India is one of the most promising and developing marketplaces in the world. There is a great deal of desire among multinational corporations to take advantage of the consumer base in India and to enter the market first. Due to India’s wealth of resources, availability of labour at relatively low costs, and special investment wages such tax breaks, etc., foreign corporations prefer to invest here. To improve the business climate and make it simpler for foreign companies to register fully owned subsidiaries in India, the Indian government has implemented a number of rules, regulations, and policies.
India is the fifth largest and preferred retail destination globally. The country is among the highest in the world in terms of per capita retail store availability. India’s retail sector was experiencing exponential growth with retail development taking place not just in major cities and metros, but also in small cities. Healthy economic growth, changing demographic profile, increasing disposable income, urbanisation, and changing consumer tastes and preferences were some of the factors driving growth in the organised retail market in India. But the decision of demonetisation by the government of India and the ongoing pandemic became the stumbling block for the retail market in India.
Even before the pandemic, the Indian economy was marked by a slowdown in economic growth and record increases in unemployment and poverty. Thus, India’s capacity to deal with a new crisis was weak when the pandemic hit in March 2020. The economic crisis after March 2020 affected all the sectors of the Indian economy. In agriculture, farmers were faced with broken supply chains, lack of market outlets, poor demand and falling output prices. In industry, micro and small enterprises were the most acutely affected. The crisis led to a loss of employment to the tune of at least 15 million.
The announcement of the demonetisation of the currency caused huge inconvenience to the people. The unexpected news caused chaos and had a significant impact on the economy. Because employers couldn’t pay their daily wages, a lot of low-wage workers were suddenly without jobs and had no daily income. The government had to meet the expense of producing new banknotes. It also struggled to introduce new money into circulation. Additionally, a large number of people secretly disposed of the demonetised currency notes, which caused a loss to the national economy. Given India’s propensity to deal in cash, especially when shopping in luxury malls and high streets, retail saw a short-term impact on sales. Retail sales dwindled in the immediate aftermath of the government’s announcement. The impact was felt largely by small traders and the unorganised retailing segment, as compared to organised retailing and malls.
The covid-19 pandemic’s impact on the retail sector seems to be far from over. Due to quarantine measures, retail customers have been opting for minimal human contact and moving towards online consumption patterns. The major concern faced by almost every retailer is either a crunch of essential supplies or a stockpile of non-essential goods. According to a study by the Retailers Association of India, retail sales in India dropped by 79 per cent in May 2021 compared to May 2019. The report also says that beauty, wellness, and personal care products saw the biggest drop in the retail sector, falling by 87 percent, followed by footwear, which fell by 86 percent. The COVID-19 crisis marked a dramatic acceleration of many trends already underway, propelling some industries to record heights of performance while others dropped even further behind.
India’s consumption, which was expanding at a rate of about 12% before the pandemic, has since recovered to reach pre-pandemic growth levels of 17%. By 2026, e-commerce in the nation is projected to reach USD 130 billion, up from USD 45 billion in 2021. Players in both the retail and non-retail sectors are interacting with customers as a result of increased competition and the need to continuously improve the customer value proposition. The retail market size in India is expected to amount to 1.7 trillion U.S. dollars by 2026, up from 883 billion dollars in 2020. While an overall increase was noted up to 2019, 2020 marked a decrease due to the coronavirus pandemic. Nevertheless, the market is estimated to recover in 2021.
Despite the pandemic, India was among the few countries showing growth in retail sales in 2020. Characterised by its unorganised retail, primarily via kirana stores, the country underwent a process of change in retail forms. The emergence of larger retail spaces such as malls and supermarkets, along with the growth of online commerce, drove the change in the subcontinent’s retail landscape. Nevertheless, kirana stores continued to dominate Indian retail, adopting digitalisation and collaboration with larger players in this sector as well.
In India, retail sales of groceries accounted for up to 65% of all retail sales. Only a small portion of that was sold through online or contemporary merchants. The COVID-19 pandemic provided internet grocery stores a boost. Online grocers like Big Basket were able to successfully fill the vacuum left by products that occasionally weren’t available at conventional stores. Every minute, more people in the nation are purchasing online. Many e-commerce players will experience the biggest change in the retail industry as a result of improvements in internet quality, smartphone use, payment accessibility, secure payment portals, and changing consumer behaviour. It won’t be wrong to say that all the top foreign brands established their market in India through online portals.
According to IBEF, by 2021 traditional retail will hold 75%, organised retail will hold 18%, and e-commerce retail will reach 7% of the total retail market share. E-commerce in India is growing at a rate of 51%, the highest in the world, and is expected to achieve a cap of USD 200 billion, by 2026. Online retail has a very disruptive approach to the market. Factors like cash on delivery, improved supply chain, increasing internet penetration, rising number of online shoppers, availability of deals and cashback, increase in the adoption and use of smartphones, and government initiatives like Digital India are the reasons contributing to the growth of the e-commerce market in India.
Since the liberalisation policy of 1990, the Indian economy and its consumers are getting a whiff of the latest national & international products with the help of print and electronic media. The social changes with the rapid economic growth due to trained personnel, fast modernisation, and enhanced availability of retail space are the positive effects of liberalisation. With the onset of a globalised economy in India, the Indian consumer’s psyche has changed. People have become aware of the value of money. Nowadays Indian consumers are well versed in the concepts of the quality of products and services. These demands are the visible impacts of the retail sector of the Indian economy.
One of the most active and quickly expanding businesses in the world is the Indian retail market. The entire consumption spending is predicted to reach USD 3600 billion by 2022 if figures are to be believed. These figures have grown from USD 1824 billion in 2017. The next round of changes in the Indian retail sector would be brought on by the entry of the Transnational Companies (TNC). Foreign Direct Investments (FDI) are not yet promoted in the organised retail sector of India, but once they are, TNCs will attempt to displace their domestic competitors.
The writer is an MBA in Marketing & HR. He has worked with Samsung, Biostard and other companies. He is currently working with an MNC and can be reached at [email protected]