Budget wishlist: Retail sector

KEY DEVELOPMENTS

• Brick-and-mortar retail stores forge tie-ups with e-commerce companies.
   
• PE money  continues to pour in for e-tailers and start-ups in the space. Spurt of new players continues. At the same time, firms are under pressure to perform to keep winning investors.
  
   
• Industry conglomerates entering e-tail with own portals carrying curated product portfolio.
   
• Foreign brands continue to prefer online channel for India entry. Also, FDI-funded single-brand retail firms have now been allowed to undertake e-commerce activities
   
• With emphasis on regulatory compliance, maintaining brand image has become as important as overall sales strategy
   
• Personnel management has moved to top of the priority list. While blue-collar personnel have faced hardships, employment in the e-tail industry has become uncertain.
   
• Mobile-only strategy has proved unviable in this age of multi-channel retailing, while the growing acceptance of mobile wallets and mobile-based marketing campaigns has definitely helped the smartphone transition to be the primary tool for purchase activity.

KEY ISSUES

• Competition: After the injection of PE money, the onus is on retailers to perform. Competition has intensified. Also, an omnichannel approach and a managed marketplace model will pose a challenge to existing online-only players. 
   
• Counterfeiting: Fake goods remain as a cause for concern; there are legal charges for selling imitation of local retailers’ products
   
• Offline forays: Several pure-play e-tailers have announced plans to foray into the offline medium, further emphasising the continuing shift towards building ‘experience stores’
   
• Customer service: Better service and loyalty programmes could help differentiate among retail companies and drive brand stickiness among consumers

EXPERT VIEW: Anurag Mathur

PwC expert answers Business Standard readers' questions on what to expect from the Budget

RITWIK: With innovation becoming the watchword in e-tail, what will be the challenges for a rural-centric retail chain — sponsored and fed by the government — to cater specifically to rural demand and price ranges?

The promise of Indian consumer demand over the next few decades is going to be fuelled in no small means by the rural mass. The last few years have seen significant growth of digital access in rural areas, especially through mobile phones, growth of "micro" technologies like digital wallets and some success of private players with rural distribution models - from FMCG to automotive and microfinance. The core challenges remain around efficiently servicing demand through building low-cost infrastructure or utilisation of existing government infrastructure without cost leakages.

KAMRAN: While the GST Bill might still be under fire in the Budget session, what impact do you think it will have on the e-commerce sector in the event it is passed? 

The GST Bill presents itself as a large discontinuity that will create an opportunity for many businesses. The e-tail sector deals with a very large number of vendors and customers and the largest impact, thus, would be in the nature of ensuring dealings with compliant vendors and renegotiating sourcing costs to ensure credit passthrough, lowering the working-capital impact and competitive-pricing ability. There would also be a significant impact on the supply chain structure to ensure the lowest number of stock movements to balance cost and service.

Anurag Mathur

Leader (Retail & Consumer Practice), PwC India

Kunal Bahl

Co-founder & CEO, Snapdeal

“We hope the Budget will continue the task of creating a favourable, predictable and investment-friendly climate for global funds seeking to participate in India’s growth story. India presents a huge opportunity as it continues to build physical and digital infra for its large population. This will boost economic activity and create employment. Large capital inflows and suitable tax breaks can help accelerate the process”