Country first , Religion later…..

It is rather shameful that people from North East have to panic and run for cover in their own country because their fellow countrymen have chosen to show solidarity to Muslims from Bangladesh by threatening to kill or hurt them across the country if they stay put.

And after what has happened in Mumbai and Lucknow it is evident that they could well mean what they say. I fail to understand why Muslim organizations throughout India have taken upon themselves to protest against the violence in Assam where people from both sides got killed over an issue which we all know is linked to illegal immigrants from Bangladesis encroaching upon the land and resources of Assamese people. It is known that the Muslims in Assam are from Bangladesh and this can be very well validated by the census records

http://en.wikipedia.org/wiki/Illegal_immigration_in_India.

The Muslim population has grown at twice the rate of growth of Hindu population in Assam proving that there has been an influx from Bangladesh. The congress has been supporting this since independence under its  appeasement vote bank politics but now things seem to have gone beyond their control as there are more Bangladeshis than Indians in pockets where violence has broken out.

Now here comes the part that hurts. When it is a conflict between Indians and foreigners who just happen to be Muslims why do we find Muslims in India supporting the Bangladeshis going to the extent of damaging government property, fighting with Indian policemen and even vandalizing martyr’s memorial by rampaging and tramping all over it !!  Even if I believe for a moment that the rally was against the violence happening in Assam what does it say when you disrespect what the Indians hold so close to their hearts.

http://www.mid-day.com/news/2012/aug/140812-Mumbais-most-wanted.htm

If you read the report above you will know the theme of my argument. Even as Muslims your protest is for violence against Muslims not against India,the country you live in and which allows you to carry out your protest liberally. The martyrs memorial that got vandalized was erected in honor of a Muslim freedom fighter so is the anger against the Bodos fighting with your Muslim brothers from a Foreign land or against India as a nation regardless of the fact that our freedom was won with sacrifices from Hindus as well as Muslims. The last line of the report says it all – Several Muslim leaders have also condemned the act. As if they were supposed to applaud the act but have somehow chosen to condemn it.

Two important questions :

1. How many Hindus came out in large numbers against the violence in Assam and why most of them still either don’t know what the actual problem in Assam is or feel that it is a local conflict between 2 groups fighting for control in the region ?

2. Why only Muslim organizations felt the need to come out so aggressively and protest when essentially the fight is between Indians and Bangladeshis .

Threatening the north east people in Bangalore, Pune and Hyderabad is cowardly and treacherous as obviously these folks have nothing to do with the violence in Assam and have come out of their homes like millions of other Indians in search of a better life. The right to move freely and settle in any part of the country is guaranteed by our constitution so who are these enemies of the state to force them in their own land ??

Anyone ,whether Hindu or Muslim who has chosen to be an Indian citizen has pledged to have country before religion as India was and remains to be a secular nation.I strongly feel that all Muslims in India will have to resolve and choose the nation over their religion, unconditionally and without exception else the patriotic Muslims will have to bear the cross for those who seem to have a doubtful stance…..

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Six Men, Elephant and FDI in retail….

Watching the circus on TV  for the last two days since FDI in Retail has been announced I could not but help comoparing the situation to the famous parable of the elephant and six blind men. While each has its own opinion based on what part of the elephant they are holding ( like the opinions of our learned media,business men and politicians) , no one exactly knows what the animal ( in this case quite literally ! ) looks like. For someone like me who has worked closlely with the farmers as well as in retail for a long time the picture is quite clear. We are talking two different business models here : one is based on scale and the other is based on service and convenience. If you just look around : has a single mom and pop store closed down even when you have a number of so called organized big box retailers are all around them. Within a Km radius of my place in Bangalore I have a Big bazar super centre, a More Super centre and a number of Nilgiris, MK Retail,Reliance and others but I still order from the store next to my place or go and buy it from there for day to day needs : No ques therefore quick transaction or homedelivery that gets the store to your doorstep being my simple drivers.

