Physical retail witnessed 24 percent growth in last five years

A recent study by Crisil says the organised brick and mortar retail segment in India has grown at a compounded annual rate of 24 percent in the past five years to Rs 70,000 crores. Crisil analysed financials of 24 large retailers to reach the conclusion. However, it may be recalled that ASSOCHAM too had said that while ecommerce is witnessing a boom in India, low consumer sentiment is having a negative impact on physical retail format, another

Crisil says the online retail space has expanded at a much faster rate of about 60 percent, with an estimated gross merchandise value of Rs 40,000 crores in fiscal 2015. While growth has been driven in part by large discounts, brick and mortar retailers have shown an unprecedented, relentless focus on profitability, which led to a moderation in revenue growth in some cases, said Crisil.

Adding further, the report said, brick and mortar retailers are making a combination of initiatives to ensure improvement in operating efficiency, including exiting unviable product categories, rightsizing stores, increasing focus on private labels and undertaking cluster-based store expansion. Many are revisiting their business strategy, adopting an omni-channel approach, while focusing on small cities and towns.

Crisil expects this realignment of business model to continue over the medium term, helped along by an expected improvement in the macroeconomic environment. Prudent store addition and debt accretion, along with strong promoter support, are likely to help organised these retailers sustain credit. Small and medium-scale regional retailers are also expected to engage with online marketplaces to support revenue growth over the medium term, it said.