Retail is going on a fast forward mode. Like telecom, energy retail sector is the next big thing. The current scenario is building up numbers or a quicker turnaround especially by players who have the scale and capability even if it means learning from your own mistakes. The most recent Reliance Ahmedabad store is an addition to the Indian retail milestones. The biggest in the country which will carry more than 95,000 products and is one of 500 planned by 2010. These further increase the fear amongst small retailers who had recently shown a lot of distaste against the entry of Wal-Mart into India through the JV with Bharti. The fears revolve around from the fact that in other countries where these big retailers have entered they have totally destabilized local retailers.
Another relevant fear is that the modern retailers might adopt predatory pricing with the sole aim of gaining into ever increasing organized retail with a emphasis on volume than value. This is actually a real fear, because one can see that because of stores like Big Apple, Spinach, 6-10 the rehri waala’s value add would be reduced to the convenience factor that they might be able to provide. In the neighborhood where I stay stores such as 6-10 have completely sucked out the air out of the local vendors. The F&V are not only fresh but they are really cheaper then the local guys. People might question that the stores have crowded aisles and might have a mix of both fresh and damaged crop .Though it’s a fact but the current king of Retail Kishore Biyani has some other opinions. An entrepreneur who is known to be driven more by guts then excel sheets and numbers, his recent modification of a Mumbai store proves this point wrong. Kishore Biyani has adapted India’s culture of order-in-disorder to transform his company Pantaloon Retail (India) Ltd. into the largest retailer in the country.Biyani’s shopping malls are crowded and Indians love them. Unlike Americans, Indians prefer crowded places where they can hear and smell each other. Kishore Biyani, recently spent $50,000 to improve his Mumbai store. The wide aisles and neatly-stocked shelves modeled after Western supermarkets just weren't doing the trick. Now thanks to Biyani's remodeling, the store is messier, noisier and cramped—a more familiar environment for customers accustomed to fighting their way through chaotic street markets. Narrow, winding aisles were added to create traffic jams and force people to stop and look at the products. Wheat, rice, and lentils are sold in large buckets so that consumers can feel and smell them to ensure their quality. Biyani even discourages his staff from st
raightening up after shoppers, believing that his customers are less likely to check out a product if it is in neat stacks. He even throws imperfect produce into the mix. For the average Indian, dusty and dirty produce means fresh from the farm, he says...[H]aving damaged as well as good quality produce in the same box gives customers a chance to choose and think they are getting a better deal. Haggling is still not allowed.
Reliance's new three-storey hypermarket and future similar roll-outs is the next step in this league.The most striking feature in the new outlet is the Rs.195 denim jeans something akin to Wal-Mart’s highly successful $10 jeans. Other unique offerings of RelianceMart which falls in line with the above ‘Chaos theory’ include tailoring, shoe repair, watch repair, a photo shop, gift services, laundry services, fresh bakery, ice-cream train for kids, ready-made batter, loose tea and pickles.There are apprehensions that prices of the RelianceMart chain would undercut rivals by as much as 60%. In this case of scenario others players will have to add a lot of value on price and quality to compete. The Bharti-Walmart stores on the other hand are not open to retail shoppers but will serve small shops, fruit and vegetable sellers, restaurants and other businesses.
But the problems that ail this sector manifold:
1. The biggest problem facing Indian retailers and consumers is a dysfunctional supply chain. Because the market is highly fragmented--about 96% of the retail marketplace consists of small shopkeepers--economies of scale are elusive and both producers and retailers depend on long chains of middlemen to bring goods to market.
2. Agricultural produce typically travels from farmer to trader to commission agent to wholesaler to retailer, and each step imposes new costs. The cost escalation is huge. By one count, the amount an India consumer pays for food is five times the amount the farmer actually receives. In the U.S., the ratio is closer to twice. Waste is also a problem--about 60% of the value of India's agricultural output is lost between farm and market, as processing delays and "wear and tear" on delicate produce takes their toll on quality.
3. Indian has also yet to match America's feat of creating a single internal market for consumer and agricultural goods. Each state imposes its own inspection requirements, duties and regulations on shipments that cross its borders, even en route to another state. In the U.S., a trucker can haul a load 1,000 miles in about 20 hours. The equivalent journey in India takes four to five days.
