Review of the retail sector for 2022 and a roadmap for retailers in 2023
Indian retail is a captivating lore in itself. It is worth complimenting how much this sector has evolved over the years while retaining its core value toward its customers. Just like every business, the Indian retail market also has its fair share of challenges. Year 2022 was the year when everybody was getting back to the office just like the pre-Covid normal. As the year ended, this is the best time to reflect on the nitty-gritty of Indian retail and contemplate what is on the horizon for 2023.
How the year started
The market witnessed an increased consumer sentiment during the festive season in 2021 which gave a promising start to 2022. It is worth contemplating CBRE’s study wherein it was noted that from January ’22 to April ’22, the retail sector transactions grew by 160%. The increase in consumer purchasing power and the opening up of offices and travel spaces led to growth and made the market optimistic.
Indian retailers welcomed the incorporation of Open Network for Digital Commerce (ONDC) by the Government of India which aims to create an interoperable network for digital commerce and give a necessary push to the Indian e-retail ecosystem.
How 2022 benefitted the industry
India has become home to the third largest e-retail shoppers, and there’s a growth in consumers’ purchasing power. Factors impacting the growth include the increase in household incomes, improved access to malls, and shopping complexes and increased brand awareness due to higher internet penetration. The modern Indian retail industry is utilizing burgeoning e-commerce networks. Now, a major chunk of e-retail business is coming from targeted social media ads aided by strong marketing techniques across digital platforms. Businesses selling through social media are set to rise by at least 79% and this trend will continue to create imprints on the way retail is going to look in the years to come.
The retail industry utilized the opportunities to refix inventory management practices, restructure promotional policies and supply chains and calibrate their physical store according to the needs of the digital generation. Retailers realized the importance of creating an ‘omnichannel’ experience that aims to integrate online and offline channels. Shoppers and retail partners benefitted from the rise of mega ecosystems which gave them an opportunity to collaborate with brands to create demand for the products they supply. Technology has become a truth in today’s retail experience and retailers should now look at permanent technological innovation like contactless shopping and touchless technology.
As shoppers have become more demanding, brands and retailers have started experimenting with innovative ways to connect with shoppers like transforming merchandise, marketing techniques, presence and appeal in order to remain relevant for its customers. While EBOs help to carve a niche market for brands and offer exclusivity to convey its brand values and offerings; MBOs put the brand and its product right in the middle of its competitors. Most of the customers today are cognizant about the product they choose to buy, its comparative benefits, and price range offered by similar other brands, hence the sheer volume of shoppers stepping in traditional Indian MBOs cannot be ignored. It seems like the best time for retailers to take thorough note of the developments as both the traditional and modern methods merge to establish a neoteric phenomenon which will continue to grow in the years to come.
Challenges faced by the industry
The dynamic global economic environment may have a direct impact on the overall retail. The disruption of the supply chain caused by a pandemic-like situation may cause raw material prices and overhead costs to rise, reducing the brand’s competitive advantage in the market. Attrition in the workforce, counterfeit products, innovation and new product development, rapidly changing consumer preferences, and data breaches are a few significant concerns that could have an impact on the brand’s overall performance. Amidst market volatility, E-commerce has quickly established itself in the market and is now a significant factor in the expansion of organised retail. Value brands and increased EBO penetration in tier II, tier III, and lower towns across the nation will help in contribution to the growth of the organised format. While EBOs are important for brands to create an impression in the customer’s mind and establish a market presence, MBOs offer a pragmatic route towards success of a retailer as they offer a wide variety of choice to the shoppers under a single roof.
Transformation and innovation for the year 2023
With the onset of the year 2023, the industry is predetermined to observe changes in consumer preferences, next-gen stores, and revenue models. Retail stores have changed from just being point of sale for brands to a point of experience. It helps in attracting new consumers, engaging and retaining consumers. Fashion, personal care, and grocery retails will account for more than two-thirds of the e-retail market and curtail the share of mobile phones, electronics, and appliances. Addressing the changing customer landscape with Genz and millennials in focus as they contribute about 77 per cent, brands should consistently strive for innovative offerings, while adapting to changing needs and preferences of customers across platform using tech interventions. Also, Indian footwear industry anticipates a favourable growth environment due to technological advancements, improvements in retail, and the government of India recognising the footwear industry as a priority area.
As per IBEF estimates, India’s retail market was valued at around $883 billion in 2020 and is forecasted to be about $1000 billion by 2030. It has now become imperative that our country’s retailers must start digitizing with focus on omni-channel framework that integrates inclusivity at forefront. And to that end, innovative, tech-driven hybrid solutions backed with strong offline presence can prove to be a road map to ensure a seamless shopping experience to consumers and benefit Indian retailers and local offline sellers by advancing footfall, which inevitably leads to higher revenues and increase profitability over the long term.