BCG RAI - Retail Resurgence in India-Leading in The New Reality (Feb 2021)

RETAIL RESURGENCE
IN INDIA
LEADING IN THE NEW REALITY
FEBRUARY 2021
Boston Consulting Group partners with leaders in business and functional expertise and a range of perspectives to
and society to tackle their most important challenges and spark change. BCG delivers solutions through leading-edge
capture their greatest opportunities. BCG was the pioneer management consulting along with technology and design,
in business strategy when it was founded in 1963. Today, corporate and digital ventures—and business purpose.
we help clients with total transformation—inspiring We work in a uniquely collaborative model across the
complex change, enabling organizations to grow, building firm and throughout all levels of the client organization,
competitive advantage and driving bottom-line impact. generating results that allow our clients to thrive.
To succeed, organizations must blend digital and human
capabilities. Our diverse, global teams bring deep industry
Retailers Association of India (RAI) is the unified voice of encourages, develops, facilitates and supports retailers to
retailers in India. A not-for-profit organization, RAI, works modernize and adopt best practices. It works with all levels
with various stakeholders to create the right environment of the government and stakeholders to drive employment
for the growth of modern retail in India. It represents an opportunities, promote retail investments, drive thought
entire gamut of retailers, from chain store retailers and leadership, enhance customer choice and build industry
department stores to independent emerging retailers. RAI competitiveness.
AUTH RS
Abheek Singhi
Managing Director and Senior Partner,
Boston Consulting Group
Rachit Mathur
Managing Director and Partner,
Kanika Sanghi
Partner and Associate Director,
Mehak Dhir
Principal,
Abheek Singhi
Managing Director and
Senior Partner,
Kumar Rajagopalan
Chief Executive Officer,
Retailers Association of India
FOREWORD
India has been seeing steady consumption growth driven by preferences in four large categories: staples, mobile phones,
strong fundamentals for several years. However, in 2020, the apparel and food ordering. Our insights suggest that while some of
Covid-19 pandemic dealt a heavy blow to the economy and the preference shifts are short term, some of the others will have
consumption patterns, changing several facets of the everyday life mid to long-term implications for the supply side. Overall, we are
of consumers. To understand the changes brought by the pandemic, positive about a strong sectoral comeback.
BCG conducted proprietary research in 2020 across a wide The report also shares a path forward for retailers, both in
range of consumer segments for India. The research delved into essential and discretionary segments, to lead and win in the
understanding the shifts in consumer purchase behavior across changing demand dynamics. We also lay out some interesting
categories and the underlying reasons behind the same. actions undertaken by international and domestic retailers to take
This report “Retail Resurgence in India: Leading in the new reality” advantage of the context. We hope you find this report informative
jointly developed by BCG and RAI details these shifts in consumer and useful for your business.
YOUR FUTURE HASN’T BEEN WRITTEN YET.
NO ONE’S HAS!
YOUR FUTURE IS WHATEVER YOU MAKE IT.
SO MAKE IT A GOOD ONE!
‘BACK TO THE FUTURE’

INDIA CONSUMPTION … SIGNIFICANT VARIATION …LEADING TO CLEAR
BACK ON GROWTH ACROSS DIFFERENT ACTION AGENDA FOR
TRAJECTORY… CATEGORIES… RETAILERS
Supported by uptick in economy, Driven by shifts in consumer From fighting the pandemic to
increased confidence and robust preferences and confidence leading in the new reality
fundamentals as pandemic recedes
10 22 54
CONTENTS
India has been displaying steady consumption growth
for several years with the expectation of consumption
tripling by 2030. The growth has been driven by
strong fundamentals of the country – increasing
share of affluent and elite households, urbanization,
nuclearization of households and increasing Gen-I
population with higher appetite to spend. However,
with Covid-19 hitting the country in 2020, the factors
driving consumption came under pressure and the
avenues for consumption growth became limited.
Retail sector too saw its first contraction in 2020 post
showing double digit growth over past several years.
EXECUTIVE
However, economic revival is on the anvil now. The
signs of recovery are visible both on-ground (increasing
GST collections, increasing e-way bills etc.) and in the
sentiments of consumer and capital markets. We
SUMMARY
expect India’s retail to bounce back to the pre-Covid
trajectory, with a delay of 1-2 years introduced by the
pandemic.
The category consumption stack of Indians has been
evolving over the last two decades with spend towards
categories like health, clothing and footwear growing
faster than basic categories like food. Additionally,
many new categories and channels of spending also
accelerated during this time. Now, Covid-19 has brought
changes in the spending patterns of consumers along
with some long-term lifestyle changes.
In staples, the major emerging trends are reduced
need to ‘touch and feel’ the products before buying and
increasing focus on brand. Consumers are preferring
healthier and pure products. Online media is emerging
both as a strong influencer as well as buying channel for the products are expected to be long term.
category which traditionally has least online penetration in We believe that as consumption recovers steadily, retail
India. In mobile phones, functional needs for low-income sales are poised for a comeback in 2021. India’s retail
people and upgradation needs for high-income people market has been at a higher growth trajectory than several
are driving purchases. Also, while price is the top driver bigger economies and the same is expected to continue
for low-income people, brand trustworthiness has gained through 2030. There is a big opportunity for retailers to
importance for high-income people. Imported value capture a share of the increasing demand in the years
brands are performing strongly despite “Made in India” ahead. However, they need to cater to the changing
sentiment, due to limited options and compelling prices. demand dynamics and re-evaluate their value proposition
In apparel, comfort wear categories like athleisure are basis their target segment, brand promise, range and
witnessing significant acceleration owing to ‘work from assortment, design and quality, pricing, service, experience
home’ and fitness needs of consumers. Role of traditional and omni offering.
media as an influencer has got diminished in this category The chosen value proposition will then require retailers
post-Covid with social media and other online channels to take key business model decisions centered around
emerging as dominant influencer. Though the share of seven themes a) Adapting store network for safety and
online buying has increased, brick and mortar stores omnichannel excellence, b) Providing right product and
continue to be relevant for apparel. In food ordering, merchandise offer c) Pricing and promotions across
need-based ordering has increased instead of celebratory consumer cohorts, d) Innovating along the purchase
but spontaneous buys remain relevant. Word of mouth journeys, e) Enhancing supply chain agility, f) Optimizing
recommendations remain important as selection driver. customer acquisition cost and g) Creating digital capabilities
Aggregators and company websites have seen increase in in the post-Covid world. Globally, several essentials and
share but doing phone calls to order remains relevant in discretionary players have taken such decisions to ride
the category especially for low-income people. over the pandemic. Lastly, in the long term, locally adapted
Some of these trends like shift to need-based buying in operating model decisions like low-cost ops, multi-channel,
food ordering or focus on only functional and upgradation use of flexible labor, alliances and data driven play will be
needs in mobile phones are expected to be short-term. the key to market leadership in the new reality.
Trends like focus on price and brand by low- and high- We hope the report will serve as an inspiration and a call
income groups respectively in mobile phones or fast growth to action for retailers who want to emerge victorious from
of athleisure apparel should be important in medium this unprecedented crisis which our generation has seen.
term and trends like increasing online penetration across
categories and reducing need to ‘touch and feel’ food
INDIA CONSUMPTION BACK
ON GROWTH TRAJECTORY…
Supported by uptick in economy, increased confidence
and robust fundamentals as pandemic recedes
10 RETAIL RESURGENCE IN INDIA

