Sagar Malviya, Economic Times
26 October 2023
Surging demand for fitness wear and sports equipment for disciplines other than cricket and football helped Decathlon’s India unit expand sales 37% to Rs 3,955 crore in FY23. With more than 100 large, warehouse-like stores selling products catering to 85 sporting disciplines, the French company is bigger than Adidas, Nike and Asics all put together in India.
In FY22, sales were Rs 2,936 crore, according to its latest filings with the Registrar of Companies. The retailer, however, posted a net loss of Rs 18.6 crore during the year ended March 2023 compared to a net profit of Rs 36 crore a year ago.
Experts said a host of factors – from pricing products about 30-40% lower than competing products to selling everything from running shoes, athleisure wear to mountaineering equipment under its own brands – has worked in its favour. “They have an extremely powerful format across different sporting activities and have something for both active and casual wear shoppers. For them, the market is still under penetrated with the kind of comprehensive product range they sell for outdoor sports beyond shoes and clothing,” said Devangshu Dutta, founder of retail consulting firm Third Eyesight. “Even their front end staff seem to have a strong domain knowledge about products compared to rival brands.”
By selling only private labels, Decathlon, the world’s biggest sporting goods firm, controls almost every bit of operations, from pricing and design to distribution, and keeps costs and selling prices low.
Decathlon uses a combination of in-house manufacturing and outsourcing to stock its shelves. In fact, it sources nearly 15% of its global requirement from India across sporting goods. And nearly all of its cricket merchandise sold globally is designed and made in India.
(Published in Economic Times)
Christina Moniz, Financial Express / BrandWagon
November 4, 2022
Direct-to-consumer (D2C) lingerie brands, often credited with transforming the category and the way women shop for innerwear, are expanding their offline footprint in response to growing demand from tier-II markets and beyond. Zivame, whose journey began online just over a decade ago in 2011, has grown its offline presence to over 120 stores and also sells through over 4,000 partner outlets. In its recently concluded Grand Lingerie Festival, Zivame saw its sales grow three times,with a 120% increase in new customer acquisition. “Tier-II markets are showing massive potential and though tier-1 remains our highest revenue contributor, we are seeing significant revenue baseline shifts in tier-II locations,” says Khatija Lokhandwala, head of marketing at Zivame. The company has announced that its focus will be retail expansion in the second half of this fiscal, going beyond metros and tier-I markets.
Another decade-old D2C player in the innerwear segment, Cloviais eyeing the immense opportunity presented by smaller markets with aggressive expansion plans in place. “Clovia currently has 45 exclusive brand outlets in the country and has been diversifying its product range, with plans to open 130 outlets by the end of this fiscal. Ours has always been a mass- market brand, and most of the repeat customers come from tier-II and tier-III markets,” explains Pankaj Vermani, founder and CEO, Clovia. He notes that over 65% of its customer base is from the non- metro markets, and average order values are 20% higher in these cities compared to the metros. Earlier this year, Reliance Retail Ventures acquired an 89% stake in Clovia’s parent company (Purple Panda Fashions) for Rs. 950 crore. Vermani adds that Clovia will ben- efit from the conglomerate’s scale and retail expertise, driving up growth and love for the brand. Reliance Retail had picked up 15% stake in Zivame back in 2020.
Shaping the market
The women’s innerwear market in India is set to double to reach $11-12 billion by 2025, according to a report by RedSeer. Aside from the key segments of bras and panties, ancillary products like athleisure, sleepwear, swimwear and lounge wear are also boosting the lingerie category’s growth in the country, as is evident from the widening portfolios of leading brands. The online segment for women’s innerwear is expected to become a $1 billion market by 2025.
Experts believe there is a large opportunity for companies to grow since 60% of the $6-billion women’s intimate wear market in India is unorganised, and the category is still largely underserved.
“The lingerie market is an example of improving supply feeding into a growing demand, and the increasing demand expanding the opportunity for more brands to step in. Larger cities, with their higher income profiles and demand concentration, are the logical first-choice market for companies such as Zivame,” points out Devangshu Dutta, CEO, Third Eyesight.
