Growth important but retailers should watch bottom lines: experts

Ebitda margins of Indian retailers dropped to 2% in 2014 from 8% in 2011, while those of global chains were 7-11%

India and China, two key consumer markets, would lead the next phase of growth in organised retail, experts and industry heads said at the India Retail Forum here. They, however, added while the growth prospects in these two markets, especially India, were huge, retailers should watch their bottom lines.

As new retail formats across platforms emerged, organised retailers were expected to increasingly face challenges in reaching out to consumers, Anurag Mathur, retail and consumer goods practice leader, PwC India, said, adding this was unlike a decade ago, when the online retail wasn’t as big.

This was corroborated by Abheek Singhi, the Boston Consulting Group’s senior partner and director. “Online and e-commerce with varying digital density, along with the Omni channel, are straining traditional business models in retailing. More, with consumer companies selling directly via offline and online tools, value chains are also being disrupted,” he said.

As a concept, he added, direct selling had existed in India for long but what the retail universe was now seeing was evolution. “Consumer product companies have realised the dotcom potential and are evolving newer ways of using this medium. Company websites, for instance, today directly reach consumers.”

Consumer goods major Procter & Gamble, for instance, had developed an e-store as a “living learning lab”, while Abbot’s e-store was focused on nutrition and Hindustan Unilever was looking at a hyper-local e-commerce platform, experts said.

Delivering the keynote address, Krish Iyer, president and chief executive of Walmart India, said while the current government's focus on manufacturing was laudable, the future of India's growth would be driven by the services sector, through technology.

According to a PwC survey, 65 per cent of Indian retailers are keen on improving profitability through improvement in the sales and revenue mix. The survey showed 53 per cent of Indian retailers were considering a change in their operating model, driven by changing consumer behaviour.