The way forward for the Indian Retail Sector

Birender Singh

Birender Singh

A conversation with Kumar Rajagopalan, Chief Executive Officer at Retailers Association of India

According to the  India Brand Equity Foundation, the Indian retail industry has emerged as one of the most dynamic and fast-paced industries with the entry of several new players. It accounts for over 10% of the country’s gross domestic product (GDP) and around 8% of employment. India is the world’s fifth-largest global destination in the retail space. According to various reports published on Statista and Mordor Intelligence – “the Indian Retail Market is estimated to reach 1.5 trillion by 2030”. We ranked No. 2 in the Global Retail Development Index as well as our e-commerce industry is set to grow by a whopping 84% by 2024.

CMR India had an exclusive interview with Kumar Rajagopalan, CEO at Retailers Association of India, on the impact of the pandemic on the retail sector, recovery model, and further plans of the association. Kumar is also part of the advisory council of the ONDC under the Department of Promotion for Industries and Internal Trade.

Q1. How do you see the recovery rate of the retail sector in India after being hit by the pandemic?

Ans. The last two years of the pandemic have definitely impacted the retailers and their ability for cash inflow. They had all the expenses to bear while not having the income they needed to run their business due to lockdown restrictions. The first year of the pandemic went on and off for the retailers, where everything was uncertain. This has removed the buffer they had in terms of cash in hand, which means that the ability to buy and trade has gone down overall. When you have money in hand, you can leverage getting the best deals in the market and improvise delivery speed to get the item on time.

Super and hypermarkets haven’t been impacted as much due to the pandemic because they were open all the while with restriction and COVID-19 protocols. In cities, consumer durables and information technologies functioned because people were still buying them somewhere or the other even if they were at home because they had to work from their homes.

The two sectors that were highly impacted were garment and footwear (wearable accessories). That is where we are now going forward. There is a possibility of a return to normalcy, and we believe that retailers have also learned from the pandemic. They have learned how to do omnichannel kinds of businesses, and they also have created new ways of partnerships and collaboration. But as of now, there are two worries we have in front of us, i.e., inflation on almost all products, which impacts the customers; capability to buy.

Another one is the supply chain because the pandemic is not over yet in most countries, and war is happening in a few countries. This also creates a huge amount of pressure on the international supply chains.

Q2. With the increase of online retail market share, how does it affect the offline retail space?

Ans. Even before the pandemic, there was clarity that businesses would become omnichannel soon. For the last five years, we’ve been doing our survey with customers every time before the festival. It showed that 85% of the customers did the discovery phase of shopping online. I mean that people just look for what they want to buy and check what is available and where it is available. So the discovery phase of shopping may not be the shopping per se, but the discovery – 85% of the customers are still doing online.

So we’ve been advocating all the modern retailers that should be visible online in some form or the other. Further, this pandemic has ensured that almost everybody has gone online. Some of them are successful, some of them aren’t successful. But they’re all trying to rekindle their capabilities. Similarly, online retailers have also found one truth: they can’t really survive by selling online only. They also need to have the physical infrastructure to deliver faster because our customers want first to develop trust with whom they are dealing. Trust is a very important factor because an aggregator selling items does not make a customer feel a sense of confidence. They know that aggregators sell from multiple people, and aggregators don’t take responsibility for those products. So they’d like to understand the retailer who is selling and who is the actual seller.

Q3. What are the upcoming trends that the retail market would see?

Ans. The biggest trend is speeding up the commerce and accessibility of the products. Customers want to have the touch and feel of a product immediately, and they don’t want to wait for a long time. This has always been the problem with e-commerce. The waiting time is more when exchanging any product, unlike what happens when they go into the store. Another thing is that when customers go to any retailer, they expect that the retailer will have all the items that they want to buy. If the retailer does not have it in stock, they expect that the retailer would be able to find whether it’s available elsewhere and supply it to the customer directly.

The concept of the endless aisle has become important nowadays. This means enabling customers in your stores to virtually browse or order a wide range of products that are either out of stock or not sold in-store. So that they can have them shipped to the store or their home directly; moreover, another important aspect in the retail sector is payment options. It has to be exceptional because more and more customers are getting digitally enabled on the payment system.

