When I was driving down MG Road in Bangalore this morning, I
remembered the BIG store of the country for kids that used to stand tall once with
animated characters welcoming everyone at its doors, all the time. It was an
attraction for tourists coming to the city. So lively was the atmosphere around
the store that it was the cynosure of all eyes passing by. Tucked away from the
busy high streets of Brigade Road and Commercial Street, this specialty store
was undoubtedly a destination for kids’ shopping and attracted customers from a
very wide catchment. It was often referred to as an Indian parallel to the Toys
R Us store in Manhattan, New York! Though the store started off as a kids’
destination, it moved on to selling sarees as well and then went on to expand
with a huge multi-brand department store a few kilometers away. The
organization could not survive the large expansion initiative.
The retail industry in India has seen many such examples of
quick expansion drives that threw financial plans out of gear and such
businesses got into trouble. As the South based supermarket chain wanted to
have more than a thousand branches at once, it got into profound trouble and
the business has vanished into thin air. Any number of restructuring
initiatives has not yet borne results. Wanting to be bigger and bigger, often
retailing organizations may lose their focus and take their eyes off the core
business. Sometimes, as we have seen in the case of the kids store referred
above, one wrong decision may cost everything that has been built over years! I
know of a jewellery firm that took a very large space in Chennai during its
expansion phase and the organization has struggled for long to make both ends
meet. Similarly the one decision taken by a successful Mumbai city based
retailer to open a pretty large store in MG Road Bangalore a few years ago cost
the organization dearly and it took more than five long years to pull itself back
on to its growth groove.
Some companies are very quick to gather themselves as they
make mistakes like the large footwear retailer in India who like phoenix rose
from the ashes and its successful growth is a testimony to the fact that
retailers need to be very careful as they expand! When a small business is planned to grow bigger, the exercise is compared to a baby trying to take its
steps to walk first – the baby steps. Each step has to be taken carefully.
The other day I was sitting with a very successful CMD of an
apparel retail business, who had his very humble beginnings. As he traced his
steps – the baby steps – he said that he worked very carefully on his gross
margins and aimed at more than 20% EBITDA always! Opening doors within
multi-brand department stores initially, the majority of this successful
retailer’s current turnover comes from his own retail stores. Way to go! And retailers
have to resist the temptation of not making that ONE mistake of looking for a
quick and big expansion!
Yes, it’s the baby steps that can only lead to giant leaps!
Dr. Gibson G. Vedamani
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