For farmers there is absolutely no link between FDI and what they will get for the price of their produce. They sell to the mandis governed by APMC act today or just sell their produce to anyone that gives them a better price. On what basis are people debating that farmers will be adversly effected beats me completely.Typically in all economies with dominance of organized retail farmers realize 2/3 of the retail price of their produce vs. just 1/3 or lower in economies where such a mechanism does not exist.It’s quite simple if You know that at what price the retailer is going to sell what he buys from me and if all farmers know what price their produce sells in organized retail are they fools that they willl give it up to a Wal Mart just like that ?? It is this non transpareny that kills them today.When we are buying Onions at Rs50 a Kg the farmer is still getting just 5 Rs for it , so where does the Rs. 45 go ??No one knows or those who know are crying wolf wolf !! I don’t even want to go into the efficiencies in supply chain etc which will of course add a lot o value to consumers, producers and retailers alike. I have seen Wal Mart very closely and I know that it is one of the most hoenst, forthright and efficient companies in the world. What a lot of people say about Wal Mart is mostly out of ignorance or their own selfish interest. It’s a giant that competition is afraid of and fear always brings in insecurity.

Anyways you enjoy the poem and try to figure out which of the blind men is Politicians, Media, Businessmen, shopkeepers, farmers and general public :

It was six men of Indostan

To learning much inclined,

Who went to see the Elephant(Though all of them were blind),

That each by observation

Might satisfy his mind

And so these men of Indostan

Disputed loud and long,

Each in his own opinion

Exceeding stiff and strong,

Though each was partly in the right,

And all were in the wrong!

So oft in theologic wars,

The disputants, I ween,

Rail on in utter ignorance

Of what each other mean,

And prate about an Elephant

Not one of them has seen!

For the complete version click here : http://www.wordfocus.com/word-act-blindmen.html

Let’s first see the elephant and then we can talk about it.

Sourcing – India or China ?

Off late there has been a lot of debate as to which is a better sourcing destination – India or china.Going by just volumes China is far head of India in both value and variety of products shipped ,especially to the US market, but India is emerging as a strong contender with recent changes that shift the balance in its favor.

While India will not be able to overtake china as a sourcing base  it will be able to take away a major share in low technology manufacturing such as apparel,shoes,Handicrafts and the such while China will continue to lead in high tech goods.India will emerge as an “alternate source” for those looking for a more stable,quality conscious and environmentally freindly supply source with a long term horizon.

A few compelling reasons for retailers to develop a sourcing base out of India :

1. A stable supply base governed by democratic economic policies which are linked to the world unlike China where demand is artificially created and supply is pegged to control price and consumption.

2.Almost all regions in china have raised labor wages.The rise is varied from 20 % in coastal china to 65 % in cities like Shenzhen.They now range from $150 to $300 where as they are low and stable at about $100 to $ 150 in India.At most they go up to $ 200 for skilled labor in some of The Indian Factories.

China has done this to lower the income gap which was giving rise to frustration among the working class and also to boost domestic consumption.

Being a free market economy Domestic consumption in India has always been high which is one reason for poor export outlook.Companies can make a lot more money by selling to Indians and they only go for export for engaging spare capacities or for securing bulk deals.With an increased focus on world markets this manufacturing base will drive the export growth.

3.Chinese currency Renminbi which was pegged again in 2008 to help the exporters fight recession , may be allowed to free float under pressure from IMF and other world bodies.

Indian Rupee has always been free floating and remains stable at about Rs.45 to a dollar with maximum 10 % fluctuation on either side beyond which the government may need to intervene.It has not happened so far except during the 2008 economic crisis when Rupee became too strong effecting dwindling exports negatively.

4.As customers ask for products which have been produced in more environmental friendly and sustainable manner the retailers will be forced to ask for questions such as chain of custody,effluent treatment,carbon footprint,labor friendliness etc.With strong laws governing Indian Manufacturing it will have a definite win over China which has ignored these for a long time.

If China pushes for the environmental compliances now they will most certainly scar the low cost image it has created for itself.I understand that many Chinese provinces are pushing environmental issues which is adding cost to the manufacturing bases there.Many others may follow soon.

