Retail industry remains Indian economy’s vital cog

In the B2C segment, retail consumption witnessed an annual increase of 9.3% in the key 11 sectors, during the April–September 2023 period. The FMCG and E-commerce sectors experienced an annual increase of 26.2% and 19.4%, respectively, during Q2-FY24, reflecting rising consumer demand in these sectors amid easing inflation. Aviation and hospitality sectors saw annual growth of 29.7% and 12.8% in Q2-FY24, respectively

“India will be the world’s largest economy within 39 years. Its GDP in 2050, measured by purchase power parity will be $ 85.97 trillion. China will follow with a GDP of $8.02 trillion and the United States at $39.07”, indicates a global survey by an internationally reputed agency.

India's retail market has a huge scope for growth and is projected to grow around 10 per cent every year over the next decade.

According to a new report by the Boston Consulting Group (BCG), India’s retail industry is back on track and will be worth a staggering $ two trillion by the year 2032. The Group said that the disruption induced by the pandemic was responsible for delaying the landmark $ two trillion valuation by 1-2 years.

The contribution of retail to GDP is 10%. The contribution of retail to employment - 8% of total population of India is associated with the retail sector.

So, imagine, a very big potential associated with retail segment to boost up GDP and employment potential of the country’s economy.

One factor driving consumption, as noted by BCG, is India’s increasing affluence and its population. The household income is expected to rise 40 per cent by 2030, with the average reaching INR 732,000 per annum, equivalent to around $9,500. This also represents a near twofold increase from 2010, when the household income stood at INR 387,000 – just over $5,000 at the current exchange rate. Moreover, the number of households in India will continue to grow, reaching 354 million by 2030, up from 289 million in 2020.

BCG also notes accessibility as an enabling factor driving consumption growth. It highlights that Indian households now have access to avenues to malls, shopping complexes and multiplexes while being more exposed to information and advertising through the television and the internet

Another factor driving the growth of the retail market is increased internet penetration. Invest India notes that the country will become the third largest online retail market by 2030, with an estimated annual gross merchandise value of $ 350 billion.

BCG predicts that e-commerce sales are expected to reach $ 130 billion by 2026, a sizable increase from 2019 when online sales was just $ 29 billion.

CMS Info Systems has revealed key consumption trends in organized retail segment in the first half of FY24, through a comprehensive analysis spanning 11 consumer-facing sectors, such as large format retail, jewellery, FMCG, e-commerce, hospitality and aviation, among others.

Retail Consumption Trends by CMS is a macroeconomic indicator of retail purchases based on the cash collected processed from 52,000+ organized retail touch points across India. It provides a view into consumers’ spending trends as seen in FY24 compared to FY23, which included the Cricket World Cup, festivals and the wedding season. The analysis takes a closer look at consumer preferences through the demographic lens, offering trends into consumer behaviour in the country by measuring in-store and online retail purchases across various sectors.

In the B2C segment, retail consumption witnessed an annual increase of 9.3% in the key 11 sectors, during the April–September 2023 period. The FMCG and E-commerce sectors experienced an annual increase of 26.2% and 19.4%, respectively, during Q2-FY24, reflecting rising consumer demand in these sectors amid easing inflation. Aviation and hospitality sectors saw annual growth of 29.7% and 12.8% in Q2-FY24, respectively, reflecting increased demand for travel, driven by large events such as the Cricket World Cup. The jewellery sector saw an annual growth of 7.1%, in contrast to a 4.6% decline in Q2-FY23, suggesting higher spending triggered by the wedding season and endorsing post-pandemic demand bounce-back. The large format retail sector experienced an annual increase of 7.8% in Q2-FY24, driven by factors such as rising incomes, urbanization, and changing consumer preferences.

From a demographic perspective, Metro cities which had grown the fastest from Q2-FY23 to Q1-FY24, were outpaced in H1 FY24 by SURU (semi-urban and rural), which saw the fastest consumption growth of 9.2% YoY, triggered by improved discretionary spending and tailwinds in the rural economy.

YoY analysis of 11 B2C sectors in H1 FY24 reveals key patterns in consumer behaviour in the organized retail segment. Higher GDP and softening inflation expected to catalyze retail consumption growth in Q3-FY24 aided by festival and wedding season.

The rise of online shopping has been a major trend in recent years. It has had a significant impact on the retail industry. Online shopping has made it easier for consumers to purchase goods and compare prices, which has led to increased competition among retailers.

This has resulted in an increase in the number of online retailers and the near decline of brick-and-mortar stores.