The retail party has just begun

An aware consumer spoilt for choice, mushrooming retail outlets and malls and increased spending power — all ensure a boom time for retailing, writes Sukhdeep Kaur

THERE is not a patch of grey in the horizon and tomorrow may be even better," is what trade pundits predict for the Indian retail industry. With both real income and spending intent going up through the roof, there seems to be nothing that can spoil the party.

Consumer niches have begun propelling the market and the concept of ‘value for money’ is picking up. As consumers move from the ‘feel-good’ to the ‘feel-great’ zone, those turning to the retail industry know the bounty that awaits them. No wonder then that not only conglomerates such as Tatas, Birlas, Rahejas and ITC have initiated investment in retailing but also oil companies like HPCL (Speed Mart), IOCL (Convenio) and BPCL (In and Out) are diversifying from fuel retailing to grocery and convenience stores. What’s more, even venture capitalists like ICICI and IL&FS are increasingly investing in retail businesses.

Today, India may be called a nation of shopkeepers as it has more outlets than any other country in the world. However, the retail industry is still in its nascent stage here as organised retailing accounts for less than two per cent of the total pie.

Besides, we have the lowest retail space per capita in the world (two feet per person) and against about $2,500 retail business in the US for a population of only 263 million, the industry accounts for only $200 billion for over a billion people we have.

Organised retailing in India began in the South mainly due to availability of land and low real estate prices, Chennai followed by Bangalore and Hyderabad being the trendsetters in this realm. Later, the recession in Mumbai and Delhi saw this concept take root in these cities. As of now, the retail industry in India is evolving into an exciting and competitive segment with both the private sector and global players vying for their share in the world’s second largest consumer market. So not only big cities but also smaller metros and even large towns are witnessing a construction boom with shopping malls and large retail stores taking on ambitious projects.

The increasing income and assertiveness of the Indian consumer and growing supply base (both in the domestic market and from outside due to cheaper imports post-liberalisation resulting from fall in customs duty, shift from quota to tariff-based system and easing of entry restrictions for multinationals) are not the only compelling factors. Technology is perhaps the most dynamic change agent in the retailing industry. Computerisation of operations, including inventory management, billing and payments and database management, use of bar coding, point-of-sale terminals, MIS (management information systems), electronic article surveillance systems like close circuit televisions and interactive applications like CD-ROMS to virtual reality have all made retailing an appealing proposition.

Besides, the tech-savvy customers find it a lot easier to indulge in shopping delights using credit, debit or smart cards. Toll-free numbers, tele-shopping and online shopping are other ways the retail industry is trying to add to its fortunes and woo customers.

Add to this, the explosion of the electronic media in the last decade. Today, there are more cable connections than telephones in Indian homes! This media bombardment has exposed the Indian consumer to products and lifestyles of more affluent countries and raised their expectations in terms of choice, value, convenience and ambience. Besides, the behaviour of the consumer, too, has undergone a drastic change and a greater number of working women, nuclear families (children accompanying parents to malls) and hectic lifestyles have all necessitated the need for bringing products under one roof.

Tapping rural sector

The rural market is no longer a non-player in the retail game. It is now accounting for over one-third of the market for most durable and non-durable products. Even manufacturers are developing new products with the rural consumer in mind besides using village-oriented marketing strategies for brand promotions. Whether it is Rani Mukherjee promoting the chocolate Munch or master batsmen Sachin wowing village lads with a soft drink, both ad makers as well as top company honchos know where to put their money and how. The rural market is no longer of hypothetical empirical value but is well researched and reached by most companies looking to tap India’s vast and abundant bounty.

As of now, India can be said to be in a stage when retailers control the market, being the closest link to the consumers in the supply chain. They are now providing good ambience, merchandising and extra services to emerge as power retailers.

Most of the small kiryana stores in your neighbourhood must have gone for a makeover and are quick to offer you home delivery, cleaned and packed dals and spices and other small services. The ones in prime locations with greater space offer good display, imported goodies at reasonable rates, separate counters for top cosmetics’ brands and a magazine section besides stacking your weekly dose of veggies, bakery items and poultry. The list does not end here.

Also in the offing are holiday packages and other exciting prizes, more so when the festive season is on. Now that the retailer is the king, even consumer goods’ giants like Hindustan Lever Limited are going for a makeover and realigning its distribution channels.

