Budget 2022: Expectations of the retail sector – Stories from Dr. Bibek Banerjee


Industry Outlook
The last two years have been particularly difficult for the retail sector. The COVID pandemic has brought unprecedented hurdles to the industry, including frequent lockdowns, regulatory shutdowns of markets, large-scale supply chain disruptions, and inventory availability. The massive decline in disposable income due to pandemic-induced changes in livelihoods has profoundly affected the retail sector. Consumer focus has shifted to safety, convenience and value shopping, leading to increased orders and consumer reluctance to leave home, leading to a sharp reduction in footfall in retail stores. detail.

Retail and retail now face a confusing dilemma: will consumers return to pre-COVID behavior or will the low-touch, high-tech practices incubated during the pandemic become the new normal? Data from developed countries indicates that online retailing is here to stay and online shopping penetration is set to accelerate. “Amazon is expected to overtake Walmart as the largest US retailer in 2022,” says a study by JP Morgan.

This COVID-19-induced shift in online retail is a global phenomenon driven by an increased need for consumer safety and convenience during sporadic and extended stay-at-home periods. This has mostly happened in India, where e-retailers have been the lifeline of consumers and sellers in urban markets – providing access to basics and hygiene products to millions of households for lockdown, and providing business opportunities for thousands of digitally savvy marketers.

E-Retail has also democratized shopping by providing access to over 95% of Indian PIN codes. It has empowered India’s small-scale vendors and micro-entrepreneurs, broken down barriers to market access for incumbent and insurgent brands, and provided jobs for millions.

That being said, challenges lie ahead for the industry, and the retail industry must adapt dynamically to stay afloat, profitably. Increased attention to supply chain optimization, data analytics and AI-based applications, and innovations in product offerings are set to reshape the future of retail. Although retailers are bearing the brunt of the economic slowdown, they should rebound to previous growth levels once things get back on track.
Meanwhile, when it comes to retail format, the lines between online retail and physical stores are gradually blurring.

Big Bazaar, which was previously a mainstay of the physical department store-based model, is now closer to the customer through online services and home delivery, while Lenskart, which started as a 100% online business, grew rapidly with over 600 physical stores today. Other challenges faced by large retailers include reduced store footfall, expansion into small towns, limited multi-channel presence, sub-optimal assortment planning, high cost of employees, lack of trained talent, high attrition rate and rising supply chain costs (especially last mile costs).

Overall, the retail sector is poised for a good outlook. A report by Kearney predicts that “the retail industry in India is likely to grow at a CAGR of around 10% to reach a size of USD 1.8-2,000,000 in FY 2030”. Bain & Co estimates that the pandemic has facilitated the adoption of online retail and online shopping, causing it to reach a penetration level of 4.6%. There was a 25% growth in e-commerce, while bricks-and-mortar retail fell 5%. There has been an emergence of direct-to-consumer brands and this growth opportunity has not only benefited the big players. The report predicts that the online retail market could reach USD 120-140 billion in fiscal year 2026 with an annual growth rate of 30%. Some key factors that are expected to fuel this growth in the retail sector are growth in per capita income, increasing urbanization, nuclear families, millennials, and a steady growth in agricultural and industrial production.

Some suggested regulatory changes and measures to support the industry

Anticipated implementation of the National Retail Policy: This policy has been in the final phase for over a year now. The policy will cover several areas such as ease of doing business, streamlining retail compliances, etc. under one umbrella.

Financial support for the digitization of kirana stores and small retailers: For these players to adapt, they need access to low-cost/interest-free capital and tax breaks for the digitalization of their businesses.

Gig Economy models: Formalization or inclusion of independent contractors as employees.

Confidentiality and data protection: With increased digitization, there must be strong laws on the capture, storage and use of personal data that clearly communicate and enhance transparency in the use of personal data.

Any measures in the budget aimed at increasing the discretionary income of middle-class consumers will support retail consumption. The relaxation of tax procedures and the reduction of the overall tax burden are what the retail trade would like.

DISCLAIMER: The opinions expressed are those of the author alone and ETRetail.com does not necessarily endorse them. ETRetail.com will not be liable for any damage caused to any person/organization directly or indirectly.


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