DA00D3 • May 2, 2025

How Digital Commerce Can Rescue Indian Retailers from Rising Costs and Dead Stock – Chitrangana Analysis

The Signal

Imagine a small retailer in rural India, hesitant to embrace digital commerce, fearing loss of control over prices and customer relationships. This scenario is no longer hypothetical; it’s a reality many face today. As digital commerce becomes as essential as electricity, retailers who ignore this shift risk being left behind. With the bottom of the pyramid poised for a digital leap, understanding the implications of this transition is crucial for survival.

How We Found It

The insights shared in this report emerged from Chitrangana consultants’ observations during engagements with various retail clients. We noticed a striking trend: traditional retailers were not just resisting digital transformation; they were grappling with fears of losing bargaining power and customer intimacy. A case study involving a mid-sized home appliance retailer revealed that its offline cost-to-serve was 22% higher than online models. This misalignment in the physical-digital value chain, which we estimate to be 11-14%, is a critical factor driving inefficiencies. We identified that by 2029, if 37% of retailers digitize, they could collectively save ₹4.5–7.2 lakh per crore annually from losses due to excess logistics and dead stock.

Patterns Emerging

  • A staggering 37% of Indian retailers are expected to digitize by 2029, potentially saving ₹4.5–7.2 lakh per crore annually in logistics and leakage, according to Chitrangana’s market studies.
  • In categories like home appliances and fashion, the cost-to-serve offline is 14–22% higher than online, indicating a significant opportunity for traditional retailers to leverage digital platforms.
  • By 2032, the B2B commerce sector could contribute an additional ₹1.1–1.5 lakh per crore annually in margin protection, highlighting the importance of efficient bulk fulfillment and routing strategies.

Strategic Note

“The ROI isn’t merely in adopting technology,” argues Ashok Kumar, a Principal Consultant at Chitrangana. “It’s about rethinking your entire supply chain.” Traditional retailers are currently burdened with dead stock and hidden costs. The shift to digital commerce offers a pathway to ‘on-demand stocking’ through predictive AI, which can streamline inventory management and reduce costs. For instance, a retailer that switched to a digital inventory system reported a 30% reduction in holding costs within the first year. As Kumar highlights, ‘Businesses that fail to adapt to this zero-latency supply web will face insurmountable working capital pressures.’ The transition isn’t just operational; it’s a survival strategy in an increasingly competitive landscape.

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The Strategic Impact

By 2025, 70% of Indian businesses will need to integrate into a digital commerce framework to remain viable—especially if they wish to avoid the pitfalls of rising operational costs and inefficiencies in the retail sector.

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