The retail environment is changing rapidly across the world and India is one of the most exciting markets today. The Deloitte FICCI Report 2018 says the retail market in India is expected to reach $1.2 trillion in the next 5-8 years. Modern retail is expanding its footprint across India and is expected to reach 25 per cent of total retail sales from the current 10 per cent. During the same period, e-commerce is expected to double its share to 10-12 per cent of total retail sales.
Such an optimistic outlook is backed by several factors — the country’s large and aspiring middle class, rising disposable income, a supportive business environment, strong GDP growth, and growing smartphone and internet penetration and use. The increasing growth opportunity can even be attributed to the young demographic dividend which comprise 70 per cent of our country’s population and fall below the age of 30 years.
Complementing the above is the tremendous push by the government to improve business and investment climate. The debate is no more about whether the future of retail is offline or online — it is imminent that India would have a mix of offline and online shopping experiences that best serve consumers. The strategy therefore is to find innovative ways to serve the discerning customers, and this also means being able to move with speed and create tailored experiences.
Today’s consumers are becoming digital-first, hyper-connected, and expect engagement on their terms. For most categories, the ‘Moment of Truth’ (the moment that customer would make up the mind to buy) is now happening online. Therefore, customer ‘experience’ is getting more real. With access to consumer data, and machine learning and Artificial Intelligence helping drive insights faster, retailers are now competing on providing that seamless experience. This is impacting the creation of niche jobs such as retail data analysts, digital imaging leaders, IT process modellers, digital marketing specialists and customer experience leaders.
“Partnerships” is the new normal as retailers are realising the power of more than one and that they no longer can go at alone. The “ecosystem” along the customer journey will see partnerships become more common and essential to meet customer requirements. New retail models are also evolving as retailers are realising the potential of the kiranas and the opportunity to include them in the whole journey of retail renaissance.
Social responsibility and sustainability, particularly in the supply chain, are gaining more importance with increased awareness and accountability for businesses. This is true for not just the retailers that assort brands but for the brands themselves. An international survey by Cohn & Wolfe found that 87 per cent of global consumers felt that it was important for brands to: Act with integrity at all times, ranking authenticity above innovation and product uniqueness when asked what they valued most in a brand. Customers are demanding transparency as they take an increased interest in the ethical practices of the brands they buy from.
The retail sector per se has immense potential to contribute to the country’s economy in various ways, such as being engine of growth; spurring manufacturing; contributing to jobs; strengthening supply chain and logistics and creating shared value.
Retail drives the virtuous cycle of growth in the economy because it is not at the end of the chain but is at the beginning of it. Retail drives consumption which in turn drives demand and hence therefore leads to capacity creation/utilisation. This cycle spurs local job creation, more disposable income in the hands of people to further sustain the consumption cycle as part of this growth engine. As a result of the ‘access to the market’ in the form of modern retail, food processing industry grows leading to increasing income for small and medium farmers. In a nutshell, retail works as the engine of growth in growing market like India. The Indian retail sector already accounts for over 10 per cent of the country’s GDP.
A vibrant retail ecosystem plays a critical role in growing the economy and also leads to huge exports. It also transforms logistics, supply chain, cold storage techniques etc.
In an interconnected world facing unprecedented environmental and social challenges, society will demand and have a basic expectation from the companies that their business should provide significant net positive return to the society at large. This is what “Shared value” is. Retail sector, offline or online, has the tremendous ability to create shared value.
Retail growth is good for the country, and investments will support employment, give opportunity to thousands of local suppliers and manufacturers accessing consumers through all models of retail.
The writer is President and CEO Walmart India