INDIA CONSUMPTION BACK ON GROWTH TRAJECTORY 11
PRE-2020
11-12% 10-11%
360-370
115-125
35-45
Total consumption
(INR Tn)1
India displaying steady

2010 2019 2030
consumption growth Pre-Covid
pre-2020; size of
consumption expected
to triple by 2030 73 200 580-590
India GDP
(INR Tn)2
54.8% 60.2% 62.0%
India Consumption
as % of GDP
Note: 1. Total household consumption is in nominal value 2. GDP of India is in nominal value
Source: BCG projections and estimates

Affluence, Urbanization, Nuclearization, Gen-I population – key drivers of
consumption growth
Expanding base of affluent and elite households >1/3rd population getting urbanized
No of households, Mn % of households % of total population
80 79 1.0 40 Urban population (% of total population) ~38
60
~34
35
40 36 0.5 ~31
23 30
20 16
12
6
0
2010 2019 2030 0.0 25 2010 2019 2030
% of Affluent and Elite households No of Affluent and Elite households
3/4th of total households being nuclear1 Increasing Gen-I population with higher appetite to spend2
% of total households % of total population
80 80 ~77
Nuclear families (% of total households) Gen I population (% of total population)
~76
75 70 ~69
~72
70 60
~66 ~58
65 50
60 2010 2019 2030 40 2010 2019 2030
Source: CCI proprietary income database; BCG projections and estimates; 1. Nuclear households are households comprised of a married couple or a man or a woman living alone or with unmarried children
(biological, adopted, or fostered) with or without unrelated individuals; 2. Gen I constitutes individuals who have grown up in the liberalized economy (<14 years of age when economy started opening),
Population % with age 0-29 taken for 2010, age 0-39 taken for 2019, age 0-49 taken for 2030;

2020
US to lockdown 70 million
people in bid to stop India implements strictest
coronavirus spread lockdown in the world, lags in
testing: Expert
Coronavirus job losses

could total 47 million,
unemployment rate may
hit 32%, Fed estimates
In 2020, India and the

world were hit by the
Covid-19 pandemic Rs. 3 lakh crore gone! Sensex
tanks 7oo points amid rising
Covid-19 cases
Coronavirus:
The world economy
at risk
Italy anounces restrictions
over entire country in
attempt to halt coronovirus
Brazil central bank cuts 2020 In one of world’s toughest

GDP forecast to -6.4%, warns lockdown in South Australia,
of uncertain recovery only one family member
allowed to leave home.
Source: World map source Bloomberg; Press Articles

Factors that were driving …came under pressure during
consumption… the pandemic
• Households’ income on the rise • Job losses, salary cuts

• Increasing share of Affluent + Elite HHs • Shutdown of businesses
Affluence
• Access to avenues of consumption like

• Shutdown of commercial establishments,
malls, shopping complexes, multiplexes etc.
impacted supply chains
• Information availability through online and
• Shrink in advertising by businesses
offline media
Accessibility
• Positive outlook towards future prospects • Negative outlook towards economy

• Propensity to increase spends • Reduction in spends, income crunch
Awareness &
Confidence
• Safety concerns in going out

• Tendency to shop anywhere, anytime
• Focus on savings, reduced
• Increasing discretionary expenses
Attitude discretionary expenses
to spend
Note: India-specific trends

Overall retail sales decreased in 2020 post witnessing double digit growth over
the past many years
Overall retail
(INR Tn)
~-3%
Retail sector declined
for the first time in
12-13%
India in decades
KEY CAUSES
Supply chain and

47-48
operational restrictions 16-19
46-47
Lower footfall due to

health risk
2010 2019 2020
Lower discretionary spends
due to income uncertainty

However different formats impacted by varying degree through the year
Brick-and-mortar retailing (especially modern trade) suffered the most, e-commerce got an acceleration
Illustrative for grocery retail
2010 2019 2020

General Modern
Trade (GT) Trade (MT) E-commerce
Brick and Mortar Retailing 1Q’20

(INR Tn)
45-46 ~-4%
~11% 43-44
16-19
2Q’20
E-commerce
(INR Tn)
~28% 3Q’20
3-4
~48% 2-3
<0.1
4Q’20
Source: RAI, BCG projections and estimates

USA FRANCE CHINA
Globally, in-store In-store spending1

spending was vs. pre-Covid-19 levels –3% –4% -7%
repressed over the
year, clear shift in
preference for online
Online spending1 ~36% ~17% ~20%

vs. pre-Covid-19 levels
Source: BCG projections and estimates; 1. Total spending captures market size for overall retail, In-store spending captures market
size for store-based retailing and online spending captures e-commerce market size changes in the respective countries; comparison
of 2020 numbers with 2019