5.Infrastructure has been a major concern for India for a long time.But the last few years have seen the strengthening of the rail road network and development of sea and air ports.Today India can boast of some of the best airports in the world and soon the number of sea ports with container handling capacities which are many times over their current capacities will be a reality.Public Private partnership model has not only brought in the required investment but has also ensured before time completion of projects as most projects have a severe penalty clause for overruns.

6.Last but not the least – India today has the largest pool of skilled English speaking manpower which is below 35 years of age.As they work hard and play harder a new consumption pattern is beginning to emerge which will fuel domestic consumption and thus attract huge investments in manufacturing of goods and services.The rise of the “Indian middle Class” which is as big as the US population is now a reality.

Manufacturing industry in both SME and large scale industries has to gear up to keep up with the rise in demand.Most of the MNC’s which were earlier importing are now having their own manufacturing bases in India now.This will help in raising the production and quality standards of Indian enterprises as they will have to compete with International competition.It will certainly help in making the “made in India” label more valuable than ever before.

NREGA – Good politics Bad business

While the government is basking in the success of the NREGA (National rural emaployment Guarentee Scheme) and the opposition is crying fowl from the rooftops,the real  impact of this scheme on the economy is something no one seems to be bothered about.

Many years ago IBM computers was in the dumps and it had to do something drastic to turn around its dwindling fortunes.They had a huge workforce which they could neither fire right away nor could keep for always in its current form.Driven to the wall the team at IBM told its employees that we would like to retain everybody so long as they can prove themselves to be employable.This simply meant that there are no free lunches and whoever contributes can be a part of the party.This simple idea turned out to be one of the most important case studies in HR history as it brought back IBM computers from the brink of bankruptcy to the centre stage of IT revolution as we know it.

Professionals like us  have no issues with sharing our destiny with our less fortunate brethren but the only worry is that can we sustain it for long.If the dog starts biting the hand that feeds or in softer words if we cut the branch on which we are perched its going to be sad tale of foolhardy for all of us.On one hand the money is being ill spent and on the other the sources from which it came are being attacked at the same time.

http://www.indianexpress.com/news/in-opposition-camp-too-delays-mismanagement/259701/0

Lets look at some very compelling situations which I am putting here not for starting a debate but to sound a red alert for ‘fools’ who keep living in their own  paradise :

1.Today you go to any of the Industrial cities such as Ludhiana , Moradabad, Tirupur ,Kanpur,Cochin etc and there’s one thing you will find common on all factory gates – a sign declaring labour required for packing,polishing stiching,cutting,weaving and so on.So what’s new ? well there is no labour !

And where have they all gone ?? Nowhere.They have just not turned up.Who would bother to lead a harsh life of hard work when you can enjoy the fruits of someone else’s labor for free at home.A share has to be given away in bribes but that’s OK.I did not do anything do deserve it anyways.

2.NREGA may be a great scheme but its implementation is seriously flawed.Has the government come up with a white paper on how the country has benefited by keeping the nations working hands tied up to their place of origin.Displacement to urban centers could have been a problem but is this the right solution.What are the metrics applied and how the performance of the workers,supervisors and babus is being measured.NREGA is supposed to build check dams,community roads,wells etc but how have the parameters for achievement been set against the work being done by a private contracter.

3.In order to be ’employable’ by world markets our industry needs to be competitive.But we have floating exchange rates compared to China’s fixed ones,we have all kinds of industrial policies that hinder free flow of men and material,we have excise duty which encourages export of raw material and discourages export of finished goods,We have labor laws that were fit for the 1950’s but no one has bothered to change them,we have the lowest productivity of workers and highest cost of transport and duties.

4.India is touted to be on the growth path as more than 70% of its population is under 35 years of age and we have the largest pool of working population.But with schemes like NREGA we must question if the working hands are getting utilized optimally.Whats the differential when you have a skilled tailor work on a machine producing merchandise for exports vs. the same guy working in his village and digging a canal.

