Retail has played a significant role in India's economic narrative due to growing income levels, consumption, and fast modernization. Retail is India's third-largest economic sector, contributing more than 12 percent of the country's gross domestic product (GDP). Retail, which employs more than 5 crore people, also significantly influences allied industries like warehousing, shipping, construction, and packaging.

According to the Ministry of MSME, 27 lakh retailers in the country are registered with the Udyam registration portal as on October 2022, since the government revised the MSME classification in July 2021, opening new doors for retailers and sellers through which they can now avail priority sector financing already available for MSMEs. The government is taking efforts to provide the required support and policies for the retail trade of the country to flourish.

In today's digital era, many retailers have recognized the importance of going digital, especially during the pandemic, and raised their capabilities in e-commerce and digital marketing to access local and global markets through digital channels.

Recently, a survey was constituted by India SME Forum, to study the state of business of retailers, sellers, and traders, across industry sectors throughout India. 32,859 Retailers were selected for the survey from the verified retail MSME database of the members of the India SME Forum and its constituent supporting organizations and federations.

New Age Retail Start-Ups on the Rise

Responses from select 13 states were considered for analysis. The findings suggest 56 percent of the retailers are in business for less than 5 years, which indicates that retail start-ups are on the rise, whereas 76 percent of the retailers are in business for a decade, while only 24 percent of the retail businesses surveyed PAN-India were more than 10 years old.

India has ample opportunities in the Indian Retail Industry and is the fifth-largest preferred retail destination globally. The Indian Retail market is estimated to grow at 9-11 percent CAGR and is expected to reach $1.1-1.3 trillion by 2025 on the back of multiple structural, socio-demographic, and economic drivers to boost consumption.

Basic Needs Comprise Major Retail

The survey reported that “Food & Grocery” emerged as the major sector in the respondents’ retail business with 23 percent, followed by 18 percent in “Electronics” and 14 percent in the “Pharmaceutical, Dental & Optical” sector.

Retail for personal basic needs has ample growth opportunities in Tier I as well as Tier II and Tier III cities. It has also been observed in this survey that the majority of the retail new entrants and start-ups belong to the above three sectors.

Retailers Adopting Omnichannel Approach

The survey reported that 2 percent had no physical retail space while 98 percent have an on-ground retail presence. On the other hand, 64 percent of the retailers have an online presence, whereas, 36 percent of the respondents have still not gone online and are still operating purely in brick & mortar stores.

With the economy opening up, it seems imperative for a retailer to have an on-ground store as well as an online presence, as customers prefer an omnichannel approach to have an enhanced experience of shopping. Selling online can help retailers increase their reach and acceptance among a larger customer base across the country, ultimately leading to greater profits.

Having an online presence in the market has brought many benefits to retailers and has helped most of them ride the Covid wave. Some of the key driving factors for the young demography are increasing internet and smartphone penetration.

Outreach, Marketing & Customer Experience is the Key

The festive season, sees usually higher sales than the rest of the year, mainly due to the offers & discounts given by the stores, which enables the customers to loosen their purse strings. Most of the retailers offer some or the other discount and many customers prefer making purchases during these times.

The survey reported that the top driver as per 17.84 percent of the respondents is festive & occasion shopping, while an overwhelming 30.50 percent considered customer outreach and innovative marketing as the key driver for the retail business. 21.26 percent of retailers felt that customer experience & customer loyalty is the top driver of their business while 14.86 percent of the retailers reported that less competition in their area is the top driver of their business. 12.91 percent of the retailers reported that the top driver of their business is cost competitiveness and on the other hand, 2.31 percent of the enterprises reported survival instinct as the major factor influencing their retail business.

Omnichannel Gains over OTC

The survey reported that despite the online boom, almost 57 percent of the retailers were still taking orders over the counter, which mainly belong to the food & grocery, consumer electronics & pharmaceuticals categories.

26 percent of the retailers take orders through digital platforms using third-party e-commerce, WhatsApp, online website, and mobile applications, which states that the majority portion of the retailers are still taking orders through offline channels and are slowly moving towards digital.

Digital can Transform the Retail Landscape

Digital technologies are enabling radically new ways to deliver value to customers as well as it has helped retailers become more innovative and has increased agility as depicted in the figure. Going digital will help the retail business to move towards a cashless economy and will eventually help to reach a bigger market. Indeed, digital technologies have altered the competitive landscape.

The survey reported that the majority of the retailers believe that going digital will help them inculcate a culture of innovation in their enterprise & improve their businesses, followed by improved services for building new customer experiences. 72 percent of the retailers believe that going digital will solve the issue of increased agility and 53 percent of them believe that it will improve collaboration across departments and 29 percent believe that it will increase revenue. Further, the survey reported that 25 percent of the retailers feel that Digital adoption will enable a more adaptive culture & 18 percent believe that it will reduce non-value-added work, whereas 16 percent of the retailers believe it will lead to increased profitability.

Technological revolutions like mobile computing and data analytics have made it easier for retailers to communicate with and also understand customers better than ever before. Prior to the pandemic, the e-commerce channel witnessed continuous evolution and growth. The pandemic significantly changed customer behavior and accelerated e-commerce adoption, which changed the composition of India's retail industry. Leading FMCG brands such as HUL, Emami, ITC, and Marico built extensive digital presences to capture newer opportunities. The online sales channels of these industry leaders cater successfully to the needs of new-age online shoppers.