Online, offline to drive retail growth

  • Sales via O+O retail model will touch $640 bn by 2030, says report
  • The O+O retail model is likely to contribute around $8 bn in incremental GST collection

Madhurima Nandy
Updated8 Mar 2021
The retail sector seems to be recovering from demonetisation and GST, as visible in the second quarter results of the leading FMCG firms. Photo: Indranil Bhoumik/Mint
The retail sector seems to be recovering from demonetisation and GST, as visible in the second quarter results of the leading FMCG firms. Photo: Indranil Bhoumik/Mint

The next phase of retail evolution in India will be led by the convergence of online and traditional channels, a digitally-enabled ecosystem, and rising adoption of digital platforms by consumers, according to a report released on Monday by information technology (IT) industry body Nasscom and retail consultancy Technopak Advisors.

Online and offline collaboration (O+O) will be a significant growth driver, given that the pandemic has brought the entire retail sector closer.

The emergence of the O+O market is seen as a rising collaboration of digitally enabled retail stores, including neighbourhood kirana and modern trade stores, along with e-tail.

O+O-enabled sales will touch the $640 billion-mark by 2030, with digitally enabled retail contributing 43% to the overall retail pie, according to the report ‘Retail 4.0’. The O+O retail model is likely to contribute around $8 billion in incremental goods and services tax (GST) collection, accounting for 37% of the retail sector’s total tax contribution in the same period.

From an estimated $2.1 billion in 2020, O+O-enabled exports have the potential to reach $125 billion by 2030. In addition, the retail sector is expected to add 25 million new jobs over the next 10 years, and the report estimates that nearly 50% of these jobs will be supported by the O+O model.

“The pandemic backed by ever-changing consumer preference has accelerated the adoption of online and offline play that will define the next phase of retail growth in the country. This will create enormous potential in terms of job growth, exports, and an inclusive retail ecosystem with great participation of micro, small, and medium enterprises (MSME). Technology will be the key driver of retail evolution in the future,” NITI Aayog chief executive officer Amitabh Kant said.

The government is in the process of formulating the national retail trade policy, which will not only create a conducive environment for retail trade, but will also simplify policies hindering the growth of the sector in the country, said Kant, who unveiled the report virtually.

“Retail 4.0 is rapidly evolving to O+O retail models that will bring incremental economic contribution, job growth, and exports. To achieve this, a greater need for collaboration among retail stakeholders, policymakers, and supporting sectors for tech awareness will be the key, which will accelerate the sector’s growth in the years to come,” Nasscom president Debjani Ghosh said.

As the O+O retail model matures, both online and offline retailers will digitize point-of-sale (PoS), in-store operations, and inventory tracking, according to the report.

Nasscom has also recommended that for wider adoption of digital payments by medium and small sellers, the policy makers should address key barriers and incentivize adoption of digital payments, including measures such as providing MSME-specific tax relief and bringing parity between online and offline businesses on tax costs and compliances.

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