Covid won’t impact fast-growing retail sector in 2023, says EY’s Angshuman
The wave of consolidation is likely to hit the shores of the country’s fast-growing retail industry next year also as larger players seek to strengthen their footprints, leverage technologies to improve efficiency and expand beyond metros.
While the growth prospects are promising, the industry is entering 2023 with “cautious optimism” amid inflationary headwinds and concerns over spurt in coronavirus cases in different parts of the world.
After learning the lessons from the pandemic-induced disruptions, the retail players will continue with their multi-channel approach and marketplaces such as B2B (Business to Business) commerce and D2C (Direct to Consumer), and also focus on diversifying their supply sources.
Consultancy EY’s India Leader – Consumer Products & Retail Angshuman Bhattacharya said India seems to be skipping the modern trade wave, with two of the large modern trade chains adopting a path of B2B commerce and kirana integration, with an ambition to create a data-unified retail environment.
D2C data, delivery information, and telecom data integration are likely to drive the eventual convergence of offline and online channels towards a “connected commerce” model of tomorrow, he said.
According to him, the industry is likely to continue witnessing consolidation, as the scale gets driven through technology-led integration and efficiencies.
The Retailers Association of India (RAI) said the retail in the country is expected to grow better than all other key markets across the world.
“The occasion-wear market (festivals, weddings etc.) will thrive in the country if no Covid restrictions are introduced,” RAI CEO Kumar Rajagopalan said.
Reliance Retail, part of billionaire Mukesh Ambani’s Reliance Industries Ltd (RIL), has become India’s biggest brick-and-mortar retailer with over 16,600 stores. It is ranked 56th amongst the top global retailers with USD 18 billion in revenues and is the world’s second-fastest-growing retail company behind only South Korea’s Coupang.
Earlier this month, Reliance Retail snapped up German retailer METRO AG’s Indian cash and carry business along with assets in a Rs 2,850 crore-deal.
In 2022, Reliance Retail Venture Ltd (RRVL), the holding company of all the retail companies under the Reliance Industries, had acquired a majority stake in leading couture house Abu Jani Sandeep Khosla (AJSK), Purple Panda Fashions (that owns and operates the Clovia business) and domestic robotics company Addverb.
Similarly, TMRW, the D2C-focused entity of Aditya Birla Group, had in 2022 acquired majority stakes in eight digital-first lifestyle brands in the fashion category. Earlier this year, it acquired the contemporary brand — Masaba — promoted by the leading designer Masaba Gupta.
Value retailer V-Mart had acquired LimeRoad in a bid to expand its online presence.
This year also witnessed the near collapse of Future Retail, once a prominent player in the Indian retail industry with around 1,500 stores under various formats. The company, part of Kishore Biyani’s Future Group, is facing insolvency proceedings.
Deloitte India Consulting Partner Rajat Wahi said, “We are also likely to see continued consolidation in retail, with many smaller and less profitable retailers exiting the business in favour of more efficient and larger players who are able to leverage technology to drive efficiency across their retail operations, expanding beyond metros and Tier 1 cities to Rurban/Tier 2, 3 and 4 cities”.
According to Wahi, the retail industry is also likely to see more tech adoption in stores to track the customer journey, from search and discovery to selection and checkout.
“Another area of major focus will be around delivering best-in-class customer experience and engagement in-store and online by leveraging customer data lakes for analytics and customer segmentation, creating a single view of shoppers and customers across channels so as to better serve them, and ensuring that the assortment across channels is available to the customers when they need this,” he said.
RAI said that with the integration of online and offline channels, omnichannel retail has now become the norm for the industry. Going forward, concepts like ONDC (Open Network for Digital Commerce) will enable millions of small retailers to participate in digital commerce, it added.
The aspirations of the consuming class are driving consumption with mobile, internet connectivity and digital payments integration being key catalysts.
“Inflation has been a dampener in some categories, but the Indian consumer story stands tall amongst all developing economies, with strong optimism around financial security and growth,” Bhattacharya said.
In the apparel and lifestyle segment, traditional EBO (Exclusive Brand Outlet) based models are transforming into the “store of the future” models with virtual and endless aisles, online catalogues and trials, try-at-home, and delivery to home.
“These may allow for more profitable scale-up of retail players, with lower burdens of rentals, manpower and working capital,” he added.
A report by rating agency Icra said the Indian organised food and grocery retailers are expected to witness healthy year-on-year revenue growth of 15-20 per cent in FY23.
This will be led by increased footfalls aided by the lifting of restrictions, continued healthy demand for essential products and regular expansion of retail areas under operations.
However, Icra said the operating profit margin is expected to remain range-bound at 5-6 per cent in FY23 due to inflationary pressures, which has also adversely impacted demand in the non-food category.
IKEA India CEO Susanne Pulverer said its Delhi-NCR projects are progressing well. The company has also opened new stores in R CITY Mumbai and Nagasandra, Bengaluru.
“Despite critical global challenges with inflation, energy crisis, the ongoing war and supply chain issues, we have been able to focus on keeping prices as low as possible to enable our customers to create better homes and better lives,” she said.
According to Pulverer, India is predicted to be one of the biggest home furnishings markets in the coming years.
“We will continue to build and enable the growth of the home furnishings ecosystem in India along with our coworkers, products and services suppliers and other partners,” she added.
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
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