Watch out e-tailers Future Group just merged its retail operations with Bharti Retail

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As per a report by UBS, the e-tail business in India expected to grow 10 times by 2020 to reach $50 billion. As against the organised retail market's growth estimation of $95 billion by 2019.



The merger between Future Retail and Bharti Retail to create a company with combined revenues of Rs 15,000 crore and over 550 stores across India is still not enough to gear them up against the growing clout of the online retail market.




The battle-lines have been drawn for long and foreign direct investment (FDI) in the retail business has been crowned as the villain. The mom-and-pop stores, or the kirana stores, as they are called in India are under existential threat, or something.



What one tends to tide over in these debates are the two distinct features of the offline retail market in India -- the organised market and the kiranas.




92% of the retail market in India is in the unorganised sector. The total size of the retail market in India pegged at $534 billion in 2013-14 while the revenue generated from organised retail was $41.4 billion in 2012.




As per a report by KPMG, the organised retail market is expected to reach $95 billion by 2019. The total retail market by 2019 is expected to reach $950 billion.




This throws up an interesting story.

Organised retail in India is actually just 10% of the total retail market.

With a Compounded Annual Growth Rate (CAGR) of 12-13%, the market is not nearly getting canabalised by the online or the e-commerce businesses like Flipkart and Amazon.





The crisis that is looming large is on the organised market.

As per a report by UBS, the e-tail business in India expected to grow 10 times by 2020 to reach $50 billion. As against the organised retail market's growth estimation of $95 billion by 2019 and unorganised market at nearly $900 billion, the threat is clearly against the traditional methods of retail -- the organised sector.




The organised retail market has clearly realised this and are moving towards significant online presence as well. One example of this is the strategic partnership between Future Group and Amazon India.



Moreover, with the online retail businesses in India realising that taking on the kirana stores might just leave them out of breath, they have decided to team up with them to take on the organised retail market.




Amazon is now delivering from your local kirana store and Flipkart, too, is firming up its plans to do the same.



The KPMG report said, "The online retail industry in the country was worth $552 million in 2012, and is expected to witness 45-48% CAGR over the next three years, thereby making it worth Rs $1.7 billion by 2015."




With a CAGR of nearly 50% as against 12-13%, guess who is winning the organised vs online retail battle in India?

 


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