Future of Retail

By  Thomas Varghese

The Future of Retail by Thomas Varghese is a fascinating and dynamic topic that encompasses numerous factors driving the growth and transformation of the industry. Varghese is an accomplished business leader with a remarkable career span of over 40 years in the industry. Throughout his impressive journey, Thomas has held key positions within the Aditya Birla Group, demonstrating his skills and expertise. Most recently, he served as the Business Head of the Domestic Textile, Overseas Spinning, and Acrylic Fiber Businesses, contributing to the success of Aditya Birla Group’s Textile Businesses. Thomas Varghese stands out for his professional accomplishments and his coaching abilities as a certified coach from the International Coaching Association.

This report delves deep into the diverse growth frontiers of Indian retail, exploring its evolution from food and grocery to apparel, jewellery, and luxury sectors. Furthermore, we shed light on the rising prominence of Tier 2 and 3 cities as pivotal players in this journey.

However, it is crucial to understand that this growth isn’t solely fueled by urban expansion. Forces shaping Indian retail encompass changing consumer preferences and the influence of society and culture.

Moreover, the rapid advancement of exponential technology acts as a catalyst, driving industry upheaval and opening up the doors to emerging new channels.

In this report, we aim to analyse and present a comprehensive view of the future of retail, highlighting the key trends, challenges, and opportunities that lie ahead. By exploring the impact of changing consumer dynamics, societal shifts, and technological advancements, this report aims to provide valuable insights into the transformative journey of the retail sector in India.

Unlocking the Potential: The Bright Future of India’s Thriving Retail Industry

The Indian retail industry is pivotal in driving India’s economy, contributing 10 per cent to the country’s GDP and generating employment for 8 per cent of the population.

In recent times, the retail industry has experienced significant expansion driven by various factors, including

1. Increasing urbanisation, 
2. A rise in disposable income, improved logistics, 
3. Increase product offerings/assortments/SKUs and digital accessibility for rural consumers.

India, one of the top five retail markets globally, is projected to become the third-largest consumer market worldwide by 2030, following China and the US. This upward trend showcases the remarkable and bright prospects awaiting the Indian retail sector. As the country continues to develop and embrace technological advancements and ongoing efforts to enhance infrastructure and consumer reach, the Indian retail sector is poised for further expansion, cementing its position as a key driver of economic growth.

India’s retail sector, deeply ingrained in the nation’s cultural and economic framework, has long thrived as a dynamic and vibrant industry. With time, it has embraced notable changes to synchronise with evolving market dynamics, consumer inclinations, and technological progressions.

Today, as we stand on the cusp of a new era shaped by the pandemic and subsequent geopolitical changes, the future of the retail sector in India holds immense promise and potential.

The scale and size of e-commerce will experience exponential growth, outpacing organised retail.

Moreover, the shopping habits of millennials and Gen Z will be transformed through emerging avenues like social commerce, quick commerce, and D2C.

Investment in specialised vertical ecommerce is also expected to grow shortly. Retailers recognise the need to move beyond transactional interactions and create immersive, memorable experiences that leave a lasting impact. 

The rise in incomes and changing demographics will accelerate luxury retail in India.

Continued Economic Growth: 

India’s economy is projected to maintain its growth trajectory, positioning it as the world’s third-largest economy by 2030. Furthermore, by 2030, India is set to add 110 million middle-income households (current 190 million) and 14 million high-income households (current 15 million).

Key Consuming Cohort: 

Sixty-five per cent of India’s population (an addition of ~50 million people) will continue to belong to the key consuming cohort of 15-59 years until 2030.

Population Growth And Urbanisation:

India has surpassed China as the most populous country and will continue to experience population growth. Additionally, the urban population is projected to rise from the current 35 per cent to 40 per cent of the total population by 2030.

Exploring Endless Horizons, From Daily Essentials to Fashion, Gems, and Extravagance

Food and Grocery 

The food and grocery segment dominates the retail sector, which accounts for 65 per cent of market share. This significant portion is fueled by the rising demand for processed foods like snacks, sweets, and savoury items. The sector also benefits from rising dairy consumption premiumisation trends, shifting from unbranded to branded and value-added variants.