One more important factor is things like “video commerce.” Often, a difference can be seen between the buyer, the influencer, the payer, and the user. Sometimes an item is bought by somebody, payment is made by somebody else, somebody is influencing it, and it is actually used by somebody else. For example, if you want to buy a camera, the influencer could be somebody on social media, the buyer could be your parent, and the user could be you or someone else. That’s the way it works. With the need to make sure that all these are being taken care of digitally, video commerce becomes very important.

Another exciting initiative happening in India is ONDC (Open Network for Digital Commerce) which is an initiative created by the Department of Promotion for Industries and Internal Trade. This is about creating a common Open protocol so that customers can easily buy from multiple platforms without getting too worried about the product’s availability.

Now, this is exactly what happened to UPI for payments. The seller could have an account somewhere, and the customer might have an account somewhere else. Here transactions can be done easily using the open UPI protocol. There are significant developments taking place in commercial systems and electronic transaction methods in India. Leveraging such technology will help the smaller retailers become more visible and accessible than the typical system where only two or three aggregators can enjoy the benefits.

Q4. The industry has witnessed a massive change in consumer behavior, such as shifting towards digital/online shopping. What could offline retailers do to enhance the customer experience and attract more customers?

Ans. “The power lies in knowing your consumer.” If you understand your consumer, you have a better chance of creating products or selling services to that particular customer. The customers need to be known because the same customer could buy something really cheap and a discounted item in the morning and buy something really expensive in the afternoon because they were trying to be thrifty in the morning. They were trying to purchase items for a special occasion in the evening. Now, how do you perceive the customer’s needs rather than putting them into the traditional method of segmenting? How do you then enhance the customer capability? How do you create the concept called retailing? This means you are retailing to that individual; you are not retailing in the mass. This approach is going to become more important.

Traditionally, the local kiranas and the local guys know their customers in their catchment very well. We need to ensure that they use technology to scale their business.

Concepts like ONDC digitization will help and the ability to do things like video commerce. For example, items manufactured in some remote part of the country can now become available to a retailer directly because of digitization. Know your customer and know your product well and make sure you understand and satisfy the needs of the customer

Q5. With so many e-retail start-ups coming up in the country. Please tell us your views on technological advancement and digital infrastructure within the country and its impact on the sector?

Ans. We have all witnessed the capability of the digital infrastructure of India during the last two years of the pandemic. People were able to talk to each other easily; people were working from their homes. Retailers also got digitally aware and became visible digitally. There is no reason for them not to get on to it because it’s not that expensive, digital capabilities have become democratized, and many small-scale IT solution providers are there to easily give you something which is SAAS based, unlike the typical licensing method. The amount that one needs to pay for the application is purely based upon the amount of trade, rather than just buying the user license for a hefty big capital. Retailers in the country also got better access to financial benefits and services because they are now part of MSMEs and various government initiatives.

Q6. What are the associations’ plans for this and the coming year?

Ans. The business realities have completely changed for retailers as well. The association always conducted various events and conclaves where retailers get to interact with each other and learn from each other. Accordingly, we will do our annual event called ‘Retail Leadership Summit in April (27th – 28th) in Mumbai. This is normally seen as a Kumbh Mela for the retail sector. Generally, we see all the retailers are coming from various parts of the country. There will be many technology providers, service providers, real-estate players on a single platform where they get the chance to get creative ideas, and efficient business collaborations can happen. This will be in hybrid mode; some of the activities and conferences will also occur digitally.

After that, four months down the line, we will be doing ‘Retail Technology Conclave’ because there is a need for technology intervention in the sector. We can explore the potential of technology in boosting market growth. We will also be doing ‘People in Retail’ because we have seen that people’s practices in retail have changed a lot in the past few years. The goal is learning and overall development in the retail sector.

Along with all these events and engagement with the retailer’s community, the RAI is supporting the whole concept of ONDC, intending to get retailers digital nationwide.