Specialty retail in India is growing and is heading for a stupendous growth in the near future. Both Indian and international market leaders are eying the Indian market to encash on the specialty stores retail boom.
A cursory view on market
As per Rajat Tuli, Co-Founder, Happily Unmarried: “This market has a very small base and can only grow. When malls opened, people would just go for the sheer experience of shopping in a mall. However, that era of vanilla retailing is long over. The specialty retailers add the critical spice to complete the shopping experience. In fact, mall developers are now creating special areas to encourage specialty retail. This includes creating smaller size stores and kiosks to encourage the new businesses.”
Speaking on the same, Upkar S. Sharma, Founder, Crea says: “Specialty retail, amongst other formats of retail, is only set to thrive in India. The country’s overall retail market is growing exponentially. The stratospheric GMV figures quoted by online retailers can be somewhat misleading at times, giving us the impression that the market is bigger than what it is. Even after accounting for the glib, the market is sizeable and is growing at a healthy rate.”
Citing her views, Archana Kumari Singh, President, Frazer and Haws says: “More than a multi-brand store, it is specialty retail which will continue to hold firm ground.”
“The specialty retail market is growing quite swiftly in a developing country like India. The Indian consumer is well travelled and has a more global evaluation of their buying needs. Specialty retail is growing organically at a rate of 15–20 per cent every year,” says Shreya Jain, Founder, La Kairos.
“According to a research, specialty retail constitutes 50 per cent of the total organised retail market in India, and this segment will experience double-digit growth over the next decade,” says Amit Jain, President, Shingora.
Speaking on the same, Rashi Narang, Founder, Heads Up For Tails informs: “Heads Up For Tails is a boutique firm that provides the very best for your pet! We are in a niche segment, but we have seen a 20 per cent year on year growth since we started out in 2008. As awareness and exposure continues to grow, there will be a rise in specialty retail.”
“Specialty retail in India is heading for a stupendous growth in the near future. Both Indian and international market leaders are eying the Indian market to encash on the specialty stores retail boom. Specialty retail today contributes approximately 50 per cent of the total organised retail market in India. This form of retail is here to stay since it offers the breadth of the specific category. Retailers specialising in high level of involvement categories would do better, as specialty stores are the destination shopping landmarks. The specialty retail sector, which currently accounts for around 5 per cent of the Indian retail market, will soon see numerous large format malls and branded retail stores in many parts of India in the next two or three years,” sums up R.K. Jain, MD, Bonjour.
Anurag Poddar, Director, Presto says, “ Speciality Retail is on a constant growth path in India and has been growing at a rate of 30 per cent YOY basis. Everyday we see new Retail Concepts emerging and this growth is seen as sustainable in the short to medium term as the propensity to consume grows in the Retail segment.
Specialty facing the heat from e-retail
“While the e-tailing market is going to grow and stay , the impact on Speciality Retail will be very limited as most e-tailers function as Discount Vendors and their offering is mostly limited to fast moving commodities where Price is the main consideration for a Purchase. The Specility Retailers are high on then Service element and hence e-tailers will have limited impact on this segment. Presto is known for Personalised Gifts and the offering is very high on the Service elemeant which is difficult for etailers to match. Presto’s strategy is continous innovation in Products and Services to stay ahead of all competition including e-tailers,” adds Poddar.
“Is this not quite the dichotomy? While there has been an increased interest in e-commerce players from customers in general, most specialty retail products require a certain experience and invariably drive the customer to the physical store. A high involvement category like a pashmina shawl does not see the kind of traction that something like a T-shirt would see online for obvious reasons and our business has not been affected by the sudden influx of e-tailers like any other category,” says Bhuvan Ahuja, Retail Head, Ahujasons.
“At the heart of the success of any specialty retailer is a great product! No amount of reach or promotional schemes by e-commerce companies can take away the pie from a specialty retailer. Specialty retailers need to focus on product quality and innovation along with brand story. While there are people who would look to buy a Rs. 650 canvas knock-off or lookalike from any of the online sites, an informed customer would still go and buy a VANS. Specialty retailers need to be aware of their target audience. Their communication should be so powerful that it entices the shopper buying knock-offs online to join the fold,” feels Sharma.