5.Those who earn much more that what NREGA offers and have skills which are far beyond will continue to rise on the economic path but what is the government doing to upgrade the skills of those who work for NREGA ??What about those who have under utilized skill sets.I am sure their numbers far exceed those of the few software engineers we keep talking about.

6.If the factories cannot produce goods for shortage of labour or become uncompetitive in world market place who will take the responsibility and how will the deficit in export earnings be made good.What are our options and what are we doing about mechanizing processes that are labor intensive.Is the government giving incentives to SSI’s and Exporters so they do not suffer due to lack of cheap labor which has been their competitive advantage for so long.

I am not predicting a doomsday scenario here but if you go to one of the centers of export excellence above you will be as aghast as I was when I saw half the units either closed already or on the verge of it.

When last season our supplier in Ludhiana told us that he can’t supply the goods due to shortage of labour we went to an importer and bought Chinese sweaters.I wonder what will hold the buyers in other countries to act any differently if we in India continue on this path of self destruction.

The Link below to NREGA website does not measure any of the stuff I have mentioned but interestingly shows the lowest levels of Funds utilization and sanctioned in states like Goa,Himanchal  and Uttarakhand which have done far better on the industrialization and improving quality of life for their people.

http://nrega.nic.in/netnrega/dologin/MPR_fin_rep_cmp.aspx?state_code=24&fin=2011-2012&Digest=9sBuBxgG+sPk1eZzpM7%2foA

Making (Fab)India work

I am currently reading ” Making India work” by William Bissell( MD of Fab India). I have always been a big fan of the FAB India concept and have patronised the store for a long time.In the late nineties when there were just a few stores (first one being in the GK Market) I used to take foreign buyers there and they just loved the stuff – I wondered why ? After all it was just cotton and that too kind of very plain and simple.I guess somewhere down the line I got hooked to the casual comfort and comfortable pricing.It also made me look more intelligent than I actually am.

And then whenever I visited Lucknow and went to buy stuff for my parents from the Khadi Gram Udyog outelt I found the concept very similiar to that of Fab India.Khadi Shirts,Home made Pickles,Shampoos,Kutir Neem Soap, Herbal Medicines,Home linen etc…The only big difference I found was that of customers who frequented these two places promoting Gandhian Way of life and Community based enterprises.While Fab India was thronged by the Firangis and the Elitist intellectual types the visitors at Khadi Gram Udyog were more rustic in appearance and represented people with limited means, at best the middle class.

Over a period of time Fab India has grown to be a profitable chain of stores across the country, the Khadi Gram Udyog is languishing in its semi comatose state  surviving on life support provided by the government.Well the reasons for its failure are multiple but the most prominent ones :

Lack of Focus on Bottomline

Positioning and value preposition

And Of course the midas touch of Babus who literally mess up with anything that they ever lay their hands on.They should be actually prohibited to bless children else they would stop growing.

Anyways , what pains is that while Gandhi has caught the fancy of the world in a big way as more and more have realized the non sustainable nature of the material pursuits , his ideas are still being promoted in his own country by an American who has made India his home.Even the Organic line of products at Fab India comes from a company promoted by Bharat Mitra who is an Israeli settled in Lucknow.

In a way it epitomizes how we are.Years of colonial baggage has ensured that the Indian Psyche keeps looking for affirmation from the white skin.Unless reaffirmed our faith in our own self  and our own knowledge keeps flickering. I do believe in Globalization and have tremendous respect for both gentlemen but this attitude needs to go.

Coming back to the book.The central idea is how India can grow and join the league of developed nations without putting pressure on an already bursting at the seams and fragile planet.The book argues that we must put a value to all natural resources and the communities that live in these habitats must be able to command a price for the clean air and fresh water.

While I agree that a self sustaining community might be an answer to a happier and more content world around us I found the ideas presented in the book simplistic in their approach.