Apparel and Footwear

The surge in athleisure and activewear, a rising health consciousness and a strong inclination toward comfort propel growth. Casual and premium ethnic wear (blending traditional elements with modern aesthetics) is gaining consumer traction. 

Jewellery

Jewellery occupies a significant position in Indian households, ranking gold as the second-largest asset. It remains a growing segment, serving as an investment instrument and a fashion accessory. Lightweight and diamond jewellery are particularly sought after by GenZs and Millennials. Moreover, wedding-related purchases contribute to around 50-55 per cent of the demand.

Luxury

With one of Asia’s highest HNI growth rates, India’s luxury market will likely witness bright prospects. Brands actively explore bridge options to luxury products, helping drive the consumer base and conversions to the luxury market.

The traditional retail channel remains the largest in India, but online retail is expected to grow 2.5 times faster than offline retail. The rise of organised retail can be attributed to diverse product offerings, enhanced customer satisfaction, and the influence of Western shopping mall trends. However, e-commerce has led to a significant shift in consumer behaviour towards online shopping. 

Factors such as 

1. Ease of ordering and returns, a robust logistics infrastructure covering over 19,000 pin codes,
2. A digitally savvy consumer base of 220 million online shoppers and 
3. Substantial investments from private equity and venture capital firms totalling US$23 billion over five years have contributed to the exponential growth of e-commerce.

Consequently, online sales are expected to surpass organised retail. There will be a growing prominence of omnichannel retail, where retailers integrate offline and online channels to provide consumers with the best of both worlds.

The Rise of Tier 2 and 3 Cities

Tier 2 and 3 cities are propelling the next phase of growth in India’s retail sector, fuelled by shifting consumption patterns and increased purchasing power. With a growing appetite for branded goods and quality retail infrastructure, retailers are expanding their presence beyond tier-1 cities.

The retail landscape is transforming due to the exponential rise of e-commerce in tier-2 and 3 cities. In 2022, these cities surpassed tier-1 markets, comprising over 60% of the overall orders. Tier-3 cities experienced a 65 per cent order volume growth, tier-2 cities witnessed a 50 per cent growth, and tier-1 cities saw 10 per cent growth.

Forces Shaping Indian Retail

Changing Consumer

In recent years, India has experienced a substantial rise in disposable incomes, especially in the growing middle-class segment. This has resulted in a notable shift in consumer preferences, as individuals increasingly prioritise quality, convenience, and enriching shopping experiences.

Additionally, India’s demographic is shifting, characterised by a surge in the urban young, predominantly led by Millennials and Gen Zs.

There has been a significant rise in per-capita income in India, substantially increasing from approximately US$1,400 in 2014 to around US$2,200 in 2022. This economic growth has led to a rising middle class, projected to expand by 110 million households (from 190 million) between 2021 and2030, equivalent to one-half of the current households in the European Union.

As income levels rise, Millennials and Gen Zs in India increasingly seek convenience and value-added services and are willing to pay a premium. Seventy-two per cent of Millennials and 66 per cent of Gen Zs are willing to pay a premium for comprehensive after-sales support. Close to fifty per cent of Millennials and Gen Zs are willing to pay a premium for quicker delivery and flexibility in product returns, respectively.

Towards An Urban & Productive India

By 2030, India’s urban population is projected to experience a significant surge, with an additional ~100 million individuals contributing to raising urbanisation from 35 to 40 per cent. Amidst this, rural per capita consumption is expected to multiply 4.3 times by 2030, surpassing the 3.5 times growth in urban areas.

This demonstrates the untapped potential of rural markets and their contribution to India’s economic growth. The key driver of India’s economic growth will be the 15-59 age group, projected to reach a substantial size of 950 million people by 2030, representing an additional 50 million individuals.

Additionally, the retiree population (60+ years) is anticipated to increase by 50 million (from 140 million) by 2030, with states such as Kerala and Tamil Nadu leading in this age bracket.

Society and Culture

Societal and cultural factors significantly influence India’s economic and retail landscape. Festive occasions fuel consumer spending, boosting both traditional retail and e-commerce sales. The increasing interest in sports mirrors a surge in related sectors, such as the growing importance of health and growth in sports apparel, equipment, fitness, and nutrition. Moreover, the growing domestic tourism industry contributes to the economy while stimulating associated areas such as airport retail through increased passenger footfall.