The competition in the large cities is greater, with a plethora of Indian and global brands, which is why Dutta recommends that e-commerce led companies should push aggressively in smaller markets to drive sustained growth.
The fact that D2C brands have better data sets at their disposal to glean insights about Indian women and their concerns when buying innerwear has also worked in their favour.
“Intimate wear shopping can be overwhelming for a lot of women. Finding the right size and choosing styles for their specific needs requires an environment free of embarrassment and judgement. At Zivame, we help women choose the right size and perfect fit, ensuring a private, comfortable and discreet shopping experience,” says Lokhandwala.
While lingerie can sometimes be prohibitively expensive, Vermani points out that Clovia’s feedback-led design approach helps it keep pricing competitive.
The brand creates each product in small quantities, and uses technology to predict future sales based on customer feedback, thereby determining the right quantities for production. He states, “With this approach, we have created a fashion brand that is low on cost, high on consumer appeal and efficient in inventory, leading to better margins and cash flows.”
(Published in Brandwagon, Financial Express)
It was a contentious plan to repay overseas bondholders in full that brought what would have been India’s biggest retail deal to a grinding halt.
Debt-laden Future Retail Ltd.’s offshore bondholders — a relatively smaller part of the creditor pool — were promised 100% payment in the rescue offer from billionaire Mukesh Ambani, according to people with knowledge of the matter. Indian lenders were asked to take a haircut of as much as 66%, the people added, asking not to be identified discussing confidential information.
The unequal treatment led to the move last week, when the local banks rebuffed the $3.2 billion offer from Ambani’s conglomerate. Reliance Industries Ltd. announced the purchase plan in August 2020 but struggled to complete the transaction in the face of legal challenges mounted by Amazon.com Inc., which argued it had the first right of refusal contractually.
Bank of India and State Bank of India, the main bankers to Future Retail, didn’t immediately respond to emails seeking comment on reasons for voting down the deal. Representatives for Future Group and Reliance also didn’t immediately comment.
State-run lenders risked probes from federal agencies if they accepted these discriminatory terms, they said, explaining their preference now for a court-mediated insolvency process where bids are called in and there’s no risk of them being accused of cutting a bad deal. Bank of India has already requested an Indian court to initiate the process.
The hard-nosed decision by Indian banks has pushed the teetering Future Retail, which ran one of the nation’s largest retail grocery chains before the pandemic struck, one step closer to bankruptcy. Future Retail is almost certain to default on its $500 million bond coupon payment due July 22, S&P Global Ratings said Tuesday, while downgrading the company’s ratings deeper into junk territory.
The lenders’ action has also taken the wind out of a tortuous two-year-old litigation between Reliance and Jeff Bezos-owned Amazon — the e-tailer had started arbitration proceedings in Singapore to block the deal — but left the door open for Ambani to snag these retail assets, possibly at an even cheaper price, under the bankruptcy process.
“Reliance and other parties could be eligible to bid for its assets by submitting their resolution plans” even if Future Retail ends up in bankruptcy, according to Satwinder Singh, New Delhi-based partner at law firm Vaish Associates Advocates. “This would also lead to moratorium on any or all ongoing arbitration proceedings against Future.”
While the local lenders were agreeable to the deal when it was first announced, a lot changed in the past year or so, the people said. While the Amazon lawsuit dragged on, the asset value eroded and the pandemic worsened the cash crunch at Future Retail that began defaulting on its debt repayments.
Secured Indian lenders were promised recoveries ranging between 34% to 88% of the total $4 billion in dues and even those payouts were staggered over seven years, the people said.
Reliance dealt a body blow to the Kishore Biyani-led Future Group in February when it quietly began poaching employees and taking over rental leases of hundreds of stores earlier run by Future Retail and Future Lifestyle Fashions Ltd. Ambani’s bloodless coup prompted Amazon to suggest settlement talks on the bitter dispute and alarmed Future’s investors and lenders who worried about asset-stripping.
