The Tale of Retail Industry

Tale of Indian Retail

Dear friendsI was all pumped with optimism and feel good-hormones rushing through my veins after watching a show (Bharti-Walmart, possible tie-up) by the NDTV profit’s team of Shivnath & co. From that very moment I was very enthusiastic to ink down my optimism and share the feel-good inducing hormones with you all. Its little ironical, when I started typing, the Power went off. It’s a power break-down across the whole city of Indore. Yep, the feel good hormones did take a hit when the mosquitoes started having a taste of them. Nevertheless I continue typing, thanks to the batteries in my machine.Friends, when I was watching this show, which raised strong speculations on the possible tie-up between Bharti, the fastest growing Indian corporate entity and Walmart, the giant in the global retail industry; the pictures of gigantic temperature controlled trucks (26-30 tyres), huge stores, ‘24X7-we are Open boards’… started flashing in my mind. No wonder, when you are partnering with firms with annual revenues exceeding $300bn (hence they can afford operating on the lowest margins in the world) anything can happen. You have every right to dream (for the moment, please restrict the dreams to the retail sector only) and expect that whatever is possible to the west of Atlantic waters can be replicated in the land of Dravidians & Aryans surrounded by the Indian waters.With the booming Indian Economy, the corporate tycoons are dreaming big and are not afraid to take risks. They all are talking big, bold & global. Acquisition of foreign firms has become a new style statement for India Inc. Some Indian companies, especially in the IT sector are growing faster than their western counter parts. With acquisitions within the country and abroad some companies are smoothly post-graduating from NC (National Company) to MNC. We are doing acquisitions not worth millions but billions and multi-billions. The Corus bid by Tatas is valued at 8.1bn USD, the biggest till date for any Indian entity. (It is still open, with counter bid from Brazilian major, CSN giving a hope that it may rise from here.)My limited knowledge says that this is the best period ever for a 15 to 45 year old any Indian (I assume, this age group has the best processing speed, guts to take risks, and more important it has abundant aspirations) the rest of the group also has good times, for it is a cascading effect.What interests me more about this retail talk is that this retail revolution won’t be limited to urban India. That’s very important considering the current state of Indian socio-economic set-up. Presently the Service industry boom has prominently yielded more good to the urban India aiding to the divide between two Indias, rural & urban. Rural India forms a major India. This is definitely a major concern for the govt and all reformists who are working on solutions that can bridge the two. This service industry boom which also triggered the construction and real-estate market made many people migrate to cities from villages and also towns. The infra-structure in cities (e.g Mumbai, Bangluru, Delhi…) is bearing as much as twice (in some cases thrice) its maximum load bearing capacity. This is really undesired and cause for so many problems and disputes across the country.I sense a thick ray of hope with the advent of the big corporate players and gigantic estimates of their retail plans bridging two Indias seems quite possible. Studies say that 97 % of the Indian retail market is un-organized. This gives a big rather big untapped retail market for the corporate players to play their games and encash on the huge opportunities available in this sector. With big ticket investments foreign investments pooling in, low operation cost - volume driven business models, and shortest route for the farm produce to reach the end-consumer; common man is going to be the main beneficiary. Moreover, the other aspect wherein govt, especially the exchequer has some reasons to smile for organization of retail sector will earn them good amounts in taxes which were never there in the present fragmented set-up. The retail industry will generate around 10 million jobs in few years time. More important, majority of these jobs can be grabbed by unskilled non-graduates, which the current IT and ITes can’t boast about.Reliance, Bharti, Birlas, Pantaloons… all have real big retailing plans. All of them will try their best to cut down the long middle men chain which currently exists between the producer (farmer) and end consumer. I myself have an experience (we got pomegranates in our field) where the middle men (brokers a.k.a dalals) earn as much we do in a given good season. The only difference is we toil in our fields for the whole harvesting year to earn the ‘X’ amount and the broker does it in couple of week’s time by procuring the farm produce at low rates and selling them (in some cases exporting) at a good margin. Thus removal of this chain of dalals will definitely help the farmer to get a better price for their farm produce. Don’t worry about the middle men, they will surely find a role in the whole logistics which will enable the farm goods to reach the shopping floors. Yep, their margins will be cut because there is a good chance that they will be on the pay-rolls of these retail majors with fixed salaries. On a whole I see it is a win-win for one and all; farmers to end-consumers.Other aspect which would be equally important is the huge reduction in the wastage of perishable food-stuff. In the current set-up, there are occasions wherein we see shortage of a commodity in Banglore (oops… Bangluru) but the same is sold at throw away price in Delhi. Both the above problems will be addressed by the organized retail. These firms are building their own fleet of air-cargo and chain of temperature controlled storage facilities at different airports. This will address the non-uniform supplies across the country and also control the big deviation in the pricing of commodities.I also see another very important benefit of the organized retail, it is hygiene. All the players will ensure that they are maintaining high class (definitely many-fold better than the current state) hygiene for all the perishable and non-perishable food items. This will improve awareness about hygiene and health among the common folks, which is presently limited to the big malls in cities only. In smaller towns (like Udgir) there is a big problem for municipalities to clean the mess and stinking dump in the mandis and markets. They also find it difficult to stop encroaching vendor thellas selling vegetables and fruits on main roads and other prime locations. With the super & hyper markets coming in I guess municipalities can breathe a sigh of relief for these problems will no more exist.Before I quit, for the students who are in their +2s or pursuing graduation in non-professional area it would be a good idea to join some course in retail management. I see tremendous opportunities for the young and bright folks who can play a role in the logistics of this big event in the country. Believe me, this organized and mega retailing is going to affect every single person in the country and there are good times ahead for the young & aspiring.

Rajesh Gupta
SCMS cochin.