GST collection reaching pre-Covid level; uptick in logistics and
transportation sector
Mn INR Tn
80 1.5
1.11 64
60
57 1.15
1.0
50
40
0.5
20
0 0.0
Jan Apr Jul Oct Dec
2020
GST Collections1 # E-way Bills2
Economic revival is on
the anvil now… recovery
Uptick in Manufacturing & Services PMI3 - signifying expansion in key sectors visible on-ground…
59 56
60 55 52
56 54 52 50
40
27
20
0
Jan Apr Jul Oct Dec
2020
Manufacturing PMI Services PMI
Source: 1. Includes all components: CGST, SGST, IGST, Cess; Based on data from GST Council; 2. Required to be generated when
transporting goods worth >INR50,000, values taken from GST Network; 3. IHS Markit, CMIE

Decrease in number of people planning to reduce spends
Spends outlook1:
I expect my spends to decline in next 6 months (%)
% respondents
47
46 45
44
40
Mar Apr May start May end Aug

2020
…as well as in
sentiment of consumer Sensex touched 50,000 level for the first time
and capital markets Movement of BSE Sensex2
On Jan 21, 2021
‘000
50
50
45 49
41 40
40 38 39
28
0
Q1 Q2 Q3 Q4 Q1
2020 2021
Source: 1. BCG Covid-19 Consumer Sentiment Survey, 20th Jul – 02nd Aug’20 (N=3,000); 2. BSE India Website

We expect India’s Retail to bounce back to the pre-Covid trajectory
Total consumption
(INR Tn)1
8-9%
360-370
11-12% 2020-21 will lead to a 1–2 year delay
115-125
35-45
Total retail market size
(INR Tn)
130-140
9-10%
2010 2019 2030 (F) 2031-32 (F) 47-48

12-13%
Pre-Covid Post-Covid
16-19
73 200 580-590
India GDP
(INR Tn)2
54.8% 60.2% 62.0%
2010 2019
India Consumption 2030 (F) 2031-32 (F)
as % of GDP Pre-Covid Post-Covid
Note: 1. Total Household consumption are at nominal price 2. GDP of India is in nominal value;

… SIGNIFICANT VARIATION
ACROSS DIFFERENT
CATEGORIES…
Driven by shifts in consumer
preferences and confidence

SIGNIFICANT VARIATION ACROSS DIFFERENT CATEGORIES 23
HH Consumption (INR Tn)
35-45 115-125
Food, beverages,
34% 32% tobacco
7% 7% Clothing & Footwear
20% 19% Housing & household products
4% 5% Health
17% 16% Transport & Communication

4% Education
4%
Consumption in 3%
3% Leisure
Other goods & services
India showing 12% 15%
growth across
2010 2019
all categories of CAGR CAGR
household spending (2019-2030) (%) (2019-2030) (%)
Food, beverages, Transport &

8.2% 8.2%
tobacco Communication
Clothing & Footwear 9.1% Education 10.3%
Housing & household

9.3% Leisure 9.1%
products
Health 9.6% Other goods & services 6.5%
Source: CCI proprietary consumption model, BCG analysis

Category Emerged in Size, 2019
(INR Bn)
E-ticketing/ online travel 2000 3,300-3,400
Size, 2006
Passenger Air Travel 1932 (INR Bn) 2,600-2,700
350-400
Ride Hailing 2010 2,200-2,300
Mobile wallet payments 2004 1,900-2,000

Many new
categories and
channels of
Smartphones 2009 1,800-1,900 spending have
accelerated over
the past 2 decades
Holiday rentals 2013 100-150
OTT1 2007 50-100
Cloud Kitchens 2011 30-50
Wearables 2013 20-30
Note: 1. OTT refer to OTT video;

Source: Press search; Analyst reports; Euromonitor

The pandemic has also brought in changes in spending patterns…
Trends which are seeing acceleration Trends which are seeing reversal
Spending on categories like

Increase in spend on health
apparel and footwear
Premiumization in food
categories, especially by Premiumization in
high income groups discretionary categories
High growth in brick-and-mortar

E-commerce, digital payments
modern trade channels
Recovery from pandemic happening at varying speed across categories - essentials going strong,
while discretionary recovering at a slower pace

SIGNIFICANT
SIGNIFICANT
VARIATION
VARIATION
ACROSS
ACROSSDIFFERENT
DIFFERENTCATEGORIES
CATEGORIES 27
Atmanirbhar Bharat: A confectioner in every household
HI I’M
Sushma
Getting to
Sushma lives with A full-time
know
her husband and homemaker
2 children for 10+ years
No formal Comfortable
Life before the pandemic

employment history, income from
but strong grasp of husband’s mid-
household finances level employment
… along with some at a reputed firm
lifestyle changes
that are here to Great cooking skills,
“celebrity chef” status
stay... in the neighborhood
Plans to continue
and expand the
Depletion in savings, business, even
The shift in lifestyle
reduced expenditure, though husband’s
to make ends meet salary Is reinstated
post a salary cut
Profile
Initiated a homemade
35 years | Jaipur sweets venture
to supplement the
household income

Digitizing finances: Internet—India’s newest banker
HI I’M
mANOJ
Getting to
know
Manoj has a heart He is skeptical about online

ailment history purchase, but has a digitally
savvy son
A deal hunter, negotiating for

Life before the pandemic
the best prices at stores
... impacting purchase

patterns distinctly
Finds online products and
transactions untrustworthy
Gained confidence in
online shopping, turned
Under strict lockdown to e-commerce for non-
The shift in lifestyle
due to heart ailment, essentials like apparel too

with no mobility to
shop essentials
Profile
Introduced to online
shopping & benefits of 50 years | Mumbai
online payments—risk free,
economical, simplified
accounting of finances

Category selection based on mix of high and low frequency, ticket size, products and
services
Spend/
Occasions per year Occasion
(INR)
Essential
HIGH
spends
Staples 17 2,7851
FREQUENCY
Deep dive into select MEDIUM

essential and discretionary Order-in 14
FREQUENCY
605
categories to analyze
contemporary consumer
behaviour Discretionary
spends
Apparel 7 2,097
LOW
FREQUENCY
Mobile <1 10,860
High Medium Low
What is the frequency of purchase in a yr? What is the average spend on the <category> in a yr?
1. Spend/ month Data of only urban consumers
Source: CCI Survey & BCG analysis

