PROPEL Retail and FMCG sectors

Introduction:

India's retail market is one of the largest in the world, and it is expected to reach US$ 1.41 trillion by 2026 from US$ 0.78 trillion in 2019. In the last two years, the pandemic-related disruptions have significantly altered the retail dynamics, and the industry's growth looks promising. The ongoing digital and start-up wave has amplified the proliferation of brands in the country and made the competition for customer acquisition more intense. The FMCG and retail sectors have shown resilience and rapidly adapted to the new normal. Right support and interventions will propel the sector to new heights and drive the economic growth of the country.

Market Growth:

The pandemic-related disruptions brought significant changes to the retail industry, and the FMCG and retail sectors faced massive disruptions across the value chain. However, after almost three years of disruptions, the country is now fully ‘open for business’. FMCG companies and retailers are looking at major expansion plans for the next five years, developing new routes to market, building new business models (including Direct to Consumer [D2C]), ramping up their offline presence, and investing behind online platforms, expanding their urban and rural coverage, etc. The increasing integration of technologies will help businesses analyse customer behaviour and effectively direct marketing campaigns to the right consumer segment. In addition, digital enablement will continue to improve inventory management, increase store walk-ins, drive user traffic to online channels, and increase brand recall by enhancing the overall customer purchasing experience.

Consumer Behaviour:

Consumer behaviour has undergone a significant shift in the past two years. The pandemic accelerated the adoption of e-commerce and omnichannel retailing in India. The journey of a shopper is becoming nonlinear (enabled by technology and connectivity and is likely to grow with the launch of 5G networks next year), and retailers and FMCG companies will continue to embrace technology and digitisation to make their businesses more agile and bolster their growth ambitions. Consumers are embracing sustainable business practices in retail, and 55% of consumers purchased a sustainable product or service within the past four weeks. According to FICCI’s latest estimates, the current wellness market in India is about INR 490 billion; wellness services account for 40 percent and are likely to grow at a 20 percent CAGR to reach INR 875 billion (during the next three years) with evolving consumer preferences towards preventive
health care.

Government Initiatives:

The Indian government has implemented several initiatives to promote the FMCG and retail sectors in India. The Union Budget 2022-23 allocated US$ 27.82 billion to the Department of Food and Public Distribution and US$ 222,19 million to the Department of Consumer Affairs. The government approved a Production Linked Incentive (PLI) Scheme for the food processing industry with an outlay of USS 1.4 billion in the FY2021-22 to boost domestic manufacturing and exports of food products. The country's retail trading sector attracted US$ 3.96 billion FDIs between April 2000 and March 2022. The government has approved 51 percent FDI in multibrand retail and 100 percent FDI in the cash and carry segment and in single-brand retail. Moreover, 100 percent FDI through automatic route has been allowed in online retail of goods and services. A new consumer protection bill has been drafted by the government with a strong focus on building an extensive mechanism and assuring timely and affordable delivery of justice to consumers.

Conclusion:

The FMCG and retail sectors in India have shown resilience and rapidly adapted to the new normal. With improved mobility, the sectors are showing signs of a healthy rebound as evident from strong consumer goods' sales and rise in demand for consumer durables.