Consumer Traction And Brand Initiatives For Festivals

There are 700+ festivals celebrated In India, and consumers consider festivals to be auspicious occasions for purchases.

Our survey found that ~55 per cent of urban consumers (across income and age groups) consider Diwali the prime festival for purchase. Apparel and home appliances are the top two preferred categories during festivals. Retailers/brands offer discounts/incentives during the festival season to increase purchases.

Impact On Sales

Festival sales (Sep-Oct ) saw the following trends:

1. E-commerce platforms experienced significant growth, generating a turnover of >76,000 crore,
2. The retail sector generated INR 1.25 lakh crore in revenue  
3. Oct to Dec Qtr Last Year observed the highest sales for most retail brands

Sports Surge: Empowering Health And Revolutionising Lives 

Growth Of Indian Sports:

Over the last 10-20 years, India has won twice the Olympic medals (three in 2008 to seven in 2020) and the Asian Games (36 in 2002 to 70 in 2018).

Emerging Leagues And Viewership: 

Sports viewership in India increased to ~730 million in 2022; professional sports leagues in football, hockey, kabaddi, and Women’s Premier League have hiked sports engagement in India.

Impact On Consumption: 

Growing interest in sports has led to nutrition, equipment, and sports apparel growth.

The health-focused F&B market is expected to grow three times to US$30 billion by 2026.

In 2022, India’s smartwatch shipments stood at 30 million; India became the world’s biggest smartwatch market in Q32022.

India’s leading sports goods retailer grew 41 per cent to reach INR ~3,000 crore in FY22.

India’s Booming Domestic Tourism and its Potential Impact on Retail Revolution

Over the past few years, there has been a growing preference for travel amongst Indians. Domestic tourism is driven by improved connectivity and stay options, rising disposable

income, and India’s rich culture and diversity.

 In 2019, India’s domestic tourism of ~232 crores grew twice within six years (CAGR 13 per cent from 2014 to 2019); 

Additionally, 92 per cent of Indian travellers intend to explore domestic destinations.

Impact On Retail: 

Growing domestic tourism has increased consumer expenditure; in 2021, domestic tourists spent US$151 billion.

India’s airport passengers have nearly doubled to 34 crores in five years (from 2014 to 2019). This growth is expected to continue and expand airport retail from US$1.4 billion to

US$9.3 billion by 2030.

The Rising Trend of Grand Indian Weddings

In India, a wedding is one of the most showcased events in one’s life, and this wedding season, we will see 3.5 million weddings, and it is projected to be a $ 51 billion market.

The middle class in India has notably expanded, leading to a rise in disposable income. Consequently, couples and their families now possess more significant wedding budgets. As a result, extravagant celebrations have become increasingly prevalent and are even considered the norm. Those who are financially capable will go to great lengths to create a memorable occasion.

Blending traditional and modern aspects is common in contemporary Indian weddings, where couples seek to incorporate meaningful customs alongside their unique touch. Harmonising these cultural traditions innovatively necessitates meticulous planning and coordination, ultimately driving up expenses. However, this fusion of old and new also presents an exhilarating chance for originality, albeit one that demands substantial financial investment for a successful execution.

The surge of modern, tech-savvy couples prioritising the blending of cultural customs has fostered favourable circumstances for the growth of the wedding sector. With ample financial resources to orchestrate a remarkable and extravagant social affair, it’s understandable why grand Indian weddings have become a thriving retail phenomenon. The ongoing expansion of this industry shows no signs of deceleration in the near future.

Tech-Driven Retail 

Offering new experiences and convenience Consumer preferences are shifting towards technology-driven experiences. Contactless shopping, AR/VR/MR ( Augmented Reality, Virtual Reality, Mixed Reality ) and services such as (Buy Online Pick in Store, Buy Online Return in Stores, Reserve Online Pick in Store, BOPIS/BORIS / ROPIS are gaining popularity. Ensuring product availability through optimised inventory management is crucial in meeting customer demand.