STAPLES

Indian packaged staples market1 growing at CAGR of 9-10%
INR Bn
9-10%
1,700-1,800
480
Edible
1,100-1,200 Oil
Indian packaged 320 Rice

300
staples market to
reach INR 1,700-1,800 300 Spices
180
Bn by 2024…
190
240 Atta
160
…driven by 150
180 Pulses
premiumization, 90
60
100
90
Sugar
Salt
branded products and
private labels 2019 2024 (F)
Market growth driven by 3 key trends
Movement towards Premiumization Push on private labels

branded offerings, by retailers/ wholesalers
new players in the market
Source: 1. Expert discussions, BCG projections and analysis

3 key shifts in Staples post-Covid
Reduced need for ‘touch and Preference to healthier, Increasing online share in
feel’, focus increasing pure food influence & buying
on brand
Will continue Expected to Will continue

in long term continue for high in long term
Future income segments
Perspective

Clear shift from the Focus shifted from ‘touch and feel’ to brand and quality, price still important
past, consumers have
somewhat got past the % respondents1
desire to ‘touch & feel’ 26%

16%
Shift in preference for
staples; focus increasing 16%
20%
~3x
‘touch and feel’ in tier
on brand 27%
2-3 cities compared to
Metros - Tier 1
27%
23% 19%
Used to buy loose pulses & dal from 14%
supermarkets before. But have started
17% 18%
to buy from ‘leading fmcg companies’
now. Others might have touched it in the Growth in packaged
supermarkets Pre-Covid Post-Covid 11x staples in rural vs
- Tier 3 city consumer metro2
Option to touch and feel Quality
Reasonable pricing Brand
Others
Increasing share of Online emerging as significant source of influence; increase in e-commerce buyers
online as a source
of influence and Increase in # of
% respondents, getting influenced 1.4x ecommerce buyers3
channel of buying by online for purchase1 (indexed to pre-Covid)
I prefer now online shopping because New users satisfied with

things are available there. In my grocery 19% 35% 70-80%
experience3
store either products are not available or
have to stand outside for 30 minutes Pre-Covid Post-Covid
- A Tier 2 city consumer
Increase in online influence New users willing to
50-60%
~3x in tier 1 and 2 cities compared continue in future3
to metros1
Source: 1. CCI category consumption survey (Pre-Covid: Period – 2019, N=8,500; Post-Covid: Period – Sept’20, N:1,200); Data of only
urban consumers. 2. Nielsen Q3 2020 Snapshot; 3. BCG Covid-19 Consumer Sentiment Survey Jul 20-02 Aug,2020 (N = 3,000), Among
new users, scores for Very high willingness/ satisfaction

Shift from family suitability to chemical-free & health promoting products
% respondents1
4%
17% Suits everyone in family
54% Free from chemicals/promotes health
34%
Most trusted
8% Most popular
22%
11%
9% 11%
Others Increasing
18% 16% attention on
healthier products
Preference shift from family suitability to
Overall health promoting products
Low-income groups continue to use physical attributes for quality, high income Organic and chemical free products major
groups shifting to certified and organic products quality drivers for high-income groups
% respondents1 % respondents1
Started having organic pulses, sprouts,

39% vegetables. Organic food is vitamin rich
63% 54% and does not have any additives
75% - A metro city consumer
24%
8%
14% 8%
8% 4% 25%
6% 30%
11% 19% 13%
Pre-Covid Post-Covid Pre-Covid Post-Covid
Strugglers Elite
Physical attributes (color, size etc.) Organic/unpolished Certifications No harmful chemical
Source: 1. CCI category consumption survey (Pre-Covid: Period – 2019, N=8,500; Post-Covid: Period – Sept’20, N:1,200); Data of only
urban consumers. Strugglers: <1.5L, Elite: >20L (Annual average household income)

MOBILE PHONES
36 RETAIL
THE RESURGENCE
RESURGENCE
OF IN
RETAIL
INDIAIN INDIA
Incremental growth opportunity for India due to low saturation, as compared to
countries with scope for only replacement/ transition
Smartphone penetration % (2019)
100
Replacement
opportunity
80 US Germany
France
Brazil
South Korea
60 China
Thailand
With 38% mobile
Indonesia
40
penetration vs global
India
Incremental Transitional
20
opportunity Nigeria opportunity
average 66%, India has
0 20 40 60 80 100 high potential for further
Mobile penetration % (2019) growth in mobile sales
Sales value growth
India expected to achieve a faster growth rate than other countries
expected to be ~9%, India
to lead market growth
Country
India USA China
Sales Value CAGR +8.9% -0.5%

(2015- 2024) +0.8%
Source: Forrester Research (ForecastView Global Mobile, Smartphone, And Tablet Forecast, 2019 To 2024; Covid-19 Update)
IDC sales data by value (USD Mn)

3 key shifts in Mobiles post-Covid
Functional and upgradation Polarization in purchase Imported value brands

needs drive purchase drivers – Price and brand continue to dominate
Short term change Expected to

Medium to long term,
due to income continue due to
varying by segment
uncertainty limited alternatives
Future
Perspective

Purchase triggers see a concentration towards functional needs post-Covid
Dominance of functional needs

