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Retail sector in India to jump five fold to $200 bn, says Boston Consultancy Group

Rakesh Jhunjhunwala spotlights food & grocery, footwear, lifestyle as retail successes.

'FMCG is typically the last sector to slow down and over the past three years, as sector after sector slowed down' ‘FMCG is typically the last sector to slow down and over the past three years, as sector after sector slowed down’

The organised retail sector will grow five fold in the next five-seven years and touch the USD 200 billion mark, showed a Boston Consultancy Group report.

“The organised retail sector in the country would grow from the current USD 40 billion to USD 200 billion in the next five-seven years,” report released at the CII national retail-FMCG summit today stated.

“We find transformation in FMCG and retail is critical to the profitable growth of the sector,” BCG senior partner and director, Abheek Singhi said.

The study covered 45 companies in the country.

“We found that close to 57 per cent believe the world is going more uncertain going forward, while 71 per cent of executives believe they do have idea but they lack defined action plan,” he said.

“Successful models of retail namely food & grocery sectors to footwear to lifestyle products have done exceedingly well on the Indian stock markets and given very high returns to the investor,” said investor and Rare Enterprises founder Rakesh Jhunjhunwala in his keynote address.

Admitting that the retail sector has not done well in the last 10 years, he said it will do better now as retailers have realised that store level profitability is more important than the supply chain.

Terming this year as bullish for the sector owing to rise in income level, he said availability of a wide range of brands gives consumers more options to choose from.

“FMCG is typically the last sector to slow down and over the past three years, as sector after sector slowed down,” ITC executive director for FMCG businesses Kurush Grant said.

Over the last year, FMCG has also come under pressure and hence what is needed by the industry is to think about reviving itself, Grant said, adding recovering will be faster than other sectors.

Indian FMCG, retail cos not ready to meet challenges: Report

Many of the senior management of leading FMCG and retail companies in India don’t believe they are strategically or organisationally ready to transform to meet the new challenges of changing business environment, according to a report.

According to the report titled ‘Changing your Orbit, ‘The Handbook for Transformation in FMCG & Retail Businesses’ by conducted by CII and The Boston Consulting Group it is only after the business comes under severe pressure that firms “wake up” to the need for change.

“In our survey done in India, 60 per cent of companies agree that that the world around them is going to change significantly and a large number believe that they are not adequately prepared for that transformation. Acknowledging the challenge is a good first step,” BCG Senior Partner and Director Abheek Singhi said.

Almost 60 per cent of respondents believe that their business environment has shown significant change in the recent times and not many believe that they are strategically or organisationally ready to transform to meet the new challenges, the report said.

“Flat sales, rising costs, disgruntled customers as well as increasing new nimble competitors are typical signals that a company needs to initiate fundamental change. Yet, it is only after the business comes under severe pressure that they wake up to the need for this change effort,” it added.

Too many companies, especially those with a sustained track record of success, fail to transform themselves till it is too late, the report said.

According to the report, long term consumption opportunity in India is large and attractive, going from USD 900 million in 2010 to USD 3.6 trillion by 2020.

“The structural socio-economic advantages driving this growth in India are intact and it will need customised consumer-centric strategies by FMCG companies and retailers to tap into this large opportunity,” it added.

BCG in collaboration with CII conducted a survey amongst the leading FMCG and retail companies in India. The survey polled the senior leadership of these companies to gauge the extent of challenge posed by the current business environment and whether their organisations were ready to meet these challenges.

Fifty-seven per cent of the respondents agreed that consumer behaviour has changed in the last five years impacting the way companies do business, while 43 per cent said they could witness some signs of change but impact to business was still limited.

The report further said 57 per cent of the senior management interviewed in the study agreed the external environment for their respective organisations is going to become more uncertain to a large extent while ony 14 per cent felt in the contrary.

When asked about the major challenges to define a transformation agenda for the next 3-5 years, 71 per cent said “the company has a vision but doesn’t have a concrete milestone and action plan to achieve it”, while another 29 per cent said “the company doesn’t have suitable (people/skills/knowledge” to drive changes.

On the issue of new players coming in their business segments and taking share from established players, the report said 86 per cent of the respondents said they have witnessed it and the trend would continue, while only 14 per cent said they don’t expect major movements in future despite new players taking away share.

 

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