The Indian retail industry has had a rather inconsistent curve, but after the pandemic things have picked up a lot. Everything is escalating due to the boom in e-commerce, there are changes in the spending patterns and many newer ways of payments.
In this article, we’ll explore the fundamentals of the Indian retail industry, study the changes while emphasizing the significance of retail analytics.
Defining the Indian Retail Industry
The Indian retail industry encompasses a vast and ever-evolving sector that caters to the diverse needs and preferences of a billion-strong population. It consists of a multitude of players, from small neighborhood stores to sprawling hypermarkets, and everything in between.
At its core, the Indian retail industry revolves around the sale of goods and services to consumers. It’s the place where customers meet a wide array of products, from daily essentials to luxury indulgences.
This industry acts as a bridge between manufacturers and consumers, ensuring that products reach the hands of those who need them.
Industry Scenario
To truly grasp the significance of the Indian Retail Market, let’s take a closer look at the industry scenario, including its current state, growth projections, challenges, and opportunities.
An Overview of the Indian Retail Landscape
The Indian retail market is not just vast; it’s also incredibly diverse, ranging from traditional mom-and-pop stores to modern, tech-driven giants.
In 2022, the retail industry in India experienced a remarkable turnaround. After a decline of 8.5% in FY 2021 due to the pandemic, the industry bounced back to reach a staggering $836 billion.
What’s fascinating is that traditional retail contributed significantly, accounting for 81.5% of this figure. However, the pandemic-induced disruptions accelerated the adoption of e-commerce and digital channels.
As we move forward, the Indian retail sector is witnessing a shift in consumer behavior.
Tier II and Tier III cities are emerging as major players, comprising over 61% of the total market share in FY 2022, up from 53.8% in FY 2021. These cities recorded remarkable e-commerce growth rates of 92.2% and 85.2%, respectively.
In 2023, this trend is expected to persist, making it a year of significant developments in the retail landscape.
Indian Retail Industry 2023: Growth, Challenges, and Opportunities
2023 promises to be a year to watch for the Indian retail industry. International brands are increasingly drawn to India, making it the fifth-largest global destination for retail.
Several factors are driving this growth, including rising disposable incomes, the exposure of Gen Z to international brands, and an improved ease of doing business.
Moreover, the government’s initiatives from 2021 are set to make a noticeable impact on the industry.
The adoption of digital payments, spurred by new frameworks, has created a more efficient environment for customers, saving time and resources.
Notably, the central government’s decision to allow 100% FDI in online retail and the inclusion of retail and wholesale trades as MSMEs are game-changers. These initiatives are transforming the retail landscape and fostering innovation and growth.
Current Trends
The Indian retail industry is in the midst of a transformative wave, driven by changing consumer preferences and rapid technological advancements.
Let’s delve into the current trends shaping the landscape, providing insights into the challenges and opportunities that lie ahead.
Retailers are Embracing Cutting-Edge Technology
Retailers are flocking to invest in cutting-edge technology, aiming to cater to the tech-savvy Gen-Z and millennial consumer base.
A Forbes report predicts that global AR/VR investment in the retail space will soar to $72.8 billion by 2024.
Additionally, consumers are increasingly engaging in conversational commerce, with the chatbot industry expected to reach a market value exceeding $102 billion by 2026, boasting a remarkable CAGR of under 35%.
Today’s consumers seek more than just a typical shopping experience; they crave white-glove customer care and unique, immersive experiences primarily through the online retail market.
However, Studies reveal that 32% of customers are more willing to engage with in-store experiential moments.
Enter experiential retail, a strategy that allows companies to offer cutting-edge experiences both online and in-person.
Immersive Shopping Experiences with AR/VR
Retailers are harnessing AR/VR technology to provide immersive shopping experiences that prioritize in-person interactions, thereby enhancing the brand-consumer relationship.
Features like virtual navigation, virtual fitting rooms, virtual shopping, and innovative in-store displays are just a glimpse of how businesses can leverage this technology.
