Telecom | Update
Sector Update | 3 March 2020
Retail Leadership Summit 2020
Preparing to capture growth potential
We attended the ‘Retail Leadership Summit 2020’ which saw participation from
managements of retail companies across verticals such as grocery, apparel,
footwear, furniture, QSRs and restaurants. The discussions provided a sneak-peak
into opportunities/challenges amidst new competition and changing business
models (read digital advent), as well as the near- and medium-term outlook.
On an expansion mode
Unlike in the west, retailers across verticals are steadfast in adding new stores with
even online players like Nykaa and Lenskart accentuating the idea to expand rapidly.
A more striking part is the willingness of retailers to move beyond the mere
transactional approach of retailing to more experience-led shopping – something
beyond what online already offers. This includes a wider catalogue of products,
digital thrust and on-demand services/deliveries. For instance, Bata is opening full-
service experience stores including ‘endless isles.’
Private labels, new product categories – key pull factor
One key takeaway from all our conversations – particularly with retailers across
categories (including apparel players) – is that private labels increase stickiness of
customers significantly as they address two things: (i) fill product/category gaps
which have lesser options from brands and (ii) improve value proposition with lower
cost. This facilitates (i) healthy footfall and growth, even in a highly competitive
environment and (ii) better supply chain management and profit margins. For
example, Amazon Fashion elaborated how new-age sustainable products with
‘AlcisXNari’ brand made out of recycled products are gaining traction.
Slowdown is sentimental
Retailers acknowledged the grim overall sales trend. Consumer confidence index is
low due to weak sentiment. Instead of aggressive advertisements, retailers have
increased intensity of below the line (BTL) promotional activities and rejigged price
offerings to boost consumption.
Huge runway for growth; large players to take disproportionate share
At USD700b now, India’s retail market appears poised to deliver a CAGR of 9.5%
(according to BCG) to more than double its size to USD1,800-2,000b by 2030. Top
five players’ contribution could increase from 4-5% to 10-12%, implying a much
higher 19% CAGR over the next 10-11 years. This has already grown from ~1% in
2010. Top five players’ share in developed markets ranges from 25-30%, which is
indicative of the promise that larger players hold to deliver disproportionate growth.
Increased focus on supply chain, data analytics and innovative product offerings are
all set to reshape the retail industry going forward.
Research Analyst: Aliasgar Shakir(Aliasgar.Shakir@motilaloswal.com);
+91 22 6129 1565
(Suhel.Ahmad@MotilalOswal.com); +91 22 5036 2611;
(Anshul.Aggarwal@motilaloswal.com); +91 22 5036 2511
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.