The HLL, for example, is now targeting different consumer segments, namely mass, upper middle class and premium class through mohalla shops, big traditional retailers and modern retailers having self-service stores, respectively. While the last is called modern trade, it is trying to rope in traditional kiryana stores into the mainstream by certifying them as Super Value Stores (SVSs). These SVSs display the company’s products prominently and offer better deals conceptualised by the company. The company, in turn, gets better merchandising of its products to cash in on the retail boom. Thus, while manufacturing giants are wooing retailers, other big players are into opening retail chains and malls.

However, what is the most heartening factor for the whole retail scene in India is the changing face of the Indian consumer. There is a sudden whoosh in disposable incomes of households with hikes in pay reaching the skies.

Also, with competitive pricing and easier availability of finance at lucrative interest rates, the gain is trickling down to the consumer, who is now exerting his right to expect value for money.

Besides, there is a rise in new consumers, those hailing from the so-called Class B of the socio-economic milieu. The walk-ins at restaurants, cafes, bars, malls and multiplexes are up. Therefore, what we have is a win-win situation for all.

While the discounts, price wars and great offers and variety have made the "very-aware" consumers happy, wider reach through the media, better merchandising, rising consumerism and greater number of consumers with larger moneybags is good news for the retailers and manufacturers. So none seems to be complaining and the party is not only on but also rocking.

While the Super Bazaar experiment flopped, Pantaloon’s Big Bazaar and many others are doing brisk business. The reason why Super Bazaar went into losses was also inefficiency resulting from government’s handling of the same.

Present players

India’s largest organised retail chain – Batas – has a turnover of $140 million, while a single store of a retail chain like Wal Mart in the West turns in $180 million. This explains two things – we have miles to go and the unexploited potential of retail trade in the country which houses world’s second largest population.

Super Bazaar was government’s initiative into modern retailing way back in the 1960s. Started during inflationary times, it introduced the concept of self-help, controlled rates and open layout to the Indian consumer.

Vasanth, RPG’s Food World, Viveks, Nilgiris and Subsiksha in the South were pioneers, followed by real estate owners like Rahejas (who started Shoppers’ Stop) and brands like Zodiac, Park Avenue, Titan, Tanishq, Raymonds and Bombay Dyeing that have their exclusive retail stores.

These first-generation retailers then expanded to multiple locations, mainly metros and big cities. Now, pure retailers like Lifestyle, Ebony, Westside and Fun Republic are providing almost everything under one roof.

They house eating joints like McDonald’s and Pizza Hut, apparel stores like Pantaloon, Provogue and Shoppers’ Stop besides other brands offering niche lifestyle products such as sports accessories (Nike, Adidas), designer watches (Swatch) and entertainment (multiplexes, play galleries).

India can be said to have entered the second phase of retail growth when there is high-speed growth.

There are retail chains like Tata’s Westside, Pantaloon’s Big Bazaar and Rahejas’ Shoppers’ Stop, to name a few, along with global players such as McDonald’s and Benetton, trying to tap country’s vast potential.

Bringing all these under one roof are mega malls such as Lifestyle, Fun Republic and Big Bazaar. Now, top names in international malls such as Marks and Spencer and Mango are also eying the Indian market. It is only later that the retailing scene will move to the other phases when the fruits of rapid growth will result in economies of scale and greater efficiency leading finally to consolidation through mergers and acquisitions. Thus, retailing in India has a very long haul ahead.

Regional surge

Punjab mainly has Fast Moving Consumer Goods’ (FMCG) stores as modern retailers besides big kiryana stores and mohalla shops. Unlike Haryana’s Gurgaon, which is the most successful example of mall culture in India, Punjab has still to come of age in the retailing scene. While in an upcoming metro like Chandigarh, there are modern retailers like Peshawaris, JDs and Empire Stores, the Haryana General Store, a large traditional retailer, is still recording highest business in grocery and FMCG trade.

Thus, it is the masses, which still decide the turnover and not the classes. But, the scene is fast changing. Gradually, even the middle class is taking to the mall culture if the sudden surge in mega mall projects is any indication. As of now, the retailing scene looks buoyant and will continue to be fuelled by consumer expectations. Though there are concerns that cloud the otherwise clear horizon, there is nothing, feel trade pundits, that can spoil the party.

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