Reliance’s unexpected takeover of Future’s stores eroded bankers’ confidence in the deal as it stripped off value from the chain and potentially could erode Reliance’s offer terms.
The out-of-court truce talks between Amazon, Future and Reliance collapsed soon after the store-purchases were initiated, the companies informed India’s top court on March 15. Amazon will continue with its arbitration proceedings against Future Group in Singapore, according to a person familiar with the matter, who asked not to be identified as the deliberations are private.
“A major turning point was when Reliance physically took over Future’s stores, which turned it into a no-holds barred situation,” said Devangshu Dutta, head of New Delhi-based retail consultancy Third Eyesight. “Before this the battle was being fought in courts and across the negotiating table. But at this point it moved over to the real business.”
Written By Vaishnavi Gupta
UAE-based Tablez has launched a kids’ super store in India
Tablez, the retail arm of UAE-based LuLu Group, has launched its kids’ super store House of Toys in India. Tablez has been around in the country as the master franchisee of brands such as Desigual, Build-A-Bear, Go Sport, Yoyoso, Cold Stone Creamery, and Galito’s. The toy market in India, currently pegged at $1 billion, is estimated to double in size by 2025, according to a FICCI-KPMG report.
All stacked up
The first House of Toys store was unveiled at Global Malls, Bengaluru, in December, 2021. The store offers more than 20,000 products, from feeding bottles, strollers, and bathtubs, to wearable tech, remote-controlled toys, and stationery. Spread across 5,100 sq ft, the store also houses the Build-a-Bear shop, where kids can make their own soft toys. “We have toys starting from Rs 30, going up to Rs 30,000 in our assortment. We have 3,000 toys in the value segment of below Rs 500,” says Adeeb Ahamed, managing director, Tablez.
House of Toys aims to open 12-15 stores by the end of this year, initially in South India, and metros, followed by tier I cities and beyond. Tablez also plans to rebrand at least 10 Toys“R”Us stores in India to House of Toys in the second half of this year. The store’s products are available on Tablez’s own e-commerce platform, and will soon be listed on third-party marketplaces like Amazon and Flipkart. “House of Toys has potential to be one of the top revenue contributors of Tablez,” Ahamed says.
Tablez has been consolidating its presence in the Indian market lately. Last year, Tablez launched Yoyoso’s seventh outlet in India, and opened another outlet, its 33rd, of American ice cream brand Cold Stone Creamery, both in Kerala. Further, it has earmarked an investment of Rs 100 crore for the expansion of sportswear store Go Sport. Fashion brand Desigual, which caters to women in the 25-45 age group, is now present on Tata CLiQ Luxury, and will soon make inroads into Mumbai and Bengaluru, followed by Chandigarh and Hyderabad.
Presently, Tablez operates 80 brand stores in India; it plans to take this number to 250 over the next five years.
Given that more than a quarter of India’s population is under 15 years of age, intuitively, it makes for a “great market for toys,” says Devangshu Dutta, founder, Third Eyesight. He says upper-income households with fewer children tend to buy more toys, games and learning aids, especially since children have been much more confined to the home environment in recent years.
According to Angshuman Bhattacharya, partner and sector leader (consumer products & retail), EY India, the growth of this market has been driven by improved availability and penetration of branded toys, upgradation from manual to automated toys, and improved awareness and availability brought about by e-commerce.
However, any kids category, whether apparel or toys, has been a difficult model to crack, owing to factors such as low SKU proliferation, and difficulty in inventory management, says Bhattacharya.
To stand out in the market, analysts say, brands need to create an authoritative and diverse product mix, which, in turn, requires a relatively large store footprint in high-visibility high-footfall locations. “The stock turnover is also slower than many other product categories, so merchandising and replenishment strategies need to be really smart. Branded merchandise offers lower margins, so private labels and unique products are necessary to add to the margin mix,” Dutta notes.