Another relevant fear is that the modern retailers might adopt predatory pricing with the sole aim of gaining into ever increasing organized retail with a emphasis on volume than value. This is actually a real fear, because one can see that because of stores like Big Apple, Spinach, 6-10 the rehri waala’s value add would be reduced to the convenience factor that they might be able to provide. In the neighborhood where I stay stores such as 6-10 have completely sucked out the air out of the local vendors. The F&V are not only fresh but they are really cheaper then the local guys. People might question that the stores have crowded aisles and might have a mix of both fresh and damaged crop .Though it’s a fact but the current king of Retail Kishore Biyani has some other opinions. An entrepreneur who is known to be driven more by guts then excel sheets and numbers, his recent modification of a Mumbai store proves this point wrong. Kishore Biyani has adapted India’s culture of order-in-disorder to transform his company Pantaloon Retail (India) Ltd. into the largest retailer in the country.Biyani’s shopping malls are crowded and Indians love them. Unlike Americans, Indians prefer crowded places where they can hear and smell each other. Kishore Biyani, recently spent $50,000 to improve his Mumbai store. The wide aisles and neatly-stocked shelves modeled after Western supermarkets just weren't doing the trick. Now thanks to Biyani's remodeling, the store is messier, noisier and cramped—a more familiar environment for customers accustomed to fighting their way through chaotic street markets. Narrow, winding aisles were added to create traffic jams and force people to stop and look at the products. Wheat, rice, and lentils are sold in large buckets so that consumers can feel and smell them to ensure their quality. Biyani even discourages his staff from st
raightening up after shoppers, believing that his customers are less likely to check out a product if it is in neat stacks. He even throws imperfect produce into the mix. For the average Indian, dusty and dirty produce means fresh from the farm, he says...[H]aving damaged as well as good quality produce in the same box gives customers a chance to choose and think they are getting a better deal. Haggling is still not allowed.Reliance's new three-storey hypermarket and future similar roll-outs is the next step in this league.The most striking feature in the new outlet is the Rs.195 denim jeans something akin to Wal-Mart’s highly successful $10 jeans. Other unique offerings of RelianceMart which falls in line with the above ‘Chaos theory’ include tailoring, shoe repair, watch repair, a photo shop, gift services, laundry services, fresh bakery, ice-cream train for kids, ready-made batter, loose tea and pickles.There are apprehensions that prices of the RelianceMart chain would undercut rivals by as much as 60%. In this case of scenario others players will have to add a lot of value on price and quality to compete. The Bharti-Walmart stores on the other hand are not open to retail shoppers but will serve small shops, fruit and vegetable sellers, restaurants and other businesses.
But the problems that ail this sector manifold:
1. The biggest problem facing Indian retailers and consumers is a dysfunctional supply chain. Because the market is highly fragmented--about 96% of the retail marketplace consists of small shopkeepers--economies of scale are elusive and both producers and retailers depend on long chains of middlemen to bring goods to market.
2. Agricultural produce typically travels from farmer to trader to commission agent to wholesaler to retailer, and each step imposes new costs. The cost escalation is huge. By one count, the amount an India consumer pays for food is five times the amount the farmer actually receives. In the U.S., the ratio is closer to twice. Waste is also a problem--about 60% of the value of India's agricultural output is lost between farm and market, as processing delays and "wear and tear" on delicate produce takes their toll on quality.
3. Indian has also yet to match America's feat of creating a single internal market for consumer and agricultural goods. Each state imposes its own inspection requirements, duties and regulations on shipments that cross its borders, even en route to another state. In the U.S., a trucker can haul a load 1,000 miles in about 20 hours. The equivalent journey in India takes four to five days.
4. The existing Indian laws, which forbid multi-brand retailers from entering the country, are downplaying the potential of these players to build a huge business that can meet a tremendous need in the country.
5. Also another problem is the shortage of both real estate at affordable prices which would affect the expansion plans of retail chains as well as availability of skilled manpower.
6. There is going to be a huge demand for 3PL players at the backend. With the growing sizes of operation there is a need for new small players and they will gain prominence and fit into the bigger jigsaw. This brings one to the problem that there is a huge space for consulting in the retail space because of problems in managing the supply chain.
Ambani has said he wants to create a "virtuous circle of prosperity by bringing farmers, small shopkeepers and consumers into a win-win partnership.” Reliance says its goal is to overhaul in one swoop retailing and farming, linking them through a "state of the art" distribution system with proper cold storage and transport that will give consumers fresher food at lower prices and farmers bigger incomes. It has set an annual sales target of US$25-billion by 2011 and has said it aims to give an "international shopping experience" to consumers more used to shopping at dilapidated corner stores or at in open air markets. Organized retail has the potential to trigger socio-economic transformation on an unprecedented scale in our country and will bring about enormous spin-off benefits to the Indian economy and its various constituents. This is against critics who say that chains such as Reliance Retail and other large retail outfits will drive smaller retailers out of business. As has been said by Mukesh Ambani repeatedly the pie is big enough for all the players. The pie which is roughly equal to $370 Billion is actually a big.
It has not yet taken off and there are so many innovations which are coming . Some of these have been mentioned below:
1. Reliance is in a process to launch 700 Reliance Town Centre (RTC) in cities having population below 3 lakh. Each RTC would have a health centre, vocational training, multiplexes, retail outlets and an auto centre.
2. Kishore Biyani has recently opened up a new format store for apparels which gets all the left overs from all its other format stores and sells the collection at a throwaway price.
3. In the next few years, Reliance Retail will also introduce 1600 rural business hubs (RBH) in rural areas, which could give tough time to ITC’s Choupal Sagar, Godrej Aadhar and DCM Shriram’s Hariyali Kisan Bazaar.
