The retail sector in India is set to enter a “transformative era,” with an anticipated growth of 10-13 percent in the upcoming year. Embracing technological advancements, market players are gearing up to cater to the diverse needs of both luxury and value customers, all while navigating the ongoing challenge of inflation.
Network expansion, coupled with a strong uptick in demand for premium brands, increasing traction for value brands in smaller cities, and the upcoming general elections, will be among the key drivers for the retail sector. This marks a transition from the conventional tale of rural and urban markets.
Furthermore, the ongoing expansion of e-commerce, accompanied by a rise in quick commerce, hyperlocal delivery services, and spontaneous purchases, will offer additional momentum to the retail sector.
Deloitte India Consulting Partner Rajat Wahi, said “The Indian retail industry’s growth prospects for 2024 present a mixed picture with several factors influencing the landscape.”
Retail to boom in 2024:
The sector showcases positive aspects, including strong GDP growth, a transformation driven by technology, sustained impact during festive seasons, increased rural consumption, and favorable demographics. The rising middle class and a youthful population with greater disposable income further contribute to the optimistic outlook.
Industry experts have expressed the view that the sector is expected to experience a growth rate of 10-13 percent in 2024.
Wahi highlighted areas of concern, including persistent inflation, disruptions in the supply chain, and geopolitical uncertainties. These factors have the potential to influence consumer confidence and have an impact on spending patterns.
Experts warn that the potential for job losses and the escalation of food and fuel inflation may diminish disposable income, posing a scenario with adverse effects on the retail sector.
Meanwhile, the government promoted Open Network for Digital Commerce (ONDC), and D2C brands allowing customer personalisation are expected to democratise the online sales landscape, facilitating the participation of numerous brands and small retailers.
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EY India Leader, Consumer Products & Retail, Angshuman Bhattacharya said the retail sector in India continues to be one of the fastest growing across global markets.
“While long-term trends remain favourable, the retail market saw strong growth on two ends of the pyramid, namely premium products and value retail.
“Premium brands have seen a strong uptick in demand as Indian per capita GDP crosses an inflectionary point unleashing discretionary expenditure,” he said.
KPMG India Partner for Retail Puneet Mansukhani said from a retail grocery perspective, inflationary pressures are likely to continue. Hence, retailers will need to innovate to change the basket mix for consumers, and try to push premium products wherever possible, he added.
“Regional localisation and fulfilment centres and festive season offers catering to the regional consumer could go a long way in having the desired effect on topline this year,” he said.
Further, he said personalisation and direct-to-consumer business models have increased the potential to collect customer data via multiple touch points.
“In the long-term, we could expect retailers to use data-driven insights to seize performance improvement opportunities and beat rising costs and also identify new markets, products, or services,” he noted.
For the retail sector, 2023 started on a weaker footing as the players struggled with a demand slowdown following inflationary pressures. However, by the last quarter, there has been a sequential uptick in performance, led by festive and wedding season demand, ICRA Vice President & Sector Head, Corporate Ratings, Sakshi Suneja, said.
“Factors such as favourable demographics and low penetration of organised retail augur well for the industry. This, coupled with network expansions by retail players, is likely to result in a 13 per cent year-on-year revenue growth in FY2024,” she said.
Retailers’ Association of India (RAI) CEO Kumar Rajagopalan said the sector underwent a transformative journey.
“Looking ahead to 2024, expectations are shaped by various factors. The upcoming elections in India are anticipated to inject more money into the hands of the poor, potentially boosting sales of value items.
“Furthermore, some D2C brands are poised for substantial growth, leveraging improved offline market exposure and potential funding to become significant players in the retail landscape,” he said.
Moreover, a significant number of retailers are expected to integrate AI (Artificial Intelligence) to enhance business efficiencies and achieve excellence in customer service, Rajagopalan said, adding that “2024 holds promise for a dynamic and transformative era in the retail industry”.
Wahi said the retail sector would witness an increase in the adoption of technologies like AI, VR (Virtual Reality) and AR (Augmented Reality), enhancing customer experience and operational efficiency.
“Personalisation, data-driven decision-making, and automated logistics would become more prevalent,” he said.
In 2023, the retail sector also witnessed an increased inventory period in certain segments, especially in the mass premium price points.
“There will be a season or two of correction that the industry is expected to witness, including some liquidation of stocks to clear off shelves,” Bhattacharya said.
The year 2023 could also be remembered as the year of the comeback for brick-and-mortar channels, in which shopping malls and retail centres saw an increase in footfalls.
“In fact, we are expecting to close Q3 strong as well with the wedding season and a good set of movies coming along.
“As reported in our half-year report, our consumption grew at 18 per cent. Second, footfalls have gone up by 14 per cent primarily led by families who have returned to malls. This was on the back of choice for family entertainment facilities, theatres, and restaurants,” Nexus Select Trust CEO Dalip Sehgal said.
