Omnichannel sales are dominating India's retail sector

28 October 2019 Consultancy.in

A new report from JLL has highlighted how the retail sector in India is adapting to a wide variety of economic changes through a range of balanced and innovative strategies. Some strategies include optimising store space and boosting their omnichannel retail experience through technology.

The report is set against a context where a number of economic indicators appear to be stacked up against the retail sector. For starters, rental figures for the retail sector are at unprecedentedly high levels, boosting operational costs for retailers, which was further compounded by crunches in spending.

Demonetisation left many without easy liquidity, while those who did have some cash held on to it dearly. Meanwhile, the lack of foreign direct investment (FDI) has put a host of pressure on retail in India. According to JLL, quite a few factors stack up in favour of the retail sector as well.

Omnichannel sales

To rectify poor FDI inflows, the government loosened FDI norms to a great extent, which pushed India into the 8th spot worldwide when it comes to FDI confidence. The new profile has also put India high on the ease of doing business profile across the globe, leading to an influx of retail activity. 

“We have had a string of successful stories of Global retailers in India including Zara, H&M, Ikea and Hamleys, to name a few,” explains JLL. Another factor swaying fortunes in retail is the advent of technology within the space, giving rise to the economic behemoth that is ecommerce.

The majority of Indian consumers are soon to be wired online, while an overall shift in preferences to prioritise factors such as convenience and service over affordability has created the ideal environment for ecommerce to thrive. Reports have confirmed that this scenario is being realised.

On the one hand, the rise of ecommerce channels has eased the burden on retailers in terms of rental spaces. The authors point out that size is no longer the priority for retailers looking to rent commercial spaces, as a large segment of their products can be found on an online catalogue. Benefits of omnichannel

The physical store, as a result, is a space to display some flagship products, and can be optimised to have a maximum impact from minimal space. Meanwhile, tablets and mobile devices can be used to browse the full catalogue of products, giving rise to an omnichannel customer experience.

This strategy, meanwhile, has given rise to its own set of drawbacks. “With downsizing stores to increase the efficiency becoming a dominating strategy, inventory management has emerged as a key factor for operational efficiency within physical stores – and there is almost no room for error in today’s multichannel marketplace,’ states the report.

While ecommerce has offered a cost cutting mechanism on the one hand, transitioning to the online sphere means competing with ecommerce behemoths such as Amazon and Walmart, which not only entails investing heavily in ecommerce infrastructure, but also means engaging in price competition with these retail giants.

As a result, retailers are torn between maintaining their ‘brick and mortar’ sales points to have a more reliable source of revenue, or to shift entirely to the ecommerce domain. JLL describes this as a classic ‘catch-22 situation.’ At any rate, retailers need not worry about long-term demand in the Indian market, given the rapid rate of growth in the consumer market.


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