Retail: The key growth drivers
Changes in demographics: India has the lowest median age of 24 as compared to developed countries like USA, UK, Japan etc. The composition of the Indian population is shifting towards the age group of 20-49 i.e. the working population with purchasing power. Approximately 60% of the Indian population is below 30 years of age. Thus, India has the largest ‘young’ population in terms of sheer size and this young segment is the major driver of consumption as they have the ability (disposable income) and willingness to spend.
Rising income levels: India is the second fastest growing economy in the world. A larger number of households are getting added to the consuming class with growth in income levels. Increasing instances of double incomes in most families coupled with the rise in spending power is further fuelling the growth of retail sector.
Changes in consumer needs, attitudes and behaviour: The growth of modern retail is linked to consumer needs, attitudes and behaviour. Rising income levels, education and global exposure have contributed to the evolution of the Indian middle class. As a result, purchasing and shopping habits have been inculcated and are increasing day by day. Historically, Indians have not been the ones to splurge on luxury items. Today, people are willing to try new things and look different, which has increased spending on health and beauty products apart from apparels, food and grocery items.
Increased credit friendliness: There has been a radical change in the Indian consumers’ mindset regarding credit. With the easy availability of credit and declining interest rates, personal credit has witnessed growth. The boom in financing has resulted in an increase in spends on housing and consumer durables such as two-wheelers and cars. The use of plastic money (credit and debit cards) has increased significantly in the last 3-4 years. In fact the ease of payments (ability to spend without cash) due to the use of credit and debit cards, has also led to an increase in total spending on shopping and eating out. With the acceptance of and the increase in the number of electronic data converter machines installed in retailing outlets, credit and debit cards will provide further fillip to organized retail.
Increasing awareness of Indian consumers: Over the years, as a result of the increasing literacy in the country, exposure to the west, satellite television, foreign magazines and newspapers, there is a significant increase in consumer awareness among the Indians. Today more and more consumers are selective with regards to the quality of the products/services.
Growth in Indian retail has been driven by the country’s economic fundamentals over the past few years. Increasing number of nuclear families, easy financing options, increase in the population of working women and emerging opportunities in the service sector during the past few years have been the key growth drivers of the organised retail sector in India. Consumers are now showing a growing preference for organised retail, resulting in increased penetration.