Several technologies are available today to aid specific businesses, and what works for one does not necessarily mean it will work for the other; the case study and the problem that retailers want to address will determine which technology they would like to adopt. I have it to the experts to discuss more in the forthcoming sessions.

Industry Upheaval

The Indian retail sector underwent significant transformation driven by the rise of online platforms and substantial investments from VC/PEs. With its position as the world’s fifth-largest economy, faster GDP growth, a young demographic, and rising income levels, India has the potential to replicate China’s economic success. This investment is fuelled by the expectation that India’s retail industry will follow in the footsteps of China, where a substantial portion of retail activities (~25 per cent) occur online.

Additionally, the transformation in the retail industry is influenced by the increasing adoption of digital technologies and the growing comfort of Indian consumers with online shopping platforms.

The influx of VC investments has reshaped the online retail landscape and had far-reaching effects on the broader retail sector. This includes the emergence of new retail channels, intensified competition from Indian conglomerates, and rapidly evolving marketplace dynamics. Government regulations and policies also play a crucial role in shaping the retail landscape in India, adding to the ongoing industry changes. 

Emerging New Channels

D2C Market

The Direct-to-Consumer (D2C) journey has become more accessible for brands and consumers thanks to reduced technological barriers and a growing preference for this business model. Consumers are increasingly drawn to D2C primarily due to their trust in these brands and the positive customer experiences and product reviews they offer. Regarding profit and growth drivers, brands are expanding beyond digital channels and venturing into offline channels as digital growth stabilises. They focus on offering premium products, delivering personalised customer experiences, and providing curated content to drive growth in the D2C space.

These strategies aim to attract and retain customers by offering unique and tailored experiences that set them apart from traditional retail models.

Quick Commerce

It is characterised by 10-20-minute deliveries, and has emerged as a popular trend driven by the convenience it offers customers. Food and beverages are the largest

contributors to quick commerce. Within online F&B, quick commerce has a growing significance, contributing 13 per cent of the overall online F&B sales.

In terms of profit and growth drivers, quick commerce benefits from various factors. Retailers often encourage higher order sizes by offering free delivery, promotions, and a wider

assortment of high-margin products. Improved checkout recommendations also play a role in driving growth. Moreover, cost reduction is achieved by optimising dark store networks and implementing lower discounts, enabling retailers to streamline operations and improve profitability. 

Social Commerce

It is a unique retail model that harnesses the power of social networks and communities to facilitate product sales, particularly in the fashion and kitchen categories. This approach involves incentivising small-scale suppliers and empowering women, as most resellers in this space are women.

Social commerce primarily targets tier-2 and 3 cities, focusing on affordable and non-branded products. The key drivers of profit and growth in this sector include a wide supplier base that provides access to affordable and unbranded products and the strength of the reseller network. Social commerce platforms often rely on advertising revenue rather than commission-based models to generate profits.

Government-Backed Open Network For Digital Commerce As A Game Changer

India’s ambitious goal is to increase the e-commerce share of consumer purchases from 8 to 25 per cent within the next two years. A cap on platform referral commissions has been set at 3% to facilitate this growth, significantly lower than the 15-35% charged by other platforms.

Over the past year, ONDC has expanded to 236 cities and onboarded 36,000 merchants, with plans to add 160,000 post offices for logistical support. Currently, ONDC covers the following sectors‒consumer goods, food and groceries, fashion, electronics,

pharmaceuticals, etc. 

Key Benefits Of Ondc Include

• Lower platform commissions and increased seller customer access.
• Better pricing options for consumers.
• An increased customer and seller base with reduced technology costs through the buyer app.
• New revenue stream opportunities for logistics providers.
• Growing competition

Entry Of Indian Conglomerates In E-Commerce:

Indian conglomerates have made significant inroads into the e-commerce sector through organic and inorganic routes. They have established a strong presence in grocery, apparel, electronics, furniture, pharmacy, and FMCG sectors, collectively contributing to 75-85 per cent of the overall e-commerce market. These conglomerates have also collaborated with local Kirana stores to explore opportunities in the quick commerce segment.

