Mar 04, 2002 09:38 AM
6428 Views
(Updated Mar 04, 2002 09:40 AM)
On being asked for his opinion, a renowned economist had once remarked that India is nothing but a “Nation of shopkeepers”. How true he was! At last count, there were an estimated 11 million retail outlets of varying sizes and sophistication, from the street-corner pan-walla to the neighbourhood super-market. A recent study by ORG-MARG reveals that only 2% of the total retail operations in the country are in the organised segment as compared to more than 50% in most other developing countries.
The concept of Organised Retail Outlets(ORO’s) started in the country about 2 decades or more ago with the launch of stores like “Nallis” and “V. G. Paneerdas” in the South. These were however confined in their area of operations and quite content with the pie they enjoyed. Retail selling in India got a shot in the arm with the setting up of “Shoppers Stop” by the Raheja Group at Mumbai in 1991. A lifestyle and shopping destination, Shoppers’ Stop has since expanded its operations to Bangalore, Hyderabad, Jaipur, Delhi, Chennai and Pune. It is today considered a one-stop destination that provides a complete shopping experience for the entire family by offering the complete range of consumables from apparel to lifestyle accessories.
My energies, in this review, will be spent on analysing the current status of OROs, the factors responsible for their growth and try to look into the future to see if they survive.
I. Current status
“Organised retail is just another bubble”. That was what was held forth against these outlets when they first opened shop in India. While the arguments on this count are many and heated, the verdict is yet to be declared conclusively in favour of any party. Originally seen as the shopping stores for the upper strata of the society, these have now come to be accepted by a huge chunk of the middle class people as well. The range of products coupled with their excellent quality and the convenience of buying most of the family’s requirements at one place has worked in favour of these OROs over the last 10 years.
That still did not mean that the unorganised segment would die a slow death. Players like Foodworld have been around for a long time now but we also have a kirana shop next to them, right? Players like Cherma’s in Hyderabad and Kids Kemp in Bangalore have been around for a long time but the small time cloth retailers too exist to this day. If anything, both the organised and un-organised segments continue to play a significant role simply because of the many segments that exist in the Indian society. After all, how many people actually go to buy something at a “Shoppers Stop” or at a “Lifestyle” on a regular basis? The entry of the organised retailers has only forced the unorganised segment to strike back with personalised services, free doorstep delivery of goods, credit facilities, etc. The beneficiary of all this is has been the happy Indian customer because he not only gets the best goods for the best prices but also gets top class services.
The advent of the organised retail sector in India has played a major role in employment generation. Stores like FoodWorld and Shoppers Stop employ hundreds of young men and women, many of whom have never been to college and never had a hope of finding a job. With almost all the organised retailers talking of expansion, the number of jobs in this sector should only increase in the future. Food and grocery retailing has huge potential given that over 40 per cent of the spending by the Indian consumer is on this. So those who offer value in this segment are likely to have greater success.
II. What sets the Indian consumer apart and why have Retail Outlets been successful so far?
The following impediments hampered the spawn and growth of Organised Retailing in India:
Uniqueness of the Indian consumer - Blame it on our lack of trust, but the fact remains that we cannot be easily conned or talked into purchasing something unless we actually touch, feel and are convinced of the quality of the merchandise. The Indian customer is still evolving and is very different from, say, a European customer, who knows exactly what to purchase, walks up to a shelf, picks up the merchandise, pays and walks out. This has also been the reason as to why e-shopping and e-tailing have not taken off in a big way in India.
Loath for using Credit Cards - A majority of the Indian consumers still prefer to pay by cash for their purchases and would use their credit cards only when absolutely necessary. This, however is changing with the new generation which prefers to use a Credit card even for a litre of petrol bought from the petrol station.
Lack of logistical support - Simply put, Logistics is all about making available the required merchandise to the customer at the right place. This was one factor that was unattended by retailers in India but has gained tremendous importance of late. Retail stores are now better equipped when it comes to figuring out what exactly are the needs of the customer and make sure that they provide the same pro-actively.
Apart from of Shoppers Stop, there are also Lifestyle, Foodworld, etc. which have been around for quite sometime and shown a knack for understanding the psyche of the Indian consumer and in particular the above mentioned deterrents. They have been successful because they have been able to fathom the needs of the consumers apart from giving him good quality products at reasonable prices. They have also hit upon the right format and customised their size to suit the requirements of different geographic locations. Above all, they have got the nitty-gritty of retailing bang on spot in terms of merchandising, forecasting, phasing the supply chain, training and recruitment of staff, successful branding, category management and last but not the least, providing value to the customers - all under one roof.
III. What does the future hold out?
Inspite of their tremendous success, the fact remains that these outlets face constraints when it comes to scalability and economies of scale. Inspite of having more than 300000 sq. feet of prime property and a turnover of more than Rs. 200 crores in 2001, it is not just possible for these big outlets to set shop in second rung cities for the simple reason that the people in these places are as yet not used to the Organised Retail culture.
Unless India sees some drastic economic growth over the next decade or so and the same in turn translates into a better standard of living in these second rung towns, I don’t foresee the organised retail players venturing their operations to these places. As it is, the conversion factor(number of buyers vis-a-vis the total visitors who visit these stores) is quite low at around 40-45%. Most people just frequent these places either to check out the place, enjoy the air conditioning on a hot day or just to indulge in some ornithology. There is bound to be a shakeout in this segment and those not upto the mark will be shown the door. Clearly, the Indian consumer is still in the process of undergoing a change in mentality and has some way to go before he gets used to the organised retail segment fully.
One thing, however is for sure.Organised Retailing is here to stay.
PS - Forgive me for posting this review under this head.didn't really have a choice.Thanks.
