Retailing in India: Store or Non-Store, No Longer the Question
Consumers in India are no longer loyal to just one brand, or a particular retailing channel. With a surge in internet and mobile internet retailing, the number of options available to consumers has changed dramatically. Retailing continues to be dominated by store-based channels, but the fastest growth was registered by mobile internet retailing in 2015, indicating that both online and offline retailers are here to stay. The preference of one over the other is primarily based on what the consumer needs at a given point in time.
Which is the favourite channel?
Consumers in India continue to use offline stores, predominantly. Store-based retailing constituted over 97% of total values sale in 2015. Within store-based retailing, the proportion of grocery retailing accounts for more than half. This clearly highlights the ongoing preference amongst consumers to shop via traditional channels when it comes to grocery.
Chart: Retailing in India, Grocery vs Non-Grocery vs Non-Store Retailing, 2005-2020
Source: Euromonitor International
Most residential areas in the country, irrespective of whether rural or urban, have a minimum of two to three kirana stores in a vicinity of 2 kilometres. Furthermore, these retailers provide credit, which can be settled either at the end of a week or month, depending on the personal relationship between the retailer and the consumer. On top of that, these traditional retailers also provide free home delivery. With so many benefits, most consumers continue to prefer traditional grocers, even now.
One of the key trends that has evolved in the last five years (2010-2015) amongst consumers and characterising their shopping habits is how consumers choose a retail outlet. For some products such as apparel, electronics, appliances, beauty products amongst many others, consumers have started to shift towards online shopping. This is primarily driven by price and in the case of tier-two and tier-three cities, lack of availability of certain brands in traditional stores.
Room for growth for everyone
If we dig deeper into shopping patterns, another strong consumer trend is the emergence of online grocery retailers in 2015. Grocery retailing, for the first time in India, has registered success via online retailing, attracting a growing number of consumers. Companies such as Grofers.com, BigBasket.com, and LocalOye.com, have become popular in cities such as Mumbai and Bangalore.
Though this continues to be a very urban concept, these retailers are proving successful in attracting the young urban population to their websites. Most of these retailers have mobile applications, which allow one to shop for groceries, or any other household product, on the go. Furthermore, these retailers have a product portfolio encompassing fresh food, packaged food, home care, personal care, beauty and hygiene. This provides consumers with the convenience of selecting the time slot and date for delivery as well.
In addition to online grocery shopping, if we look at the success of companies such as Flipkart.com, Myntra.com, Jabong.com, Snapdeal.com and many others, it can be easily established that, even though non-store retailing only contributed 3% to total retail value sales in 2015, the channel is beginning to emerge as a significant force.
Changes in consumer mind set change the path to purchase
The urban population base, which remains the primary target audience in India, with increased annual disposable income, is motivated by convenience and lack of time. The competition is no longer between offline and online stores, given the emergence of the omnichannel as a key strategy.
The process of shopping in India has witnessed a paradigm shift. Technology has changed the path to purchase observed in retailing. From the first point where the aspiration of owning something sets in, to researching and eventually purchasing, use of technology has become an integral part of the shopping process. Small screen viewing and showrooming have become everyday retail practices amongst consumers. Most consumers will pick up their smartphones to compare features, prices and other specifications as part of research before purchase. However, in the case of shopping for grocery, consumer tend to use internet retailing or shopping via mobile when they do monthly grocery shopping or the bill amount is above Rs1500.
A mix of convenience, price, quality and lack of time is changing how consumers are shopping in India. With faster growth being observed by online retailers, a large number of retailers, are jumping on the bandwagon. However, store-based retailing is here to stay. And it is no longer because of a certain population, or the fact that consumers prefer the touch and feel of the product; it’s because, consumers have the power to pick and choose the channel, the price, the brand, and the delivery time. Any retailer not giving all those options to the empowered consumer, stands to lose.