Modern retail to help sector clip at 6% CAGR till 2023: Report

Currently modern or corporatised retail is about 8%, expected to grow to about 24%

Buoyed by growth in modern retail and alternate channels like e-retail and home-shopping, the retail sector is projected to grow at a compounded annual growth rate of 6% to touch $865 billion by 2023, says a study by consulting firm Technopak.

Estimated to be at $490 billion currently, modern or corporatised retail is about 8%, or $37 billion of the sector now and is expected to grow to about 24% ($204 billion) by 2023, said the report.

"There are some key trends that we are seeing. There is strong growth in alternate channels like e-shopping and home-shopping. Continuing spirited response from pure-play retailers and increasing number of exclusive brands are also indicative of growth in the sector," Technopak Vice-President Ankur Bisen said at a retail summit here today.

He further said, "e-tailing is expected to emerge as a key alternate retail channel, which will drive the growth of corporatised retail and hence its share in the total retail market, while e-retail is expected to touch $56 billion by 2023 from $1 billion now."

"Aspirations of consumers in smaller towns are similar to those in the metros. Exposure and affordability are driving this parity. However, the limited penetration of organised retail has helped growth of alternate channels. This trend will continue to grow unabated," Bisen said.

The study finds that non-food categories like apparel, consumer durables and IT and footwear have shown greater receptivity to corporatised retail.

While food and grocery comprise 69% of total retail market, the contribution is just 3% to corporatised retail market.

"This is because proper infrastructure and logistics is not available and so, this category has not been able to contribute to corporatised retail platform. The scenario is not going to change much in the future as policy uncertainties and lack of structural reforms across the value chain will act as deterrents," Bisen said.

The study said nearly $21 billion (56% of corporatised retail) comes from the top 24 cities that contribute to about 30% of the total retail basket. "Going forward, penetration of corporatised retail beyond these urban centres will drive growth," Bisen said.

However, corporatised and traditional retail will co- exist, he added.

The study said the retail sector has about 22.7 million direct employees, of which 22 million are part of corporatised retail. This is expected to grow to 34.3 million by 2023. Of this corporatised retail would comprise 31 million, while the remaining would be part of independent retail.