2012: Marked in the annals of Indian retailing!

Seeing in retrospect, the year gone by, 2012, was very significant to retailing in India. FDI opened in multi-brand retailing amidst a great deal of furore from various quarters. In a turn of dramatic events, the decision to allow FDI in multi-brand retailing was voted into reality by a clear winning majority in the Parliament. Though notified clearly that states would take a call on allowing companies with FDI to operate in their territories, it is expected that soon many states may relent, giving way for the entry of multinational retailers.

As we are aware, agitations went off across the country by a section of the scared Small and Medium retailers. Whether FDI is allowed or not in a state, big domestic retailers are set to open their doors in the cities and key towns of India. I was addressing a group of Small and Medium retailers at a national level Food Forum in Mumbai and I was amazed to see their own realization that their key strengths could sustain them under any competitive circumstances. Support for Small and Medium retailers in order to motivate them and help them realize their potential was the only thing felt as required immediately. So the RETAIL INDIA TRANSFORMATION EMPOWERMENT Foundation (RITE Foundation) is being established now in India with a clear mandate to train, help upgrade or even rehabilitate Small and Medium retailers across the country besides advocating their issues and concerns wherever and whenever required.

During the middle of the year, Aditya Birla Nuvo bought a controlling stake of Future Group’s Pantaloon Retail de-merging the format business from Pantaloon Retail India Limited and that has gone into the annals of the history of modern retailing in India. Rapid expansion of Future Group over the past few years with investments in a diverse portfolio of companies resulted in mounting losses and the group had to consolidate its operations exiting from a few non-core businesses of the group. As the group quickly bounced back on track, the lesson learnt points to the fact that one should stay focused on growing one’s core businesses leveraging one’s strengths and not be rapidly experimenting in unrelated sectors, however bright their prospects of growth could be.

Last fortnight as I was walking down the busy shopping lane of Hiranandani Gardens in Powai, I came a cross a shop premise, which used to house a popular bookstore and it was being renovated aggressively. Curiosity got the better of me and I asked the security guard outside the premises what new shop was going to open. He informed me that it's none other than the new sensation of Starbucks coffee shop! The entry of Starbucks in India a couple of months ago with the opening of its first store in the Horniman Circle in South Mumbai made waves in the Indian consumer and shopping circles! The welcome sign that it sports in six languages – Marathi, Hindi, Gujarati, Tamil, French and English, points vividly to the company’s expansion plans in the near future.

As Christmas celebrations began, the Church At Powai (CAP) organized a Christmas Carnival in the open grounds in Raheja Vihar, Mumbai and in the precincts of Norita in Hiranandani Gardens, Mumbai. Carols rent the air in full throttle and the food stalls and entertainment counters were busy ringing in business.  A member of CAP that I am, I walked into the Rajeja Vihar carnival to listen to the carols but managed to land myself at the cash counter that was selling coupons in various denominations which customers could exchange for products and services. Someone recognized my retailing experience and asked me to do the cashiering there. I was continuously busy for a good three-hour stretch in the evening without a break, when even a couple of big retail professionals among a few CEOs of companies walked into the carnival too! There was every reason at the fag end of the year for me to believe that the New Year has all the promises for brighter retailing in India!

Wish you all a Very Happy and Prosperous New Year 2013 and May God Almighty bless you abundantly!

- Dr. Gibson G. Vedamani

Big-Boxers: How Big, Big could get?

For the large food retail stores like the huge Wal-Mart kinds, the challenge may remain in merchandising the humongous spreads of shelves on the shop floor appropriately when they try to establish their presence in India. The shelf space may be about 3 to 4 times more than the carpet area of the floor, depending upon the space between shelves and the height of the fixtures. True ‘big-boxers’ may find it difficult to come by enough listings to merchandise all the shelves. Food categories need to be planned well in terms of accurate considerations of space for every category, sub-category, brand and SKU mapped in a planogram. When international hypermarkets establish their business in India, the size and scale of each store may have to be shrunk to fit the country’s needs and conditions. The average size of such hypermarkets cannot be the same as we find in the USA or UK. Would they trade their DNA off as hypermarkets? Or, would they continue to have the same large size and try to meet the challenges successfully?

I call it the ‘big-boxer’ because the format may need to fight with the complete merchandising and supply system to get the store to operate in well-oiled precision without being stuck for want of replenishments on time. These big-boxers as they establish their business in India may ask the valid question whether there is a local service support available for products sourced from other locations than the one the store is located in. India is a composition of many states, which behave like different countries, but at the same time many major cities of the country house a cosmopolitan mix of people from all states and for regional products with strong local flavor may find it difficult to gain distribution pan-India. For such regional products the network of distributors may be scant and often may not have the required capabilities to replenish stocks as when needed. Truly big hypermarkets when they open their stores in various town locations may insist on merchandise supplies from the company’s local distributors and not from manufacturers directly for many products. So, ‘middlemen’ who are the distributors may still have a strong presence in the supply chain in the retail supply chain. Would these ‘big-boxers’ want to enjoy the benefit of availing maximum margins and yet insist on supplies to be made from local distributors, ignoring the incidence of high supply chain expenses and squeezed margins?

Recently a premium mall management company conceived the idea of opening a large ‘Outlet Mall’, where a mix of premium brand outlets, which could be strategic clearance outlets functioning throughout the year. On the strengths side, it was a good strategy to drive footfalls. If done well in a premium brand mix, it could even stand out as a first-of-the-kind outlet mall in India. The widest and deepest merchandise overruns exclusively retailed in premium brand ‘outlets’ in the mall may be of great interest to customers. On the flip side, it may be a challenge for brands to continuously merchandise outlet stores given the limited merchandising seasons that typical Indian retailers adopt. The risk one may foresee is that while premium brand partners may not be adequately available in number, currently to partner, many may also prefer to clear bargain merchandise from their own stores twice or even thrice a year. In course of time, premium brand partners may wean in number if they don’t find adequate quantum of merchandise to clear and mediocre brands may find space in the mall if the mix is not controlled over a period of time. The idea was instantly dropped as infeasible.

Would globally successful BIG retailers make a BIG BANG in India? After all, BIG is just relative!

- Dr. Gibson G. Vedamani