Indian retail sales to surge

10 August 2012

NEW DELHI: Retail sales are expected to more than double in India by the end of the decade, a trend particularly benefiting modern chains and digital channels, a study has predicted.

FICCI, the industry body, and TCS, the consultancy, predicted that retail revenues in the country would rise from approximately $500bn per year at present to $1.3tr by 2020.

Within this, the organised retail category, ranging from shopping malls to supermarkets, should see annual returns grow from $27bn to $220bn.

One driver of this development will be rising affluence levels outside India's biggest metropolitan centres, as nearly 200 cities are set to house at least 500,000 people by 2020.

"Modern retailers in the past have tried to capitalise on this opportunity by increasing their store presence across major cities," the report added.

Online and mobile commerce are also anticipated to play a more important role in the purchase process, despite currently only contributing a "miniscule percentage" of sales.

Digital platforms were thus pegged to deliver between 6% and 8% of returns by the end of the decade, yielding a minimum of $13.3bn, and potentially some $17.6bn.

This may ultimately help many operators, which have come under pressure as the cost of renting bricks and mortar outlets has surged.

"Expensive real estate costs have already played a spoilsport for the retailers. It would be impossible for most retail categories to reach break-even at such high rentals of 10–15% of ... revenue," the study said.

"Retailers need to rethink their business plans and shift a chunk of their sales from stores to alternate low-cost channels."

Manufacturers and retailers will also be required to work more closely together, prioritising areas like product selection and replenishment, store layouts and promotions.

"FMCG firms have a lot to gain with the advent of multi- channel retailing. The depth of retail FMCG collaboration will be one of the key success factors for multi-channel retailing," the study said. "It is be imperative for FMCG and retail companies to collaborate in this journey."

Data sourced from Business Standard; additional content by Warc staff