INDIA’S RETAIL story shows incredible resilience and potential where premiumisation is harmonising well with the trend of burgeoning middle class. Pre-Covid, it was hard to imagine that brick and mortar retail would face doomsday, but in Covid-hit 2020, it was widely assumed that unless retailers hopped on the e-commerce bandwagon, they might sink.
However, retailers proved naysayers wrong, adopting a dual strategy of tapping online as well as physical channels to keep consumers engaged. That has now transformed into an ‘omni-channel’ strategy. “A number of companies are looking at multi-channel expansion. They are opening exclusive outlets, looking at new-age e-commerce models. Quick commerce & social commerce are going to play a large role in FMCG & grocery categories to some extent,” says Praveen Govindu, partner at Deloitte (India) Consulting.
This year, 13 companies from retail sector have earned a spot on Fortune India’s The Next 500 list. Collectively, these have seen a 27% increase in total income from ₹21,378 crore in FY22 to ₹29,384 crore in FY23. The retail industry as a whole is projected to double revenues by 2030. Revenues were close to $980 billion in 2023.
With the sector growing at 10-11%, India is on the cusp of becoming the world’s third-largest consumer economy, behind only China and U.S. This is underpinned by anticipated addition of 110 million middle-income households over next eight years, according to Deloitte. Nissan Joseph, CEO, Metro Shoes, attributes post-pandemic sales growth in consumer goods to pent-up demand. Metro saw a 53.34% increase in income to ₹2,355 crore in FY23. It has more than 600 stores in over 190 cities with brands like Metro Shoes, Mochi, Walkway and Crocs. Post Covid, disposable income is being spent on experiences, including travel, entertainment, shopping and lifestyle, he says. The consumer is gravitating to premium segment, he adds. There is also a certain consistency on both supply and demand fronts with fear of a recession ebbing. “We are seeing a confident, buoyant consumer profile in general; they’re buying with optimism,” he says. FY23 was, in fact, fruitful for most retailers. For instance, total income of Landmark Cars Ltd., led by Sanjay Karsandas Thakker family, soared 15.82% to ₹3,509 crore.
Such robust numbers reflect consumer optimism and confidence. “It could be regarding their incomes, it could be regarding general development around them. On most parameters, people have become more positive,” says Jai Krishnan, CEO, India, Samsonite South Asia. From slump during Covid years, Samsonite recorded a staggering 84% jump in total income to ₹2,041 crore in FY23. An evident trend that has helped is higher discretionary spending by consumers, many of whom are vacationing quarterly instead of just once or twice a year before the pandemic. Revenge travel, fuelled by pent-up demand post-pandemic, too, contributed in bringing businesses back to normal. As people sought to make up for lost time by embarking on extravagant vacations, this surge in travel directly led to a significant uptick in the luggage industry. “There were a lot of people who missed travel, and we anticipated they would come back. So, during the pandemic, we really prepared for second half of 2021 because we knew things will become better," says Krishnan.
Govindu of Deloitte speaks of ‘psychological safety’. Born into relative privilege, today’s generation has financial security built into their mindset, due to which they are comfortable spending without fear. "The replacement cycle has come down from 10 years to three-four years in categories like auto, electronics, home furnishings & lifestyle. With every replacement, people want to upgrade. We are witnessing a change from mass to premium to luxury across consumer cohorts," he says.
Buying Into Luxury
Despite venturing into premium grocery with the acquisition of Nature’s Basket and launching neighbourhood value retail stores last year, Spencer’s Retail Ltd., part of the RP-Sanjiv Goenka Group, has orchestrated a symphony of growth and adaptation. Spencer’s total income rose 4.34% to ₹2,518 crore in FY23. “Every strata of society is being aspirational to move up to that next level in some sense. Everyone’s trying to buy better or curate better experiences versus what they did the previous year or two years before that,” says Shashwat Goenka, chairman, Spencer’s Retail and vice chairman, RPSG Group. “We are also seeing premium becoming luxury. So, a lot of segments and sub-segments are emerging, and each of these spaces is there for anyone to grab and win,” he adds.
Companies across sectors are making efforts to attract the growing opulent population that is consistently upgrading. India has 60 million individuals with annual income of $10,000. According to a Goldman Sachs report, population of affluent Indians has been growing at a compound annual growth rate of 13% and is projected to reach 100 million by 2027. Puma Sports India saw a staggering 62.78% increase in total income to ₹3,329.89 crore in FY23, a testament to the allure of premium brands as well as focus on health in India’s retail landscape.
Steep Hill
Historically, both consumers and companies in India have led with a product-first approach. In last 10-15 years, focus has shifted to after-sales service and experience — ease of shopping, accessibility to customer care, ability to resolve issues and keeping customers happy. Consumers are also asking about the story a company is communicating.
Prakriti Jaiswal, partner, JSA, a law firm, feels there has been a remarkable shift in consumer preferences towards sustainable and personalised services.
However, Govindu says consumer brands have not invested sufficiently in bringing their talent up to speed in meeting these demands. “People should be groomed to sell the experience as well as the story of the company,” he says.
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Meanwhile, Indian landscape is a challenge in itself. “Every state is like a different country. Understanding consumers, understanding laws, understanding nitty-gritties, create challenges,” says Joseph. More critically, companies need a lot of capital to be successful in India. “There will be times when either you have bought too much inventory or what you have bought is not selling. If you don’t have the capital to pull through, it could put you into deep trouble,” says the shoe-tailer’s CEO.
While big retailers are spreading wings and soaring, they are taking a more calculated flight. Store-wise profitability is a crucial point while planning expansion. “The first two quarters of FY24 were ‘reset’ quarters for us. This included tough but necessary actions such as exiting Kerala and Tamil Nadu, which impacted our top-line negatively, but bottom-line positively. Additionally, we faced intensified competition alongside industry-wide price deflation in edible oils and a softening apparel demand. We’re actively addressing these challenges with targeted strategies to maintain market share and profitability,” says Shashwat Goenka.
Although retail consumption saw muted growth last fiscal year due to inflation, Mrigank Gutgutia, partner, Redseer Consultants, is bullish on growth of the sector for the rest of the decade and expects it to double by CY30 to $1,900 billion. “We expect consumption pick-up this year on the back of India’s GDP growth and people’s penchant for premium goods,” he says. “Overall, India is still the dreamland for a lot of companies and brands,” says Joseph.