I recently read an interesting article in Times of India (Click here to read the article) about physical retail offering competitive and lower prices. This is from a report published recently by Goldman Sachs and compares the prices of few categories and some examples are in the visual below.
My long held view is that online is not going to destroy physical shopping. At the very least, this is not going to happen in the short or even medium term. I have seen concerns similar to this from the mid 90s and more recently in the context of FDI in Retail. When supermarkets and then hypermarkets came into India, everyone was predicting the demise of the local grocer (Kirana store), This has definitely not happened. In fact after almost two decades the modern trade segment is just about 10% of the total Retail sector in India. This is in spite of the fact that the retail sector has grown from approximately USD 200 Billion in 2000 to close to 600 Billion in 2015. This clearly indicates that the conventional outlets are growing and growing significantly. The share of modern trade (Organised Sector) is expected to increase to 13% by 2019 – 2020.
These percentages might vary depending on the report you read. However, the macro picture remains the same. Modern trade is still a small contributor to the overall retail sector in India. This share might drop much lower if food & grocery alone is considered.
Online retail is roughly 10% of modern trade or 1% of the total retail sector in India as of now. This article states that Goldman Sachs estimates that online retail would grow to be 22% of the modern trade in the next five years.
Seems to be extremely optimistic!
These percentages might vary depending on the report you read. However, the macro picture remains the same. Modern trade is still a small contributor to the overall retail sector in India. This share might drop much lower if food & grocery alone is considered.
Online retail is roughly 10% of modern trade or 1% of the total retail sector in India as of now. This article states that Goldman Sachs estimates that online retail would grow to be 22% of the modern trade in the next five years.
Seems to be extremely optimistic!
The widely varying, but always optimistic projections regarding online retail is best captured a detailed article in Livemint (Click here to read the article).
The variance between the lowest and highest estimate of online retail in 2020 USD 70 Billion. To put that in context, The modern trade contribution to the overall retail sector in India would be in the range of $ 60 Billion TODAY!
In summary I can only hope that the investors pouring money into the online space do two things –
- Physical retail is an important segment and investing there might be worthwhile.
- Put someone to work to cross tally and tabulate all the various percentages and figures being quoted in the various reports about retail in India. The variances across all these forecasts and projections might be a wake-up call.
Image courtesy - Times of India
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