Comparison of Retail Industry in India and Australia
The very concept of retail involves process of selling consumer goods and/or services to the customer section by means of multiple distribution channels with the goal of earning profit. Retailers are service providers who cater to the various needs of the end-users or customers with regard to satisfying demands identified through supply chains. Retailers tend to make different strategic decisions to ensure the product range is ready to attract consumer attention (Narayan et al. 2015). Retail mix is being devised accordingly to make sure the store’s overall market positioning is effective and the consumers’ demands are met with. In this digital age, both bricks and mortar and online retailing rule supreme and this is apparent in any nation. India and Australia are the chosen countries in this task in respect of retailing scenario and the workings of retail industry.In this work of research, how retailing differs in India from Australia has been explained in detail in terms of providing sufficient evidence. Moreover, how the differences tend to affect the retailing of products in India has also been discussed critically.
Body of Discussion
Understanding the differences in the structure of retail market in both nations
In connection with the retail industry of India, it can be mentioned that the sector has turned out to be one of the most face-paced sectors with dynamic potential on account of entry of multiple new players (Akhter and Equbal, 2012). The retail industry of India is said to have immense potential as India is the second largest population with affluent middle class section, urbanization in rapid rate and impeccable growth of Internet.
Study by Federation of Indian Chambers of Commerce and Industry (FICCI) reveals that the total potential of business to consumer (B2C) being estimated at US$26 billion, $3 billion is under easy achievable target within the next 3 years from the categories of 16 products(Handa and Grover, 2017). As per estimated by Indian Institute of Foreign Trade (IIFT), India is set for becoming the fastest growing e-commerce market in the world largely driven by enormous investment in the retail sector and rapid increase in the numbers of internet users (Shaikh and Gandhi, 2016).
Furthermore, the e-commerce market of India is in all likely to reach US$ 220 billion with regard to gross merchandise value and more than 530 million shoppers by the end of 2025 (Bansalet al. 2013). This is expected to happen in terms of faster online service adoption, faster speeds on the telecom networks of reliable nature as well as improved variety coupled with convenience. If all goes well, it is highly expected that India would go on to become the 3rd largest consumer economy of the world in connection to attaining US$ 400 billion in consumption by the end of 2025 (Archana, 2012).
The Australian market structure in retail can be understood in terms of discussing the market scenario. Australian retail industry can be largely characterized as diversified as well as heterogeneous both sector-wise and geographically. Given the technological advancement all across the world, it is quite obvious that the online retail development is indicative of the diversification of the retail industry in Australia(Singh, 2014). The provision concerning online retail not just has added to the industry diversity, but also has thrown challenges towards the respective market positions of the long-standing players(Pani and Sharma, 2012).
Competition and Consumer Act 2010 is the supreme piece of regulation that directly impacts on the competition within the Australian retail industry. This particular Act is enforceable in nature by the competition regulator – the Australian Competition and Consumer Commission (ACCC) (Quach et al. 2017). Certain measures are put to use by the ACCC for assessing the industry concentration level.
Estimation of potential size and profitability of retail industry in both countries
As far as the national economies are concerned, both of India and Australia are booming in the retail sector. While the retail business industry in India accounts for more than 13% of the GDP in 2011 and around 8% of the employment; the retail industry contribution seemingly accounts for nearly 4.1% of GDP and 10.7% of employment in case of Australia (Jhamb and Kiran, 2012).
Studies reveal that India’s unorganized as well as organized retail industry can be found in over 6 million stores and outlets all across the nation. The Indian retail sector is greatly diverse in respect of size, region, format, competition and nature of goods and services (Kumar, 2015).
India is considered as the 5th largest global destination in the retail space with variety of brands with the goal of catering to the numerous demands of the huge consumer population. As per the prediction of the retail experts, the retail market of India is all set to increase by 60% for reaching US$ 1.1 trillion by the year of 2020 (Mathew and Mishra, 2014). The factors such as growing income level, changes in the middle class lifestyle, and trend of spending more and ever increasing digital connectivity contribute and would continue to aid significantly in this regard. While the overall market of retail is in all likely to be growing at 12% on a yearly basis; expansion of modern trade would be twice as fast as 20% annually with traditional trade increasing at 10% (SrivastavaDabas et al. 2016). As Indian retail market is segregated into organized and unorganized retail – both the divisions happen to contribute effectively i.e. organized contributing 93% and unorganized contributing 7% of the total sector(Scott, 2017).
While the business to business (B2B) e-commerce market of India is in all possibility would be reaching US$ 700 billion by the end of 2020; it is expected that online retail would be at considerable par with the physical stores in the next 5 years and the growth in this regard has been quite significant i.e. 23% to $17.8 billion inthe year 2017 (Singh and Tripathi, 2018).
The Australian retail industry is found to be making a significant contribution i.e. $19 billion in 2011-12 towards the aggregate profits. This accounts for 7% of all pre-tax profits of the retail industry; whereas half of this profit is attributed to other store-based retailing(Dunne et al. 2013). In 2014-15, the retail industry profit increased 7.8% from the preceding years and this is way better than other industries which have a profit growth by only 1.4% (Davies, 2017).
