In a study conducted by Boston Consultancy Group (BCG) and Confederation of Indian Industry (CII), it was revealed that organized retail in India, which is currently valued at $40 billion will swell to $200 billion in the next 5-7 years. The findings were shared during Confederation of Indian Industry (CII) National Retail Summit and CII National FMCG Summit in Mumbai yesterday.
Super successful and popular Indian investor Rakesh Jhunjhunwala, who was present at the event sounded very optimist when he said, “Retail is one of the best sectors with a long-term growth. It offers great opportunity. I recommend companies, which have a high chance to scale up.”
He added that although the industry hasn’t performed well in the last decade, it is expected that the next 5-7 years would be crucial as newer emerging areas of growth are being witnessed currently. He pointed out that food & grocery; footwear and lifestyle products has done exceedingly well in driving up numbers, and these are sectors which will push higher growth in the coming years.
CII vice-president and Forbes Marshall director Naushad Forbes said, “FY14 was tough for both FMCG and retail. Modern retail still accounts for 8% of the total retail, lagging behind its own expectations of 10% by now, though we are already seeing early signs of revival.”
The report, a copy of which is with Trak.in, specifically mentions that digital mode holds the key for rapid expansion of organized retail. As per the report, by 2020, average household income in India will become nearly 3 times of 2010 income, majority of which are currently present online.
With a burgeoning Internet population (200 million by the end of 2014) and middle class households, internet based transactions would be exponentially rise in the next 5 years, which will drive up the numbers overall.
The report mentions that five levers of change will drive the growth in the next 5 years:
- Digital Experience of the end users
- Brand advocacy across different mediums
- International Market (mainly for FMCG)
- Leveraging technology to make the process of shopping easier
- Talent management and organizational skills of the organized retail players
Besides that, the report observed that a complete transformation of operations is required which can support exponential growth of the organized retail sector:
- Retail pricing and promotion strategy needs a boost with a holistic approach
- End to end supply chain which doesn’t break the process
- Enhancement of margins through reduced COGS (Cost of Goods Sold)
- Multi channel management
- Advanced business models and network
The report comes out at an interesting time, when Food retailers are bleeding big time as they accumulated Rs 13,000 loss in 2013; and Reliance Retail have posted their first profit after 7 years and $1 billion investment.
Right now, when Govt is not allowing FDI in retail sector and eCommerce is threatening the industry from every corner, this report certainly brings along a ray of hope for the organized retail industry.
You can access the report titled: “Changing your Orbit – The Handbook for Transformation in FMCG & Retail Businesses” by CII and The Boston Consulting Group right here.
Interesting study