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The Demand for Experiential Retail to Grow in 2023

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Sandeep Kumar
Sandeep Kumar
A multimedia journalist with over eleven years of experience in print and digital media, Sandeep Kumar is assistant editor with Images Group. Books, retail, sports and cinema are an inextricable part of his life.

In 2023, retail in India is expected to grow better than all other key markets globally with Omnichannel becoming the norm for the retailers. Concepts like these will enable millions of small retailers to participate in digital commerce

By Sandeep Kumar

The retail industry starts another year with new goals, objectives, mission, and hopes. Another year, where the threat of the pandemic is still looming large globally, the industry cannot afford to take the step of the pedal and is gearing up for another set of challenges associated with it.

The year 2022, was a good turnaround for the industry as we witnessed every segment of retail recording a reasonable revival rate, both in terms of profits and footfalls. India’s retail trading sector attracted US$ 4.11 billion FDIs between April 2000-June 2022. According to data released by the Ministry of Statistics&Programme Implementation (MoSPI), India’s Consumer Price Index (CPI) based retail inflation stood at 6.77% YoY in October 2022.

Categories That Stood out

The reports and analysis from Flipkart (RAI) states that retail businesses across regions have indicated growth in sales as compared to pre-pandemic levels pan India. with West India signaling growth of 25%, while South India and East India indicate a growth of 18% each followed by North India at 14% as compared to sales levels in October 2019.

The industry witnessed a 19% sales growth in the period between April and November 2022, when compared to the same pre-pandemic period in 2019. The eastern part of the country saw a 21% growth compared to 2019, while the north saw a 19% growth. Both western and southern parts of India witnessed an 18% growth during the period when compared to 2019, the report added.

The festival season once again turned out to be a jackpot for the retailers. India reported a 21 % jump in sales in September 2022 compared to September 2019 or pre-pandemic levels. September saw an uptick in festive buying as consumers shopped for new clothes and bought gifting items. As per Confederation of All India Traders (CAIT), till October, a
business of more than 1.25 lakh crore was already done. Diwali brought a big boost for the economy as the retail business crossed 1.5 lakh crore mark, along with the gold sale witnessing a 20% hike in comparison to the last year sale.

A COVID restriction-free wedding and festival season played a huge role in this turnaround. With offices reopening and no restrictions on travel, consumers shopped and travelled a lot throughout the year. Ethnic and traditional wear, formal wear, footwear, accessories, electronics, health skin care & beauty, and subscription orders were some of the categories which led the race.

Apparel and clothing grew 11% Y-o-Y, beauty, wellness & personal care, furniture, and furnishings both grew at 8% Y-o-Y each. Interestingly, at 9% growth Y-o-Y, QSR which shows the highest growth when compared to pre-pandemic levels, sits among the categories that did not perform well.

Top Stories: 2022

  • Reliance Retail, part of Mukesh Ambani’s Reliance Industries Ltd. (RIL), became India’s biggest brick-and-mortar retailer with over 16,600 stores. It is ranked 56th amongst the top global retailers with $18 billion in revenues and is the world’s second-fastest-growing retail company behind only South Korea’s Coupang. The Group acquired German retailer METRO AG’s Indian cash and carry business along with assets in a Rs 2,850 crore deal in December.
  • Reliance Retail Venture Ltd. (RRVL), acquired a majority stake in leading couture house Abu Jani Sandeep Khosla (AJSK), Purple Panda Fashions (that owns and operates the Clovia business), and domestic robotics company Addverb.
  • Walmart India Pvt Ltd., which operates Best Price Flipkart wholesale stores, witnessed its loss widening to Rs 299.01 crore in FY22 despite its revenue from operations going up, according to financial data accessed by business intelligence platform Tofler.
  • TMRW, (D2C-focused entity of Aditya Birla Group), acquired majority stakes in eight digital-first lifestyle brands in the fashion category. Earlier this year, it also acquired Masaba — promoted by the designer Masaba Gupta.
  • Tata Consumer Products to acquire packaged water giant Bisleri for about Rs 7,000 crore.
  • V-Mart acquired LimeRoad in a bid to expand its online presence. HUL to acquire majority stake in OZiva and 19.8% in Wellbeing Nutrition; to invest Rs 335 crore.

