Indian organized retailers will have to revisit their growth strategy as they are found short of the early promises shown by the industry, according to a report by PwC India released on day 1 of the two-day India Retail Forum 2017.
“At 8-10% penetration of organized retail is far short of initial estimates that has led to several global & Indian players exiting on not achieving profitability and scale,” said Anurag Mathur, Retail & Consumer Goods Practice Leader, PwC India.
However, Indian organised retail remains an unparalleled opportunity as the market size is seen rising to $983 billion by 2020 from $553 billion in 2016. The unparalleled opportunity is based on the facts that India has 17% of world population and 3% of global consumption with per capital income quadrupled in last 15 years to $1600 and consumption being driven beyond the metro belt, the report said.
According to the survey conducted by PwC India with 40 large retailers including global retailers, the reason enumerated by them for not able to match expectations included ground realities that were different than envisioned. This resulted in faltering on execution in a bid to scale up fast.
In the process, value proposition got ignored and competition from well-funded online players posed a new challenge, the survey said.
Among the infrastructural challenges for retailers unable to keep pace with expectations included availability of quality real estate, access to capital and acquiring, developing and retaining talent. Moreover, rapid scale expansion resulted in a large percentage of new stores that ended up putting pressure on profitability. Furthermore, the one size fits all approach too didn’t work in the heterogeneous Indian mark, the report said.
To add to the woes, competition from online posed a new challenge as discounts and sales have become a way of life and there has been a shift in how consumers buy with increased focus on non-food grocery retail by the consumer, the report said.