• Deccan Chronicle
  • Andhra Bhoomi
  • Asian Age
  • ePaper
  •  Auto Refresh
Home

ePaper
Last Updated:05:25 AM IST | Wednesday, Feb 01, 2023
  • Home
  • Politics, Plan And Policy
  • Markets
  • Companies
  • Economy
  • In Other News
  • Autos
  • Just In
Menu
  • Home
  • Politics, Plan And Policy
  • Markets
  • Companies
  • Economy
  • In Other News
  • Autos
  • Just In
Home > Politics, Plan and Policy > Shift from unorganised to organised retail
Politics, Plan and Policy
Shift from unorganised to organised retail
By  
  , Published : Jun 5, 2017, 11:47 am IST | Updated : Jun 5, 2017, 11:47 am IST

Consumers in metros and tier I and II cities are readily shifting to card payments, with organised retailers benefiting from this

The essence
Demonetisation has catapulted the shift from unorganised to organised retail sector in the light of the cash crunch.
While the market expected the organised retail sector to witness contraction in the third quarter (Q3) of the ongoing financial year (FY17) post demonetisation, most companies in the sector are likely to post low single-digit growth with varying impact across different sub-sectors.
The impact of demonetisation across retail segments is expected to vary, depending on the nature of consumption (discretionary/non-discretionary), ticket size and ease of adoption of alternate modes of payment.
Organised retailers in the food, grocery and fashion retail segments are expected to be unaffected, while high value items such as jewellery, luxury items (watches) and consumer durables can show contraction in topline in Q3FY17.

ORGANISED RETAILERS INSULATED, HIGH VALUE ITEMS FEEL PAIN
Organised retailers in the food, grocery and value to premium fashion retail segments have been insulated from the influence of demonetisation in Q3FY17, given the relatively low average ticket size of transactions (around Rs 2,000) and the willingness of consumers to switch to cashless transactions.
However for segments of high value, namely jewellery, luxury items (watches) and consumer durables, where the transaction value is high and the purchases are more discretionary in nature and presumably the use of unaccounted for money is higher, even organised retail is likely to report de-growth in Q3FY17.

ORGANISED FOOD AND GROCERY RETAILERS WIN
Organised food and grocery retailers are the biggest beneficiaries of demonetisation and are expected to post a healthy double-digit growth and even like-to-like sales growth in Q3FY17.
The cash crunch impaired the traditional wholesale and retail channels and led to a shift in consumers from local grocery stores/neighbourhood stores to supermarkets/hypermarkets.
Additionally, footfalls were also driven by the availability of cash withdrawal facility from the POS machines installed at some of these stores, supported by the discount and promotional offers.
The consumers were quick in adopting the digital mode of payment and the share of cash transactions declined to about 20 per cent from about 50-60 per cent earlier.
Companies in the segment will, however, face the challenge of building customer stickiness and retaining the growth momentum witnessed in the last two months as the traditional channel emerges from the disruption in the fourth quarter.
ORGANISED FASHION RETAILERS RECOVER FROM KNEE-JERK REACTION
Contrary to the popular belief, organised fashion retailers (departmental stores) have bucked the impact of demonetisation.
After the sharp decline in footfalls as well as volumes in the first week post demonetisation, revenue growth recovered and is likely to be in high single digit to double digits in Q3FY17 on the back of festive season and early commencement of end-of-season sale in December 2016.
Most of these departmental stores are located in metros and tier I and II cities where consumers were readily shifting to card payments. Consequently, the share of cards as a percentage of revenue has increased to 80-90 per cent in the last quarter (averages around 40-50 per cent).
Additionally, the impact on margins due to the end-of-season sale was largely counterbalanced by the fee waiver on POS transactions through debit cards which were earlier in the range of 0.75-1 per cent.
Further, companies in this segment continue to be on track with their store opening plans for the second half of the current fiscal.
n Share of digital wallets is still below 5-10 per cent in the both these segments and the industry is gearing towards increasing the share of digital wallets and launching their own wallets as well.

ORGANISED RETAIL JEWELLERS TO DE-GROW
Organised retail jewellers are likely to report minimal growth to de-growth year-on-year in third quarter revenues as consumer demand remained muted in the aftermath of demonetisation.
Margins are also likely to be impacted given the high operational leverage in the segment, albeit supported by higher gold prices for most part of the demonetisation period. Companies are cautious on restocking to reduce any liquidity pressure which may arise due to reduced offtake.
It remains to be seen whether organised retail will continue to gain market share at the cost of unorganised retail post re-monetisation or the customers will go back to their preferred mode of transaction once the currency notes are replaced completely.
Source: India Ratings & Research end-of
Tags: 
economy watch
Latest From Politics, Plan and Policy
As per the finance ministry, Finance Minister Nirmala Sitharaman will meet stakehokder groups of 'New Economy: Start-ups, Fintech and Digital Sector' on Monday morning, and financial sector and capital market representatives later in the day. (Photo: File | ANI)

FM Sitharaman to hold pre-Budget meetings with stakeholders beginning today

Brent crude futures were up 19 cents, or 0.3 per cent, at USD 62.47 a barrel.

Oil rises amid optimism over OPEC supply cuts, hopes on US-China trade

Traders are now eyeing next month’s meeting between the OPEC and Russia to determine if the group would deepen output cuts to prop up prices. (Photo: Twitter)

Oil slips as US-China trade deal hopes dwindle

Most Popular

Mukesh Ambani 9th richest on Forbes' real-time billionaires list
Top credit card myths harmful for your financial well-being
Microsoft CEO Satya Nadella tops Fortune's Businessperson of the Year 2019
Employment growth slowed down in last two years: report
GST structure: key challenges and its solutions

Editor's Picks

Income tax e-filers drop by over 6.6 lakh in FY19: Official data
Swiping on your smartphone reveals a lot about you to your social media company
  • Read Financial Chronicle as it appears in print.
  • Subscribe, and get it delivered in the inbox everyday.
  • Politics, Plan And Policy
  • Markets
  • Companies
  • Economy
  • In Other News
  • Autos
  • Just In
  • Home
  • About Us
  • Contact Us
  • Terms of Service
  • Privacy Guidelines
  • Copyright © 2019 Financial Chronicle, All rights reserved
Developed & Maintained By Daksham