Deeply understanding a store’s catchment, so that consumer engagement can be kept high through the year — rather than being limited to local celebratory peaks and holidays — could be a useful strategy, say analysts.
Retail is such a pervasive and dynamic a sector of the economy, that it is impossible to identify a single point at which modernisation began. I’ve met countless people who perhaps entered the retail sector during the last 15 years, and who mark the beginnings of modern retail around then. There is no doubt that there has been an explosion of investment in retail chains in the last 2 decades, but we need to acknowledge the foundation on which this development is built. The current titans of the sector are standing on the shoulders of previous giants who have created successes and failures from which we are still learning.
This piece is not an exhaustive history of the evolution of the retail business in India, nor a census of all the brands operating in this sector, but the aim is to capture the flavours of the phases of development. (PDF available here to download.)
If we were to trace back the growth of “organised” retail (mind you, I dislike that word!) or modern retail to the first retail chains, we will have to cast our mind back more than a hundred years. While many businesses of that time have disappeared, a few pioneers continue to survive, straddling three eras: the British Raj, the Socialist Raj and the Liberalised Lion economy. The businesses that continue to stand, having been through multiple transformations, include:
Fifty Years of Independence
The 1950s and 1960s remained fertile times, post-Independence and before the heavy-handed Socialist Raj truly began squeezing the life out of Indian businesses. Leading textile companies such as DCM, Bombay Dyeing and Raymond, and footwear companies such as Bata and Carona established chains of retail stores including company-operated stores as well as authorised dealers operating under the companies’ banners.
The 1980s brought the Asian Games, colour television, and a new up-to-date car model to India, all marks of a new vibrancy. Over the 1980s, a new retail wave was led by indigenous ventures such as Intershoppe (launched by a fashion exporter), Little Kingdom and The Baby Shop (children’s products), Nirula’s (fast food) and Computer Point (home computers, PCs and accessories). Many of these were certainly ahead of their time: the critical mass of consumers had yet to develop, the business infrastructure was inadequate, and funding norms were unsuitable to the capital-hungry business of retail. Unlike the textile companies that had large manufacturing and trading businesses, these new retailers were like shooting stars, glorious but visible for only a short period of time. This period, unfortunately, also witnessed the degeneration and disappearance of some of the older stalwarts such as DCM and Carona that were beset by labour disputes, management issues and disconnection from the transforming market.
Numero Uno, an indigenous denim brand, was launched in 1987 soon after VF’s American denim brands were launched, and it took nearly a decade for Numero Uno to reach other geographies in India. Nirula’s, one of the oldest fast food restaurant chains based in North India, expanded across the Delhi NCR in the 1980s and 1990s, and also explored other cities, albeit with mixed success.
Future Group, which today has a large retail and consumer brand portfolio, launched trousers under the name Pantaloons in 1987, initially as a distributed brand, and then denimwear under the brand name Bare. Within a few years the company also launched exclusive stores by the same names, to provide focussed visibility to the brands. About a decade of growth later, the group launched its first large format store under the Pantaloons name, but by now covering a much wider range of products, which became its launch pad for achieving scale.
The RPG group that had acquired Spencer & Co. relaunched it in 1991 in a spanking, new format as Spencer’s in Bangalore, and a short few years later rebadged it again as Foodworld in a joint-venture with a foreign partner. It subsequently went on to launch other formats such as Musicworld and Health & Glow.
Also in 1991, the Rahejas converted an old cinema into a department store, Shoppers Stop, aiming to provide an international shopping experience, although initially focussed on menswear. The store added women’s and children’s sections in subsequent years and the second store was launched four years later after the first one. Subsequent large scale retail expansion only came about towards the end of 1990s.
