Indian consumer market to surpass $1 trillion by 2021

15 October 2018 Authored by Consultancy.in

India’s retail sector appears to be on track for substantial growth over the next few years, in addition to a drastic shift in its composition. According to a new report from global professional services firm Deloitte, the sector will reach an approximate value of $1.2 trillion between 5 and 8 years from now. 

Digital disruption is a common theme globally cutting across sectors at the moment, and its manifestations in the retail sector are several and multifaceted. The most direct of these is the advent of online retail and the subsequent emergence of a host of new avenues for producers to sell their goods.

India is expected to have 850 million online users by as early as 2025, which creates tremendous potential for online commerce in India. Big Four accounting and advisory firm PwC already predicted massive growth in India’s ecommerce sector two years ago, when the share of online shopping constituted nearly 35% of monthly purchases.

Indian e-commerce market

Last year, the Boston Consulting Group released a report that predicted that 40% of the purchases in India’s fast moving consumer goods (FMCG) segment would be conducted online by as early as 2020. Deloitte’s new report on India’s consumer market has reaffirmed these claims.

As per the report, India’s ecommerce market grew by a compound annual growth rate (CAGR) of nearly 50%. Over the next three years leading up to 2021, Deloitte predicts a CAGR of 32% to take the total ecommerce sector up to a value of $84 billion. By 2026, this figure is expected to reach $200 billion.

However, digital enhancements have a number of less direct influences on the retail sector as well, which generate a range of other opportunities. Packaging is one major area in which digital innovation can be leveraged to increase speed, reduce costs and broadly increase appeal based on data analytics.

Indian retail market

The shopping experience itself is expected to change drastically in light of digital advancement. Augmented Reality and Virtual Reality technologies are now being leveraged across the globe to create a digitally interactive shopping experience, termed alternately as ‘immersive retail’ or ‘connected retail.’

Other new forms of retail include free product trials at home and what the report terms as ‘peer to peer’ marketing. Broadly, Deloitte categorises this wide variety of developments under the umbrella of ‘modern retail,’ which is expected to contribute 25% of retail revenues in India over the next five to eight years.

This number is significantly higher than the expected contribution from ecommerce, which stands at approximately 10-12%. Underlying all these developments, however is substantial growth in the overall retail sector in India, which is expected to reach a value of $1.2 trillion by 2021.

Evolving parameters in the consumer domain

The substantial growth is presumably on the back of growing income levels per capita and other demographic trends. One of these patterns, for instance, is the increase in the number of households with a corresponding decrease in the size of these households, leading to a larger pool of disposable income.

Between 2011 and 2017, India’s retail market grew by a CAGR of nearly 14% to reach a size of nearly $800 million. This figure is expected to increase by nearly 11% till 2021 and subsequently at nearly 8% to reach a value of $1.75 trillion by 2026, according to Deloitte’s report.

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