Indian conglomerates in the e-commerce sector differentiate themselves through offline and online integration, loyalty membership programmes, WhatsApp integration, and luxury

e-commerce offerings. These strategies enhance customer experience, foster loyalty, and cater to the growing demand for premium products online.

Dynamics Shaping Indian Retail Space

Dynamics Shaping India’s retail landscape: Vertical marketplaces, strategic partnerships, and private label growth

Rising Vertical Marketplaces In India

India’s retail landscape boasts over 165 funded vertical marketplaces, catering to sectors such as food, apparel, pharma, kids’ products, and online beauty and personal 

care. These vertical marketplaces offer specialised platforms for consumers to explore and purchase products within specific categories, enhancing convenience and choice in the Indian retail market.

Factors driving the adoption of vertical marketplaces.

Specialised buying behaviour:

• Accommodating “touch and feel” needs (grocery), 
• Facilitating consultative purchases (e.g., fashion, pharmacy),
• Efficiently serving discovery-based categories (fashion categories – women, Gen Zs)

Marketplace can create tailored UI/UX and offer curated content and feed-based experiences.

• Specialised Supply Chains: Categories that need purpose-built supply chains (e.g., groceries and large furniture) can provide superior pricing and faster deliveries
• Supply Fragmentation: Differentiating on price (driven by reduced costs via aggregating supply) and selection (via curation and building relevant width and depth)

Driving Alliances

E-commerce firms are forming strategic partnerships with key stakeholders, including organised retail chains, to expand their essentials business, leading logistics firms to enhance reach and reduce costs, and the government to support small businesses.

Additionally, e-commerce companies collaborate with Kiranas to enable them to register and sell on their platforms, effectively utilising them as customer fulfilment centres.

An Indian conglomerate aims to digitise 30 million local stores with an end-to-end digital and physical distribution stack using blockchain, IoT, AI, and other new technologies.

Growth In Private Labels

The offline private labels market is experiencing a growth rate of twice that of the organised retail sector. On the other hand, the growth rate of online private labels is under pressure due to increased regulatory scrutiny. According to surveys, private labels are predominantly used in the F&B (50 per cent) and apparel (45 per cent) categories, followed by consumer electronics and furniture and home furnishings (35 per cent each).

The growth drivers for private labels include increasing awareness of product offerings, competitive pricing, the rise of online channels, declining brand loyalty in low involvement

categories, shifting from unbranded to branded products, increasing commodification of consumer goods, and rising disposable incomes.

A major e-commerce firm has 14+ private labels, with 10,000+ products in groceries, furniture, home furnishing, and electronics, where 10-15 per cent of sales come from private labels.

Climate and Planet

Consumer awareness and concern for climate change and environmental impact have increased in the post-pandemic world.

This realisation has shifted consumer preferences towards sustainability and eco-friendly products in the retail sector. 

Consumers now prioritise retailers committed to reducing waste, promoting circular economy principles, and minimising carbon footprints. This changing consumer behaviour is pushing businesses to adopt sustainable practices. Companies actively embrace sustainability measures, reduce emissions, and adopt renewable energy sources. India is now committed to reducing its GDP’s emissions intensity by 45 per cent by 2030.

Sustainability Practices

New Product Development (NPD)

Circular design and product sustainability are at the forefront of promoting recycling, resource conservation, and durability. This is evident in sustainable collections and initiatives like shoe boxes made from 95 per cent recycled paper.

Responsible Sourcing

Retailers place a strong emphasis on sourcing sustainable products from certified suppliers. This includes the use of certified cotton, such as organic and recycled varieties, to ensure

environmental responsibility throughout the supply chain. 

Manufacturing

Sustainable manufacturing processes use renewable power, focusing on energy efficiency, waste reduction and water conservation.

Packaging

Retailers are increasingly adopting environment-friendly materials for packaging bags, such as natural corn-starch packaging, jute-based bags, and fibre mesh bags. By utilising biodegradable materials, they aim to minimise the environmental impact

after disposal. 

Store Operations

Retailers are implementing high-efficiency Heating, Ventilation, and Air Conditioning (HVAC) systems and LED lighting to optimise energy usage within their establishments. This ensures a more sustainable approach to energy consumption.