67% 60% 50% (replacement, repair) due to Functional needs
97%
6%
income uncertainty in low
income groups
become a focus for low
5% 12% income groups, high
34%
21% 19% income groups move
7% 3% 8% 11% towards upgradation
Upgradation requirement
increased due to need for better
Strugglers Affluent features (video streaming2
Imported value brands
increased by 16% & conferencing performing strongly
Functional Spontaneous Upgradation Experimental by 485%), but functional needs
remain highest despite “Made in
India” sentiment, due
Imported brand sales by volume share continue to grow in 2020 by 17% to limited options and
Leading countries in market by % share of value
compelling prices
Sales Volume %
(Q3 2020):
64% 27% 7%
2019 24% 17% 47%
Everyone is using Chinese phones only;
if there is a good feature phone at a good
China South Korea USA price from China – how can I say no that?
Apr - Dec 1% 1%
30% 7% 58% - Recent smartphone purchaser2
‘20
India Finland
China India Others Limited alternatives in the market for consumers
looking for value for money products
CCI Category Consumption Survey (Per-Covid: Period-2019, N= 8500; Post-Covid: Period-Sept 20, N=1200). Data for urban consumers
shown; 2. BCG CCI Survey Sep 2020. Strugglers: <1.5L, Next Billion: 1.5-5L, Aspirer: 5-10 L, Affluent: 10-20 L, Elite: >20L
Source: CCI Survey and BCG analysis, Sep 2020 2. [BARC Nielsen –TV + Smartphone consumption report during crisis, 7th May 2020] 3.
IDC sales volume and value by brand for 2019, 2020 Q1-3

Purchase drivers polarizing towards economical pricing in low income, and brand
trustworthiness in high income segments post-Covid
16% 15%
31% 30%
44% 43%
25% 26%
37% 40% Strugglers and Next Billion1:

41% 34%
Income uncertainty has
driven the need strongly
1% 7% 3% 3% 4% 5%
towards offers, discounts and
Lower income groups Pre-Covid Post-Covid Pre-Covid Post-Covid lower prices
express higher price Strugglers Next billion
sensitivity..
…while brand
trustworthiness gains 31%
43%
29%
44%
importance for high 26% 23%
income segments 14%
9%
Affluent and Elite1: Higher
31% screen time and usage,
43%
38% 35% coupled with less opportunity
3%
2% to go out for repairs, leads
2% 2% 5% 3% 3% 12%
to increased preference of
Pre-Covid Post-Covid Pre-Covid Post-Covid trustworthy brands for better
Affluent Elite and longer performance
Brand Attractive price/offers Features

Reviews and recommendation After sales service
Source: 1. CCI Category Consumption Survey (Per-Covid: Period-2019, N= 8500; Post-Covid: Period-Sept 20, N=1200). Data for urban
consumers shown. Strugglers: <1.5L, Next Billion: 1.5-5L, Aspirer: 5-10 L, Affluent: 10-20 L, Elite: >20L

APPAREL

Indian apparel market growing fast after seeing downturn in 2020
INR Bn
5,700-5,800
18%
-27%
13% 4,000-4,200
Indian apparel 3,000-3,100
market most hit 2500-2600

by Covid, making a
gradual comeback
Despite a ~27%
drop in size in 2020, 2015 2019 2020 2024 (F)
market expected to Market growth driven by 4 key trends

come back strongly
driven by a range
of consumer and
supply side factors
Focus on
Entry of
E-commerce private labels
Premiumization international
and Digital (entry level as well
brands
as retailer brands)
Source: Press Search, BCG estimates and projections

3 key shifts in Apparel post-Covid
Casualization of wardrobe, Social media/ websites Increasing e-commerce but

focus on athleisure dominant source brick and mortar to stay
of influence relevant
To continue in Will continue in Will continue in

near term long term long term
Future
Perspective

Wardrobe getting Growth of categories like athleisure fast-tracked during Covid
casualized, fast growth of

categories like athleisure
Consumers preferring casual comfortable
clothing over formal 20-25% expected CAGR for
athleisure category • Increased work-from-home (wfh)
over next 4-5 years1 − Expectation of partial wfh
continuing even after pandemic
• Rising spends on health and wellness
percolating to apparel
− Shifting focus towards fitness needs
• Consumers increasingly dressing for
We have wardrobe full of clothes for going comfort
to office and hanging out with friends. But Category growing faster than
we didn’t have enough for wearing at home. the overall market
So, I bought myself Tracks and short pants
and Night suits recently…
- A consumer working from home

Influence of online channels increased significantly post-Covid, diminished role of
traditional media
% respondents2
22%
30%
36%
Social media/ websites/ 41% Pre-Covid Post-Covid
apps emerging as a Across city tiers,
online mediums
dominant source of acting as major
29% 42%
influence source of influence
TV/ print/ radio Online3 Word of mouth
Source: 1. BCG estimates and projections; 2. CCI category consumption survey (Pre-Covid: Period – 2019, N=8,500; Post-Covid: Period
– Sept’20, N:1,200); Data of only urban consumers. 3. Includes reviews/ ratings on shopping websites/ Apps (Flipkart, Amazon), Social
Media (Facebook, WhatsApp, Instagram, etc.) and search websites like google

Increase in online buying, differences seen in income groups on priority of
buying channel
1.2x Increase in # of ecommerce buyers (current users indexed to pre-Covid users)1
Strugglers
% respondents2
4% 9%
Large share of apparel
34%
47% Pre-Covid 49% Post-Covid
Focus of low-income
groups shifted towards
commerce has shifted
local shops/ boutiques online, other channels
58% relevant based on
income groups
For high-income groups, modern retail still
the biggest channel for purchase
Affluent
Price conscious low-income groups have
% respondents2 moved towards local shops/ boutiques
post-Covid
7%
20%
14%
Pre-Covid 10% Post-Covid Higher shift in high

income groups towards
online buying, however
79% 70% modern trade outlets
remain preferred channel
of buying for them
Hyp/ MBO/EBO Local shops/ boutiques Online
Source: 1. BCG Covid-19 Consumer Sentiment Survey Jul 20-02 Aug,2020 (N = 3,000); 2. CCI category consumption survey (Pre-Covid:
Period – 2019, N=8,500; Post-Covid: Period – Sept’20, N:1,200); Data of only urban consumers. Strugglers: <1.5L, Affluent: 10-20L
(Annual average household income)

