 "Physical store format is here to stay")
The existence of on-line retailers may have disrupted the retailing segment and changed the way many shop but brick and mortar retailers are here to stay. That was the theme at the India Retail Forum held in Mumbai today which saw participation from some of the marquee names in the on-line and offline retailing segment.
Rakesh Biyani, joint MD, Future Retail, said, "Everything can not go digital. Physical format stores are here to stay. We still see a footfall of 4.5 million people when we hold our Wednesday bazaar at our retail stores. In evolved markets, maximum amount of customers are coming back to the stores to shop."
Consultants said with the arrival of e-commerce players, the Indian retail sector has undergone huge shift which has been accentuated by a change in consumer buying behaviour. According to a survey by PricewaterhouseCoopers (PwC), around 53% of retailers said that they have thought of changing the operating model driven by the changing consumer behavior.
The survey also stated that 51% of retailers feel that the biggest challenge is creating a differentiated model, with just 18% stating that this is being driven by disruption caused by on-line retailers. Krish Iyer, President and CEO Walmart India said, "Online will definitely catch on but physical retailing will not get eliminated."
Iyer added that, while the focus on manufacturing is important, the future growth for India will come from the services sector, driven by technology and the focus on ease of doing business.
"I think the key is the focus on ease of doing business. As a representative of a foreign company operating in the country, I can share that in the last one year I have seen a very significant focus from all the state governments as well as central government in the area of doing business," said Iyer.
For the brick and mortar companies, there is a clear focus on profitable growth. "As companies start delivering greater profitable growth and the 2% CSR investments start kicking in, I think the alleviation of poverty and inclusive growth will also take place," Iyer added.
The PwC survey adds that the operating margins of online retail players are negative 15-22%, when compared to 6-8% among the Mom & Pop retail players, and 2-4% among the organised retail players.
“EBITDA margins of Indian retailers have dropped to 2% in 2014 from 8% in 2011. During the same period EBITDA margins of select international retail chains like Walmart, Target, Tesco and Home Depot have maintained 7-11% during the same period,” said Anurag Mathur, Retail & Consumer Goods Practice leader, PricewaterhouseCoopers India. EBITDA is earnings before interest, taxes, depreciation and amortisation.
The PwC survey also highlighted that the focus among retailers will be profitable growth. According to the survey, more than 65% of Indian retailers are focusing on improving profitability through improvement in revenue throughput as fast changing consumer behaviour is driving many retailers to rethink their business model. As per the said survey, 53% retailers are considering a change in their operating model driven by changing consumer behaviour.
Iyer who is also the Chairman of the India Retail Forum, said that retail needs to be recognised as an industry. "Unfortunately at this point of time retail is not recognised as an industry and that will go a long way in making cheaper finance accessible to even the small kirana stores and everyone else in retail."
Rakesh Biyani, joint MD, Future Retail, said, "Everything can not go digital. Physical format stores are here to stay. We still see a footfall of 4.5 million people when we hold our Wednesday bazaar at our retail stores. In evolved markets, maximum amount of customers are coming back to the stores to shop."
Consultants said with the arrival of e-commerce players, the Indian retail sector has undergone huge shift which has been accentuated by a change in consumer buying behaviour. According to a survey by PricewaterhouseCoopers (PwC), around 53% of retailers said that they have thought of changing the operating model driven by the changing consumer behavior.
The survey also stated that 51% of retailers feel that the biggest challenge is creating a differentiated model, with just 18% stating that this is being driven by disruption caused by on-line retailers. Krish Iyer, President and CEO Walmart India said, "Online will definitely catch on but physical retailing will not get eliminated."
Iyer added that, while the focus on manufacturing is important, the future growth for India will come from the services sector, driven by technology and the focus on ease of doing business.
"I think the key is the focus on ease of doing business. As a representative of a foreign company operating in the country, I can share that in the last one year I have seen a very significant focus from all the state governments as well as central government in the area of doing business," said Iyer.
For the brick and mortar companies, there is a clear focus on profitable growth. "As companies start delivering greater profitable growth and the 2% CSR investments start kicking in, I think the alleviation of poverty and inclusive growth will also take place," Iyer added.
The PwC survey adds that the operating margins of online retail players are negative 15-22%, when compared to 6-8% among the Mom & Pop retail players, and 2-4% among the organised retail players.
“EBITDA margins of Indian retailers have dropped to 2% in 2014 from 8% in 2011. During the same period EBITDA margins of select international retail chains like Walmart, Target, Tesco and Home Depot have maintained 7-11% during the same period,” said Anurag Mathur, Retail & Consumer Goods Practice leader, PricewaterhouseCoopers India. EBITDA is earnings before interest, taxes, depreciation and amortisation.
The PwC survey also highlighted that the focus among retailers will be profitable growth. According to the survey, more than 65% of Indian retailers are focusing on improving profitability through improvement in revenue throughput as fast changing consumer behaviour is driving many retailers to rethink their business model. As per the said survey, 53% retailers are considering a change in their operating model driven by changing consumer behaviour.
Iyer who is also the Chairman of the India Retail Forum, said that retail needs to be recognised as an industry. "Unfortunately at this point of time retail is not recognised as an industry and that will go a long way in making cheaper finance accessible to even the small kirana stores and everyone else in retail."