More than FDI (foreign direct investment) in single brand retail, omni-channel will trigger growth in the organised retail. Within a few years, the concept of organised brick-and-mortar retail and e-commerce as separate entities will no longer exist, say experts.
The government recently approved 100 per cent FDI in single brand retail through the automatic route, while the facility was subject to government approval earlier. The government had approved 49 per cent FDI in single brand retail a few years back, which saw several international brands entering the market and expanding largely through franchising.
The investments that have come into the country since the opening up of single brand retail is not even a portion of what the e-commerce companies were able to attract in the past few years. Industry experts don’t expect a huge growth in investments even after allowing 100 per cent FDI through automatic route.
“At least 30 brands across different retail segments like food, apparel and accessories would come into the country with this move,’ said Kumar Rajagopalan, chief executive officer of the Retailers Association of India (RAI).
Crisil expects the market share of the organised retail in India to rise to 10 per cent by financial year 2020, compared with 7 per cent in the last financial year. This will be supported by the government’s decision to permit 100 per cent FDI in single-brand retail, relaxation in sourcing norms, and healthy growth prospects for the organised retail.
However, RAI finds that the future growth of organised brick and mortar retail will depend upon omni-channel. “In the coming years, there will be high levels of amalgamation between organised brick and mortar and e-commerce. By 2020, these won’t be separate but will be part of modern retail. A significant portion of the retailers’ revenues will be coming through online channel. We expect this modern retail to grab 22 per cent share of retail market by 2020,” said Rajagopalan.
Several large retailers are tying up with e-commerce companies and launching their virtual stores in those sites apart from having their own online sales. Shoppers Stop has recently tied up with Amazon to open a virtual store with the e-commerce marketplace.
“Many online players globally are going offline. Biggies like Amazon and Ali Baba have invested in offline stores. The fact is, brick-and-mortar business is not going anywhere in spite of the assault of online. When customers want an experience they are coming to the stores. The online and offline together have started working in one eco system,’ said Govind Shrikhande, managing director of Shoppers Stop.
“Currently, we get about 5 million traffic a month in our site and another 4.5 million people walking into our stores. But around 400 million customers visit Amazon.in. So this is 100 times what we get in our store and site. That also gives us an entry into tier II and III location or smaller towns where will not open our stores or may look at it in a different point of time. This access through Amazon definitely multiplies the reach of Shoppers Stop,” he added.
In 2014, Amazon India had entered into a strategic alliance with Future Group to leverage the product knowledge, extensive brand portfolio and sourcing base of group. The group also benefits from the e-commerce platform, customer base and reach of Amazon.in.