Set to enter a "transformative era", the country's retail sector is expected to clock 10-13 per cent growth in the new year with players adopting technological advances to cater to luxury as well as value customers while inflation shadows continue to lurk in the background.
Network expansion, a strong uptick in demand for premium brands, increasing traction for value brands in smaller cities and general elections will be among the key drivers for the retail sector, which is also moving from being just a tale of rural and urban markets.
Besides, the continuing e-commerce growth with a surge in quick commerce, hyperlocal delivery services and impulse purchases will provide additional tailwinds.
"The Indian retail industry's growth prospects for 2024 present a mixed picture with several factors influencing the landscape," Deloitte India Consulting Partner Rajat Wahi told PTI.
The space has bright spots such as robust GDP growth, tech-driven transformation, continued festive season impact, higher rural consumption as well as favourable demographics with a rising middle class and a young population having more disposable income.
Sectoral experts opined that the sector is projected to see a growth of 10-13 per cent in 2024.
According to Wahi, there are areas of concern such as continued inflation, supply chain disruption, and geopolitical uncertainties, which may affect consumer confidence and impact spending.
Potential job losses and rising food and fuel inflation could erode disposable income, a scenario that can have an adverse impact on the retail sector, as per the experts.
Meanwhile, the government promoted Open Network for Digital Commerce (ONDC), and D2C brands allowing customer personalisation are expected to democratise the online sales landscape, facilitating the participation of numerous brands and small retailers.
EY India Leader, Consumer Products & Retail, Angshuman Bhattacharya said the retail sector in India continues to be one of the fastest growing across global markets.
"While long-term trends remain favourable, the retail market saw strong growth on two ends of the pyramid, namely premium products and value retail.
"Premium brands have seen a strong uptick in demand as Indian per capita GDP crosses an inflectionary point unleashing discretionary expenditure," he said.
KPMG India Partner for Retail Puneet Mansukhani said from a retail grocery perspective, inflationary pressures are likely to continue. Hence, retailers will need to innovate to change the basket mix for consumers, and try to push premium products wherever possible, he added.
"Regional localisation and fulfilment centres and festive season offers catering to the regional consumer could go a long way in having the desired effect on topline this year," he said.
Further, he said personalisation and direct-to-consumer business models have increased the potential to collect customer data via multiple touch points.
"In the long-term, we could expect retailers to use data-driven insights to seize performance improvement opportunities and beat rising costs and also identify new markets, products, or services," he noted.
For the retail sector, 2023 started on a weaker footing as the players struggled with a demand slowdown following inflationary pressures. However, by the last quarter, there has been a sequential uptick in performance, led by festive and wedding season demand, ICRA Vice President & Sector Head, Corporate Ratings, Sakshi Suneja, said.
"Factors such as favourable demographics and low penetration of organised retail augur well for the industry. This, coupled with network expansions by retail players, is likely to result in a 13 per cent year-on-year revenue growth in FY2024," she said.
Retailers' Association of India (RAI) CEO Kumar Rajagopalan said the sector underwent a transformative journey.
"Looking ahead to 2024, expectations are shaped by various factors. The upcoming elections in India are anticipated to inject more money into the hands of the poor, potentially boosting sales of value items.
"Furthermore, some D2C brands are poised for substantial growth, leveraging improved offline market exposure and potential funding to become significant players in the retail landscape," he said.
Moreover, a significant number of retailers are expected to integrate AI (Artificial Intelligence) to enhance business efficiencies and achieve excellence in customer service, Rajagopalan said, adding that "2024 holds promise for a dynamic and transformative era in the retail industry".
Wahi said the retail sector would witness an increase in the adoption of technologies like AI, VR (Virtual Reality) and AR (Augmented Reality), enhancing customer experience and operational efficiency.
"Personalisation, data-driven decision-making, and automated logistics would become more prevalent," he said.
In 2023, the retail sector also witnessed an increased inventory period in certain segments, especially in the mass premium price points.
"There will be a season or two of correction that the industry is expected to witness, including some liquidation of stocks to clear off shelves," Bhattacharya said.
The year 2023 could also be remembered as the year of the comeback for brick-and-mortar channels, in which shopping malls and retail centres saw an increase in footfalls.
"In fact, we are expecting to close Q3 strong as well with the wedding season and a good set of movies coming along.
"As reported in our half-year report, our consumption grew at 18 per cent. Second, footfalls have gone up by 14 per cent primarily led by families who have returned to malls. This was on the back of choice for family entertainment facilities, theatres, and restaurants," Nexus Select Trust CEO Dalip Sehgal said.
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