Trends and challenges in Retail

With the rapidly changing profile of consumers the world over, it’s a challenge for retailers to keep up with the shifting shopping demands. Shoppers today are more discerning and better informed about products and services, and expect a certain standard of shopping experience from retailers. This might be a global trend, but in today’s globalised environment similar consumer trends may be replicated across most local markets — including India.
Each local market has its own distinct characteristics and retailers need to adapt themselves to stay ahead of the game. Processes and approaches, which work in the home country of a brand, may not necessarily work as efficiently in other geographies. Local preferences, traditions, tastes and preferences, besides real estate dynamics — such as operating infrastructure and costs — have to be kept in mind for a successful foray into a foreign marketplace.
Despite the structural challenges and bureaucratic bottlenecks that the Indian retail market suffers from, global retailers have been queuing up to enter and establish their footprint in the market, as they are aware of its potential growth opportunities. Growth has almost plateaued in most developed markets, providing little room for retailers to drive their business expansion amid growing competition across segments. Th e Indian market, being largely under-penetrated, offers significant opportunity for growth — especially in segments such as F&B, fashion apparel, and luxury goods — due to factors such as an expanding middle class, rising disposable incomes, and a growing appetite for international quality goods and services among Indian consumers. Th e Indian market, however, continues to face significant challenges to growth in the form of inadequate quality retail real estate space, restrictive legislation policies, and infrastructure bottlenecks. These challenges tend to impede India’s retail story, and restrict the market from attaining its true potential.
Some key challenges that retailers face in India include real estate rentals; real estate quality; slowing consumerism; MRP constraints; and policy issues. The erstwhile Indian government’s move to open the country’s retail sector to foreign supermarkets has been anticipated for some time, and is regarded by market experts as being crucial to kick-start the country’s flagging economy. According to the Confederation of Indian Industry (CII), such a move would likely increase the income of producers across sectors by about US$ 35–45 billion per year, creating approximately 3–4 million jobs with retail chains, and about 4–6 million jobs in the logistics sector, other than creating a demand for more contract
labour in distribution and repackaging centers and functions such as housekeeping and security.
Supporters of the new policy say the entry of international supermarket retailers will help bring down the soaring prices, make the retail sector more competitive, and help modernise its ageing infrastructure and distribution systems. Small and medium sized family-run retailers will survive, they say, as they off er a valuable local service that large supermarkets are unsuited to provide.
As FDI in multi-brand retail encompasses big ticket investments, individual as well as institutional investors should have enough policy incentives to encourage them into making commitments towards the retail sector in India. The key beneficiaries of such investment inflows would be the cities with population bases of one million or more, with phased benefits percolating to other locations as well. Vacancy levels would also drop as hypermarket chains would likely occupy large spaces across the cities. Th e country’s logistic sector would also benefit significantly, as leading global players would be inclined to invest huge amounts in logistics and supply chain, which will help to reduce wastages and allow for faster delivery of perishable goods
The author has over 25 years of experience in FMCG and Modern Retail. He is on the selection panel of ‘Hunar’ skill centre (Retail and Hospitality), a collaboration between Delhi and Singapore governments. He can be reached at [email protected]