Additionally, they are adopting eco-friendly refrigerants for energy-efficient and sustainable refrigeration, reducing their environmental footprint in the cooling process.

Warehousing and Logistics

Retailers use electric vehicles for logistics, effectively reducing carbon emissions in transportation. They also utilise IoT solutions for energy management, allowing for more efficient resource use.

Additionally, green buildings, designed with sustainability in mind, consume 30-40 per cent less energy than traditional buildings. 

Economics, Policy and Power

New Product Development (NPD)

Circular design and product sustainability are at the forefront of promoting recycling, resource conservation, and durability. This is evident in sustainable collections and initiatives like shoe boxes made from 95 per cent recycled paper.

Responsible Sourcing

Retailers place a strong emphasis on sourcing sustainable products from certified suppliers. This includes the use of certified cotton, such as organic and recycled varieties, to ensure

environmental responsibility throughout the supply chain. 

Manufacturing

Sustainable manufacturing processes use renewable power, focusing on energy efficiency, waste reduction and water conservation.

Packaging

Retailers are increasingly adopting environment-friendly materials for packaging bags, such as natural corn-starch packaging, jute-based bags, and fibre mesh bags. By utilising biodegradable materials, they aim to minimise the environmental impact

after disposal. 

Store Operations

Retailers are implementing high-efficiency Heating, Ventilation, and Air Conditioning (HVAC) systems and LED lighting to optimise energy usage within their establishments. This ensures a more sustainable approach to energy consumption.

Additionally, they are adopting eco-friendly refrigerants for energy-efficient and sustainable refrigeration, reducing their environmental footprint in the cooling process.

Warehousing and Logistics

Retailers use electric vehicles for logistics, effectively reducing carbon emissions in transportation. They also utilise IoT solutions for energy management, allowing for more efficient resource use.

Additionally, green buildings, designed with sustainability in mind, consume 30-40 per cent less energy than traditional buildings. 

Economics, Policy and Power

Retail policy aims to enable sustainable growth in the retail sector by creating a cohesive framework that addresses the challenges and bottlenecks faced by the industry. It also aims to streamline approvals and compliance mechanisms, creating a win-win situation for the

government and society and generating more jobs in the sector.

Retail-Specific Initiatives

At present, 100 per cent FDI in single-brand retailing (2018), cash and carry/wholesale trading (1997), and the e-commerce marketplace model (2016) is permitted via the

automatic route. FDI in multi-brand retailing is allowed up to 51 per cent via the government route (2012).

The change in FDI policy has had a transformative impact on the Indian retail sector. FDI in retail and commerce has grown 13 times in the last ten years.

In Budget (2023), the government removed 39,000 compliance requirements, repealed over 1,500 redundant laws, and decriminalised over 3,400 laws hindering MSME growth.

GST has provided benefits such as reduced taxes and increased efficiency in the supply chain. States such as Maharashtra, Karnataka, Tamil Nadu, and Telangana allow retailers to operate for 24 hours. New labour codes recognise gig and platform workers, which could enhance workforce availability for the retail sector and reduce unemployment.

Reducing corporate income tax to 22 per cent and the exemption from Minimum Alternate Tax (MAT) of 15 per cent could stimulate growth by leaving companies with more funds for expansion and investment.

The implementation of faceless assessment and appeal schemes simplifies tax processes, enhancing efficiency and transparency for retailers by reducing physical interactions

and human intervention in tax disputes and assessments.

By increasing the presumptive taxation limit to turnover/ receipts of US$240,000, the government has potentially reduced the tax burden for small retailers, facilitating their

growth and expansion in the retail sector.

The National Single Window System (NSWS) is a digital platform and a one-stop portal for investors and businesses to identify and apply for approvals (hosts applications

from 28 central departments and 20 state governments).

For example, the MAITRI programme in Maharashtra has shortened the online approval window to 48 hours, down from the previous six-month wait. Similarly, eBiz in Karnataka has also enhanced its single-window clearance.

These policies and laws have helped India improve its Ease of doing business (EODB) from 142 in 2014 to 63 in 2022.

