Picture an upper-middle class consumer out shopping groceries in a large, air-conditioned hypermarket after catching the new movie at the mall.

Global best-practice is the standard here. The aisles are wide enough to allow two shopping-carts to pass each other comfortably, and are organized according to product categories. The shelves are neatly ticketed, and the products equipped with bar-codes to allow for quick checkout. The emphasis is clearly on convenience. But (surprise!) the store has apparently underestimated the demand for the conveniently pre-cut and packaged vegetables. The loose vegetables are going untouched, while the pre-cut packs are almost sold out. Looks like another win for modern retailers.

This scenario would seem plausible to most people who have observed or been part of the growth of modern retailing in a market like India.

The “organized retail boom” and “growing consuming class” are consuming miles of newsprint and eons of airtime, while the malls are the gleaming new temples at which every devotee of retail must pay respect. This is the picture of modernization or organization of the Indian retail sector that comes to the mind of most people.

On the other hand, the picture that comes to mind when one thinks about the traditional sabziwala (greengrocer) is a total contrast. A messy side-street, with the push-carts overflowing with an indifferent mix of vegetables, other than the occasional yellow bell pepper or some other such “exotic” produce. Or the typical kirana shop owner scrawling an illegible list of items and figures on a scrap of paper and handing it over as the “bill” for the groceries one has just bought. Surely, a business model that is not going anywhere fast.

So, to most people, the line between modern or “organized” retail and traditional or “unorganized” retail is quite clear, and the differences quite stark. “Organized retail” usually means large, “corporate” stores that personify the so-called “retail revolution” which apparently is about 3-5 years old, while traditional retail business usually means “unorganized” and “belonging to the past” (or at least, soon to belong to the past).

However, a revolution is when the majority starts getting impacted. When only a few create a change that mainly benefits them, it is a coup.

To anyone who has been involved in the retail sector for longer, in fact, there has been a far more interesting, widespread and ongoing change in the retail business over the past couple of decades, and possibly further back. This is not restricted to a few corporate groups. It is not even restricted to the front-end (store-end) of the business.

The change is created by the feedback loop between customer expectation and the minimum acceptable standard of service which is constantly being moved up. Of course, the newly-minted corporate retailers have a role to play in this. But, more than that, it involves many small changes accumulating organically over a period of time involving individual kirana owners, farmers, wholesale traders, market associations, the FMCG companies and even the migrant villager who sets up a hand-cart that may be stocked daily with rolling credit from the money-lender.

And that is my point. The modernization of retail is an ongoing process, and it is sustainable because it is widespread.

In recent Indian retail history, as customers we may identify a point where we saw the local shop shift from stocks in a dingy back-room to being displayed openly, setting the example for other shops in the market.

But the changes needed were not just at the retailer’s end – they also required the wholesale vendor’s approach as well as the FMCG principal’s approach to begin changing.

Certainly a shift occurred in service standards, when vegetable vendors started taking home-delivery orders on mobile phones – impossible without the wider telecom price-quality revolution. And when credit card swipe machines started appearing in the kirana, something that could have only happened with the support of the banks and their intermediaries.

And the pre-cut packaged vegetables whose demand the hypermarket had underestimated? Well, the sabziwala has that covered as well – beginning with the packs of cleaned baby-corn, this list has now expanded to include pre-shelled green chick-pea (chholiya), cut jackfruit and chopped sarson saag – vegetables that can be quite inconvenient to clean at home when time is scarce.

The impact of this modernization was brought home to me, when I observed a customer reprimanding the local sabziwala for not keeping adequate stock of shelled peas. The interesting aspect was that this was not one-half of an upwardly-mobile DINK couple. The customer here was a domestic helper, whose complaint was that he had many other jobs to get done around the house, and shelling peas was something that was too time-consuming and best “outsourced”!

So, to all those who have the question, “what is the key to succeeding in the Indian retail market”: the key may lie somewhere entirely different from where you have been looking, or the customer-profile that you have been building.

