The retail sector has also been hit by the slowdown bug and it is evident from the fact that the growth rate in the retail industry has slowed down from 12-13 percent in the past two years to 3-5 percent currently, according to Kumar Rajagopalan, Chief Executive Officer, Retailers Association of India (RAI).
"Sentiments are not very positive at this point, which only adds to the difficulty. However, the silver lining is that retailers have not come to a stage where they have de-grown substantially," Rajagopalan told Moneycontrol.
The retail industry is pinning high hopes on the ongoing festive season for an uptick in demand which will help revive growth in the second half of the current financial year (FY20).
"The next two to three months will be particularly crucial as there is festive season coming up. As of now, retailers are cautiously optimistic," Rajagopalan said.
On the retail growth, he said that ease of doing business requires further simplification.
"Approvals require approaching too many authorities. Licensing is becoming harder. Around 40-odd licenses have to be sought before a retailer commences operations. This is not only time-consuming but also discouraging," he said.
FDI in Retail
According to Rajagopalan, allowing foreign retailers to commence online sales before setting up offline stores is likely to augur well.
He further said that international brands may be looking at entering into tie-ups with e-commerce marketplaces or even brick-and-mortar retailers.
In August this year, the government relaxed sourcing norms for single-brand retailers. On the sourcing front, single-brand retailers can now meet the norms of 30 percent as an average during the first five years, and annually thereafter.
Also, any sourcing made by the company that owns the brand, its group companies, and even third-party vendors will now be accounted to meet the local sourcing requirements.
Such companies are now allowed to operate the online-only model waiving the clause of having mandatory brick-and-mortar stores first.
Consolidation?
Rajagopalan agreed that mergers and takeovers will take place at regular intervals in the retail industry as there is enough scope for new retailers to enter the market.
However, he refrained to give details on the names of the companies that are looking to get merged.
"There are more than 12 million retailers in this country, of which most are unorganised. Thanks to GST, they are now modernising their operations," Rajagopalan said.
He said when the brands gain a certain degree of visibility, bigger retailers may look at partnering with unorganised players.
Outlook
Rajagopalan believes that the next leg of growth in organized retail going will come from Tier 2 and 3 cities as most of the store additions are liking to take place in these towns. He said that branded retailers are increasingly eyeing smaller cities for expansion.
However, stores will be predominantly franchise-run since locals have a better understanding of buyers' preferences in the hinterland.
Keeping a tab on the ever-changing consumer preferences will be equally crucial on the part of retailers, Rajagopalan said.
“Order fulfillment times are also likely to reduce. Customer acquisition and retention/loyalty will be high on the agenda as well. Buyers will become more knowledgeable and seek more shopping convenience-cum-personalization with the passage of time,” he said adding that e-commerce will also gain momentum in smaller regions of the country as well.
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