For Example – If Reebok starts pricing its shoes at the product cost + distribution + profit + the cost of getting rid of the pair in an environmently friendly way it can then be called the real cost of the pair.But I understand that Reebok already prices its products at 6 times the cost of production so how come ? and then would not the same logic be applied to a Paragon chappal ? So what do our villagers with fresh water and air do ? The chappal is already beyond their reach as it is now a sustainable chappal.

There is lots of bibliography and Mr. Bissell goes on to propose a new system of Taxation ,Politics,  Govenment. To me the ideas will never go beyond the drawing board even though they are simple to understand and execute.India is much more complex a nation and what makes it even more so is the fact that for 70% someone else needs to tell them what’s good or bad for them.How else do you explain Mayawati becoming chief minister the third time.Politics and Government in India is a 2nd class game played by third class people for those who belong to the 4th class.And unless my vested interest of building a nation is same as your vested interest of providing for next 3 generations things will never change.

In all this I see a ray of hope for me – with everyone imagining their own India may be its time for me for think of my own version and publish it.As it is my poems and short stories are not going anywhere…

Let me start :

Aisa hoga sab log Ice cream khaa rahe honge …samjhe.Itte mein mercedes se bhikhari utarenge aur golden bowls mein bheekh maangne lagenge.Aur tab main ek dialogue boloonga ‘ saala nagar basa nahin kangal aagaye.Goli maar do sabko.’

Chote chote bachche apni guns nikalkar chalayenge.Usme se Gems choclate nikaleingee goliyaan nahin aur sab log khushee khushee apne ghar jaane lagenge ye gaate hue ki saare jahan se achchaa hindostaan hamaara ….

Not bad. hai na ?

Traditional wholesale and Organized retail

In my earlier post I had suggested that Semi Organized Retail will succeed in India.To build upon the idea I am presenting another case below.

India is a uniquely different from the west if we consider the following factors :

1.While the Retail stores big and small have been there for almost a century now,Organized chain stores are a new phenomena to the Indian market

2.In the absence of pan Indian chain stores we had bazaars and whole sale and retail markets which catered to the needs and  lifestyle  of the Indian Public.By virtue of their long innings these have a place of prominence in the mind of the Indian shopper.Their value preposition too is quite clear and each bazaar caters to a different taste and wallet size.This is something that organized retail is struggling with at the moment.image118

3.While Labor is in short supply and is therefore costly in the west,its in abundance in the country of more than a billion people.This has shaped the Indian wholesale and Retail Market very very differently.

For cash and carry models I believe that they will not be successful unless they target institutional clients and offer door to door delivery.In India if you have cash ,you don’t carry someone else does it for you.Large number of house holds are still serviced by Deliver ‘boys’ across neighborhoods.This service is free of charge and many a times if you are a regular the bill value does not matter.

4.While there may appear to be very little method in the madness and chaos seems to be buzzword if you scratch a little deeper you will find  self aligning systems very similar to those found in primitive life forms.They may look like randomly moving around but a pattern emerges as soon as you put them under a scanner and start to study their behavior.

Go to any ‘Mandi'(wholesale market) and you will know what I mean.

They may not be carrying Laptops and have fancy accounting systems but they know their business well partly because that’s what they do 24X7 and partly because it has become a part of their DNA.

5.In Organized retail we work on SOP’s and MOU’s to forge  supplier and buyer agreements but in case of traditional retail these are handed over from generations to generations.The buyer and the supplier are not only business partners but they are friends who sometimes even marry their siblings into each others families.

It is very difficult to replicate that level of trust and understanding and the spirit of co creation.The MBA’s in organized retail learn about segmentation,customer focus and value creation but in the traditional whole sale business they KNOW that that’s the only way.Survival to them means continuously reinventing themselves keeping an eye on the pulse of the market.They get their information through informal channels but the actions that follow them are fast and practical.

6.On the other hand the Organized retail lacks many if not all of the above attributes.The systems and processes neatly laid down in SOP’s and charts and tables remain there and very few retailers have been able to drive them down in the organization.The team members are young and new to the trade so while they may not do it deliberately the understanding of the importance of each step of the business process is missing.

