s digital transformation has made possible for consumers. This has obviously also changed the way the retail landscape has been operating. Favourable government regulations and demographics among other drivers, has attracted deep-pocketed international players to the country.

Let’s dive a little deeper and look at some of the top things that have made a great impact on the retail landscape in 2019″

Impetus received from FDI policy reforms for single-brand retail

The changes to FDI norms may well re-position India on the global map. Allowing single-brand retailers to start online stores, while meeting local sourcing norms, aligns well with the ‘Digital India’ initiative, giving them time to build their brick-and-mortar presence in parallel. This will positively impact job creation and investor sentiments abroad.

Manufacturing hub

100 per cent FDI via the automatic route for contract manufacturing is true to the ‘Make in India’ initiative and will attract global players looking to set up alternate manufacturing hubs. In the same vein, adding exports to the local sourcing norms may help build larger capacities, reinforcing India’s stand as a potential global manufacturing hub.

Draft e-commerce policy focused on data protection and consumer interest

The policy was envisaged keeping in mind the Indian retail landscape, so as to maintain tighter control over e-commerce companies, create a level-playing field for foreign and domestic players and promote the government’s ‘Make in India’ initiative. Keeping privacy and data security at the centre, a formalised e-commerce policy will go a long way in empowering the consumer.

E-retail growth driven by local/regional markets

Tier 2/3 cities and some rural markets have emerged as the major consumption drivers across the retail segments. Further, e-retail promotions coupled with convenient pricing and easy financing options have managed to push sales in these regions. E-retail has continued to create a huge impact in the overall retail scheme of things.

Future sectoral outlook 2020

Brick and mortar stores to re-invent

Wallet share has been gradually shifting from selling products to morphing into consumer experiences, driven by the growing millennial population. Hence, brick and mortar stores will continue to re-invent and we believe, the focus should be on providing a seamless omnichannel experience to their consumers. It is essential to achieve digital and physical touchpoints working together seamlessly. This could help them with better consumer connect and loyalty.

Emergence of new retail models

Consumers today look for value, variety, convenience and good customer experience. These attributes if addressed by an omnichannel approach of online-offline can serve consumers best either through smaller or large store formats. We expect retailers to increasingly turn towards e-commerce (via marketplaces or own-websites) as their internationalisation strategy. Loyalty programmes could evolve and become more integrated with the shopping experience.

Tech-driven retail

With a need to improve operational efficiency and profitability, we could see social commerce, Virtual Reality (VR) and Augmented Reality (AR) gradually making their way into the retail space. Leading retail industry players are experimenting with the possible applications of automation and AI to derive productivity gains.

Regionalisation/localisation to continue to gain popularity

Retailers are working to find a way to connect with the digital savvy, non-English speaking consumers. There is a growing base of Indian language users particularly in Tier-2, Tier-3 cities and rural areas. Hence, we expect retailers to adopt a regional content strategy to reach out to the masses. Further, retailers could also leverage on ‘assisted commerce’ models to connect with the ‘offline’ consumers.

Consolidation

With FDI liberalisation, retailers are looking to consolidate in a bid to control costs and maintain market share. E-commerce retail players are looking for consolidation to expedite shift from penetration to profitability and achieve cost synergies.

To conclude, we expect the retail landscape to gradually undergo a myriad of changes in the coming year. Of course, most of these changes are eventually going to impact the industry positively. Considering the ever-changing consumer expectations coupled with the socio-demographic mix, it will be important for the government to help retailers adopt the right channels to push growth. Retailers too on the other hand, will need to continuously innovate to unlock the growing consumer demand. With the emergence of the ‘new rural demand’, we are hopeful that Indian retail will continue to grow exponentially.

  • Harsha Razdan is Partner and Head, Consumer Markets and Internet Business, KPMG in India.

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