A Red-Letter Day For Retailing in India!
24th November 2011 - It’s yet another red-letter day in the history of modern retailing in India! The Union Cabinet passed 51% Foreign Direct Investment in multi-brand retailing and opened up the single brand sector to allow 100% investment.
The first major breakthrough in the matter of allowing FDI in retailing in India was achieved when the Government of India passed 51% investment in single brand retailing. Though it has taken almost five long years after that to go to the next level, it is an achievement on the part of the ruling coalition government to take this bold initiative to pass FDI partially in multi-brand retailing with a few conditions though. A lot has been done to satisfy various quarters which had those significant kind of people crying foul to a good cause of opening the retail sector to attract more investments; many studies and researches have been carried out to establish the fact that FDI in retailing will do more good to Indians than any harm. It is worthwhile at this juncture to remind ourselves of this: when automation started in the country a score years ago, many cried foul with a vociferous reluctance to adopt technology. Such cries were heard from the nationalized banking sector to cite as an instance, and they feared loss of jobs. Today banking is one of the most significant sectors in India offering direct and indirect employment even in rural areas. Customers are happily smiling their way not just to the banks but to the ATMs! The same happiness is going to be seen when all our Indians are able to get the best of goods anytime, anywhere!
Is our Indian retailing not organized at all? That’s a question that used to come to my mind, especially whenever research agencies kept anchoring the figure of organized retailing in India at four or five percent. And they have been publishing such a consistently stunted figure for almost a decade now! It needs only a few steps to be taken to become organized in retailing. It means a retailer has to be registered under all the relevant regulations and statutes; he must give a bill for each transaction and above all the retailer should stand by the goods he sells! Even many jewelers have started making their bills for each of their transactions properly since a few years now. The GOI took special efforts to keep VAT at just 1% in almost all the states to facilitate this transformation. Going by these parameters we are a lot organized in retailing in India. Many confuse modern retailing with organized retailing!
Some Indians in the USA like quite a few of the natives there do not want to be seen shopping in a Walmart! The reasons are obvious. So for them the presence of a Walmart in India does not make any difference at all. Like them, there may be many more in future as they may have their own experiences of buying from such stores. I am not demeaning a value store, but I am just explaining the fact that a wide variety of customer segments in India will discern and buy from the stores of their choice for different reasons. At the same time the same customer may be happy buying vegetables from a street vendor who calls at the door! This definitely goes beyond the fundamental marketing principles learnt in our B-Schools. A customer living in Malabar Hills is comfortable making his purchases from a modern store while he is also at a full throttled ease eating from a ‘chowpatty’ vendor when he goes for a walk in Marine Lines in Mumbai. A former colleague of mine who is the CEO of a large organization invariably goes hunting for bargains and discounts and he never purchases any of his garments at full price! An industrialist friend of mine who lives in Madurai travels to Mumbai for the last thirty years to a particular store to buy his preferred brand of shirts available in a solitary location and that’s the height of customer loyalty! Customer segments are studied in India with their behavior analysed on occasions, companionship-mix during different occasions and on the degree of dynamism of their attitudes! Every retail format in India will co-exist. What may be perceived as modern now may become mundane with the attributes of modernism becoming hygiene factors pretty soon and Indian retailing will not be an exception to this as it evolves further!
A relative of mine grows a lot of coconuts in the Cumbum valley in Tamil Nadu. He says that he sells coconuts to the ‘mandis’ at Rs.4 or Rs.5 each depending on the size. You can guess at how much price do we all get coconuts in retail stores – at least at thrice the cost! And this anomaly should come to an end with the supply chain becoming organized soon, as a consequence of the transformation of retailing in India. I am sure as retailing in India becomes organized fast, it will integrate backwards in a swifter pace to make the entire pipeline effective. Is a two hundred percent hike in price as an item travels from the farm to the store, justified?
The phantoms of threats against having multinational retailers in India resulting from vested interests will vanish into thin air. We Indians have every right to enjoy the availability of everything that a common man across the world does! Everything in retailing in India is going to be about satisfying customers at the right time and place with the right products sold at the right price. And whether modern or ultra-modern, organized or unorganized, customers will look for all the value that they can get to attain maximum benefits. As competent retailers may step into India with their own investments, the value of the customer in India will be only be truly realized – literally! The rest will be history!
- Dr. Gibson G. Vedamani
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