Value retail to be a $170 billion market in India by 2026

New Delhi: India’s value retail market, excluding food and grocery, will likely surge to $170 billion by 2026 from $111 billion in FY23, as per a report by Wazir Advisors. This segment is set to grow at a compound annual growth rate (CAGR) of 15% between 2023 and 2026, surpassing the overall retail sector's expected 10% CAGR, which is projected to reach $1,219 billion by FY26.

Apparel leads the value retail category, followed by furniture, beauty and personal care, and footwear. The Indian market has witnessed the entrance and expansion of major value retailers, particularly in smaller cities. Following Trent’s Zudio's success, numerous large retailers like Reliance Retail’s Yousta, Aditya Birla Fashion & Retail Ltd’s Style Up, and Shoppers Stop’s InTune have ventured into the value apparel sector, focusing on affordable clothing, footwear, and accessories.

Yet, a significant portion of the value retail market remains in the hands of unorganized players, who held 79% of the market share in 2023, selling unbranded goods at low prices. Organized retail, encompassing both physical and digital formats, constitutes 21% of this sector in India. The key to value retail in India lies in accessible pricing across essential categories, targeting the mass, economy, and mid economy segments, the report noted.

Despite organized retail's three decade presence in India, its spread has been limited primarily to metro and tier 1 cities. As organized brick and mortar retail continues facing challenges in smaller cities, digital channels are expected to drive value retail growth, with platforms like Amazon, Flipkart, and Snapdeal expanding their focus beyond major cities, it said.

From 1995 to 2010, India saw the rise of large retailers like Shoppers Stop and Westside, focusing on mid to premium brands in metropolitan areas. The 2010 2015 period marked the emergence of more value oriented retailers, such as M Bazaar and Citi Style, catering primarily to tier 2 and 3 markets. This shift led to a distinct segmentation between national and regional champions in the fashion segment.

“Players such as M Bazaar and Citi Style, which primarily focused on the eastern and northern regions of the country, offered curated assortments for tier 2 and 3 markets. This triggered a sharper segmentation of value retailers into national and legacy retailers and regional champions, particularly in the fashion segment," the report added.

The average transaction value for value retailers typically range from 500 to 2,500, with average basket sizes of 2.5 to 7 items. Value retail stores are primarily situated in tier 3 or smaller cities and towns, with an average of 50% of their presence concentrated in such markets. Despite challenges posed by the pandemic, several retailers like Vishal Megamart, Style Bazaar, and V Bazaar have maintained a robust CAGR of over 15% from 2018 to 2022.

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