Mumbai: Despite the current slowdown, the retail industry is poised to touch USD 1.3 trillion in the next eight years, driven largely by modern trade, which will jump seven-fold by then to touch USD 220 billion.
"The estimated value of the retail sector at the present juncture is about USD 500 billion. Penetration level of modern retail, which currently stands at 5 percent, will grow about six times from the current USD 27 billion to USD 220 billion in 2020," says a Ficci- Tata Consultancy Services report.
The report titled 'Driving Consumption through Integrated Multi-Channel Retailing' was released here on Tuesday at a retail summit organised by Ficci, further said, "The domestic retail sector is poised to become a USD 1.3-trillion opportunity by 2020. Modern retailers in the past have tried to capitalise on this opportunity by increasing their store presence across major cities."
The report further says to achieve this growth, the industry cannot solely depend on the conventional brick-and-mortar stores, but will have to look at other avenues like digital and mobile sales.
"Expensive real estate costs have already played a spoilsport for the retailers. It would be impossible for most retail categories to reach break-even at such high rentals of 10-15 percent of the revenue. Retailers need to rethink their business plans and shift a chunk of their sales from stores to alternate low-cost channels," it says.
According to the report, such alternate channels can add immense value to sales.
"Sales through digital channels, which is a miniscule percentage on Tuesday, will increase to 6-8 percent of total modern retail amounting to about USD 13.3-17.6 billion by 2020," says the report.
It further says there will be close to 200 cities with population of over 0.5 million by the turn of 2020, which will fuel retail growth. Consumer goods companies that depend on retailers to hawk their wares have a lot to gain if they collaborate with the retailers, it observes.
"There is a symbiotic relationship between retailers and FMCG companies, which spread across the value chain from assortment planning, replenishment, space planning and promotion. It is be imperative for FMCG and retail companies to collaborate in this journey.
"FMCG firms have a lot to gain with the advent of multi-channel retailing. The depth of retail FMCG collaboration will be one of the key success factors for multi-channel retailing," it said.
First Published: Tuesday, August 07, 2012, 18:55