4. ITC is coming up with branded Rehris with in-built storage which is going to take modern retailing to your doorstep.
I am sure there are going to be many more innovations and a burgeoning need for skilled manpower in retail. But on the other hand the experience for foreign companies on the subcontinent has been less than pleasant: Retail giants Tesco and Carrefour have been deterred from entering the market and have pulled out of negotiations to launch joint ventures; others like Germany's Metro have been plagued by uncertainty and troublesome government regulations. Though Wal-Mart is one of the best, if not the best supply chain management companies in the world. Their recent move into India as a wholesales supplier and consultant underscores this strength. Another strength it plays to is their experience and expertise in buying direct from manufacturers in the U.S. and elsewhere. This will be a similar role they would play in the Indian market, which includes somewhere in the 12 million small mom and pop type stores spread across the country.
Even with Wal-Mart it is going to be a steep learning curve, as Biyani's remodeling strategy suggests. Cracking India's retail market is going to require something different than the usual smiley faces and "always low prices. Also Wal-Mart does not have its performance in Asian countries to back is performance in the US. Even after having set up bases abroad only 16 % of its revenue is Non-US.Seiyu Ltd Japanese based subsidiary of Wal-Mart recently reported losses for 2007 which would give it six straight years in a row without a penny of profit. Questions immediately come to mind: Will Wal-Mart India face similar future .After all, it exited Germany and South Korea in 2006 after many bad financial performances in those countries. It cut its losses there and escaped from the doldrums of loss .But unlike Japan, India will not pump in money equivalent to what was put in there which was roughly more than $1 billion into Seiyu for 393 stores in Japan as foreign players are very apprehensive about changing regulations.Wal-Mart has found good headway recently in China with the Trust-Mart partnership and in India with partner Bharti, but they have yet to show their mettle in both the places. What holds in the future for the country and the retail players is yet to be seen but is something which is definitely going to be one fast paced ride ...I
Ambani has said he wants to create a "virtuous circle of prosperity by bringing farmers, small shopkeepers and consumers into a win-win partnership.” Reliance says its goal is to overhaul in one swoop retailing and farming, linking them through a "state of the art" distribution system with proper cold storage and transport that will give consumers fresher food at lower prices and farmers bigger incomes. It has set an annual sales target of US$25-billion by 2011 and has said it aims to give an "international shopping experience" to consumers more used to shopping at dilapidated corner stores or at in open air markets. Organized retail has the potential to trigger socio-economic transformation on an unprecedented scale in our country and will bring about enormous spin-off benefits to the Indian economy and its various constituents. This is against critics who say that chains such as Reliance Retail and other large retail outfits will drive smaller retailers out of business. As has been said by Mukesh Ambani repeatedly the pie is big enough for all the players. The pie which is roughly equal to $370 Billion is actually a big.
It has not yet taken off and there are so many innovations which are coming . Some of these have been mentioned below:
1. Reliance is in a process to launch 700 Reliance Town Centre (RTC) in cities having population below 3 lakh. Each RTC would have a health centre, vocational training, multiplexes, retail outlets and an auto centre.
2. Kishore Biyani has recently opened up a new format store for apparels which gets all the left overs from all its other format stores and sells the collection at a throwaway price.
3. In the next few years, Reliance Retail will also introduce 1600 rural business hubs (RBH) in rural areas, which could give tough time to ITC’s Choupal Sagar, Godrej Aadhar and DCM Shriram’s Hariyali Kisan Bazaar.
4. ITC is coming up with branded Rehris with in-built storage which is going to take modern retailing to your doorstep.
I am sure there are going to be many more innovations and a burgeoning need for skilled manpower in retail. But on the other hand the experience for foreign companies on the subcontinent has been less than pleasant: Retail giants Tesco and Carrefour have been deterred from entering the market and have pulled out of negotiations to launch joint ventures; others like Germany's Metro have been plagued by uncertainty and troublesome government regulations. Though Wal-Mart is one of the best, if not the best supply chain management companies in the world. Their recent move into India as a wholesales supplier and consultant underscores this strength. Another strength it plays to is their experience and expertise in buying direct from manufacturers in the U.S. and elsewhere. This will be a similar role they would play in the Indian market, which includes somewhere in the 12 million small mom and pop type stores spread across the country.
Even with Wal-Mart it is going to be a steep learning curve, as Biyani's remodeling strategy suggests. Cracking India's retail market is going to require something different than the usual smiley faces and "always low prices. Also Wal-Mart does not have its performance in Asian countries to back is performance in the US. Even after having set up bases abroad only 16 % of its revenue is Non-US.Seiyu Ltd Japanese based subsidiary of Wal-Mart recently reported losses for 2007 which would give it six straight years in a row without a penny of profit. Questions immediately come to mind: Will Wal-Mart India face similar future .After all, it exited Germany and South Korea in 2006 after many bad financial performances in those countries. It cut its losses there and escaped from the doldrums of loss .But unlike Japan, India will not pump in money equivalent to what was put in there which was roughly more than $1 billion into Seiyu for 393 stores in Japan as foreign players are very apprehensive about changing regulations.Wal-Mart has found good headway recently in China with the Trust-Mart partnership and in India with partner Bharti, but they have yet to show their mettle in both the places. What holds in the future for the country and the retail players is yet to be seen but is something which is definitely going to be one fast paced ride ...I
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