6 trends that will define the future of retail in India

It’s been little over a decade since the ecommerce evolution changed the face of retail in India. While the earlier debate was around offline vs online vs omnichannel, COVID-19 has shifted this battle to direct-to-consumer and effective distribution.

What’s more interesting is the growth of many niche sectors into mainstream markets within the ecommerce horizon. This includes health-commerce, agri-commerce, expansion of brick and mortar retail brands in food and beverage segments to foodtech, and the rising popularity of retail-tech and kirana-tech.

India’s retail market has always been huge. A November 2019 IBEF report projected that by 2021, traditional retail will hold a major share of 75 percent, organised retail share will reach 18 percent, and ecommerce retail share will be seven percent of the total retail market.

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In the new normal, in 2021, here are a few trends that define the future of retail in India:

The middle-income group will lead India’s consumption story

Market leaders believe the Indian ecommerce industry has seen a lot of changes over the last 14 years. In 2006, only three percent shopped online, and now, with the internet population touching 500 million, around 10 percent did online transactions in 2019. Those offline retailers, who have an ecommerce play, will have an added advantage over others. In India, technologies of voice and vernacular will accelerate digital access.

“India’s consumption economy will be the third-largest (globally) by 2030, and we are looking at a scale of $5 trillion. This consumption growth will not be restricted to certain segments, and 75 percent of this will be led by the middle-income group,” said Kalyan Krishnamurthy, Group CEO, Flipkart.

Cost optimisation will be the core of retail operations

COVID-19 taught people to survive in the most critical of times. As a result, businesses not only had to take some drastic measures but also got back to the drawing board when it came to deciding the cost centres. As Shivam Shahi, Co-founder of Blue Tokai Coffee Roasters shared from his experience — “With our retail outlets being the biggest cost centre, we took all efforts to curtail the menu, make the servings fast to avoid over-crowding, and changed service model to self-service.” 

“Going forward, in 2021, we believe there is a huge scope for cost optimisation in retail, considering the experiences we have had. We are still in a slightly more profitable position than in pre-COVID,” he added.

D2C and local kiranas will rewrite the success story of retail

According to Rohan Mirchandani, Founder of Epigamia Drums, once the recovery phase kicked in, not only manufacturing but also making sure brands were able to sustainably get those products to the consumer became a challenge. 

“Our ability to supply to small kirana shops, which we perfected over time and it became our core competency later, plus the distribution through direct-to-consumer and local kirana channels, helped in overcoming these challenges,” he added.

D2C as a channel is live and activated, which is exciting. The retail startups are now sitting on a pile of massive data generated from the direct customer feedback, which they did not have access to earlier. 

“Pre-COVID D2C was a small placeholder. But, during the lockdown, it was the main channel. We believe that D2C and ecommerce will grow differently. D2C is where people will try the products, and ecommerce is where they will buy a brand,” said Meghana Narayan, Co-founder, Slurrp Farm.

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Premiumisation will continue to happen at the consumption end

Damodar Mall, CEO of Grocery Retail at Reliance Retail, believes that during the lockdown, when people started doing things like cooking, cleaning on their own, instead of degradation, the premiumisation of consumption happened.

“Instead of the Palmolive oil, they (consumers) switched to Olive oil, while we saw an increase in orders for pasta, cake mixes, and premium grocery, among others. And, this will continue in near future as well. Both the kirana stores and modern retailers could play to that opportunity,” he added.

Digital will open new opportunities for distribution

In 2020, the digital wave made a lot of kirana stores adopt technology at an accelerated pace. This made a lot of middlemen in the traditional multi-stage distribution bypass, and digital flyovers were built over distribution channels in India. 

“If you have a startup now, you get the advantage of this. This change is fundamental,” said Damodar.

Modern retail to infuse employment opportunities

Modern retail creates formal jobs close to neighbourhoods. It also creates jobs that are gender agnostic, with formal jobs closer and embedded in the community.

Also, as kirana stores are getting modernised, it creates a multiplier that is probably even bigger. No longer would you have the conventional errand boy service model as kirana stores move to become self-service stores, and encouraging the next generation to join in the family business, too.

The speakers were part of keynote sessions and panel discussions during the inaugural event of the four-day conclave of the Resurgence TiEcon Delhi-NCR for the Indian startup ecosystem.