NEW DELHI: India's retail sector is set to double in value over the next five years, a new study predicts, and while e-commerce and organised retail will grow far faster, the unorganised retail sector will continue to account for more than 80% of the total.
The report – Retail transformation: Changing Your Performance Trajectory – from the Confederation of Indian Industry (CII) trade body and consulting firm Boston Consulting Group projected a retail market worth between $1.1 trillion and $1.2 trillion in 2020, compared to a 2015 figure of $630bn, Mint reported.
E-commerce has been grabbing headlines and funding over the past couple of years, but even the upper range of the report's estimates gave it less than a 2% share of the total market in 2015.
Worth between $8bn and $12bn, the study anticipated annual growth in e-commerce of 40% to 50% over the next five years for a market worth between $45bn and $50bn in 2020.
By then, some 650m Indian consumers will be online and more than half these – 350m-400m – are likely to be "digitally influenced".
Organised retail, meanwhile, was worth $60bn in 2015. That translates to a share of just under 10%, but this is forecast to rise to around 13% by 2020.
The sector faces a testing time as e-commerce makes inroads into lower-tier cities and rural areas where many bricks-and-mortar retailers do not have a presence. They "need to transform themselves to capture the massive opportunity," said Abheek Singhi, senior partner and director at BCG India.
That will mean refining their e-commerce offer – with all that entails, including adopting technology, understanding big data and analytics and developing reliable logistics – to tap a growing army of internet-enabled and digitally savvy shoppers.
The great bulk of the market, however, is currently taken by the unorganised retail sector and that will continue to be the case.
At $560m, this accounts for 89% of the total today; by 2020, that share will have slipped to around 82%, or $990bn.
Urbanisation and rising income levels are evidently factors driving a larger retail market, while a growing number of "nuclear families" is also expected to result in higher consumption per capita spend.
Data sourced from Mint; additional content by Warc staff