“Rewrite Rules, Retain values” is the mantra of Mr. Kishore Biyani, founder of the most successful retail chain of the country. The ‘Rajah of Indian Retail, as he is fondly called, has weaved magic into the organized Indian retail over the past few decades by following his afore mentioned philosophy. Pantaloon Retail (India) limited, the flagship company of Future group (owned by Mr. Biyani) operating through its various formats across the country has written and rewritten retail rules relentlessly while maintaining Indian-ness as its core value. Pantaloon Retail has continuously earned national and international accolades for its phenomenal success and there seems to be no stopping for this well established retail giant
With a turnover of 3263.73 cr in FY 06-07, Pantaloon Retail,
CUSTOMER CENTRICITY
INDIANNESS
Retailing in
A PARADIGM SHIFT
- Evolving Organized Sector
Traditionally, the Indian landscape has been dominated by the unorganized retailers, mainly by the local kirana stores. Till date, unorganized retail enjoys an over 96 per cent share of the overall pie. However, with time, there has been a major paradigm shift towards the organized sector. Maximum contribution towards organized retail is by apparels followed by food and groceries as is shown in figure1.
Another significant factor in retail is its penetration. Although food and groceries form a significant chunk of retail in
- Changing market trends
Urbanisation – It has lead to population moving towards towns and cities and hence a change in consumption patterns.
Growing incomes – The rise of disposable incomes of the Indian consumer has lead to increased demand, higher spending and a striving to buy higher value and better quality items
Increase in education and awareness levels: As a result, the customer has become quality conscious and demands better value for money
Changing family structures and lifestyles: This has given rise to convenience led shopping and product experience. In fact, the 21st century has seen the rise of consumerism with highly demanding customers, especially earmarked by the wealthier and stronger middle class.
- Entry of organized retail players
Retail has emerged as one of the most dynamic and fast paced industries with several players entering the market. Recently, many players with substantial financial muscle have forayed into the organized retail bandwagon to unleash the opportunity lying there. As a result, the retail landscape has become all the more competitive with numerous players and a lot more formats in which they have entered. Table2 captures some of the major retail formats and Table3 shows the major retail players and their formats in
ISSUES & CHALLENGES IN INDIAN RETAIL
“Phir Bhi Dil Hai Hindustani”: The Diverse Indian Consumer
The Indian consumer is “discerning different”. As some say, there are many
Economic aspect: A volumes game
In the retail industry, margins are generally quiet low and hence, it calls for high volume for sustainability of the business. Hence, retailers seldom look for economies of scale to sustain their businesses.
Infrastructural Issues: Supply Chain (Major Bottleneck)
Looking from the lifecycle concept; being in the nascent stage, the supply chain practices for the retail industry have not been properly established so far. In a setup like that of retail, where there is no buffer between warehouse and store, the risk for stock out is very high. And being a comparatively new development, there is an element of unpredictability involved in it which makes it very difficult to manage.
Hence, supply chain for a retail setup demands high levels of responsiveness and flexibility which comes at a cost. As a result, outsourcing in retail has been a challenge since the Third Party Logistics (3PL’) are not competent enough to handle the high costs and flexibility at a reasonable cost.
Moreover, to minimize costs, even the best companies are not utilizing the benefits of IT (like RFID, GPS, bar coding etc) in their supply chains (warehouse/transportation/goods).
Social Dynamics:
Being a society dominated by unorganized retail, where the shop is the only source of livelihood for the people, a high volume retail format poses formidable threat to the small local retailers. It is, in fact, a threat to the social setup as a whole since there is a fear of the bargaining power getting in the hands of the strong retail players.
The “middle man” problem
However, the class of professionals which is worst hit by the retail industry is the “middlemen”. The basic model of retail bypasses the middleman and directly tie-up with the end supplier for gaining the required cost advantage. As a result, the middlemen are eradicated out of the loop and thus, his source of income gets snatched.
Political Aspect
With the people at the lower segments of the society getting affected, the issue becomes of political relevance within no time. And, the government has to take steps to safeguard the interests of the common man. The case of Reliance Fresh in UP is an instance of the same.
The taxes in case of inter-state transfer of goods pose another hurdle in this regard. The Central Sales Tax (CST) causes cost inefficiencies in the entire system. Although it is going to be phased out completely by 2010, but presently (3 percent) it poses a lot of economic inefficiency.
To reach out to the customer, locating a store near customer is appropriate but the high real estate cost becomes a hurdle in this regard. Also, it makes the warehousing/ storage expensive as well.
The Indian retailing sector is at an inflexion point where the growth of organized retailing and growth in the consumption by the Indian population is going to take a higher growth trajectory. The Indian population is witnessing a significant change in its demographics. A large young working population with median age of 24 years, nuclear families in urban areas, along with increasing working-women population and emerging opportunities in the services sector are going to be the key growth drivers of the organized retail sector in
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