Outlook for retail in 2023 bright, say experts

The prediction for this upward growth is slated for not only 2023 but for the next decade as India readies itself to become the third largest global economy by 2030. From consumers’ perspective, the drivers of this growth will be led mainly by Gen Z and millennials and the sector is rearranging its offerings and services to cater to the largest consumer segment in India.

India’s retail sector is expected to experience resurgence in growth and buoyancy, and offline shopping would return, feel experts. They predict, unless another wave of the Covid-19 pandemic or a major global recession came in the way, happy days are predicted for this sector which did take a big hit in 2020 and 2021. As India as a nation continues on a growth trajectory that is being hailed by icons of financial institutions including World Bank and the International Monetary Fund, retail sector will flourish and see phenomenal growth in the next three to four years, say industry leaders. The wave of consolidation is likely to hit India’s fast-growing retail industry in 2023 also as larger players seek to strengthen their footprints, leverage technologies to improve efficiency and expand beyond metros. While growth prospects are promising, the industry is entering 2023 with “cautious optimism” amid inflationary headwinds and concerns over spurt in coronavirus cases in different parts of the world.

Outlook for 2023 and beyond

After the retail sector’s major comeback in 2022, the prediction for this upward growth is slated for not only 2023 but for the next decade as India readies itself to become the third largest global economy by 2030. From consumers’ perspective, the drivers of this growth will be led mainly by Gen Z and millennials and the sector is rearranging its offerings and services to cater to the largest consumer segment in India.

Product quality, its provenance in terms of sustainability and premiumisation will play key roles in determining the success of retail brands. The new and most powerful Indian consumer segment is ready to pay more for better products. This is an opportunity for retailers to cash in and deliver. As some experts say, the retail sector is in an enviable position compared to other countries as only a few nations are going to see this kind of success. However, retailers need to envision a large and diverse market like India like the EU which is a cooperation of 30 nations with different attitudes, cultures and requirements. A one coat will fit all will become a thing of the past in India as different states will have to be addressed as different consumer segments. The disparities in financial successes, development rate and overall opportunities in different states will drive attitudes, cultures and requirements accordingly. Tier II and III cities will also play an important role in retail offerings and the metropolis model may not be applicable without relevant tweaks.

Consultancy EY’s India Leader-Consumer Products & Retail Angshuman Bhattacharya says India seems to be skipping the modern trade wave, with two of the large modern trade chains adopting a path of B2B commerce and kirana integration, with an ambition to create a data-unified retail environment. D2C data, delivery information, and telecom data integration are likely to drive the eventual convergence of offline and online channels towards a “connected commerce” model of tomorrow, he said. According to him, the industry is likely to continue witnessing consolidation, as the scale gets driven through technology-led integration and efficiencies.

As per the Retailers Association of India (RAI) said the retail in the country is expected to grow better than all other key markets across the world. In fact a RAI report had said, Eastern India recorded the highest growth with over 25 per cent jump in July 2022 as compared to July 2019, with South India coming in second with 21 per cent growth. The traditionally more affluent markets of North and Western India witnessed 16 per cent and 10 per cent respectively. The flourishing e-commerce industry is growing at a CAGR of 23 per cent and the new wave of D2C retail in the country, will invariably lead to a greater presence of organized retail players in the near future.

After the lessons the pandemic taught the sector, retailers will continue with their multi- channel approach and marketplaces such as B2B commerce and D2C, and also focus on diversifying their supply sources. According to retail experts, D2C data, delivery information, and telecom data integration are likely to drive the eventual convergence of offline and online channels towards a “connected commerce” model of the future.

Category indicators from 2022

According to a RAI report for April to November 2022, overall growth rate was 19 per cent. Quick serve restaurants (QSR) and footwear experienced the highest growth with 30 per cent as compared to 2019 whilst beauty and personal care lagged at only 7 per cent growth.

Deloitte India Consulting Partner Rajat Wahi feels, “We are also likely to see continued consolidation in retail, with many smaller and less profitable retailers exiting the business in favour of more efficient and larger players who are able to leverage technology to drive efficiency across their retail operations, expanding beyond metros and Tier I cities to Rurban/Tier II, III and IV cities.” According to Wahi, the retail industry is also likely to see more tech adoption in stores to track the customer journey, from search and discovery to selection and checkout.

Bhattacharya says in the apparel and lifestyle segment, traditional EBO (Exclusive Brand Outlet) based models are transforming into the ‘store of the future’ models with virtual and endless aisles, online catalogues and trials, try-at-home, and delivery to home. “These may allow for more profitable scale-up of retail players, with lower burdens of rentals, manpower and working capital.”