Scaling Up = Dumbing Down?

Devangshu Dutta

February 26, 2007

It often seems like “Scaling Up = Dumbing Down.”

As an organisation starts to scale up, the challenge is getting everyone to work the same way as earlier. And Process with a capital “P” takes over.

In the absence of inspiring and totally involved leadership, it often is just a hop and a skip from Bureaucracy.

If a lot of people feel the same way, there may yet be hope for small businesses and the more personalized touch.



February 20, 2007

MINT (Exclusive Partner The Wall Street Journal)
DELHI, 20 February 2007

Bharti Enterprises, the parent of India’s best selling wireless service provider Airtel, confirmed that it will invest up to $2.5 billion (Rs. 11,026 crores) in the next eight years to roll out convenience stores and hypermarkets nationwide, joining a raft of companies looking to profit from an expected boom in organised retailing.

As reported on Monday by Mint, Rajan Mittal, the youngest of the three founders of Bharti, will head the retail foray, dubbed Bharti Retail Pvt. Ltd. Bharti’s Investment will be financed by a mix of debt, internal accruals and equity. The investment excludes the cost of real estate.

The company is targeting Rs. 20,000 crore of revenues by 2015 but didn’t say how many stores it plans to put up and where. The company will need 10 million square feet of space for its stores and did not say whether the company would go the leasing or purchase route, or a combination of the two. The first stores are likely to start a year from now.

Bharti is also partnering with Wal-Mart Stores Inc. for managing the back-end supply chain and logistics for its new retail foray. There were very few details on that front from Bharti pending a visit by Michael Duke, vice-chairman of the Bentonville, Arkansas-based retailer later this week.

“I think putting the supply chain in place will be the critical element for Bharti,” said Devangshu Dutta of retail research firm, Third Eyesight. “It makes sense for them to open early next year as an investment of this nature and magnitude needs a year or so for the supply chain and real estate to be put in place.”

Retail has become the latest target of Indian corporate giants trying to diversify and rush into emerging opportunities. As organized retail takes roots in India, as much as $25 billion is expected to be invested in the sector in the next five years, compared with $2 billion in the last decade.

France’s Carrefour SA and Britain’s Tesco PLC are also looking at ways to enter India’s $300 billion annual market. But analysts say Bhartis major competition is expected to come from other home-grown retailers including India’s largest listed retailer, Pantaloon Retail (India) Ltd. and Reliance’s retail arm as both companies separately plan to open thousands of stores in th enext five years. Much of the criticism about organized stores hurting mom-and-pop stores has pointed the finger at the likes of Wal-Mart, even though Bharti’s retail investment is significantly lower than what the likes of Reliance have said they will spend in more ambitious roll-outs of stores.

Mittal said Bharti Retail will create 60,000 direct jobs but would also “provide linkages to farmers and small artisans”, to its stores selling everything from food to furniture.

Consumerism in India

Devangshu Dutta

February 7, 2007

In my view, India and China are two countries that can change companies.

Most analyses of “consumer India” are led by affluent analysts primarily based in the biggest cities. These incomplete analyses are followed avidly also by international companies to draw up their India strategy. Most do not even scratch the surface of the diversity of the country, let alone customize the approach.

There are reasonably large and distinct consumer segments in India–many are alien to most companies based in the developed markets, because they have been extinct there for several decades.

The companies that seem to be succeeding are the ones who don’t come in expecting a billion-plus market (or even a “percentage” of that) hungering for their brand/product just as it is sold in the US or Europe. They are the ones who take the time, and show the patience, to understand the specifics that their target segment in India is looking for.

They are the ones who are prepared to to the extra mile in tailoring their offering to India. Some may even launch new products in India and then take them elsewhere.

If you’re prepared to discard the filter of the history of developed markets when looking at India, then opportunities abound.



February 2, 2007

MINT (Exclusive Partner The Wall Street Journal)

DELHI, 2 February 2007

Targeting an emerging segment of night shoppers, New Delhi-based round-the-clock convenience chain Twenty Four Seven Retail Stores Pvt. Ltd plans to invest Rs 880 crore (US$200 million) in opening 1,000 outlets in the next five years., in a country where even late markets shut by midnight.

The company plans to open 178 stores in Delhi and its suburbs before expanding to the country’s commercial capital, Mumbai, next year and thereon to other major cities.

Last year, the K.K. Modi Group forayed into organized retail by opening India’s first 24-hour convenience store in New Delhi. So far, it has opened four such outlets in the city. The fifth store will open in April.

Round-the-clock stores are virtually unknown in India’s retail market, which is growing by 7% each year. Almost half the country’s 1 billion population is below 25 years and more than a million of them work in call centres and other offshoring firms that keep Western hours.

Samir Modi, president, Twenty Four Seven Retail, said Rs 440 crore of its expansion capital would be funded by internal accruals, the rest from private investors. Modi wants to franchise 80% of the new stores. He said there was potential for 1,00,000 such stores in India in the next 20 years.

“There is an emerging consumer segment that works longer hours,” especially among the workforce in the country’s outsourcing and technology industry, said Devangshu Dutta, head of retail research group, Third Eyesight. “There has to be something catering to them.”

Twenty Four Seven studied various global 24/7 store formats for two years before rolling out its first outlet.