However, Tuli quips: “We sell at physical stores as well as through online stores. We maintain a uniform pricing policy so our products cost the same whether you buy online or at a store. We do not see these channels as mutually exclusive. Instead, they are complementary. Our biggest online sale comes from the NCR, and we have the largest number of stores in the NCR. In our case, when we open physical stores the online sales from that city also goes up. “
According to Shreya Jain: “Our strategy is to provide our clients with a completely bespoke experience. All our products are mostly hand-embroidered and we customise collections by fabric, style, individualistic concept and price-point to our customer’s requirements. Thus, we provide an intricate experience to the customer, which online retailers may not be able to provide in totality.”
Challenges for growth
“The economic slowdown has definitely affected the specialty market in terms of decrease in retail sales growth, footfalls, employment rates and, most importantly, profitability. Most affected by the slowdown operate in the apparel and textile segment. Also understanding consumer behaviour and customer retention are the major challenges that they face. Shortage of talented professionals, especially at the middle management level, and lack of infrastructure leading to impediment of a pan India network of suppliers, lack of uniform tax rates across states, and low productivity level in labour are also key challenges being faced,” states R.K. Jain.
“The government has recognised the challenges and is planning constructive changes to remove the barriers and open it up for expansion. Through implementation of Value Added Tax (VAT), sanction of large plots of land for retail development, permission of Foreign Direct Investment (FDI) in real estate and partial FDI in retail, development in infrastructure, the government is taking the necessary steps to make it big for this sector,” he adds further.
According to Ivana Perovic Shah, CEO, AP Group: “The biggest challenge lies in the import duty and freight of international products brought into India. If the duty and tariff of imported goods goes down even by a few percentages, it will help in reaching out easily to every potential customer, as it bring down the price of goods.”
Sharing similar views, Sharma says: “The government can do a lot primarily by introducing a rational rate of G.S.T. and removing road blocks for international players. Comptetion is always good for any market. It is years of protection that has made Indian brands lazy and rather insensitive to customers’ needs and they seem to be paying the price right now. The blood-letting you see right now is not of young energetic brands, but old ones who lost their plot in the years of domination and security. The challenge is to wake up and smell the coffee. Overall, India is going to be an extremely challenging, yet highly lucrative, market to be in. Owing to its diverse demographics and populace, the Indian market can help a lot of brands sustain and grow.”
“You need to keep innovating, so investing in design, R&D and new product development needs to be part of your DNA. The government needs to encourage entrepreneurs all across. Even now the largest employer in India is SME and small enterprises,” says Tuli.
“Getting the word out to enough people is key. People need products, but often think that they are not available. The key is to have deep enough pockets to spread the word as much as you can,” shares Narang from Heads Up for Tails.
Growth aspects in smaller towns
“Tier-II and -III cities have huge potential as they are becoming more aware of fashion trends and must-haves in their wardrobe. We set up an e-commerce website for Hawaiians over two years ago and we receive orders from all over the country,” shares Shah of AP Group.
“With increasing awareness and growing income, consumers in small cities today are splurging on food, shopping and entertainment, and many retailers are shifting to tier-II and -III cities. Retailers are basically moving into non-metros to make the most of this change, which is largely brought about by western influences, increased number of working women and a growing desire for luxury items. Thus, tier-II and -III towns are showing strong momentum with an improved demand appetite and specialty retail stores are eying these cities for expansion and reaching out to the target audience. Also, the increasing competition has forced retailers to tap growth opportunities in tier-II and -III cities in India,” shares R.K. Jain.
According to Tuli: “People in big cities already have too many distractions. The challenge in smaller towns is that the sheer number of customers may not be enough to sustain stores, so malls should invite stores to set up pop stores on a short-term basis. This also keeps the novelty of the mall going as people expect something different every time they visit.”
Clearly, specialty retail is an evolving category with tremendous growth potential. a