In today’s retail landscape, dominated by online giants, brick-and-mortar electronic retailers in India are quietly thriving. A recent report by Nuvama highlights how these traditional retailers continue to report strong profitability, defying the odds in a digital-first shopping era.

The resilience of brick-and-mortar retailers can be attributed largely to disciplined operations and robust support from original equipment manufacturers (OEMs). According to the report, OEMs play a pivotal role in sustaining these retailers by providing essential resources, credit facilities, and strategic corrective measures. This support mechanisms have enhanced operational efficiencies, reducing overhead costs and improving profit margins.

For instance, consider the consumer durables segment. The report notes that despite significant competition from online players, brick-and-mortar stores have managed to maintain healthy profit levels. The argument posits that their success is not just coincidence but a result of a disciplined approach toward channel management, largely influenced by OEMs. Through strategic partnerships, these retailers can access materials, credit, and guidance that streamline operations and enhance customer satisfaction.

Moreover, the competition among electronic retailers tends to be intensely localized. Once a traditional retailer establishes a dominant market presence within a particular area, new entrants face considerable barriers to displacing them. This localized competitive edge further stabilizes their market position. For example, a successful electronic retailer in Mumbai might dominate the local market, making it difficult for newer competitors to attract the same customer base without significant investments in marketing and operational efficiency.

However, while the profitability story appears encouraging, the report also cautions about a muted demand outlook for the overall sector. Factors such as an uncertain global economic climate, subdued household incomes, and a slowdown in consumption credit are dampening consumer sentiment. The report states, “The demand outlook is dull as global recovery is uncertain, household incomes are weak, and consumption credit is slowing.”

In addition, a decline in capital expenditure among BSE500 companies poses further challenges. Although government spending is anticipated to ramp up in the latter half of FY25, this may not completely offset existing headwinds, leading to an uncertain market environment for traditional retailers.

Yet, amidst these challenges, the consumer durables sector in India has enjoyed significant growth, achieving an impressive compound annual growth rate (CAGR) of 10 percent from FY19 to FY24. The growth can be attributed to several factors. Notably, the under-penetration of durable goods in the Indian market presents ample opportunity for expansion. Rising affluence and changing consumer preferences toward premium products have also fueled this growth. Shorter replacement cycles, driven by rapid technological advancements, further compound the demand for new consumer electronics.

An interesting observation from the report is the increasing affordability of such products. Loans sanctioned for consumer durables increased from ₹740 billion in FY20 to ₹1,165 billion in FY23, significantly expanding access to high-end gadgets. This shift has encouraged consumption and repeat purchases, contributing to the vitality of brick-and-mortar electronics retailers.

Looking ahead, several factors suggest that traditional retailers can continue to grow, even amid a complex macroeconomic landscape. The focus on disciplined operations and strategic adaptation to local markets enhances their competitive stance. Moreover, with the rising consumer demand for innovative products, the future appears to hold promise for brick-and-mortar electronic retailers.

In conclusion, while challenges remain in the broader economic context, the resilience of brick-and-mortar electronic retailers in India underscores the importance of strategic operational management and OEM partnerships. As they navigate the complexities of market dynamics, their ability to adapt and meet consumer demands will be central to their continued success.