Little Kingdom is a notable example that I would like to dwell on briefly (partly for the purely personal reason that it was my first retail job!). The business was launched in 1987, headed by alumni of the illustrious IIMs around the country, built on processes and IT systems that could have been the envy of many retailers even 25 years later. The company – Mothercare India Limited – was the first purely retail company to start up and launch a public issue in 1991. During the early 1990s, it was the largest retail chain present across the country, in its categories. In 1991, it also attempted to bring the first home computer, Spectrum, to forward-thinking parents through a mix of in-store sales and door-to-door direct-selling. It was admittedly one of the first to expand internationally, opening a franchise store in Dubai in 1992. During its short life, the team launched multiple brands and formats, including Little Kingdom, Ms (a womenswear brand), The Baby Shop, and became a partner to the international giant VF Corporation’s Healthtex children’s brand and Vanity Fair lingerie brand in India. But, by the mid-1990s – financially overstretched between multiple brands and formats, and backward integration into manufacturing – it was gone.
Physical retail was not the only avenue being explored for growth during these decades. An Indian company imagined replicating the success of western catalogue companies, and launched the Burlington’s mail order catalogue retail venture and even became a joint-venture partner of one of the world’s largest catalogue retailers, Otto Versand (Germany). Other models included direct sales business, such as the Eureka Forbes introducing vacuum cleaners through demonstration parties (which was emulated for the Spectrum home computers mentioned above). With the growth of private television channels, products also began being promoted during non-peak hours through infomercials, though serious TV shopping was still a few years away, coming up in the mid-2000s with dedicated teleshopping channels.
The Foreign Hand and Corporate Retailing
The 1980s and 1990s also saw the launch of international brands from global giants such as VF Corporation (Lee, Wrangler, Vanity Fair, Healthtex), Coats Viyella (Louis Phillippe, Van Heusen, Allen Solly), Benetton (UCB and 012), Levi Strauss, Lacoste, Reebok, adidas, Pepe and Nike, grocery retailers such as Nanz (a three-way German-US-Indian partnership) and Dairy Farm International (with RPG Group’s Spencer’s Retail) and Quick Service formats such as Domino’s, McDonald’s, Pizza Hut, Baskin Robbins and KFC.
India was reopening to business, global management consultants were writing glowing reports about the untapped potential of the (mythical) 200 million middle-class customers and global retailers wanted to own part of the action.
Due to the lack of large-format stores and suitable environments, international brands that entered the Indian market during this phase needed to create exclusive stores to ensure that the brand could be communicated holistically to the consumer, in an environment that was more in the brand’s control, and many of them were, in a sense, “forced” to become retailers in India.
However, around 1996, a very senior member of the cabinet is reported to have said, “Do we need foreigners to teach us how to run shops?” It was an unexpected condemnation, coming as it was from a person and a party otherwise seen as champions of an open economy. It slammed the doors shut to foreign investment and, to my mind, the sector is still yet to fully recover from that ban and the policy contortions that have come over the years to allow international brands and retailers to play a more active role in the market.
Internal weaknesses compounded the decline or exit of some of the businesses. Nanz folded due to various operational challenges and lack of adequate experience. British retailer Littlewoods’ wholly-owned subsidiary pulled out of the market due to problems back home, and in 1998 sold the sole store to the Tata Group, which eventually renamed it Westside.
Despite the early hiccups, India continued to attract international players on account of the high growth and changing social norms. Not only was there greater purchasing power available amongst more Indian consumers, there was a shift in consumer attitude from saving to spending. Several brands, including fashion, luxury and quick service formats, entered the market through licensing, franchising, and joint ventures.
During this period the domestic retail market also drew in more corporate houses, attracted by the apparently abundant market opportunity for them to mine alone or to act as a gateway for foreign companies interested in India. Most were significant diversifications from their existing businesses.
Tobacco, paperboards, agri-commodities and hospitality conglomerate ITC ventured into retailing through Wills Lifestyle and as well as its rural initiative e-Choupal in 2000, followed by John Players and Choupal Sagar respectively. Pantaloon Retail launched a partial hypermarket format Big Bazaar in 2001 and went on to Food Bazaar in 2002, Central in 2004, Home Town and Ezone in 2006. Reliance entered in 2006 with multiple stores of Reliance Fresh being opened simultaneously and over the next few years the company expanded through multiple formats such as Reliance Mart, Reliance Digital, Reliance Trendz, Reliance Footprint, Reliance Wellness, Reliance Jewels to name a few. Telecom major Bharti set up a joint-venture with Wal-Mart at the back end, while the Tata group tied the knot with Woolworths and Tesco in two separate businesses supplying its retail stores, even as it expanded its successful watches and jewellery businesses, as well as Westside.
