The organised retail sector will grow five fold from the current USD 40 billion in the next five-seven years and touch the USD 200 billion mark, according to a Boston Consultancy Group report, states PTI. The study covered 45 companies in the country.
“We find transformation in FMCG and retail is critical to the profitable growth of the sector. It was found that close to 57 percent believe the world is going more uncertain going forward, while 71 percent of executives believe they do have idea but they lack defined action plan,” said Abheek Singhi, BCG Senior Partner and Director.
“Successful models of retail namely food and grocery sectors to footwear to lifestyle products have done exceedingly well on the Indian stock markets and given very high returns to the investor,” said investor and Rare Enterprises founder Rakesh Jhunjhunwala.
Admitting that the retail sector has not done well in the last 10 years, he said it will do better now as retailers have realised that store level profitability is more important than the supply chain.
Terming this year as bullish for the sector owing to rise in income level, he said availability of a wide range of brands gives consumers more options to choose from.
According to the report titled ‘Changing your Orbit, ‘The Handbook for Transformation in FMCG & Retail Businesses’, by CII and BCG, many of the senior management of leading FMCG and retail companies in India don’t believe they are strategically or organisationally ready to transform to meet the new challenges of changing business environment.
Almost 60 percent of respondents believed that their business environment has shown significant change in the recent times and not many believe that they are strategically or organisationally ready to transform to meet the new challenges, the report said.
“Flat sales, rising costs, disgruntled customers as well as increasing new nimble competitors are typical signals that a company needs to initiate fundamental change. Yet, it is only after the business comes under severe pressure that they wake up to the need for this change effort,” it added.
Too many companies, especially those with a sustained track record of success, fail to transform themselves till it is too late, the report said.
It also stated that long term consumption opportunity in India is large and attractive, going from USD 900 million in 2010 to USD 3.6 trillion by 2020.
“The structural socio-economic advantages driving this growth in India are intact and it will need customised consumer-centric strategies by FMCG companies and retailers to tap into this large opportunity,” it added.
Fifty-seven percent of the respondents agreed that consumer behaviour has changed in the last five years impacting the way companies do business, while 43 percent said they could witness some signs of change but impact to business was still limited.
The report further said 57 percent of the senior management interviewed in the study agreed the external environment for their respective organisations is going to become more uncertain to a large extent while ony 14 percent felt the contrary.
On the issue of new players coming in their business segments and taking share from established players, the report said 86 percent of the respondents said they have witnessed it and the trend would continue, while only 14 percent said they don’t expect major movements in future despite new players taking away share.