As retail apparently is operant on low profit margins in comparison to other industries; in consecutive 2 years i.e. 2014-15 and 2015-16 – the retail industry could achieve the largest profit margin in the non-store and commission-based sector of retailing(Quach et al. 2017). In Australia, relatively lower industry gross value added per person employed can be observed in the retail industry;that happens to be reflective of the retail industry’s high labor intensity as well as comparatively low workforce skill levels(Bailey, 2014).
Analysis of potential problems facing the retail industry in both countries
As far as retailing in India is concerned, multiple problems are faced by the retail sector. The problems can be listed as –
- Stiff competition from the unorganized sector
- Shortage of quality in the requirements of real estate and infrastructure
- Strong opposition to foreign direct investment (FDI) from small traders
- Shortage of retail space in both central and downtown locations
- Opposition from traders and politicians
- Unwillingness of consumers in paying online(McArthur, 2013)
- Issues regarding multiple taxation and VAT
- Immense pressure of improving supply chain systems and channels of distribution to reach consumer-desired quality and service levels
Studies reveal that multiple factors and forces tend to govern the Indian retailing scenario. Consumer pull is one of the major reasons why retailing business in India is thriving. The nation is experiencing rising income level as well as greater purchasing power of the consumer population which adds to the ever growing demand of the retailing business in India (Singh and Tripathi, 2018). Moreover, Indian retailing industry is gaining out of the nation’s ‘booming economy’ concept which subsequently pinpoints the incredible growth of the middle class section in the era of post-liberalization.
Moreover, growing urbanization happens to lead towards a wide range of customer needs – which in turn helps the retailing business in India (McArthur, 2013). In addition to this, as shopping has become a means of family entertainment, consumers tend to spend more time in retail stores which in a way is indicative of the retail business flourishment.
Off late, Indian market has been experiencing significant increase in the brand numbers which leads the Indian customer towards a larger option set in lieu of providing them numerous options for any retail products. Media boom has been effective in increasing awareness level as well as exposure of the customers to the international trends and ideas (Zentes et al. 2016). Moreover, changing demographics tend to have propelled the retail industry growth in India; whereas psychographic changes can be observed in the consumer behavior adding to the overall development of the retail market.
Australian retail industry is found to be shaped by several disruptive forces such as –
- Daily cost of running a business
- Changing expenditure patterns of the consumers in Australia
- Arrival of overseas business organizations with new retailing approach
- Escalating energy prices
- Hike in the retail rents(Berman et al. 2017)
- Ever increasing operational costs
- Changes in the industrial relations workplace laws
- Prevalent discounting cycle
- Dearth of consumer loyalty
- Consumers’ saving spree
The Australian retail industry is facing quite a lot of problems in the recent times. One of the major issues faced by the retailers of Australia is the daily expense of running a business which though sounds mundane but is a very pressing matter for the retailers (Berman et al. 2017).
It has been found that energy prices are escalating these days and that is added pressure on the Australian retailers when it comes to running the business. In addition, retail rents are becoming higher day by day which is creating problem for the retailers in terms of making it difficult for them to remain competitive (Gardner and Sheppard, 2012). This issue is especially pressing as global players are entering the Australian business domain and making the competition really tough.
Furthermore, Australian retail industry is facing the wrath of rising operational costs which is going to be one of the greatest challenges over the coming months. The Australian Retailers Association (ARA) is found to be apprehensive of this problem for quite some time and as far as the situation is concerned, the operational costs would be increasing ever before – adding to the problems of the Australian retail industry (Peng Tan and Cadeaux, 2015). Retail experts reveal that changes to the laws of industrial relations workplace, alongside overtime entitlements to the casual workers and new model of casual conversion would be posing further challenges for the Australian retail industry which is already facing the struggles of operating in a fluctuating trading environment (Kunar, 2015).
Another potent issue faced by the Australian retail business is the prevalent cycle of discounting which is full-fledged working in the Australian retail landscape and making the business conditions even more difficult and tough. A large number of retail stores in Australia are found to be discounting at 50% or more off during the year which makes it quintessential for turning over huge inventory amounts for the sake of attaining the sales of previous year (Lakatos and Fukui, 2016). While majority of the retailers tend to keep up the trend of discounting, the overall costs of doing business goes up time and again with regard to eroding margins and bottom lines. Moreover, every associated cost of business starting from electricity to utilities to inventory to staffing costs continues to increase while the prices face sharp fall. The greater challenge in case of Australian retail industry is to maintain sustainability and how the multiple costs are balanced by the retailers (Archana, 2012).
It has also been pointed out by the retail experts that the issue of consumer loyalty is a potent problem as well for the retail industry. Erosion of loyalty amongst customers has turned out to be a difficult matter for the retail business in Australia. Retailers (mainly those operant in digital platform) are found to be no longer relying on loyalty schemes for gaining and retaining customers which is slowly leading towards ‘points fatigue’ that in turn is putting the bricks-and-mortar retailers at a disadvantageous position (Scott, 2017). In order to keep up in the intense competition, those retailers specifically have to up their in-store game.