Even a retail operation like Fabindia, born as an export surplus outlet of a handicraft product business found investors to back a rapid expansion spree, becoming more of a corporate retailer than a front-end for producer organisations and craftspeople.
Through the 1990s and beyond, the market remained in ferment. In 1997 Subhiksha, a small modern retail format for food and grocery was launched. Venture-funded Subhiksha expanded rapidly and over the next decade grew to 1,600 outlets. However, in 2009 the business closed down owing to a severe cash crunch, amidst accusations of criminal mismanagement and fraud.
New product areas emerged highlighting the pace of change of lifestyles, cafes prominent among them. Café Coffee Day opened its first store in 1998 in Bangalore and became the largest organised coffee chain in India by far, though it is now living under the shadow of the recent death of its founder. Barista was also launched in 1999 as India’s Starbucks-wannabe, found its footing, scaled up and lost its way, going on to be sold to Tata Coffee and the Sterling Group, who turned it over to the Italian coffee company Lavazza in 2007, who also exited seven years later. Its current owner, the Amtex Group, is itself going through financial troubles in some of its key businesses.
In the last two decades, while some retailers have gone out of business due to unrealistic business plans, mismanagement or lack of funds, most have taken opportunities to rationalise their operations by shutting down unviable or underperforming locations, aligning businesses to market needs, assessing their brand consistency across various touch points, improving organizational capabilities right down to front-line staff, and focusing on unit productivity.
It’s not just Indian retailers that have faced trouble. Foreign brands have had their own share of problems – some have overestimated the market, or their own relevance to the Indian consumer, while others have had misalignment with their Indian franchisees or joint-venture partners. A number of foreign brands and retailers have also churned partners, or exited the market outright, but most remain committed and invested in the market for the long-haul. The last few years have also seen the successful launch and humongous growth of global leaders such as Zara and H&M, even mass-market Chinese retailers like Miniso, as well as the largest investment commitment made by Ikea (about US$2 billion).
Showing on a Screen Near You
The late-1990s also witnessed a dotcom frenzy that led to a plethora of travel sites, and a few product sales businesses such as Fabmall, Rediff and Indiamart.
However, the online market lacked critical mass in the 1990s and early-2000s. Despite apparent advantages of the online business model, success depended on internet penetration (low!), the appearance of value-propositions that were meaningful to Indian consumers (questionable), investments in fulfilment infrastructure (lacking) and the development of payment infrastructure (regulation-bound). Malls and shopping centres – the new temples of retail – seemed to be sucking up all of the consumer traffic, in any case.
By the mid-2000s the business had reached just about Rs 8-9 billion (US$ 180-200 million), despite 25 million Indians being online. Dotcoms became labelled dot-cons, with an estimated 1,000 companies closing down. However, multiple changes took place in the mid-2000s, among them being the price disruption of the telecom market and explosion of mobile connectivity, as well as a renewed funding appetite among venture funds.
This laid the path for growing the second crop of ecommerce in India. Billions of dollars of investment was poured into creating India’s Amazon wannabes, the high streets ran red by ecommerce-fuelled discounts, aggressive advertising budgets (most promoting discounts) and mergers/acquisitions pushed through by venture investors.
After more than a decade of the second coming, India’s ecommerce business accounts for a market share of total retail in the low single digits. India’s Amazon – if one can call it that – is the Flipkart group, now owned by Walmart, bought at an eyepopping $21 billion valuation and still bleeding cash, and the runner-up is relentless Amazon that continues its aggressive push to own what could be one of the three largest markets in years to come. The Chinese internet giants Tencent and Alibaba are also trying to hack piece off the market, having fulfilled their aim of kicking out Western competitors from their home market.
