Drivers of Retail Growth in India

DEMOGRAPHICS

1. 60 % of Indian population is less than 30 years of age
2. 6 metropolitan cities contributes 6% of Indian population , 14 % of Indian GDP & 60 % of shopping malls.
3. Urban population spends 2.5 times more than rural population.
4. Greater per capita income
5. Increase in disposable income of middle class household

• Growing at a pace of over 10% per annum over last decade
• Falling interest rates.
• Easier consumer credit

6.The Urban Consumer

• Getting exposed to international lifestyle
• Inclined to acquiring assets
• More discerning and demanding than ever
• No longer need-based shopping
• Shopping is a family experience
• Increasing tendency to spend
• Post Liberalization children coming of age
• 100 mn 17-21 year olds. Tend to spend freely.
• Greater levels of education

ECONOMIC STABILITY

• 8% annual growth.( service driven GDP growth)
• FER( foreign exchange reserve)= USB$140
• FDI = USB$8
• 20 % increase in export from last year..
• Private consumption is 68% of GDP( India is the highest nation in terms of private consumption).
• Second most favoured destination after china for FDI.
• Unemployment rate has decreased to 7.8% in 2006 as against 10.3% in 2003.
• 24% decrease in unemployment post liberalization.
• India ranked 1st in the A.T Kearney Global Retail Development Index.
  (Considering the Country risk, Market Attractiveness, Saturation & Time Pressure)

PWC India Retail Report for 2007

Are The Indian Customers ready for self checkout system at showrooms?

The question from Kabilan prompted me to think about the modernity in the mind of the consumer. Modernity is it ? Or would it be a need based act? So many apprehensions in the service providers minds emerge from the vastness and uniqueness of the Indian customer. As I look at it, in the vastness and uniqueness lies the answer to all the questions. The variety in our behaviour and the volatility is in some ways a huge opportunity. As if to better that, a service driven economy is a ramification of the fact that we adapt to new technology with a fair amount of ease. So all's well I think for IT providers. Volume driven formats would have no go eventually but to adapt high end technology rather than depend on people purely because of customer convenience and consistency across stores. Watch out for Self Check out technology implementation and keep me posted too!!

LinkedIn: Answers: Are the Indian customers ready for self checkout system at showrooms?

Real Estate and Retail In india - Friends or Foes?

What prompted me to write this was(besides the fact that I hadnt written in along time and was missing it) was the acquisition of Piramyd Retail by Indiabulls Real Estate (through their subsidiary Indiabulls Wholesale Services).

At many forums lately, I have sen the explicit (and some times tacit) conflict between real estate developers and retailers. Now that India has some of the most expensive mall/business districts, it is difficult to fathom the relationship any other way. This definitely isnt helping the mass retailers, especially if they havent been foresighted in space acquisition.

An if you turned this process around, real estate developers are leveraging the space availability and treading into retail. And like they say, makes it convenient to acquire an existing chain

Books on Retail Management

I have been teaching at various B Schools as adjunct faculty for more than 3 years now. The process has evoked mixed feelings and thoughts. While its wonderful to see so many students prepare themselves - mostly,for the corporate world, the gaps in education strike me as glaring. More on that later....

Because I teach Retail management, I have had the opportunity to read many a text book in this time, and some books have been as good as to inspire me to write a text book myself.

Amongst the Indian books I find, Swapna Pradhan's book - Retail Management - text and cases, holds a lot of information in the Indian context.

ANd then, IIM-A Prof Piyush Kumar Sinha's and Prof D P Uniyal's co-authored book titled ‘Managing Retailing’ is very insightful and contextual for Indian students. The approach taken in this book is especially worth mentioning, because it is that of 'retail decision making'. also, it gives retail the imporatnce that it deserves- that of creating value for all the stakeholders. So if you want to learn it the right way, go with it.

Catalog Retailing or Multi Channel Strategy

I have been wondering about the appropriate timing of catalog retailing in India. Was glancing through one of the zillion retail newsletters yesterday, which had this report on how online shopping has increased leaps and bounds in India. And believe me, I have met many VCs who have made me open my eyes to the opportunities in the internet space.

And then I think, buying movie tickets, railway tickets, air tickets, music, books etc.etc is one thing and shopping for clothes, personal products, even gifts is quite another.

