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Unleashing India’s Retail Potential: A $2 Trillion Economy by 2032

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Devashish Fuloria
Devashish Fuloria
Devashish Fuloria is the co-founder and chief executive officer at GeoIQ, a location intelligence platform.

Several factors, from omnichannel strategies and influencer marketing to digital payments and vernacular dynamics, will steer the trajectory of retail

India’s retail could potentially be the 11th largest economy in the world by 2032, ahead of Russia, South Korea, Australia and Spain. It is one of the largest and fastest growing in the world, contributing 10% to India’s GDP of $3.7 trillion today.

This sector also employs 8% of India’s working population or 35 million people and is expected to add another 25 million new jobs by the end of 2030.

As Indian retail continues to be on an upward trajectory, here’s a look at the changing dynamics of Indian retail and the trends that are set to stand out.

D2C brands continue to go omnichannel

In India, Pepperfry, Lenskart, Caratlane, and Sleep Company are some of the major brands employing an omnichannel strategy to build an efficient inventory management tool and reduce data optimization costs as well as for cost-effective marketing purposes. Pepperfry has witnessed a 45% increase in conversion rate by implementing an omnichannel strategy.

Adopting an omnichannel retail strategy ensures that customers develop loyalty toward the brand, leading to an increase in foot traffic, profitability, and customer engagement.

Retailers will strike a fine balance between physical stores and the online experience to create an environment where customers will enjoy a seamless shopping experience.

The Halo Effect

The brick-and-mortar Halo Effect is when you open a store, there is an overall increase in sales—offline and online—from its serviceable catchment.

A few years ago, the rage in the retail business was the dominance of online-only retail stores. The ground reality today is that the growth of online-only stores plateaus after a point. Continuous marketing eats into the profits. Going offline, therefore, is not an option but a necessity to scale up.

The International Council of Shopping Centers conducted an extensive survey and identified an average increase of 6.9% in a brand’s online traffic after opening a physical store.

Non-metro India does not believe what it does not see. A physical store establishes trust, especially for large/high-valued items. Also, offline stores also do not require a special warehouse; they can store the product inside the store itself. It is reported that showcasing products in-store can boost sales by 110%. There is an added advantage: Customers who choose the Buy Online Pick Up in Store generate a 40% increase in revenues due to additional purchases.

The data shows better profitability can only be achieved with an omnichannel strategy.

Rise of Value Fashion

Apparel brands nationwide have embraced the considerations of the evolved Indian clientele. Brands that started as purely online retailers are now venturing into the larger world of apparel retail.

Brands like Souled Store and WROGN leverage their extensive datasets related to the behaviours of their target audience to predict locations for expansion accurately. Souled Store has raised Rs 135 crore to fuel its expansion and build 100 new stores, nationwide.

There is a good reason behind the bullish outlook from investors in the Indian apparel market for 2024. Credit rating agency ICRA has predicted a 10% increase in the capital expenditure cost of retail expansion in the apparel industry, signaling a revival of the demand.

Decoding the GenZ and Millennials Consumers

Millennials and Gen Z buy into a brand’s story and display brand loyalty more than their preceding generations. With over 60% of GenZ agreeing that the brands they choose are an extension of their individuality, brands have to position themselves to stand out from the crowd.

The new generation of consumers also crave novelty from the products they purchase. For example, Newme, an omnichannel chain, releases new design drops every few weeks to maintain the freshness of its offerings.

This trend is poised to persist as brands evolve to deliver tailored and individualized shopping experiences to a consumer base that seeks to stand out from the crowd.

Influencer Marketing

72% of all millennials and GenZ users worldwide follow an influencer. Influencer marketing is an evolving domain where the meta has changed from the number of followers to niche influencers who have built a community around them. Today, the onus is on telling relatable real-life stories; brands can leverage this genuine interaction between influencers and audiences to advance their products.

Brands will shift to long-term collaborations with influencers allowing them to increase their credibility and improve brand loyalty. Influencers will also start to become more hyperlocal with brands employing geospatial intelligence to target creators who are large in specific vernacular niches.

Scarcity is Demand

People have an intrinsic tendency to associate sold-out with high-quality products. Therefore, when a famous brand announces its product is sold out, instead of losing brand loyalty, it creates a unique value proposition where scarcity leads to demand.

Consider the example of Prime, an energy drink, launched by two YouTubers, Jake Paul and KSI. To market their product, they advertised it on both channels and asked their fans to demand for the stock keeping units (SKUs) at the nearest retailers. And it was a masterclass in harnessing the latent potential of a fan base. Prime energy drinks have generated annual sales of $1.2 billion in 2023 alone, making it the fastest-growing beverage in history.

The data collected from allied technologies connected to retail shops assists in releasing hyper-personalized and limited-edition products. Brands will position these products as having a reduced supply due to increased demand.

Summing it up

The dynamic landscape of Indian retail is poised for unprecedented growth and heralds a transformative era. As the sector burgeons to potentially become the 11th largest economy globally, a nexus of factors, from omnichannel strategies and influencer marketing to digital payments and the rise of vernacular dynamics, will steer its trajectory.

The industry-wide adoption of omnichannel retail and the significance of data analysis underscores the pivotal role technology is set to play here. A nuanced understanding of these trends and the ability to read between consumer data will equip retail players to navigate the complexities, ensuring resilience and relevance in the ever-evolving realm of Indian retail.

 

 

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