The share of Indian e-commerce is set to grow from the current 4% of the country’s overall food and grocery, fashion, consumer electronics retail trade to 8% by 2025, even as the economic impact of covid-19 is set to contract India’s retail market by 25% to 40% in FY21, according to a white paper by Technopak Advisors released on Friday.
Technopak has assumed that the current and next year i.e. FY 21 and FY 22 will witness disruption in economic cycles, loss of employment and retailing opportunities across many retail categories, especially discretionary, as India emerges out of the pandemic.
“Consequently, Indian retail will witness contraction in FY 21 that can range from 25-40% from the base of FY 20,” the consulting firm said. The contraction may not be as severe in food and other need-based retail categories, however even they will face a period of no-growth-to-marginal decline on the back of supply disruptions and a severe stress on domestic consumption.
India’s retail trade—largely unorganized and still dominated by small stores, run by independent entrepreneurs, is set to undergo a change as the pandemic-induced restrictions accelerate digital adoption and prompt new shoppers to get online.
Technopak estimates that modern trade will grow at 15% CAGR to reach 18% of the total retail share by 2025—largely led by a growth in e-commerce, whose share in total retail stood at 4.3% in FY 20 but will touch 7.6% by 2025. Consumer electronics will still command the largest share of the online retail trade with a 28% penetration, followed by footwear, pharmacy and apparel.
Pure play brick and mortar or modern trade’s share will expand from 8% currently to 10% in the next five years to touch $113 billion.
Meanwhile, the share of traditional trade will shrink from the current 88% to 82% by 2025—the format will still grow.
“In spite of this E-commerce enabled projected growth of modern retail, the size and influence of traditional Retail is expected to remain the same. Though in percentage terms its share is expected to reduce from the current 88% in FY20 to 82% in FY25, in absolute terms, traditional retail is expected to increase from the current $ 749 billion to $ 934 billion in the next five years,” according to estimates by Technopak.
As covid prompts more retailers to look at new ways of reaching shoppers—this will also lead to convergence of offline and online.
“…going forward, modern retail will witness a convergence and digital commerce will become central to the growth of modern retail. Pure brick and mortar retailers will increasingly adopt digital technologies for accelerated growth and pure e-tailers will appreciate the importance of brick assets and outreach to be plugged in for accelerated growth plans,” the paper said.
This article was first published on livemint.com.