These advancements promote contactless transactions and foster interactive engagement.
Digital-Led Challenges
While the digital transformation promises tremendous benefits to India’s retail industry, it also presents challenges, notably in understanding and adapting to evolving consumer behavior.
Brand loyalty is becoming harder to maintain, as Indian consumers, armed with smartphones and access to the digital world, explore multiple options before settling. Traditional loyalty programs still hold value, but brands must find ways to cater to the growing trend of personalization.
Navigating the vast array of tech solutions in the market is another hurdle. Retailers often seek software to streamline operations but may make ill-suited choices.
To address this, business owners must select software tailored specifically for retail enterprises, aligning technology with their unique business needs.Efficiency, effectiveness, and measuring the results of marketing strategies are recurring challenges for many retail businesses.
Unlocking the potential of digital channels for lead generation, sales, and revenue growth requires cracking the code on paid media, local SEO, enterprise SEO, content strategy, and social media.
Opportunities-Led Growth
The past two years have seen a significant shift in consumer preferences and attitudes in the Indian market, blurring the lines between offline and online consumption channels.
Large corporations are now experimenting with strategies to create seamless retail experiences integrated across all channels.Retailers are leveraging digital channels to expand their reach in tier II and III cities while reducing reliance on physical storefronts.
Small-sized retailers are benefitting from the popularity of third-party e-commerce platforms, dominating the D2C market in 2023 and beyond. Successful D2C companies share characteristics such as modest size, proficiency in SEO and SEM tools, and strong brand-building and digital marketing capabilities.
Despite challenges, the long-term prospects for the Indian retail industry are promising. Rising affluence, favorable demographics, the entry of foreign competitors, and increased urbanization all contribute to a landscape ripe with opportunities.
Key Growth Drivers
As we analyze the Indian Retail Industry, several key drivers propel its remarkable growth. Let’s explore the Driving Forces Behind Indian Retail :
The Role of E-Commerce in Retail Growth
According to the global retail development index, India ranks as the world’s second-largest internet market with over 800 million users. The surge in smartphone users has fueled the growth of e-commerce.
Online retail is on track to contribute 10.7 percent to the total retail market by 2024, up from 4.7 percent in 2019.
This provides businesses with the opportunity to reach a vast consumer base without extensive physical stores, leveraging the digital economy resulting in better connected rural consumers also.
In 2021, India saw 1.2 million transactions daily in the e-commerce market, and this is projected to soar to 500 million online shoppers by 2030, up from 150 million in 2020.
The e-commerce market’s gross merchandise value (GMV) is set to reach US$350 billion by 2030. This presents a significant opportunity for businesses looking to tap into India’s thriving retail sector.
The Potential of Growing Consumer Spending
India’s expanding middle class is a catalyst for consumer spending, projected to rise from US$1.5 trillion in 2021 to nearly US$6 trillion by 2030.
In 2023, consumer spending is expected to grow by 7.1 percent annually. Although inflation impacted post-pandemic spending, discretionary purchases are set to rebound in 2024.
The organized retail sector saw impressive growth of 34 percent in FY 2022-23, surpassing pre-pandemic sales from 2019-20.
Personal loan growth, an indicator of increasing consumer spending, rose by 23.7 percent year-on-year in January 2023, particularly for major purchases like vehicles and consumer durables.
The Premium Retail Experience
“Premiumization” impacts various product segments, from chocolates and alcoholic beverages to electronics and cosmetics. Premium product demand often outpaces entry-level options.
For instance, premium car sales surged by 38 percent year-on-year in FY2021-22, surpassing lower-priced car sales’ growth of 7 percent. This shift reflects evolving consumer preferences favoring value and customization.
Premium segments now target not only high-net-worth individuals (HNWI) but also millennials and non-metropolitan consumers. Luxury housing, once reserved for HNWI and non-residents, now attracts affluent middle-class individuals, thanks to remote and hybrid working models.