As Australian economy has managed to surpass the prolonged economic dip in the recent times with regard to coping with the issues of unemployment and splurging; Australian consumers are found to be saving their money at noticeable rates which indicates expense is lower than earlier and henceforth, retailers are getting fewer customers – be in stores or online portals(Davies, 2017).
Surveys reveal that more than 60% of customers are of the opinion that customer service is declining which leads to a sharp fall in the customer experiences. The customer service level has apparently gone down in Australia which prompts the customers in leaving the shop within moments or opting for online purchasing even more where company-customer dealings are at minimal.
Consideration of cultural aspects impacting retailing in both countries
Studies reveal that both Indian and Australian retail industry is facing disruption in this current business scenario (Davies, 2017). As several overseas businesses are found to be entering the retail market and bringing forth new innovative approaches to retailing; the existent players in the Australian retail domain are facing difficulties largely. Not just the retail landscape has undergone changes, the consumer requirements have changed as well and the competition has become too intense to be coped with by the Australian retailers. Contemporary customers have become more tech-savvy, belong to affluent background and busier than ever (Lakatos and Fukui, 2016). With the changing times, the varied expectations of the consumers have evolved as well and technological advancement plays a crucial role in changing the behavioral patterns of the consumers.
It has been observed that the retail industry is in constant adaptive mode in course of keeping pace with the ever growing online consumer base. The online culture largely impacts the retail sales in both the nations. Studies reveal that consumers tend to behave in more discerning manner in times when they are to make purchases for their respective families, despite having encountered incredible amount of choices at stores (Wrigley and Lowe, 2014). In this regard, tapping into a wide ranged firsthand online reviews, helps the consumers in gaining profound insights on the respective product attributes – be it at the comfort of their homes or while standing in the store aisles. There are several reasons why online culture impacts the consumers in the retail field. Consumers these days do not possess brand loyalty and buy on their personal preferences of quality at best price or keeping in mind first-person online recommendations (Das, 2014).
Effect of the retailing differences in both nations
The retail landscapes in both the nations are different, despite having certain things in common (Scott, 2017). While the Indian consumers’ purchasing powers have increased, the Australian consumers prefer to save without splurging on products to a large extent. Though both the nations face the ordeal of online retailing, India has to some extent managed to adapt to the variety of foreign brands making business on Indian soil; whereas Australian retailers are not yet comfortable with the overseas competitors (Mukherjee et al. 2014). The laws and regulations regarding retailing are different in both nations. Australian supermarkets and retail stores do not allow for selling alcoholic drinks; whereas in some shopping malls and retail stores of India, less-alcoholic drinks are sold. The overall retailing scenario in Australia has been declining due to several issues; whereas Indian retail-scape is growing even in the post-recession phase (Delaney, 2017). As far as the future of retail industries in Australia and India are concerned, it immediately is in need of delivery platforms that contain both agility and multiplicity with the potential of leaving non-responsive retailers behind in the competitive race.
Moreover, it is also evident that the trend of online marketing is hugely increasing in India. Some of the retail brands in India have spread their businesses to online platforms, thus, making it convenient for the customers to avail the products. Moreover, as opined by Davies (2017), the hectic schedule in the lives of the people has made it even more convenient for the customers to opt for online marketing. As studied by Wrigley and Lowe (2014), the e-commerce rate has increased by 57% between the years 2012-15. Therefore, this reflects the trend in the increase of online shopping by the Indian customers. On the contrary, as studied by Mukherjee et al. (2014), the growth rate in Australia has only increased by 8% in the year 2017 which shows the dearth of inclination of the people towards online shopping. The revenue collected from e-commerce amounted to US$12060m which is huge. However, as compared to India, the retailing sector in Australia has higher revenue because of the higher prices of the products in Australia online. As compared to that, the online sites in India provide a comparatively lower rate, thereby, making it more attractive for the Indian customers.
In the concluding segment, it can be mentioned that despite retailing differences between India and Australia, both nations share multiple issues that need to be coped with for better results. Recommendations can be made to help the nations develop respective retailing industry. It is to be understood as well as considered by the retailers that creating positive in-store experiences would not be sufficient, as they should opt for creating relevant experiences as well for the customers. Understanding who the targeted audiences are and what they seek is of utmost importance in this regard for the retailers to act accordingly. Collecting as well as analyzing customer data is a significant way for the retailers to get a detailed understanding of the consumer section. Data being the representative of big opportunity for the retailers with regard to its meaningful usage especially in the time ahead, consumer data can provide the retailers with a holistic perspective of the consumers and their respective demands. This is even more effective in this time when the transaction cost of point-of-sale (POS) is facing a sharp fall in turn of giving the retailers golden opportunity for gathering insightful data at the POS. It can be mentioned in this regard that the retailers who would be using the data would be having promising results in terms of being able to sell or market or even promoting their respective brands alongside offering personalized loyalty programs to customers at ease.