Offline’s not out of vogue

By: | Updated: September 14, 2015 1:45 AM

The cut-throat competition from online retailers in a subdued macroeconomic environment was expected to hurt organised brick-and-mortar retail chains.

The cut-throat competition from online retailers in a subdued macroeconomic environment was expected to hurt organised brick-and-mortar retail chains. However, Crisil finds they have done fairly well with revenues for a clutch of two dozen retailers having grown at a compounded 24% annually in the last five years to R0.7 lakh crore at the end of March 2015. That compares with a growth of close to 60% for online retailers whose estimated gross merchandise value in FY15 was R0.4 lakh crore, driven by large discounts and shopping convenience.

Crisil believes brick-and-mortar chains have been focussing on profitability even if it means in some cases a moderation in revenue growth. They are also taking initiatives to improve operating efficiency — including exiting unviable product categories, rightsizing stores, increasing focus on private labels and undertaking cluster-based store expansion.

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The ratings agency says there is a considerable spurt in consolidation among these retailers as they look to use scale of operations and extent of reach to take on competition. Crisil believes large B&M retailers will align their business models to tier II and tier III cities to drive growth.

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