Expectations in 2023

Boston Consulting Group (BCG) predicts Indian retail reaching a whopping $2 trillion in value by 2032. This means 2023 is expected to be the beginning of the turnaround, the forthcoming decade is expected to be. The urban Indian consumer’s purchasing power will continue to increase, and branded goods in categories like apparel, cosmetics, footwear, watches, beverages, food, and even jewellery progressively advanced into business and leisure that are well-liked by the urban Indian consumer.

“In 2023, retail in India is expected to grow better than all other key markets across the world. Omnichannel retail has become the norm for retailers. Concepts like ONDC (Open Network for Digital Commerce) will enable millions of small retailers to participate in digital commerce, says Kumar Rajagopalan, CEO, RAI.

“However, going by the current situation of the pandemic, the occasion-wear market (festivals, weddings, etc.) will thrive in the country if no COVID-19 restrictions are introduced,” he added further.

Food and Grocery (F&G) are the other segments to look out for. The report from ICRA predicts that the F&G retailers are expected to witness healthy Y-o-Y revenue growth of 15-20% in FY2023. The operating profit margin (OPM) is, however, expected to remain range-bound at 5-6% in FY2023, due to inflationary pressures, which has also adversely impacted demand in the non-food category.

Increased footfalls aided by lifting of restrictions, continued healthy demand for essential products and regular expansion of retail areas under operations are some of the key revenue drivers.

“The F & G sector remained resilient during the Covid waves and reverted to pre-Covid level of sales in Q3 FY2021 itself. Revenue growth since then has remained healthy, with entities in ICRA’s sample set reporting YoY revenue growth of 21% in FY2022,” says Sakshi Suneja, Vice President & Sector Head, ICRA.

The demand for essential products will remain strong in FY2023 as well, with entities expected to surpass their pre-pandemic levels of FY2020 by ~36% in FY2023. “The share of non-food categories, commanding relatively better margins in the revenue mix, moderated to 22% in FY2021 from ~28% in FY2019, amid intermittent restrictions on the sale of non-essential items. Despite the lifting of restrictions, the share of non-food categories is yet to pick up and remained at lower than pre-pandemic levels at ~23% in FY2022 and in H1 FY2023,” Suneja added further.

The other five categories to watch out in 2023 will be:

  • Consumer Electronics
  • Apparel and Accessories
  • Furniture and Decor
  • Health, Personal Care, and Beauty
  • Auto and parts

Opportunities in 2023

After learning the lessons from the pandemic, the retailers and brands will continue with their multi-channel approach and marketplaces, such as B2B (Business to Business)
commerce and D2C (Direct to Consumer). The focus will be on diversifying the supply sources.

  • Omnichannel Route
  • Adaptation of technology
  • Digitalization
  • Better Consumer Experience

Omnichannel Route: The adaptation of the Omnichannel route, sticking to the basics, understanding the customer behaviour, and adding services as per demand, allowed the retailers to increase their sales throughout the year. Consumers are back to shopping in stores, even if they continue to buy online. Adaptation of Technology:

Adaptation of Technology: Being ‘Digital First’ is the way to survive in the new retail world. The adoption of technology by offline retailers saw a quantum jump in 2022. Online retailers continued to make inroads.

“SAAS-based technology interventions allowed retailers to augment their customer experience, refine operating processes and gain insights about customers and products through analytics and AI. Customers transformed to adopt newer technologies,” says Bijou Kurien, Chairman, RAI.

2023 is going to be a year for the metaverse and retail virtual experience, feels Sanjeev Rao, CEO, Being Human. “We believe that the next phase of Digital Transformation would be led by Virtual Reality (VR) and Augmented Reality (AR). Technologies like Virtual Store in the Metaverse gives customers a chance to have a complete shopping experience, anytime and anywhere,” he added further.

Lacoste is looking forward to making the online channels more robust going forward. “Whether it is through digital marketing, CRM tools, and more. Apart from this, what also seems promising for the future is emerging technologies like Metaverse, though these might take another few years to get into implementable stages,” says Rajesh Jain, MD, and CEO, Lacoste India.

Tarak Bhattacharya, ED, Mad Over Donuts emphasized on the importance of technology going forward. “Investment in technology has and will continue to be of prime significance for the acceleration and growth in sales for our brand. Aspects like mobile solutions, production, inventory and procurement, analytics, loyalty program, and inventory management system, creating user-friendly ordering platform and offline stores, reporting and arming the brand for the digital world, dealing with supply chain improvements are some of the initiatives that we plan to strengthen in the upcoming quarters,” explained Bhattacharya.

The article was first published in the Jan 2023 issue of Images Retail magazine.

 

 

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