FOOD ORDERING
46 RETAIL
THE RESURGENCE
RESURGENCE
OF RETAIL
IN INDIA
IN INDIA
Food Ordering in India expected to grow at 15% to 945 Bn market by 2024,
adjusted for Covid
15%
946
15%
832
401
657
Food ordering on a
Revenue
strong growth trajectory
2018 2020(F) 2022(F) 2024(F) at 15% CAGR, on a rapid
Revenue (INR Bn) recovery track
Strong growth
+12%
+12%
trajctory driven by..
271
244
204
138 Rapid urbanization, and acceptance
of online food delivery in tier 1 and
2 cities
2018 2020(F) 2022(F) 2024(F) Users
Total Users (Mn) Smartphone and internet adoption,
driving higher penetration (expected
growth from 12% in 2019 to 19% in
2024)
Rapid recovery from Covid impact, as industry innovates to meet requirements
Case in Point- Leading QSR player

• 2020 Q3 for the company saw a +18.5% growth in delivery and +64.3% in takeaway
year-on-year
• Highest ever App downloads at 7.4 mn
• Online ordering as a % of delivery sales increased from 87% in Q3 FY20 to 98% in Q3 FY21
Source: Statista (Forecast adjusted for expected impact of Covid-19), September 2020; Online Food Delivery Market in India 2020 -
Part-I, Netscribes, Pg 19, 20; Q3 2020 Press release

3 key shifts in Food ordering post-Covid
Spontaneous buy still strong; Word of mouth still a Aggregators gaining traction;
needs based order replaced significant factor tele calling still relevant
celebratory
Short term, till Medium term, till

household help Medium term internet penetration
Future starts returning increases
Perspective

Spontaneous buying remains strong, but functional needs replace celebratory
reasons to order
Overall
6%
19%
29% Functional needs
18% increase across
29%
income groups due
31% to lack of domestic Functional needs
support to cook,
while celebratory replace celebratory
36% 32% occasions decreased
post-Covid
reasons to order across
income segments
Contrary to popular
Next Billion Elite
3%
belief, spontaneous
6%
12%
30%
food ordering increased,
27%
24% 33% Spontaneous buying
gains prominence
particularly in high
7%
28%
in higher income income groups
34% 28% groups as ordering
44% becomes one of the
few outlets to break
41% monotony
30% 33%
20%
Functional Societal/ Celebratory Spontaneous Experimental
Source: 1. CCI Category Consumption Survey (Per-Covid: Period-2019, N= 8500; Post-Covid: Period-Sept 20, N=1200.
Data for urban consumers shown
Strugglers: <1.5L, Next Billion: 1.5-5L, Aspirer: 5-10 L, Affluent: 10-20 L, Elite: >20L

Word of mouth remains significant across income segments, promotions gain
importance for lower income segments
Strugglers Elite
Word of mouth 43%
continues to dominate 31% 29% • Word of mouth gains
significance due to
as a selection driver 2% 1%
59%
5%
7%
9%
7%
higher trust factor,
19% 5% and lower internet
7% 21%
Restaurant ratings gaining marginally 3% 29% penetration amongst
post-Covid 11% lower income segments
18%
2% 0% • Pricing also gains
14% 25%
14% 5% importance for this
Promotions and discounts become 16
8%
4% 4% segment due to income
important in lower income segments
instability post-Covid
Pre-Covid Post-Covid Post-Covid Post-Covid
Word of mouth Ratings Promotions Features Health food

Convenience Pricing
Online sees a significant increase in share, but calling still significant for lower
While online increases income groups
as preferred channel Overall Strugglers Elite
across segments... 21%
26% 29% 29%
38% 42%
16%
18% 22% 20%
... Lower income groups 22%
64%
30%
still rely heavily on 56%

40%
50% 51%
28%
calling to order”
Pre-Covid Post-Covid Pre-Covid Post-Covid Pre-Covid Post-Covid
Online aggregator Company website Calling
Source: 1. CCI Category Consumption Survey (Per-Covid: Period-2019, N= 8500; Post-Covid: Period-Sept 20, N=1200). Data for urban
consumers shown Strugglers: <1.5L, Next Billion: 1.5-5L, Aspirer: 5-10 L, Affluent: 10-20 L, Elite: >20L

Key changes in consumer preference observed across the categories
Common themes emerging across categories
Brand consciousness Online growth as a sales Value for money Need based buying
increased, particularly in channel and source of wanted as price sensitivity increased across
health related categories influence accelerated increased discretionary categories
Staples Mobile Apparel Food Ordering
Preference to packaged, Polarization in Casualization of Promotional buying

quality staples, from purchase drivers – Price wardrobe, focus on increased in lower income
earlier need for ‘touch and and brand athleisure groups
feel’
Imported value brands Increasing e-commerce Tele-calling still important,
Health food gains continue to dominate sale, but brick & mortar but aggregators gaining
relevance still high

CEO Speaks
Essentials
Devendra Chawla
CEO, Spencer’s Retail
Post-Covid, people are moving towards buying more packaged products, than
loose items. We have seen increase in the sale of packaged staples over last 2-3
quarters compared to last year. People have also started preferring healthier
foods like organic products. We have increased the portfolio of such products
in our stores. Our omni channel offering has also been very appreciated by
consumers as our out of store ( OOS ) business has grown multiple times than
pre Covid period. Times ahead are clearly exciting & challenging.
Adarsh Menon
Senior Vice President and Head
Flipkart Wholesale and Walmart India
The pandemic has accelerated the use of online channels for shopping
and we have witnessed a surge in e-commerce adoption across the country,
especially in tier 2 and tier 3 cities, where even small kiranas in towns such
as Meerut, Agra, Kota, Guntur, Karimanagar, Amravati etc, have taken to
e-commerce as a preferred mode to do business. We expect consumption
to shift towards e-commerce even further and will continue investing in
technology and infrastructure to bring small businesses in Bharat online and
enable prosperity and growth for the retail ecosystem.

