In India, it is quite common to see consumer patronage of retail stores varies from local kirana stores (mom and pop stores), neighbourhood stores and street shops to more organized retail experiences in brand stores and shopping malls. The former is often termed as the unorganized or traditional retail market while the latter is considered the organized sector, and each has its own respective retail ecosystem.
What is a retail ecosystem? It is a vast and inter-connected network of suppliers, retailers, logistics providers, third-party platform providers and consumers to name a few. In the case of the organized retail market, it also includes a mix of technologies and processes to improve customer experience and enhance the efficiency of retail operations. In India, the retail ecosystem sometimes also includes middlemen who act as intermediaries between suppliers and retailers. When retailers adopt a more fragmented value chain to reduce their costs, it in turn makes this ecosystem more complicated and difficult to manage.
Of late, the organized retail market in India is undergoing rapid expansion due to urbanization, rising consumerism, digitalization, government efforts, and infrastructural development. As a result of key growth trends that are shaping the retail industry in India, it is projected that modern retail, including e-commerce, will account for approximately 35% of the sector within the next 4-5 years, leaving traditional retail to make up the remaining 65%.
With rapid development, the retail industry faces a number of challenges because of its complex value chain which involves procurement, controlling the supply chain, transportation, retail operations, promotion, and customer service. This is further compounded by consumer expectations on brands on sustainability goals and customer experience including product and service excellence, price efficiency, quick and timely deliveries and returns amongst other factors. As a result, major industries are currently revisiting their strategic view of their overall value chain and striving to overcome these challenges.
Food & Grocery
The food & grocery segment is a highly competitive retail sector in India, in terms of both volume and size. The industry has experienced notable changes in recent years due to the rise in the need for last-mile delivery as well as changing customer preferences. Companies have optimized their business models to meet consumer demands by implementing various strategies.
One such strategy is direct procurement from farmers, which eliminates middlemen commissions, loading and unloading costs, transportation expenses, and waste due to multiple intermediaries.
Another notable development is the exponential growth of last-minute food and grocery delivery, driven by digital customer engagement, contactless delivery, industry collaboration, and hybrid operating models.
To ensure timely delivery, retailers have been utilizing mini-warehouses or dark stores located across the cities and a fleet of riders equipped with real-time tracking solutions. Additionally, the increasing demand for sustainability has led to the adoption of recyclable packaging materials, which not only helps reduce carbon emissions but also enhances brand image.
India's electronics retail sector is experiencing rapid expansion due to increasing spending power and technology adoption. To stay competitive, Indian retailers have incorporated e-commerce, omnichannel retailing, customization, and other innovations.
Due to the geopolitical war, the electronics segment faces challenges such as part shortage, rising interest rates, high inflation, and lower consumer confidence. Manufacturers are addressing these problems by enhancing local production capacity to increase profitability and reduce delays. Additionally, the government is encouraging "Made in India" initiative to strengthen the domestic manufacturing sector, which will help both the economic and employment growth.
Fashion and apparel
India’s fashion market is becoming more organized, and customers are also getting value-conscious with changing times. One of the biggest changes is the shift towards omnichannel retailing, where retailers are offering customers a seamless shopping experience across multiple channels.
Digitization and advanced analytics software are also being used to understand customer behaviour and optimize production and supply chain management. Organized retailers are prioritizing the creation of a comprehensive product assortment strategy, enabling them to optimize resources and production lines with suppliers and develop a long-term plan for their business.
Through digitization, advanced analytics software is being utilized with machine learning and AI technology interpreting historical data and consumer buying patterns at each location for a better sourcing strategy. Another trend in the fashion industry is sustainability, which is pushing innovations. This includes the growth of re-commerce or resale-as-a-service. This eco-friendly business model makes it easier for brands to resell garments and contribute to sustainability.
The e-commerce sector has grown significantly over the past decade, with technological advancements such as mobile commerce, omnichannel retail, and social media commerce. As this is the fastest-growing segment, the government has come up with some strategies to provide a better ecosystem. For instance, India has a large unorganized retail sector with limited customer access. To address this issue, the government has launched an open-source network called ONDC to provide small retailers with an open digital platform to sell their goods to a large customer base. This initiative will also help in mitigating other issues such as fraudulent payments, low visibility, fulfilment, poor demand planning, and forecasting.
Additionally, E-commerce companies place a high value on analysing customer insights by using big data to personalize the shopping experience, identifying trends, and sending customized communications, thereby improving their operations. Effective inventory management, pricing optimization through competitor analysis, fraud detection, and better customer service through early detection of potential problems are some of the other benefits.