7.Organized Retail does offer to its customers a neat and clean ,friendly shopping environment and a certain level of trust of quality as most are backed by big corporates of multinationals.

Another aspect which is important here is that of customer service and window shopping which is a big Grey area as far as traditional retail is concerned.The salesmen are often rude and do not have the finesse to deal with different class of customers.The idea of being confronted and not being able to just ‘have a look around’ does not appeal to many customers especially women.

The point that I am trying to make is that in a way both these entities can not only co exist but they can partner together for creating a unique value for the customer.How ?

Traditional wholesale  can serve as the supply chain for modern retailers as they stock bulk quantities which can ordered as per the sales lift on the image116shelves.

For trial runs of new products this could be great idea as you do not have to commit yourself to quantities upfront.A organized retailer can continue buying from wholesalers as long as the quantities become so large and predictable that owning a production line is the best option to enhance and retain higher margins.

This model will work very well for new retailers with young and image117inexperienced buying teams as they can use the skill and expertise of wholesalers who have been in the market for decades.Their understanding of local taste and price points will be far more than someone who has just passes out of college.

In fact what I am suggesting is nothing new.Almost all big retailers in the developed economies depend heavily on importers for their business.The concept of category captains is akin to what I am proposing.

In India we do not have ‘importers’ and also the organized retail market is not so big to support such operators but that gap can easily be filled by wholesalers.Those who have been touted as the biggest adversaries by an ignorant media can in fact bring a lot of value on the table for themselves and for the customer too.

I have been experimenting with the above in my business and it as worked quite well so far.

Semi Organized retail will succeed in India

After being in the Indian retail market for close to 3 years now and having some sort of an understanding of this business I have realized that it will be very difficult for Organized business to succeed and sustain in the Indian retail scenario.This has been demonstrated by the recent fall of some of the most talked about stories – Subhiksha,Reliance and now Vishal retail.I am not even talking about scores of others in  the pipeline.

The very reason for which the customer shops and makes a choice in favor of a particular retailer is flawed due to the uneven playing field between the organized and unorganized retail – Experience,Taxes,Quality of manpower,customer understanding,relationships all go in the favor of unorganized sector.The fact that they have been there for ages and rule consumers mind adds further to the woes of someone setting shop with neat fixtures,air conditioning and smiling Service associates who know very little about the product.

On some counts the Organized sector does have an advantage -hygiene,ambiance,trust of larger brand names that back the store fronts,courteous and polite staff,transparent exchange policies,promotional schemes,scale and scope of operations and width and depth of merchandise offered,Supply chain etc.The biggest challenge they face however is that while these cost the retailer a good amount of money on a recurrent basis the customer is not ready to pay for them.

She wants the best of both worlds :

  • Fixed prices which can be bargained
  • Clean ambiance but low prices for F & V
  • Smiling CSA’s who know them by name
  • Relationship without the CRM cards
  • Fashion consultants who don’t cost a fortune
  • A personal touch that is not backed by computer data

And that is what we need to give her.Indians are value conscious regardless of their social status and earning capacity and spending money wisely is still considered to be a great virtue.One of the Highest rate of savings( 30 %)explains this behavior to a large extent if one does not already know it from his/her upbringing.Splurging on costly branded merchandise is considered an act of ostentatious stupidity and you always end up congratulating yourself on the ‘graet deal you had at the mall or bazaar as the case may be.

I am presenting below and excellent aricle by William Bissel MD of FAB Indian Overseas which has a similar thought process.It was published on Retail Angle Website on 24th march2009 :

William N. Bissell: Retailing Indian Style
Posted On: 23-03-2009 21:28:2 PM

William Bissell is the Managing Director of Fabindia

Organized Indian retail has copied the Western Retail Model at a time when the conditions in India are not developed as in the West.