Vishak Kumar Discretionary
CEO, Madura Fashion
Business is coming back for sure. While consumers today feel a lot more comfortable walking into
stores now, there is still a clear skew in preference of high street stores. I expect two important usage
occasions that will provide the next quantum of business recovery. The first is the return of weddings –
which is expected to see a surge in April. The second is the “return to office”, we expect a large part of
the work force to return to physical offices over the next few months- fueling the need for work wear.
Lalit Agarwal
Chairman and MD, V Mart
Our e-commerce operations which were negligible pre-Covid increased significantly during lockdown,
stabilizing now but still higher than pre-Covid; role of stores still very important for us – 95% of our target
segment in value apparel prefer offline channels for the experience of it; ROBO – Research online and
buy offline is gaining traction among users; so we have increased presence on social media to influence
customers; categories like athleisure, loungewear and value apparel seeing high growth along with our private
labels; we are focusing on omni-channel, brand & product differentiation and digital & analytics for growth.
Neelendra Singh
Managing Director, Adidas
We see more preference towards items related to health, and believe this trend and shift will continue
in the long term too. Consumers are now more aware of ‘value’ that products and services provide- Its
not about lower prices, but the VALUE she/he is expecting at a particular price. Moreover, we believe
the consumer will increasingly trust brands. Relationships and engagement with brands will matter
more than before.

…LEADING TO CLEAR ACTION
AGENDA FOR RETAILERS
From fighting the pandemic
to leading in the new reality

LEADING TO CLEAR ACTION AGENDA FOR RETAILERS 55
The pandemic has had a distinct impact on forces that shape the retail landscape
Consumer Supply side Data and technology New competitive Regulations

Shifts Innovations driven disruptions forces
Attitude and Disruptions and Data & tech to shape Blurring omnichannel Local based
demographic changes irregular supplies shopping preferences boundaries seeing a sourcing, labour
new set of players laws and store ops
Covid emerged as a Black Swan event, with impact across the board:
Shifts in consumer behaviour driven by economic and access issues
Supply chain disruptions
Technology creating consumer awareness and commerce disruptions

Potential for dominant players to consolidate market share in fast growing sector
Current Estimated
USA UK India India

(2018) (2018) (2019) (2030)
As consumption
recovers steadily,
~3.3 ~0.5 ~0.7 1.8-2.0 retail sales poised for
Size of Retail
Market ($ Tn) a comeback in 2021...
...presenting an
opportunity to
capture a healthy
Market size
3% 0% 4% 10%
share of the pie
CAGR
25-30% 30-35% <5% 10+%

Top 5 Players
Market Share
Source: Euromonitor, Company annual reports, BCG analysis

Retailers need to evaluate pivotal changes in their consumer value proposition and
decide positioning options basis it
Consumer value proposition Positioning options
Responsible Retail Focus on mainstream sustainability, localized sourcing,

Target Segment Conscious play fair trade and align with consumer values
Alternate Retail Focus on new business models, e.g subscriptions,

Pricing
Non traditional offerings renting of products, or solutions based retailing
Brand Promise Personal Retail Focus on individual level personalization,

Individual is important customization of product / service
Service
Spectacular Retail Focus on Retailtainment (entertainment, gamification,
experiences and/or additional services) to engage & involve
Experience led retail consumers in shopping experience
Range & assortment
Omnichannel Retail Focus on creating uniform, smooth and integrated omnichannel

Seamless Channels experience across both in-store and online channels
Experience
Convenient Retail Focus on ultra-convenience in in-store experience, delivery

and/or online shopping journey; focus on reaching the
Design & quality Quick & Easy customer through small stores in urban locations
Value Retail
Omni offering Focus on low pricing
India values “value”

Equally imperative to design the operating model with chosen direction of proposition
Priority impact on nature of retail

Business model decisions Essentials Discretionary
Adapt store network for safety and

1 omnichannel excellence
Align offer through merchandising, SKU

2 optimization and investing in private labels
Adapt pricing and promotions to reflect new

3 customer needs and expectations
Innovating purchase journeys through click-&-collect,

4 curbside pickup, store layout redesign
Supply chain agility through planning analytics

5 and strategic partnerships
Optimize customer acquisition cost by digital personalization,

6 channel allocation & value communication
Develop the digital capabilities to execute all

7 actions successfully
High Priority Low Priority

Essentials players developing new strategies to ace the game across the world
1 UK supermarket chain explored fluid formats to increase availability

Adapting • Initiated several formats in different geographies
network • Click and collect, express delivery through app, dark stores with increased timings were
some of the changes
2 Leading US supermarket launched private labels for higher revenue

Aligning
offering • Witnessed high revenue growth for its private label products in Q2, 2020
• Launched 50+ new private label products by end of 2020
4
US food retailer offering safe journeys to grab market share
Innovating
purchase journeys • Increased curbside pickup to 3X post Covid
• Offering it across 150 stores now, covering > 30% of total US stores
5
Ensuring supply Italy supermarket chain leveraged partnership to ensure delivery
chain agility • Reported a 10-fold increase in sales via its partnership
with logistics start-up, Glovo

Discretionary players developing new strategies to ace the game across the world
1 Leading US mobile brand transforming stores to offer seamless experience

Adapting
network • 20+ Express stores launched across the country
• Other stores designated to Curbside pickup option
3
Korean mobile brand drove sales by offering discounts through partnership
Defining pricing &
promotion • Partnered with an OTT provider, providing bundled offering of access
to its digital media subscription
4
Leading Indian QSR building omnichannel capabilities to ensure sales
Innovating purchase
journeys • Takeaway and Pick-n-Drive offered on app
• Increased online ordering as % of total delivery by 11% yoy
6 Optimizing Chinese cosmetics company leveraged online platforms for customer acquisition
customer • Trained store employees to host livestreams
acquisition cost • Increased sales by 45% vs. the same period in 2019

In the long term, locally adapted operating model decisions will be key to
market leadership
High Tech Many Indias Alliances Gig Multichannel No frill

Data driven Regional Collaboration Flexible Be present Low Cost
play play is key labour everywhere Ops
Focus on Focus on Focus on creating Focus on Focus on Focus on

automation; customizing partnerships/ leveraging Gig presence in providing bare
leverage AI, operating model alliances with platforms – both physical minimum
predictive tech, based on needs, other players, flexible labour stores and online shopping
digital supply preferences of incl. unorganized (day of week, time channels to experience &
chain, Voice tech, different regions retail to create of day, location) serve all types of keeping costs
digital payments across India to own ecosystem customer bases at a minimum;
better penetrate and more can potentially
regional markets economically leverage Gig
penetrate the economy
market