Diverse Modes of Payment and Their Impact
India’s digital payment ecosystem thrives with a range of options, including virtual cards, wire transfers, prepaid instruments (prepaid cards and digital wallets like Paytm, Google Pay, PhonePe, Apple Pay), and bank debit/credit cards.
Cashless transactions gain popularity among Indians for daily expenses. Digital payments have grown due to the Unified Payments Interface (UPI) and the Bharat Interface for Money (BHIM) app.
Over 1 billion debit/credit cards circulated in India as of Q2 2022, with UPI recording over 6 billion monthly transactions. Top states for physical merchant transactions include Maharashtra, Tamil Nadu, Karnataka, Andhra Pradesh, and Kerala, with Bengaluru leading with 29 million transactions.
Using GeoIQ for Retail Industry Solutions
Making data-driven decisions is paramount to success. As businesses strive to stay ahead of the curve, harnessing the power of data and cutting-edge technology becomes essential.
GeoIQ, a powerful location intelligence platform, offers a wide array of features and tools that can revolutionize the way retail businesses operate. With its transformative capabilities, GeoIQ empowers retailers to take data backed decisions and thrive in an ever-evolving market.
Discover how GeoIQ can unlock a world of possibilities for the retail industry.
Let’s explore how GeoIQ can be a game-changer for the retail industry:
Pick the right location for your next store
GeoIQ enables retailers to identify prime business locations with high footfall, proximity to target demographics, and competitive advantage. This critical information ensures that your retail stores are strategically placed for maximum customer engagement and sales potential.
Lightning-Fast Decisions
With GeoIQ, you can accelerate decision-making from months to hours by swiftly evaluating multiple locations using simple scores. This agility allows you to seize opportunities in dynamic markets and stay ahead of the competition.
Maximize Revenue and Profits
GeoIQ helps retailers improve their bottom line by selecting locations that optimize sales potential while minimizing operational costs. This means better revenue generation and higher profitability for your retail business.
Avoid Shut Shop and Relocation
By assessing sales forecasts, market trends, consumer behavior, and other factors, GeoIQ helps you sidestep business failures and costly relocations. You can make informed decisions that keep your retail operations thriving.
Define Target Market
GeoIQ allows you to define your target market with precision. Identify the demographic, socioeconomic, and behavioral characteristics of your ideal customer base, ensuring that your marketing efforts are highly effective.
Site Analysis and Report
GeoIQ offers Site Report Builder that helps with revenue scores, demographic insights, and other vital attributes. These reports empower you to make data-driven decisions for your next optimal retail location.
Real-time Analysis
Leveraging real-time analysis, GeoIQ allows you to gain immediate insights into market trends, customer behavior, and dynamic factors. This enables timely adjustments and proactive strategies to stay ahead in the market.
Competitor Benchmarking
Analyze your competitors’ performance and market presence using location-based insights provided by GeoIQ. Understand their strengths and weaknesses to refine your retail strategy.
Market Gap Identification
GeoIQ’s location data helps you identify untapped markets or areas with high growth potential. This valuable information refines your revenue prediction strategies and guides expansion efforts.
Predictive Modeling and Analysis
GeoIQ empowers retailers with advanced predictive models combined with location intelligence. You can accurately forecast revenue by considering both internal and external factors, making your business more resilient and adaptable.
Conclusion
In the dynamic world of retail, success hinges on making informed decisions, understanding your market, and staying ahead of the competition. GeoIQ equips retailers with the tools and insights needed to not only survive but thrive in this ever-changing landscape.
By harnessing the power of location intelligence, GeoIQ empowers you to pick the right locations, accelerate decision-making from months to hours, maximize profits, and avoid costly mistakes. It’s more than just a tool; GeoIQ becomes a strategic partner for retail businesses looking to achieve sustainable growth and lasting success.
Make GeoIQ your choice for retail industry solutions and position your business for a brighter and more prosperous future. With GeoIQ by your side, you’re not just navigating the retail landscape – you’re leading the way towards innovation and profitability.