Talking about a revolution

(This piece appeared in ‘The Strategist’ supplement of the Business Standard newspaper, on 2 July 2012.)

Modern retail is equated with a more structured and systematised organisation, hence the term “organised retail”. This term is weighted with expectations of greater capability, better competitiveness and greater benefits for industry and society. However, if we take organised to mean better for the consumer then, often, our age-old corner shop and the local cloth-merchant-turned-fashion-retailer appear more organised and better at delivering more relevant products to us at lower prices with superior services than most of the new corporate chains.

Over the last two decades or so, there has been a steady transformation of the retail landscape and the consumer’s shopping attitudes. There are many more people with much more money in hand to spend at their discretion today than ever before. This has encouraged the growth of brands, Indian and international, as well as the emergence of modern retail chains and malls. The transformation is most visible in our largest cities, with some locations already having built a surplus of mall space. A generation is growing up in these cities that takes malls for granted, and that completely avoids the more traditional retail spaces.

There has certainly been a gold-rush, among companies, investors, real estate developers, even professionals looking to put the “next big thing” on their resumes. The true impact, however, is still very limited, very shallow for the country overall. In fact, in locations with high concentration of modern retail, the impact has even been negative in terms of poorly developed space, rising costs, and stressed infrastructure to the detriment of the local inhabitant.

The impact of this growth is little understood, much less guided or planned for the long term. There are loud voices both for and against corporatised modern retail, but there is very little balanced discussion. There are several laws binding or restricting retail activity, but very little policy enabling it, whether we look at modern retail or traditional, corporate or individual owner-driven stores.

Here are some major issues that we need to tackle, at the policy level and within retail businesses:

• Regulatory frameworks: For the most part, our laws are obstructive rather than productive or directional. The multiplicity of authorities that a retail business must deal with doesn’t help either including various central ministries, state-level ministries, and myriad municipal departments, local utilities and other authorities.

• Space and Infrastructure: Retail is mostly an afterthought, either as a small fraction of poorly developed space within an urban development, or as massive glitzy shopping malls that have no correlation to their surroundings. Either there is not enough good space, or too much without adequate support services. A retail centre needs to be a positive part of the local ecosystem in every way, rather than an unwanted cancerous growth.

• Integration with the local economy: We all intuitively know that shopping is an intensely local and personal activity. Yet, in the race to gain efficiencies of scale, modern retail managers take national or international template-based approach. Decisions are made centrally, products shipped by distant suppliers and the labour force is also often drawn from outside. There is little local relevance left and hardly any contribution to generating healthy economic activity in the store’s vicinity.

• Diversity of choice and competition: We need to think through how the economic balance of power is handled between retailers and their suppliers, to maintain healthy diversity for the sake of the consumer. The evolution of modern retail business models can shrink rather than increasing the consumer’s choice. Strategic sourcing, partnering and collaboration are buzzwords that drive increasingly narrow supply-development, and retail-side consolidation means fewer channels to the consumer. For wider impact across the economy a diverse and vibrant design, development and manufacturing base is needed that can effectively compete within itself and externally.

We need to drastically rethink the role of retail in our society if we want India’s urban centres to be healthier, dynamic and sustainable in every possible way. Retail is the one economic activity that touches the daily life of virtually everyone – modernising it is an imperative. Modern retail should not mean space more expensive than that in rich economies, for a handful of companies selling brands to an elite fraction of India’s population. We shouldn’t treat it as the exclusive party to which only large companies are invited, whether Indian or foreign. For a true movement from “unorganised” to “organised retail” we need to have brands and product offerings that meet the needs and budgets of the real Indian middle class and below, delivered in an affordable and inclusive way, in cities that thrive with retail at their heart as part of the social and economic infrastructure.

Perhaps we even need a National Mission to holistically think through how we can improve the quality of the entire retail ecosystem! This may is the only way to create a true retail revolution in India and use it as an engine for wider economic and social growth.