As organised retail evolves, mom and pop stores will continue to remain relevant across both large and small towns in India, said a McKinsey & Company report.
The management consulting firm’s report projected India to be a $450-billion retail market by 2015. Further, organised retail was expected to grow from the current 5 per cent of the total market to 14-18 per cent of the total retail in 2015, it added.
The report said that retail in India could be profitable but not with ‘cut and paste’ global formats. Profitable retailers would require to keep four mantras in mind as they explored this high-potential market, it said.
Mantra one, develop innovative formats for material differentiation for which three decisions will be critical – where to participate in the retail value chain, which geographies to play in and what price-points to offer. Two, craft a customer-insight driven merchandise strategy to stimulate consumption and lock in core customers.
Three, create an efficient retail operating platform consisting of a self-sufficient system of suppliers, logistics providers and even loyal shoppers. And finally, build an evolving organisation with an empowered front-end selling team that “owns” local catchments.
Thus, the greatest challenge would be to maintain the organisation’s focus on profitability while cultivating flexibility, the report said.
“Not all Indian households will shop in these new stores. Of the current 204 million households in India, we estimate that only about 13 million are comfortable and have the income to patronise organised retail. The great news is that this relevant consumer segment will grow five-fold from 13 million to 65 million households in the next 8 years,” said Ireena Vittal, Partner, McKinsey & Company, and co-leader of the retail practice.
