Demonetisation triggers shift from unorganised to organised

Demonetisation has catapulted the shift from unorganised to organised retail sector in the light of the cash crunch, according to ratings agency India Ratings and Research (Ind-Ra).
While the market expected the sector to witness contraction in the third quarter of the fiscal, post demonetisation, Ind-Ra expects most companies in the organised retail sector to post low single digit growth with varying impact across different sub-sectors.
Organised retailers in the food, grocery and fashion retail segments to be unaffected, given the relatively low average ticket size of transactions (around INR 2,000) and the willingness of consumers to switch to cashless transactions, Ind-Ra said.

High value items namely jewellery, luxury items (watches) and consumer durables are expected to show a contraction in topline in the October-December quarter, it said.
The cash crunch impaired the traditional wholesale and retail channels and led to a shift in consumers from local grocery stores to supermarkets or hypermarkets, it explained.
Additionally, footfalls were also driven by the availability of cash withdrawal facility from the POS machines installed at some of these stores supported by the discount and promotional offers.

The consumers were quick in adopting the digital mode of payment and the share of cash transactions declined to about 20 per cent from about 50 per cent to 60 per cent earlier, Ind-Ra said.

It pointed out that while organised food and grocery retailers, specially, would be the biggest beneficiaries of demonetisation, they could however face the challenge of building customer stickiness and retaining the growth momentum.
It remains to be seen whether organised retail will continue to gain market share at the cost of unorganised retail post re-monetisation or the customers will go back to their preferred mode of transaction once the currency notes are replaced completely, it said.