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HomeEconomyIndia's Shift Towards Organized Markets: Reshaping Business Dynamics

India’s Shift Towards Organized Markets: Reshaping Business Dynamics

In India, the winds of change are blowing through the business landscape, reshaping the dynamics of commerce. Over the past decade, the organized market share has been steadily increasing, while the unorganized sector is witnessing a decline. This transformation is driven by several factors, ranging from changing consumer preferences to government initiatives and technological advancements.

Current Trend

2011-2012  2017-2018 
Organised  Unorganised  Organised  Unorganised 
Agriculture  3.2% 96.8% 2.9% 97.1%
Mining  77.4% 22.6% 77.5% 22.5%
Manufacturing  74.5% 25.5% 77.3% 22.7%
Utility Services  95.7% 4.3% 94.7% 5.3%
Construction  23.6% 76.4% 25.5% 74.5%
Food Services  13.4% 86.6% 13.4% 86.6%
Broadcasting  53.0% 47.0% 52.3% 47.7%
Financial Services  90.7% 9.3% 88.1% 11.9%
Real estate  36.9% 63.1% 47.2% 52.8%
Defence  100.0% 0.0% 100.0% 0.0%
Other Services  58.8% 41.2% 52.1% 47.9%

Changing Consumer Landscape

Indian consumers are no longer satisfied with generic products or services; they now demand quality, reliability, and brand trust. This shift has led to an increased preference for organized businesses, where the promise of consistency and adherence to standards resonates. The popularity of branded products and services is on the rise.

The most drastic change in sector dynamics:sector dynamics

sector dynamics

E-commerce and Digitalization

E-commerce giants like Amazon and Flipkart have reshaped the Indian retail scene.

They offer higher discounts, effective advertising, and operational efficiency.

Superior post-purchase customer service distinguishes them from traditional stores.

The e-commerce sector has seen consistent annual growth of 20-25% over the past five years.

Indian consumers are increasingly favouring online platforms for their shopping needs, reflecting a notable shift in retail dynamics.

DMart: The Middle-Class Magnet – Strategy to gain market share

Dmart

Customer-Centric Model

Dmart’s 6% guaranteed discount model appeals to the middle class, setting it apart from local Kirana stores.

Strategic Location Selection

Before opening a new store, DMart conducts in-depth city analysis, focusing on population, working-class demographics, local consumption, and supply-demand dynamics, ensuring they are situated in densely populated areas.

Ownership Advantage

Nearly 90% of Dmart stores sit on company-owned land, allowing them to save on hefty monthly rents, which is reinvested into the company’s growth.

Manufacturer Tie-Ups

Dmart’s direct partnerships with major manufacturers enable them to secure deep discounts, enhancing their cost-efficiency.

Franchise-Free for Quality

Dmart’s commitment to a consistent customer experience leads them to forgo franchising, opting for in-house management to ensure high-quality service.

Operational Efficiency

Their efficient operations have maintained a flawless record of not closing a single store in India, a stark contrast to challenges faced by competitors like Future Group’s Big Bazaar.

Key Differences

Aspect  Unorganized Sector  Organized Sector 
Wages and Benefits  Low wages; Limited access to healthcare Structured Pay Scales; Access to benefits like healthcare and retirement savings
Job Security  Lack of job security; Absence of formal contracts Greater job security; Formal contracts and labour law protection
Safety Standards  Lack of safety standards; Exposure to hazardous conditions Adherence to safety standards; Access to protective equipment
Access to Credit  Limited access to credit and loans Easier access to credit and loans for business growth and investment
Training Opportunities  Limited access to training and education Access to training and educational opportunities for skill enhancement
Informal Economic Activity  May contribute to tax evasion Compliance with tax regulations and avoidance of informal activities

 

Read: Top Profitable FMCG Companies in India

The organized sector, marked by established enterprises and regulatory compliance, is progressively dominating industries across India. Their structured approach and adherence to government regulations grant them a competitive edge, often resulting in superior job security, higher wages, and enhanced technological adoption.

Meanwhile, the unorganized sector, represented by smaller entities and flexible labour arrangements, plays a vital role in the informal economy, offering opportunities and challenges.

Disclaimer:This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions. 
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