The retail economy!

When the economic reforms of our country were discussed by the American President who recently tried to suggest that FDI in multi-brand retail could usher in the next phase of big economic development for India, eyebrows were raised. While many sections of the media reacted, the Prime Minister’s office reacted by tweeting its responses that our economy is better off than what he thought it was, quoting UNCTAD report on how attractive a destination is our country for investments. The angry opposition parties reacted more vehemently and attempted to justify our stability saying that no financial institution in India has failed unlike the situation in the USA where many have collapsed.  The US President had added that FDI in retail would not only create jobs in both countries, but it would help India grow.

Many global retail organizations have a strategic intent to grow internationally by opening up their operations in new economies. Everyone eyes the Indian subcontinent, as FDI in retailing is not yet allowed in full swing and there is large opportunity spotted in an economy that is supported by strong internal consumption from a large consumer base. Ticket sizes may be small as compared to developed economies, but the consumer visit repeats have been creating multiple ripples on the topline of the retail business. In developed economies we have heard about ‘stock-up’ buying and ‘top-up’ buying but in the case of India for the majority of customers it is only ‘daily’ buying. More than 12 million retailers are said to operate in India and in almost 90% of these retail stores, more than 70% of each store’s customers visit the store everyday for making purchases.  Will these ‘daily visit’ customers walk into a Wal-Mart or a Tesco every day in India if at all FDI fully opens up and these organizations would set up shop? The actual purchase patterns and their baskets would easily defy any researcher’s attempt to understand them! 

The very fabric of Indian retailing is different. This evening I had two experiences.  One, as a petty shop in the Velachery area was about to close I rushed towards the store asking for a Diet Pepsi can, the store owner switched on the lights, served me and then downed his shutters. I could understand that the sale of every SKU in his store is important to him.  The need to grab a drink on the go from a petty shop as one walks through the narrow streets in any Indian city is never going to vanish and as long as these needs would drive people to stretch out their arms to the petty shops, they will thrive well, come what may. The other - as I was observing shopping in fresh vegetables and fruits stores in Chennai, I was amazed to see the zest and zeal of the customers who were seen vying with each other to fill their shopping baskets. The two stores I was observing (and purchasing from them as well) were very well organized and supported by extremely customer-friendly staff. The product mix ranged from mangoes to mangusteen! The prices too were very reasonable. In a country like ours, managing wide and deep assortments of multiple fresh categories is a humongous task. How on earth is anyone going to understand easily the game of the ever-changing diversity of customer off-take and the dynamic ‘basket behavior’ of a typical Indian housewife without the help of our own retailers?

Investments both in retail and infrastructure are the need of the hour in India for its growth. If we don’t bring investments at the right time to the sector, our consumers may get frustrated paying more all the time consequent to inefficiencies resulting in wastage of money and resources as well.

FDI in retailing with developmental conditions can truly bring into existence new alliances and relationships in efficient combinations – like the collaborative accomplishments of the tissue roll and the health faucet found innovatively together only in Indian washrooms!

- Dr. Gibson G. Vedamani