Indian retail industry is riding high on the back of a gamut of factors such as increasing disposable levels, growing aspirations, and improved standard of living.
Indian retail, one of the fastest-growing industries not only in the country but across the globe, is expected to cross $1 trillion mark by 2020. Currently pegged at $792 billion, the industry is likely “to register a growth rate of about 12-14% over the next 3 years and reach about $1,150 billion by 2021,” a CARE Ratings report said. However, there is a large potential in six Indian markets, which has been left untapped can drive the growth of the retail sector. Modern retail in top markets viz Delhi, Tamil Nadu, Gujarat, Haryana, Maharashtra and Kerala remains largely untouched but has a tremendous possibility, the report said citing Retail Potential Index of National Council of Applied Economic Research (NCAER).
India is the fourth-largest consumer market in the world after the US, China and Japan and is expected to take on Japan by 2030 to emerge as the third biggest consumer market. The industry is riding high on the back of a gamut of factors such as increasing disposable levels, growing aspirations, favourable demographics, brand awareness, improved standard of living and easy credit availability. Also, the disruption brought by e-commerce has also played a vital role even when only 12% of the Indian retail falls under the organised segment. Out of the total organised retail segment, e-commerce’s contribution is about one-fourth, according to the CARE Ratings report.
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Current challenges of retail
With the arrival of foreign retailers like Walmart and Amazon and the transition happening from offline stores (physical stores) to online stores, the market has been heavily distorted for the mom and pop stores. However, online commerce also has a challenge of its own in terms of cross-border sales. Hurdles like high shipping costs, import duties and complexities in returns and exchanges are posing a challenge in e-commerce cross-border sales growth.
Also, “the retailers’ margins are expected to remain under pressure in FY20… In terms of net sales, we do not expect any significant growth during the year,” said the report. The slowdown in consumer demand has taken a toll over retailers margins.