India's Retail industry to grow at 10% to reach approximately $2 trillion by 2032: BCG-RAI Report

India’s retail industry will continue to grow at close to 10% CAGR to reach approximately $ 2 trillion in the next decade despite a 2-year hiatus caused by the pandemic, as per a report by Boston Consulting Group (BCG) and Retailers Association of India (RAI).

BCG-RAI unveiled the report, titled “Racing towards the next wave of Retail in India”, at the backdrop of The Retail Leadership Summit, which was organised by RAI with BCG as their gold partner.

The report jointly developed by BCG and RAI, details the opportunities for retail in India while underscoring innovative practices adopted by retailers globally and in India.

It forecasts that India’s retail industry is on a robust path to recovery and despite unprecedented challenges, is set to resume its growth momentum primarily driven by growth in consumption.

India’s consumption, which was growing at approximately 12% pre-pandemic, went into negative territory during the pandemic but has now recovered to surpass pre-pandemic growth levels at 17%.

The report further highlights that while certain industry segments like food and grocery, restaurants and QSR, and consumer durables have recovered to pre-Covid levels, others like jewellery and accessory, apparels, and footwear remain on track to a full recovery.

The Indian consumption story continues to remain strong and household consumption grew significantly to Rs 130-140 Tn in 2021. As per it, Average household income is projected to increase ~1.4x from 2019-2030.

“Indian economy continues to be driven by consumption and we are observing that consumption growth is back in the positive territory after the two-year COVID pause. India’s retail industry will grow to approximately $2 trillion in the next 10 years. The next decade will see organised retailers focus on footprint expansion, across all formats - offline and online - to fuel future growth,” said Abheek Singhi, Managing Director and Senior Partner, BCG.

The report presents findings of an in-depth study of global retail players, identifying challenges in the prevailing environment and highlighting emerging trends and models that can potentially shape the future of retail.

Five key trends, namely ‘seamless’ retail, next-gen stores, personalisation, the rise of mega ecosystems, and emerging revenue models, have been identified and detailed examples of how global retail players both in the East and the West have adopted these models to optimally leverage the potential offered by these trends are shared.

 “The rising competition and the need for constantly improving the customer value proposition is driving the rise of ecosystems – and the customer being approached by players across retail and non-retail. We are seeing examples of this trend already in India and is expected to significantly transform the entire landscape in the future,” said Rachit Mathur, Managing Director and Partner, Consumer and Retail Practice, BCG.

“The pandemic taught retailers and consumers new lessons which are here to stay. Consumers shop across channels, have a hybrid shopping culture while businesses are learning to adopt hybrid work cultures. It’s evident that retail in India will grow, however, retailers have to learn new techniques and new methods to keep the customers with them. It’s a land filled with opportunities and challenges. 

When looking at retail performance, one needs to factor in the inbuilt inflation in most products like garments, electronics and some FMCG products. That said, FY 2022 onwards, retailers are hopeful that quantitative growth will be restored, and business will be back on a steady growth trajectory,” said Kumar Rajagopalan, Chief Executive Officer, Retail Association of India, speaking about the findings and state of Indian retail.

The report recommends key action points, 8 critical imperatives that retailers in India need to execute to generate sustainable and profitable growth.

The report also lays out the several factors that will influence the shape of retail in India. Three of these factors, namely, the upcoming open network for digital commerce (ONDC), retailers’ ability to leverage retail data to create offerings beyond core retail, and rise of the gig economy, have the potential to truly disrupt the retail landscape in India and influence the choices that retailers need to make in order to ‘win’ in the future of retail.

“Retailers have access to huge amount to customer data, and therefore have the potential to leverage this core data, either themselves or through partnerships, to create a layer of services which are beyond retail, for instance, using buying preferences data to provide customised financial services viz loans, insurances, etc”, explained Bharat Mimani, Managing Director and Partner, BCG.

The complete report can be accessed here: https://www.bcg.com/en-in/publications/2022/the-way-forward-for-the-indian-retail-industry

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