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Indian retailers need to take cues from west to retain profit margins


~India Retail Forum Day-1 deliberates onslaught of mobile, social and human connect~

Mumbai, 15th September, 2015: While the next phase of retail revolution will be driven by India and China unlike the past phases that were driven by the West, Indian retailers lag their foreign counterparts in retaining a black bottom-line.

As the curtain for the largest annual congregation of retailers was unveiled at the India Retail Forum 2015, industry leaders on the inaugural day discussed the need to focus on profits.

“EBITDA margins of Indian retailers have dropped to 2% in 2014 from 8% in 2011. During the same period EBITDA margins of select international retail chains like Walmart, Target, Tesco and Home Depot have maintained 7-11% during the same period,” said Anurag Mathur, Retail & Consumer Goods Practice leader, PricewaterhouseCoopers India.

With the emergence of new formats, distinct paths to sustainable profitability will need to be crafted as retailers in India face a herculean task of reaching out to the customer through a combination of mobile, social and human connect, industry experts opined.

Online and e-commerce with varying digital density along with Omni channel are straining traditional business models in retailing. Moreover, with consumer companies selling directly via offline and online tools, value chains are also getting disrupted, said Abheek Singhi, Senior Partner and Director, Asia Pacific Leader – Consumer and Retail Practice at The Boston Consulting Group.

Sharing his perspective at the retail conclave, Krish Iyer, Chairman IRF 2015 and President and CEO Walmart India said, India being a consumption driven economy has come handy as against the export driven economy for the country’s retail sector amid the ongoing adjustments in the global economy.

While focus on manufacturing is important and laudable the future of India’s growth will come through service sector driven by technology and 300 million new internet users as majority of sales in brick and mortar is digitally influenced, Iyer said.

According to a survey conducted by PWC, more than 65% of Indian retailers are focusing on improving profitability through improvement in revenue throughput as fast changing consumer behaviour is driving many retailers to rethink their business model. As per the said survey, 53% retailers are considering a change in their operating model driven by changing consumer behaviour.
The conventional issues of skilled manpower and affordable lease rentals of real estates continued to be part of the retailers concern.