The Retail Turf
The year 2016 begins on a strong footing for the consumer durable market, thanks to falling interest rates, declining inflation and funding support from banks.
Photo Credit : Bivash Banerjee
While retailers are still closing the books of 2015, the bigger question remains what is in store for them in the year 2016? What is clear is that this will prove to be a transformative year for retailers. The quarter on quarter improvement in demand, fuelled by higher income households, urbanization and a shift in the very meaning of the word "shopping", coupled with the radical shift in buying sentiment of consumers living in Tier II & III cities, is sure to bring its own opportunities for the $600 billion retail market.
Currently at a CAGR of 12-13 per cent, India is an interesting station in the global retail scenario as the country offers high market potential with moderate political risk and lower economic risk. This conducive environment could also mean an influx of potential retailers to make the most of these opportunities.
The year 2016 begins on a strong footing for the consumer durable market, thanks to falling interest rates, declining inflation and funding support from banks. This is further amplified with a shot in the arm in the form of the 7th pay commission which is likely to fuel purchase of consumer durables.
The demand in urban markets is expected to increase for aspirational products such as larger screen LED TVs, 2-in-1 laptops, split ACs, side-by-side refrigerators and beauty and wellness products. On the other hand, a surge in the demand of durables like double-door refrigerators and basic smart phones would drive the growth in the rural markets.
The industry is also poised to ride high on the 'living healthy' wave, on account of rising availability of healthy living gadgets like wearables, along with rising health consciousness amongst consumers. This particular insight has given way to a plethora of products like air purifiers, soup makers and vegetables/ fruit cleaners that promise to deliver on these benefits. Several companies, including Eureka Forbes and Hindware foreseeing an opportunity have already forayed into this space.
The deepening pockets of the 'below 30' population is paving the way for some differentiated behaviour within the CDIT category. The year 2016 promises to witness a swell in demand for items of individual rather than family consumption across categories owing to the acceleration of both wealth accumulation and propensity to consume. Guys earning 15,000 -20,000 a month think nothing of spending it all on a cool music system or the latest smartphone.
2016 is the year more and more retailers will be able to unveil their omni-channel services to their customers. The focus will be on creating a seamless experience that engages and inspires shoppers as they hop from channel to channel, deciding when and where they want to make their purchase. Today the word 'commerce' seems incomplete without the 'e' being its prefix. Shopping is no longer about the store, the phone, the laptop - but about a seamless synthesis of all of these. Consumers will not distinguish between channels. They will expect the same service, products, offers and pricing online as they do in-store and on mobile. The omni channel strategy is clear: Build and optimize the performance of a store network by satisfying a broader range of shopping occasions for a large part of the population. It is about combining the twin advantages of an established physical store and a robust customer database to the overall benefit of the retailer. In a mere 3 months of going live with its omni-channel offering, Croma has witnessed an increase in store footfall and reduced time between store visits on account of the higher level of engagement delivered.
Emboldened by a buoyant festive season in 2015, we will continue to witness aggressive schemes and deals by the brick and mortar store retailers to strengthen their hold and draw among customers. Whilst the pureplay e-tailers will continue to get bigger, they will face a huge pressure on account of the above as well as new entrants in e-tailing itself. 2016 will witness phase II of the virtual customer acquisition battle as newbie e-models compete with the established online players for every transaction even as the incumbent marketplaces look to build sustainable business arguments to appease their now restless investors.
The retail industry in India, has over the past few years seen a tectonic shift, with the focus shifting from brick to click and now, the emergent narrative of brick and click. With internet connectivity getting steadily better and smartphones' soon to become ubiquitous, more and more Indians will start their journey to a new purchase on their palms. However, it's difficult to imagine a nation that is so in love with "malling" that it continues to be the number one activity on weekends; will conclude a purchase without visiting the store. The successful retailer of the future will have to perforce be present in both the virtual and real world in order to effectively compete. The next stage of evolution is one of convergence - just as brick and mortar retailers are adding e-com to their offering, online marketplaces too will acquire physical manifestations of their proposition in order to compete.
By the end of FY 2016-17, expect a leveling of the playing-field across e-tail and retail with the retail giants competing effectively with the e-tail monsters on their turf.
Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.