Recovery scenario planning
Due to the uncertainty post-Covid, only
one definitive recovery plan may prove
insufficient. A scenario-based recovery plan
and the strategies for each of the scenarios
is needed for any disruptions in the future
PROCESS Retailers need to build

crucial capabilities and
enablers to succeed
against unpredictability
TECHNOLOGY in the future
PEOPLE
Agile & resilient organization Big bets in Technology

Build innovative organization and Technology is going to drive purchase
creative collaboration models with journeys going ahead. Retailers need
dedicated, cross-disciplinary teams to to focus on an end-to-end digital
respond to problems in an agile way presence from product discovery to
post-purchase

FOR FURTHER READING
Boston Consulting Group publishes reports on related topics that may be of interest to senior executives. Some examples include:
Retail 4.0: Winning the 20s Decoding value creation in retail

A report by Boston Consulting Group, February 2020 A report by Boston Consulting Group, February 2018
How India Spends, Shops and Saves in the New Reality? Digital Consumer Spending: A $100 Bn Opportunity
A report by Boston Consulting Group, December 2020 A report by Boston Consulting Group, February 2018
Demystifying the online food consumer: An $8 Bn opportunity Fashion Forward 2020

A report by Boston Consulting Group in association with Google, January 2020 A report by Boston Consulting Group in association with Facebook March 2017
Ten Trends That Are Altering Consumer Behavior in India The New Indian: The Many Facets of a Changing Consumer
An article by Boston Consulting Group, October 2019 An article by Boston Consulting Group, March 2017
Going for gold by creating customers who create customers Decoding the digital opportunity in retail
A report by Boston Consulting Group, February 2019 A report by Boston Consulting Group, February 2017

NOTE TO THE READER
ABOUT THE AUTHORS FOR FURTHER CONTACT
Abheek Singhi is a Managing Director and Senior If you would like to discuss the themes and content of
Partner, in the Mumbai office of Boston Consulting this report, please contact:
Group and led the Consumer and Retail practice in
Asia-Pacific.
Abheek Singhi
Rachit Mathur is a Managing Director and Partner in
the New Delhi office of Boston Consulting Group and Managing Director and Senior Partner,
leads the Consumer and Retail practice in India. BCG, Mumbai
Singhi.Abheek@bcg.com
Kanika Sanghi is a Partner and Associate Director in the
Mumbai office of Boston Consulting Group and is the
India head of the Center for Consumer Insights.
Mehak Dhir is a Principal in the New Delhi office of
Rachit Mathur
Boston Consulting Group. Managing Director and Partner,
BCG, New Delhi
ACKNOWLEDGMENTS Mathur.Rachit@bcg.com
This study was undertaken by Boston Consulting Group
(BCG) with support from the Retailers Association of
India (RAI). Kanika Sanghi
We would like to thank Kumar Rajagopalan, Bhakti Partner and Associate Director,
Halder and Dr. Hitesh Bhatt from the Retailers BCG, Mumbai
Association of India for their support and guidance Sanghi.Kanika@bcg.com
while developing this report.
We would like to thank Ashish Jain and Nayamat Bal for
their assistance in writing this report.
Mehak Dhir
We are thankful to Jasmin Pithawala and Bhumika
Gupta for managing the marketing process as well Principal,
as Jamshed Daruwalla, Saroj Singh, Vijay Kathiresan,
BCG, New Delhi
Soumya Garg and Akshata Thakur for their contribution Dhir.Mehak@bcg.com
to the editing, design and production of this report.

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RETAIL RESURGENCE

‘BACK TO THE FUTURE’

10 RETAIL RESURGENCE IN INDIA

India displaying steady

54.8% 60.2% 62.0%

12 RETAIL RESURGENCE IN INDIA

60 2010 2019 2030 40 2010 2019 2030

INDIA CONSUMPTION BACK ON GROWTH TRAJECTORY 13

Coronavirus job losses

In 2020, India and the

Brazil central bank cuts 2020 In one of world’s toughest

Source: World map source Bloomberg; Press Articles

14 RETAIL RESURGENCE IN INDIA

• Households’ income on the rise • Job losses, salary cuts

• Access to avenues of consumption like

• Positive outlook towards future prospects • Negative outlook towards economy

• Safety concerns in going out

Note: India-specific trends

INDIA CONSUMPTION BACK ON GROWTH TRAJECTORY 15

Supply chain and

Lower footfall due to

Source: BCG projections and estimates

16 RETAIL RESURGENCE IN INDIA

2010 2019 2020

Brick and Mortar Retailing 1Q’20

Source: RAI, BCG projections and estimates

INDIA CONSUMPTION BACK ON GROWTH TRAJECTORY 17

Globally, in-store In-store spending1

Online spending1 ~36% ~17% ~20%

18 RETAIL RESURGENCE IN INDIA

INDIA CONSUMPTION BACK ON GROWTH TRAJECTORY 19

Mar Apr May start May end Aug

20 RETAIL RESURGENCE IN INDIA

2010 2019 2030 (F) 2031-32 (F) 47-48

54.8% 60.2% 62.0%

INDIA CONSUMPTION BACK ON GROWTH TRAJECTORY 21

22 RETAIL RESURGENCE IN INDIA

7% 7% Clothing & Footwear

20% 19% Housing & household products

17% 16% Transport & Communication

Food, beverages, Transport &

Clothing & Footwear 9.1% Education 10.3%

Housing & household

Health 9.6% Other goods & services 6.5%

Source: CCI proprietary consumption model, BCG analysis

24 RETAIL RESURGENCE IN INDIA

E-ticketing/ online travel 2000 3,300-3,400

Ride Hailing 2010 2,200-2,300

Mobile wallet payments 2004 1,900-2,000

OTT1 2007 50-100

Cloud Kitchens 2011 30-50

Wearables 2013 20-30

Note: 1. OTT refer to OTT video;

SIGNIFICANT VARIATION ACROSS DIFFERENT CATEGORIES 25

Spending on categories like

High growth in brick-and-mortar

26 RETAIL RESURGENCE IN INDIA