However, the wild card has just been played by the Reliance Group – having moved from textiles to fibre to oil, the group has made its move into telecom and data (didn’t someone say, “data is the new oil”?). It has strategically pushed handsets and cheap data plans into the hands of the consumers and, according to the latest announcement on Jio Fiber, will soon offer High Definition or 4K LED television and a 4K set-top-box for free. The play is to grab as much of the customer’s share of spend on products and services (including entertainment) as possible.
Possibly the biggest driver of modern retail in the coming years will be the shift in the demographic structure of the country. The young consumers who are joining the workforce now are a distinctly different set from previous generations. This is a generation that has grown up in the liberalised economy and has been exposed to innumerable choices since their childhood. The most important factor is that these consumers are increasingly located outside the top 10 or 20 cities in the country, and are becoming more accessible as both physical and virtual access improves for them.
A large number of them may have only occasionally, or perhaps never, experienced modern retail first hand while they were growing up, but they have seen this upmarket environment emerge before them and are not shy of spending within it, even if it is only on select special occasions. Most of them are handling mobile phones (even if it is their parents’) while still in school and being socially active online even on the go. Certainly most of them have hardly ever visited tailors, growing from one set of ready-to-wear clothes to another. It is this set of young consumers whose outlook and habits will drive retailing very differently in terms of product categories and services in the future.
There is another significant set of consumers whose number is swelling annually: that of working women. As they add to the discretionary household income available to spend, they gain influence in purchase decisions, and with them the entire household’s lifestyle also undergoes a shift. There is a greater demand of time-saving solutions and convenience products to make their lives easier. Modern retail environments where their various needs can be taken care of under one roof, and convenience pre-packaged products are natural winners in this shift. Ready-to-wear products for women, grooming, beauty and personal care, women-oriented media products, processed foods and eating out get a boost. Another important shift is that, due to busier lifestyles, they are time-crunched and more likely to rely on branded products and services that they can trust. However, given the nascent stage of the market, these brands could just as well be retailers’ own labels, if they are managed well.
In terms of business, significantly greater efficiency needs to be achieved, both at the front-end and in head office and supply chain operations. Process and system-led planning and execution needs to become the norm. With India’s burgeoning population, people are treated as a cheap resource: on the contrary, each extra person can be expensive beyond just their salary cost to the organisation. Each extra person adds some friction to decision making, reducing the responsiveness of the business. Smart business will begin to realise this, and look closely at employee efficiency and effectiveness in the context of the overall business, rather than just in terms of individual costs.
Even as the retail business in India is far from saturation, and fragmented growth continues, the business will also undergo consolidation simultaneously, as large scale retail operations are enormously capital intensive. Mergers will be a strategy that will be explored to improve the viability of many businesses in this sector.
Should you be tempted to think that, squeezed between large corporates, international retailers and ecommerce giants, it’s “Game Over” for smaller domestic retailers and brands, let me say that the India retail story is not only not over yet, but continues to be written and rewritten. As the market grows and matures, retail businesses also need to differentiate themselves, investing more in product selection or even product development through private label growth to help them stand out in the market. A one-size-fits-all strategy doesn’t work in a country as diverse as India. For the size of the market, we have surprisingly few brands, many of them virtually indistinguishable from their competitors. Development on this front, of indigenous brands and product development capabilities, is an absolute must.
The good news is that already there is more talent available than ever before. Most importantly this management pool has experience of the retail sector not just in good times but during (many) downturns as well.
Eventually, what is needed is a mix that will be healthy for India’s ecosystem at large for a long time to come. This will not be delivered by a blind transplantation of international templates or a rapid-fire expansion across the country, nor by fearful protectionism or regional parochialism. It will only be achieved by the evolution of market-appropriate business models and a mature approach that can be make the Indian retailers robust enough to grow not just domestically, but possibly even globally over time.