Western Retail Environment Indian Retail Environment
Cheap Land Expensive land
Good high street shopping environment No high streets/ no pavements to walk on
Expensive Staff Costs Cheap Cost of Staff
Low cost of energy – heating and cooling High Temperatures 6 – 8 months a year with high energy costs – especially when you have your own generators.
Lots of parking and easy access to peripheries of towns with good public transport facilities Limited Parking and peripheries of towns difficult to reach
Excellent Supply Chain Infrastructure in place with UPS – national cold chains etc Little existing supply chain infrastructure in place NO UPS, No Cold Chains etc.
Simple regulatory environment – Low taxes Complex regulatory environment; high taxes with VAT; frequent hassles with visits from Government inspectors
Low interest rates High Interest Rates
Higher GPs Low GPs

Most Efficient Retail:

1. Self or Family Run.
2. Minimal regulations.
3. Cash and Carry
4. Small space stocked efficiently.
5. Takes goods mostly on consignment basis with weekly deliveries therefore little cost of holding inventory.

This is a true story – I’ve only changed the name of the person to Ramu.

Ramu’s Shop Organized Indian Retailer
Tiny space – uncomfortable yet has everything tucked away – Rent 2500 per month Large Centrally AC floor plate in a swanky Mall with 50% space efficiency Rent 1.5 lakhs a month
Staff of Ramu, his son or daughter and Nepali boy who sits in stock room located in the top part of the store and throws down anything required by customer – Salary Rs 2000 per month Manager, 1Asst. Managers, 4 Customer Service Associates and 5 externally leased “outsourced” staff – Salary 1.25 per month Not including head office costs.
Uses his Rs. 1000 a month cell phone to restock, order and communicate with distributors and vendors. Has SAP software to ensure Just in Time (JIT) delivery pays for each terminal and for licensed software etc. Cost 30,000 per month.
Keeps 1.5 ton AC on only when customers are there – bill is 2100 per month AC running 11 hours a day – 14 tons – Electricity bill 80,000 per month
Little or no dead stock – anything that doesn’t sell goes back to stockist 10% of inventory is unsalable – average inventory is 35 lakhs or 3.5 lakhs
No borrowings as 80% of stock is on consignment or ordered by Ramu when a customer needs it Interest on Inventory @ 12% per annum is 4.2 lakhs per annum or 35,000 per month
No capex as the interiors are simple and are small Interiors done up at 1500 a sq ft x 2500 sq ft = 37.5 lakhs the interest alone is 37,500 per month
Sales are 5 lakhs a month Sales are 15 lakhs a month
GP is 20% GP is 30%
GP 100,000 GP 450,000
Head Office Costs (nil) its only Ramu and his kids Head Office is 8% of sales
Profit at store level 100,000 Profit at Store Level 450,000 – 120,000 = Rs 330, 000
EBIDTA 100,000 – (2500 + 2000 + 1000 + 2100) = 92,400 EBIDTA 330,000 – (150,000 + 125,000 + 30, 000 + 80,000 + 35,000 + 37,500) = (-127,500)
Annualized profit/Loss = 92,400 x 12 = 11,08,800 PROFIT Annualized Profit/Loss = 15,30,000 LOSS
RETURN ON CAPITAL EMPLOYED = 100,000 I’ve taken Ramu’s capital at 100,000 as he bought an AC recently and built some new shelves and a little inventory. 11/1 X 100 = 1100% CAPITAL IS BEING DESTROYED

Ramu is the salesman, CFO and the CEO – in the organized sector, our professionals tend to be conscious of their designations and very few feel that shop floor selling is a worthy job. Small family run Asian outlets are doing extremely well in the UK and have survived the onslaught of the large retailers – in fact large retailers have been forced to extend their working hours to compete with the corner shops. ( There is a joke that Asian teams fail in hockey in the UK because every time they got a corner, they built a shop!!). Ramu works 24×7 by 365 organized retail cannot offer him much competition.

India is built on the 12 – 14 million Ramu’s and the surplus capital they generate. We just don’t notice them because of the glitz of big retail

If the Government could find a way of letting investors invest with Ramu instead of “big retail” Capital would earn a phenomenal rate of return.