India's retail sector poised for stellar growth, report predicts $2 trillion market by 2034
A joint report by the Boston Consulting Group (BCG) and the Retailers Association of India (RAI) paints a rosy picture for the future of India's retail sector. It projects a robust 9-10 per cent annual growth rate in the next decade, propelling the market to a staggering $2 trillion by 2034. This phenomenal expansion is primarily driven by robust economic growth and a burgeoning middle class with increasing disposable income, creating a fertile ground for retail businesses.
Middle class engine of growth
The report identifies India's robust economic growth as a key driver, with a growing middle class playing a pivotal role. As disposable income rises, consumption patterns are shifting, creating a strong demand for retail goods and services. Abheek Singhi, Managing Director and Senior Partner at BCG, emphasizes the importance of this segment: "The growing middle class with rising disposable income is fuelling a strong consumption story, making India an attractive market for retailers.
Despite the positive outlook, the report acknowledges challenges facing organized retailers, who need to adapt and innovate to maintain their market share. While the overall outlook is positive, the report highlights a slowdown in the growth of organized retail (like large supermarkets) in 2023 highlights the need for agility. As Singhi further explains, "Successful retailers will be those who challenge the perceived trade-off between growth and profitability through innovation."
Unlocking sustainable growth
The report proposes five key themes for unlocking sustainable growth in the Indian retail sector:
Embrace innovation: Challenge traditional business models by adopting innovative approaches, such as exploring new retail formats or leveraging technology for enhanced customer experiences.
Personalization is key: Leverage digital tools and Artificial Intelligence (AI) to create personalized customer experiences, catering to individual preferences and building stronger customer loyalty. Kumar Rajagopalan, CEO of RAI, emphasizes, "By focusing on personalized customer experiences, exploring new collaborations, and leveraging AI for efficiency, we can propel India's retail industry towards unprecedented growth and global competitiveness."
AI-powered efficiency: Enhance value chain efficiencies through the strategic implementation of AI across various aspects of operations.
Forge strategic collaborations: Foster partnerships with other businesses or brands to unlock new revenue streams and expand market reach.
Localization matters: Adapt merchandise and store formats to cater to the diverse needs and preferences of different regions within India, recognizing the concept of "Many Indias."
Interestingly, the report predicts continued store expansion despite the e-commerce boom. This growth is expected to be particularly pronounced in Tier I (large metropolitan cities) and Tier IV (smaller towns and cities) driven by increasing urbanization. While e-commerce is poised for further growth, the report suggests a potential slowdown in net new user acquisition, necessitating a reimagination of online retail strategies to maintain momentum.
In conclusion, India's retail sector stands at the precipice of exciting growth. By embracing new technologies, adapting to consumer preferences, and fostering innovation, retailers can capitalize on this promising landscape and contribute to the sector's projected success story.