The Pradhan Mantri Mudra Yojana (PMMY) (2015) has helped entrepreneurs and small businesses gain easier access to business loans with no collateral and zero processing charges. Trade loans have grown from 7% of retail to 9%; Trade loan AuM has doubled in 7 years (CAGR 10%).

Key Enablers – Government Initiatives

Government-Backed Open Network For Digital Commerce ( ONDC ) as a game changer.

Incorporated on 31 December 2022, it has a mission and vision of creating an inclusive e-commerce ecosystem.

Aims to raise e-commerce to 25% of India’s consumer purchases from 8% in the next two years. Twenty governments (NABARD, SIDBI, SBI, etc.) and private financial organisations (HDFC, Kotak, ICICI, etc.) have invested ~$35 million in ONDC.

Labour Productivity:

The government has launched skill development initiatives such as the Pradhan Mantri Kaushal Vikas Yojana (PMKVY) and National Skill Development Corporation (NSDC), etc., to enhance the productivity of the workforce

Growth Of Digital Payments:

The BHIM and UPI AutoPay apps have supercharged the adoption of digital payments, giving consumers convenience, safety, and reliability with a total transaction value of more than USD 1.26 trillion in FY22—more than a 2X growth over the previous year, according to the National Payments Corporation of India.

Measures were undertaken to promote digital transactions, such as introducing withholding tax on cash withdrawals over USD 27K, a limit of ~USD 121 for cash business expenditure, etc.

Advancements In Logistics:

Multi-modal logistics parks like JNPT-SEZ Multi-Modal Logistics Park, Mundra Port Multi-Modal Logistics Park, etc., leading to a 10% reduction in transportation cost, reduction in freight pollution and improved warehousing. Under the Pradhan Mantri Kisan SAMPADA Yojana, the Indian government greenlighted 27 projects in 2020 aimed at developing the integrated cold chain.

Post-Pandemic Changes

Changes In Consumer Mindset (Yolo) Influencing Buying Behaviour

Alternatively, You are not dead until you die how the latest generations look at life, and they would like to live life to the fullest with all the latest amenities, comforts, etc. This has led to a booming Luxury retailing in India which I will discuss. 

Luxury Retailing In India 

The Indian luxury market is poised for significant growth, similar to that of China, as the country progresses towards becoming a high-income nation over the next two decades.

Factors such as the rise of high-net-worth individuals, an expanding middle class, a flourishing entrepreneurial culture, and strong demand from non-metro cities contribute to the increasing luxury consumption in India.

Following the pandemic, there has been a surge in the launch of foreign luxury brands in India. These brands are entering the market through online luxury retailers and forming partnerships with Indian conglomerates. 

Mirroring global trends, Gen Z and Alpha generations are the key drivers of evolving consumerism in India. Brands that focus on capturing young customers through entry-level offerings can expect sustained brand loyalty in the future.

Experiential Lifestyle/Living – Young Owning/Renting Luxury Brands 

In retail, a remarkable shift has occurred, expanding the focus beyond mere transactions to creating immersive and unforgettable experiences. Experiential retail has emerged as a powerful approach that transforms both physical and online shopping environments and the perception of brands. 

This exploration delves into three essential dimensions of experiential retail:

1. Captivating in-store encounters that foster immersion, expertise, and lasting memories.
2. Online experiences that simplify complexities and unveil new virtual realities.
3. Brand experiences that prioritise personalisation, seamless omnichannel integration, and exceptional service.

By venturing into these realms, retailers unlock the potential to engage customers unprecedentedly and elevate the retail experience to new heights.

Luxury consumers have raised expectations from stores post-pandemic, making stores pivotal for brand communities, customer service and storytelling.

Revenge Buying

While revenge buying was first observed in China, it has since been observed in other countries. When physical stores reopened after the initial COVID lockdown, sales increased, particularly in luxury product stores. According to researchers for the International Journal of Social Psychiatry, purchasing luxury goods acts as a means for consumers to repress unpleasant emotions. 

Reactance theory is another analytical method sociologists use to gain a deeper understanding of revenge-buying behaviour; this theory posits that when a threat or hindrance to a person’s behavioural freedom upsets them, the person will try to regain the threatened autonomy.

We did not notice a similar demand in this fiscal year compared to last year.