We are surely underestimating the business potential amongst India’s middle and not-so-middle classes – as we would discover if only we were to re-state business objectives and tweak strategy a little bit, and look at the market without high income-tinted glasses.

Recently there was some discussion online about the so-called “politics of organized retailing” in India (on Retailwire).

I believe these are no different from the politics of anything else. There are interest-groups and pressure-groups with different objectives, who pull-and-push economic and regulatory policy with varying degrees of success. In that, India is no different from any other country, whether the US or China.

After China began opening up its economy in 1979, it took more than a decade for it to begin allowing foreign retailers to enter the market, and it was not before domestic retailers were given time to scale up.

Even in the US of current times, there are places where the community would be up in arms at the slightest whiff of a Wal-Mart store proposal.

Even in the UK, the Competition Commission is preparing a report on how retail consolidation is affecting the sector and the consumer.

So the answer to the question about “the politics of organized retail” is: yes, there is politics involved, and if you are an interested party then there is no option but to be part of the politics.

While on the issue about opportunities in the Indian market, I’m reminded of a couple of conversations, one with a client and another with an associate, who compared the Indian market to the US and the UK, respectively, in the 1970s.

My response to them, and to the question above, is: yes, there is tremendous opportunity in India now, as there was in those markets in the 1970s. Yes, in parts the market, the distribution structure etc. may remind you of the US and the UK in the 1970s. But to assume that it will play out the same way would be dangerous.

There are many other cultural, economic and social factors, apart from the infrastructure, to take into account.

My advice to international brands and retailers is as always: approach India as India in the 2008, don’t approach it as the US in the 1970s. Or as China, Brazil or Mexico.

Some pointers that may be interesting: “Slicing the Market” and other articles available elsewhere on the Third Eyesight website.

Among the frenetic activity of large stores opening and the expressed visions of organized retail taking over the market in the past couple of years, the competition is becoming more intense with each passing month. What would set the winner apart is not just the customer experience and satisfaction but also customer loyalty – where, for instance, an “unorganized” kirana store can still beat a much-larger organized retail business due to the intimate understanding of their customer base and micromanagement of the store.

What it would take for the organized retailers to replicate that experience is the people who create a culture of caring. This may sound “soppy”, but only true concern for the customer produces fabulous service from a salesperson. And if the salesperson has true concern, then he / she is probably showing the same concern to others (including colleagues and others in his / her life), and this itself can’t exist in isolation.

Many organised retailers have already made huge investments to put the technology and systems in place in the store. The missing link, however, is bridging them and customer with care and understanding, which is an absolute essential for the front end of any retail business. When time and competition is getting tougher by the day, creating a culture of caring makes great business sense for an organized retailer.

Spread of organized retail has brought both expansion opportunities and growth pangs for stand-alone eateries

Saumya Roy, Mumbai – MINT, 3 March 2008

There’s nothing even remotely North American about Tushar Jaiswal’s Red Indian pizza – replete with paneer, red peppers, onions and capsicum toppings. But it’s held its own against exotic offerings from large pizza chains in Vadodara.

 Jaiswal’s Pizza Inn vegetarian pizza chain has grown to three restaurants over the last six years, even as some overseas brands have had a hard time keeping their only outlet going in the city. Jaiswal’s Indianized pizza chain is now set to make a debut in other cities – in malls that are cropping in various parts of India.

Kshitij, a chain of 11 malls being developed through a $80 million (Rs319 crore) domestic fund raised by Kshitij Investment Advisory Co. Ltd, part of the Future Group, has hired a food and beverage chef to help stand-alone restaurants expand into malls and groom them to become a popular chain of food outlets that offer standardized food and a similar experience wherever they might be. And Jaiswal’s Pizza Inn is its first assignment.

