Retail brands have seen a strong rebound in the last six months and are registering 8-10 per cent higher footfalls and conversions over pre-Covid levels, Rajat Wahi, Partner, Deloitte India, told FinancialExpress.com. “The business seems to be recovering well, at least in metros and tier-I cities even as there is slow growth in the tier-II and tier-III towns in terms of overall consumption. Furthermore, the holiday and wedding season will add to the growth of the industry and will help drive the economy,” he said. Retail industry accounts for 25-30 per cent of the total economy, directly employing around 8-10 per cent of the country’s population and indirectly employing 15 per cent of the population. In a conversation, Rajat Wahi talked about the role of the overall retail industry in India’s economic growth. “The overall retail industry is roughly about US $ 850- 870 billion and while it remained flat in the last two years, it was expected to be about US $ 1 trillion right now,” he added. Here are the edited excerpts of the interview…
How has e-commerce transitioned over the years, especially during the pandemic? How do you see this growing in the coming years? Do you think online retail will overpower offline, going forward?
Even if I look at developed markets and markets like China where total retail is roughly $ 5 trillion, e-commerce is roughly still 20-25 per cent of the total retail. Even in markets like the US, e-commerce is 25-30 per cent of the total retail and that’s after so many years of strong e-commerce presence there. So, even if we look at the next 4-5 years, we could look at e-commerce in India being between 15-20 per cent of the total retail.
The brick-and-mortar retail is here to stay and will continue to grow in India. Today, modern retail only accounts for between 10 and 12 per cent of total retail with a huge headroom to grow in tier-II and tier-III towns where malls and high streets are still coming up. Experiencing products and being inside a retail store will remain on top of the mind of most consumers and this trend is evident with even online players opening offline stores today. Brands like Lenskart and Nykaa have now open their offline stores in high streets and malls to create that shopper experience. Also, there has been integration of technologies like AR, VR, etc. to offer a differential experience to the consumers. So, I think the model will continue to be hybrid.
Also Read: The second of a series on what 2023 could have in store: Jobs: A thousand cuts
D2C has become the next big thing. How do you see this growing in the times to come?
D2C might become a $ 100 billion business in the next five years. But the challenge with D2C is the cost to acquire customers and provide services to them. For brands to manage that on their own becomes very challenging. While D2C can help you initially launch the product and business, brands will need to go through either integrating with large e-commerce platforms or offline stores, department stores and supermarkets, etc., to scale the business.
There is a slowdown of sorts in consumer spending. How will this impact the retail industry recovery? Do you think this will change soon?
The slowdown is because of global headwinds, war in Ukraine, inflation, oil prices, and US dollar appreciation, etc. Also, import prices have gone up which is impacting the overall business. With inflation, consumers’ disposable income has gone down and it definitely has impacted consumption. The expectation is that a lot of this will continue for the next few months or quarters but eventually consumption will go up again.
What are the few suggestions to retail brands from Deloitte?
One is to have a strong omni presence, to be available on social platforms, on ecommerce. Also, to strengthen their own operations so that they are capturing customer data even if a customer walks into a store, to understand who the customer is, whether they have stopped there before, whether they have a loyalty program, how is the brand engaging with the shopper on the loyalty program, etc. How often do they reach out to them? That’s a big suggestion. Thirdly, brands need to ensure that their return policies, their pricing, etc. remains consistent across channels so that customers feel its the same brand across channels. Also, brands should have a good feedback mechanism or a return mechanism and right promotions at right times – whether it’s during festive season or special season. Generally, companies can spend between 10-15 per cent or up to 20 per cent of their total revenue on marketing and advertising.