With the rise in modern trade formats, e-commerce and online sales, the share of traditional retail shops in the grocery market will decline in the next few years, a study said.

The share of traditional retail is set to come down from 85 percent at present to 65-70 percent in the next 4-5 years as the slice of e-commerce and modern trade retailers increases to 30 percent, said consulting firm McKinsey & Co.

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As the grocery retail market grows in size in the next 10 years, traditional trade will remain big, but its share will fall, Mint quoted Abhishek Malhotra, Partner at McKinsey & Co, as saying. The consulting firm expects the grocery retail market to grow 6-7 percent annually by 2025.

Modern trade players and online grocers like DMart, Reliance Retail, More, BigBasket and Blinkit will have a greater share in the segment, Mint reported.

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Following the onset of the COVID-19 pandemic, digital players captured a larger share of the market as more consumers shifted to online buying of groceries. Companies and consumers have both experimented with new formats of retailing during the pandemic. According to McKinsey’s internal estimates from October 2021, over 60 percent of Indian consumers used omnichannel for purchases in all categories.

There has also been massive expansion by (e-commerce) companies as well, Malhotra said.

The grocery retail market in the country, with an estimated 12 million retail outlets and more than a million wholesalers and distributors, has witnessed a gradual shift in the past 10 years with the entry of cash-and-carry companies such as Walmart and Metro Cash & Carry.

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There are three factors that are shaping the grocery market in India at present. These are digital adoption, innovation and emergence of direct-to-consumer ecosystems, McKinsey’s ‘State of Grocery Retail in India’ report said.

The change in the market dynamics will also impact brands and retailers, who will now have to strengthen their core distribution and work on new emerging channels amid a fall in the dominance of traditional retailing, the report said.

Buoyed by the rise in online demand for goods, some companies are also focussing on expanding operations. Swiggy announced that it would invest $700 million in Instamart, its express grocery delivery service, to scale up non-food delivery categories. Online retailer Flipkart said it would expand its grocery services to 1,800 cities in India.

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Meanwhile, some experts believe that even though channels like e-commerce make the buying process quicker, easier and more flexible, most consumers still prefer the traditional retail store to the online experience.

“Physical retail stores provide instant availability of products, easier returns/replacements, assistance in buying decisions and most importantly, enabling customers to touch and feel a product,” Ranjan Das, Managing Director of Buying Engine, wrote in The Times of India recently.

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According to Das, 59 percent of the consumers say the key to shopping in-store is the ability to feel, touch, and try the product.

Despite brick-and-mortar retail sales witnessing a 3.2 percent decline in 2020, it will continue to remain a vital and indispensable part of the retail market in the future, said Das.

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(Edited by : Shoma Bhattacharjee)