Dhiren Kanwar, a chef who left his catering business to start Kshitij’s food division, has signed on Pizza Inn, along with several large food chains, for its malls in Vadodara, Ahmedabad and probably Pune and Jaipur. Kanwar who says his division was set up after consumer research showed that people would come into malls as much to eat as to shop and “wanted something different” will seek to bring a different flavour by signing on more such local brands and run something of a finishing school to help grow them.

The growth of organized retail has brought both expansion opportunities and growth pangs for India’s traditional, stand-alone, family-owned restaurants. They have emerged as magnets in malls where as many as 80% visitors to a mall may go to food courts compared with about 65% who visit hypermarkets and 50-55% who go to department stores, according to estimates by the Retailers Association of India, an industry body. And with as many as 320 malls coming up across India by 2010, according to an estimate by real estate consulting firm Jones Lang LaSalle Meghraj, developers are strengthening food offerings to create differentiation for their malls.

Developers are also seeking to reach stand-alone speciality restaurants in new locations to fill the growing need for varied eating experiences.

Kanwar, who has been surveying eating out options nationwide says many cities are usually less vegetarian than expected and there is demand, but no chains for chaat or thali, a reference to snacks and a complete meal on a plate, respectively.

Insights such as this have encouraged developers to fill these gaps in formal and informal ways. At Mumbai’s Inorbit mall, the management realized that the mainly vegetarian area (the mall is located in Malad) would need the services of a vegetarian who understood such palates and worked with a first-time operator to design and operate her eatery.

Jaiswal says his restaurant could start serving meat as he moves into markets outside Gujarat, where the population largely consists of vegetarians. Jaiswal, who left the family’s construction business to start his pizza chain after a trip to the US, has adopted American inspired management systems, equipment, ovens, and look and feel and coupled with the Indian taste, encouraging Kanwar to sign him on.

Now Kanwar will train Pizza Inn’s staff on how to deal with the typically large number of customers at malls, maintaining quality standards, design a kitchen intended to be open for customers to see, design seating and train staff on food safety and hygiene.

“Many of these restaurants know about the local market tastes and have pruned their menu to fit what customers want,” says Kanwar, who has been scouting for restaurants across dozens of cities over the last six months. “What they need help with is polishing their branding, service and presentation.”

But that polish may also draw away from the distinct character that makes these stand alone restaurants popular, says Devangshu Dutta, chief executive of New Delhi- based retail consulting company Third Eyesight.

“Restaurants are typically single entrepreneur ventures where it is hard to replicate the same thing across locations. But scaling up is also akin to dumbing down. To scale, you have to make things process-oriented and person-independent. In this process, something good will go, along with some learning of standard operating procedures.”

Kanwar will have to maintain this balance as he signs on more brands and prepares them to become professionally-managed chains. He will ask restaurants to have manuals specifying how long each cooking process will take, call brand designers and architects to design the look and feel of the restaurants, and help them tweak menus.

Jaiswal whose maiden mall restaurant will open at Kshitj’s first mall to open in Vadodara in March, will send design plans for approval to Kanwar.

All of this will help him grow and compete with large pizza chains elsewhere too, says Jaiswal, who now works out of an office above the restaurant supervising 200 employees- an increase from the 35 he started with.

Some of his time goes into ideating on what his first meat pizza should be.

Many pundits have passed judgement on the inevitability of ‘organised retail’. Yet, around the world, independents continue to thrive.

One may think that at least in difficult economic phases – such as the one facing economies around the world right now – large retailers are better equipped to survive. Yet, often it is the flexibility of the owner-driven small business that rides out the trough. Service levels and personalisation – that are increasingly critical in an impersonal world – are often far better delivered by a small retailer. [See “Playing with the Big Boys”]

And when it comes to business across borders, I can’t think of any retailer that is truly global. Most retailers that have successfully run international businesses in multiple countries (Carrefour, increasingly Tesco and others) have had to localise significantly – often sacrificing scale to achieve localisation.

A well-written article by Paul Chapman in Mint (February 18, 2007) raises some of these points using India as an illustration. Worth a read: The Rocky Route to Modern Retail.