The Indian Retail sector, ranked as the most lucrative sector prior to the recession, has seen many ups and downs in the recent past. Earlier, global management consulting firm, A.T. Kearney, in its annual Global Retail Development Index, had ranked India as the most attractive retail destination during the period 2006 to 2008.
Unfortunately, the downturn has hit this sector at an estimated INR 2,402,211 crore (USD 511 billion), according to figures released by consulting firm KPMG. Furthermore, the consulting firm expects this slowdown to persist for another 12-18 months. Unlike in the US, where spending on goods has decreased in the current scenario, the Indian consumer is still making purchases, albeit wisely. In order to fruitfully traverse this slowdown, the consultancy expects retailers to concentrate on food retailing and consumer goods and move away from lifestyle goods. Angel Broking reported that "Value-retailing players such as Pantaloon and Reliance are more likely to benefit in the current scenario than lifestyle players like Shoppers Stop”. Due to the value proposition offered by kirana stores and local vegetable vendors, the duo survived the economic downturn. Compared to modern retailers, vegetable vendors, more often than not, offer fresher vegetables; while kiranas offer the luxury of home delivery and interest-free credit. It was only a matter of time for customers to move towards different shopping avenues for their varied needs. One of these avenues was the Internet.
Online Shopping
Online research and advisory firm JuxtConsult reported a massive increase of online shoppers between 2006 and 2008 from 12 to 19 million. According to a recent survey by MasterCard Worldwide, the average frequency of online purchases in India grew from 2.6 percent in the fourth quarter of 2007 to 2.9 percent in the corresponding period of 2008. This growth is mostly driven by the 18-29 age group, who have the highest average global spend on online shopping. One of the areas, where the youth is inclined to drop their cash is in the personalised gifting and merchandise space. This trend has proved favourable for e-commerce portal, Myntra.com, where “business has increased up to five times this year despite the economic recession” according to its CEO, Mukesh Bansal. Another company, futurebazaar.com – an e-commerce portal venture of Kishore Biyani-owned Future Group – has also raked in profits thanks to the uptrend in the online merchandising space. Only a year old, the portal is already worth an estimated INR 62 crores (approx USD 13 million).
In the merchandise segment, popular online purchases include home appliances and electronic gadgets like mobile phones, cameras and laptops, among other contraptions. The survey by MasterCard Worldwide revealed that the online spend on electronic products has gone up by 51 percent in 2008. In a bid to maintain this flow of online shoppers to their e-commerce portals, firms have turned towards social networking features which are incorporated into their websites; these are utilised by users to take counsel with friends and relatives before making a particular purchase.
Online shoppers, overall, conduct research on their planned purchases before taking the plunge. Being able to compare prices and features of a price is another benefit of picking up items on the net. Jyoti Ramnath, CEO, Craftmygift – a personalised gifting firm, opines that "through online shopping, customers can attain the objective of value for money during these tough times."
On the Flipside
Although the downturn has been kind to value-for-money providers, the same cannot be said for value-retailers, such as Vishal Retail (VRL), who cater to the lower middle-income group consumer. The company has been suffering due to its disability to generate positive cash flows from operations in the first two months of this quarter, according to Chief Executive, VRL, Manmohan Agarwal. Analysts are of the view that the next two quarters will be critical for the company, since sales are expected to fall further. In such trying times, the company is seeking solace in the wired medium by testing waters with the sale of electronics on its launched portal, VishalMegamart.com. Further, successful companies like Tata and Videocon (with its portal, eDigiworld) have joined the fray by initialising online stores for their products as well.
Riding out the wave
Until the second quarter of 2010, when things are expected to get better, the key to riding the recessionary wave is by concentrating on the online medium and by coming up with value-for-money strategies, since at the end of it all, consumer really is king and it is he who dictates a company’s profitability.
Unfortunately, the downturn has hit this sector at an estimated INR 2,402,211 crore (USD 511 billion), according to figures released by consulting firm KPMG. Furthermore, the consulting firm expects this slowdown to persist for another 12-18 months. Unlike in the US, where spending on goods has decreased in the current scenario, the Indian consumer is still making purchases, albeit wisely. In order to fruitfully traverse this slowdown, the consultancy expects retailers to concentrate on food retailing and consumer goods and move away from lifestyle goods. Angel Broking reported that "Value-retailing players such as Pantaloon and Reliance are more likely to benefit in the current scenario than lifestyle players like Shoppers Stop”. Due to the value proposition offered by kirana stores and local vegetable vendors, the duo survived the economic downturn. Compared to modern retailers, vegetable vendors, more often than not, offer fresher vegetables; while kiranas offer the luxury of home delivery and interest-free credit. It was only a matter of time for customers to move towards different shopping avenues for their varied needs. One of these avenues was the Internet.
Online Shopping
Online research and advisory firm JuxtConsult reported a massive increase of online shoppers between 2006 and 2008 from 12 to 19 million. According to a recent survey by MasterCard Worldwide, the average frequency of online purchases in India grew from 2.6 percent in the fourth quarter of 2007 to 2.9 percent in the corresponding period of 2008. This growth is mostly driven by the 18-29 age group, who have the highest average global spend on online shopping. One of the areas, where the youth is inclined to drop their cash is in the personalised gifting and merchandise space. This trend has proved favourable for e-commerce portal, Myntra.com, where “business has increased up to five times this year despite the economic recession” according to its CEO, Mukesh Bansal. Another company, futurebazaar.com – an e-commerce portal venture of Kishore Biyani-owned Future Group – has also raked in profits thanks to the uptrend in the online merchandising space. Only a year old, the portal is already worth an estimated INR 62 crores (approx USD 13 million).
In the merchandise segment, popular online purchases include home appliances and electronic gadgets like mobile phones, cameras and laptops, among other contraptions. The survey by MasterCard Worldwide revealed that the online spend on electronic products has gone up by 51 percent in 2008. In a bid to maintain this flow of online shoppers to their e-commerce portals, firms have turned towards social networking features which are incorporated into their websites; these are utilised by users to take counsel with friends and relatives before making a particular purchase.
Online shoppers, overall, conduct research on their planned purchases before taking the plunge. Being able to compare prices and features of a price is another benefit of picking up items on the net. Jyoti Ramnath, CEO, Craftmygift – a personalised gifting firm, opines that "through online shopping, customers can attain the objective of value for money during these tough times."
On the Flipside
Although the downturn has been kind to value-for-money providers, the same cannot be said for value-retailers, such as Vishal Retail (VRL), who cater to the lower middle-income group consumer. The company has been suffering due to its disability to generate positive cash flows from operations in the first two months of this quarter, according to Chief Executive, VRL, Manmohan Agarwal. Analysts are of the view that the next two quarters will be critical for the company, since sales are expected to fall further. In such trying times, the company is seeking solace in the wired medium by testing waters with the sale of electronics on its launched portal, VishalMegamart.com. Further, successful companies like Tata and Videocon (with its portal, eDigiworld) have joined the fray by initialising online stores for their products as well.
Riding out the wave
Until the second quarter of 2010, when things are expected to get better, the key to riding the recessionary wave is by concentrating on the online medium and by coming up with value-for-money strategies, since at the end of it all, consumer really is king and it is he who dictates a company’s profitability.
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