Consolidation the way ahead for Indian retail in 2017

Raining M&As and entry of big players into the Indian territory set the tone of retail sector in 2016. However, the government's surprise move to demonetise high denomination notes made a huge dent in retailers' earnings, with sales falling by up to 70 per cent in early days. Going forward, retailers expect impact of cash recall to continue for a few more months into 2017, but new brands and offerings are set to entice customers in the year to come.

Consolidation the way forward

Last year biggies like Reliance, Mahindra and Future Group expanded their own online ventures to take on players like Amazon, Flipkart and Snapdeal. Aditya Birla Fashion and Retail -- which had acquired Pantaloons a few years ago -- further expanded its kitty with addition of Forever 21. It bought Indian operations from Diana Retail, promoted by DLF Brands for 26 million dollars (around Rs 175.52 crore). In another interesting deal, Future Retail acquired online furniture seller FabFurnish.com from its owner, Bluerock eServices. Besides, Mahindra Retail merged operations of Babyoye, with that of FirstCry.com.

Kumar Rajagopalan, CEO, Retailers Association of India (RAI) feels that the next couple of years will see more consolidation and a much greater maturity of omni-channel retail and sustainable retailing practices. The Mukesh Ambani-led Reliance Industries also forayed into online retail with its fashion portal Ajio.com.

Giving perspective into what’s in store, Rajagopalan said impact of demonetisation will continue for the first few months of 2017. Demonetisation served as a wake-up call for retailers that had not adopted modern retailing practices such as accounting every sale and accepting digital payments. Demonetisation opened up a host of opportunities for innovative partnerships between digital wallets and retailers to embrace digital technologies.

Big brands setting shop in India

With foreign brands like Ted Baker, Scotch & Soda, Izabel London and Simon Carter announcing their India entry, consumers enjoyed the retail rally in 2016. Spain's premium fashion brand Massimo Dutti set up its first store in India in May, more than two years after it received nod for FDI. After getting nod for 100 per cent single-brand operations, German sportswear brands Puma and Adidas Group opened their own retail stores during the year. Earlier, they operated through franchisees. However, multi-brand retail remained a no-go zone for foreign retailers.

Changing dynamics

The retail sector, clocked a growth of 12 per cent during the year, despite availability of good retail space posing as a major challenge. Hailing GST as an important reform for the retail sector, Rajagopalan said that once rolled out, GST will reduce distribution costs and wastage as cascading effect of taxes will go. The 'speed to market' will see an increase, as retailers can produce wherever and sell wherever to meet demand of consumers. What's most important is the availability of products for customers will improve. However, a lot will depend on the actual rollout and adoption by states.

Another key step forward for retail this year was the unveiling of state-level retail trade policies by several states such as Andhra Pradesh, Maharashtra and Karnataka which facilitate ease of doing business. While announcing the annual budget for 2016-17, Finance Minster Arun Jaitley proposed the idea of allowing small, medium shops to remain open on all days. Continuing with the trend of the previous year, predominantly online players such as Nykaa, Voylla, Lenskart and Zivame continued to expand operations through brick and mortar stores as well.