Indian retail is undergoing continuous evolution in consumer shopping preferences, stimulated by economic conditions, technological advancements, and societal shifts. The pandemic played a pivotal role in driving digital transformation and expediting the widespread adoption of e-commerce. In parallel, innovative technologies such as Generative AI, IoT, and AR/VR are revolutionising the consumer experience and giving rise to novel channel formats, such as social commerce, quick commerce, and direct-to-consumer (D2C) models.
Amidst these changes, price, convenience, experience, and trust remain the primary driving factors influencing purchase decisions across retail channels. It is projected that by 2030, India will be the third-largest consumer market. Deloitte’s analysis finds the retail sector is estimated to reach US $1.9 trillion by 2030, experiencing substantial growth from US $ 930 billion in 2022. This upward trajectory can be attributed to several key drivers, such as rising income levels, the emergence of new consuming cohorts, and rapid urbanisation.
Several factors are driving the growth of the online sector, including the emergence of new commerce models, the number of online shoppers reaching 220 million, the establishment of robust logistics networks across the country, and the exceptional e-commerce growth experienced by tier-2 and 3 cities. We conducted a research study to understand the changing consumer preferences and major forces impacting the retail industry.
Our findings suggest six forces that are expected to shape retail:
Changing consumers: The changing consumer mix involves rising income levels, with an expected addition of 110 million middle-income households and 14 million high-income households by 2030, along with key consuming cohorts and urbanisation. Deloitte’s consumer survey finds with 69 percent of surveyed consumers indicating price as the dominant purchase driver, higher incomes will drive increased demand for convenience, value-added services, and discretionary spending.
Society and culture: Festivals continue to hold their significance in India, driving consumer purchases. Diwali ranks as the second most significant event for spending, following birthdays. However, new drivers are also emerging, in the form of tourism and sports. Rising popularity of sports, coupled with the impact of the pandemic, has had a positive influence on sectors such as sporting goods, healthy food, and wellness industries.
Exponential technology: As consumer expectations continue to surge, brands are compelled to embrace a range of cutting-edge technologies. This entails adopting tech, enabling brands to deliver convenience and personalised experiences. Consumer preferences further underscore the significance of these technological integrations, with a remarkable 90 percent displaying strong inclination towards contactless shopping, 65 percent expressing a desire for immersive experiences, and over 55 percent seeking convenient purchase options.
Industry upheaval: The establishment of the e-commerce market has led to Indian conglomerates and government-backed entities entering this sector. Consumers are embracing new commerce in the online retail landscape, with quick commerce exhibiting high current usage (64 percent) and strong willingness to use (25 percent). ONDC also shows promising potential, with 61 percent of consumers willing to try it. Social commerce demonstrates moderate current usage levels (40 percent) and significant interest (28 percent)
Climate and the planet: More than 70 percent of consumers have either switched or are contemplating switching brands to align with sustainable practices. Brands are addressing sustainability by launching sustainable alternatives and involving consumers in sustainable initiatives. By involving consumers, brands are fostering a sense of shared responsibility towards a more sustainable future.
Economic policy and power: To propel retail growth, the government has undertaken a range of strategic initiatives aimed at creating a conducive environment for this industry. These efforts encompass streamlining regulations, facilitating better financial access for businesses, and implementing foreign direct investment (FDI) policies.
The future of the Indian retail landscape
By 2030, the new commerce market, encompassing D2C, social commerce, quick commerce, and live commerce, is predicted to reach approximately US $125 billion from the current US $11 billion, significantly impacting categories such as grocery and fashion. A leading D2C electronics/wearables brand became a digital-first brand with more than 75 percent of its revenue being generated from online marketplaces.
To enhance customer experiences, brands will increasingly invest in cutting-edge technologies, such as AR, VR, MR, IoT, and Generative AI, creating seamless omnichannel interactions and intelligent retail environments. The luxury market is also set to thrive, reaching US $30 billion by 2030, driven by a rise in high-income households and luxury spending. With more consumers increasingly preferring in-store shopping for premium and luxury products, brands will have to pivot to enhance both their in-store and online experiences. Private labels (PLs) are expected to self-sustain and intensify competition. Over 40 percent of consumers indicated having purchased or are likely to purchase PLs due to competitive quality or price. A leading retailer operates 16 private label brands and sells over 800 brands across categories, which contributes 14 percent to its total revenue.
partner – Consulting,
Deloitte India
Kirana stores are also likely to embrace digital solutions, such as digital payment, sales and inventory management, and e-commerce enablement, leading to increased discoverability and integration into the last-mile delivery ecosystem.
The future of retail in India is poised for remarkable growth and transformation, creating new opportunities and redefining the way we shop and engage with products. The key implication for retailers is to prioritise customer experience, convenience over loyalty, seamless integration of technology in store operating processes and look for potential opportunities beyond the metro markets. The future of retail hinges on profitable adoption of new commerce models, accelerating tech investments to drive transformative initiatives, enhancing tech adoption across the value chain and driving successful change management of the cultural shift with-in and outside the organisation.
