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.
Most Efficient Retail:
1. Self or Family Run.
This is a true story – I’ve only changed the name of the person to Ramu.
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.