So, has the time for catalog retailing in India arrived? I saw the Hypercity-Argos site (www.hypercityargos.com) and interestingly,their catalog shopping was 3 pronged - you could shop online/phone/brick n' mortar store , have merchandise delivered home/pick it up from the store. Catalog retailing? More like multi-channel retailing. And I but agree, the time is right for multi channel retail!!

Shop from your catalogue at home or in store or Browse our complete range online at

Store Design - Customer Convenience Vs. Space Productivity

Time and again I have come across the now cliched customer service motto/philosophy of retailers which is expressed in may different ways

• we put customers first
• customer is king
• you want it , we have it
• we don't just provide goods, we provide the experience

Sets me thinking of the times when.....

• i went to a store for a pair of black trousers and found it at the fag end of the store
• i went for a white blouse and was told "the white regular shirts are in the formals department, the new ruffled blouses are in the casual department, and there were perhaps another 3 places where I could find white blouses.
• i wanted staples like milk and eggs and had to walk around an entire hypermarket to find them near the exit.

Both the above lists are totally oxymoronish. Here we are telling our customers (and ourselves) that we do everything for your convenience and there we go playing games with her trying to ensure that our space gives us maximum returns.

Agreed that there is a trade off between the two. However, rest assured that there is a way of resolving the customer inconveniences beginning from the stage when we are arriving at the retail concept/format.

More importantly, gain clarity on whether as retailers, we are committing to customer delight or not in the first place. We could just be committing to the lowest prices and not much more. We need to come out of the garb of great customer service when it isn't truly a part of the plan or even when we aren't sure of fulfilling the commitment.

However, taking a position of 'best customer service' etc. we need to remember that every thing in the store (right from layouts to checkouts) stand true to our commitment.

Small And Medium Retailers In India

Small and Medium Enterprises in India is a very large and extremely difficult market . To use a cliched phrase, India behaves like many different countries. Also, geographically, you don't know where the customers are, which city and which marketplace. Therefore to support these businesses it is important to create a comprehensive ecosystem around them rather than piecemeal efforts. This obviously takes longer than one would expect, given the infrastructure, lack of education and awareness etc.

From the SMEs' perspective, what they are looking for is a

• a solution that will help address their business needs
• a solution that can be easily implemented, and
• a solution that is cost effective in the short and the long term.

By an estimate by AMI Partners Inc., there are 2.7 million small businesses in India (less than 99 people) which do not have a single computer and a major proportion of them belong to the wholesale and retail sector. Also, India has the largest no. of retail stores in the world, Highest shop density (11 outlets for every 1000 people) . With close to 12 million retail outlets the country has one of the highest retail densities worldwide.However, the per capita retail space is one of the lowest in India, which is a ramification of the small sizes of the stores. Which again reflects on the largely unorganised retail industry in India.

Impressions about the Small and Medium retail being largely unorganised are authentic, however , by the same logic all large retailers may not be organised. Paying/Not paying of all applicable taxes being the conceptual distinction between organised and unorganised retail, retailers are increasingly moving to the terminology of 'modern retail' vis-a-vis 'traditional retail'. (which was mostly the meaning anyway even earlier when 'organised' and 'unorganised" terms were used)

All these traditional retailers fall in the purview of Micro and Small Businesses,. Needless to say, the challenges for this sector are only magnifying by the day.

Besides all the vocalised needs , what might make a difference to these businesses is mentoring in a structured manner. Evaluating the areas of mentoring ......i will leave for the next post. Watch this space...........

Our Workshop at The India Retail Forum 2007

I and Rajeev anchored the "Mentoring SMEs in Retail" at the India Retail Forum 2007. While we had detailed preparation, it was still exciting to find that people responded so well to our workshop. The response was tremendous - by the end of the workshop there was no place to stand , leave alone sit. We talked about the imperatives for a Small/Medium Sized Retailer, especially knowing and monitoring the basic metrics, keeping your eye on the cash flow, focusing on providing the Right product at the Right time and the Right Price to the identified target segment.

Simple as it may sound, at the retail practice at Milagrow we come across many such small retailers who are struggling with cash flow challenges for instance. It is of paramount importance for them to know this well and make the right investments at the start up stage. To build organisations ready for scale, we have to keep our eye on the customer and the product while building capabilty inside!

Drivers of Retail Growth in India

DEMOGRAPHICS

1. 60 % of Indian population is less than 30 years of age
2. 6 metropolitan cities contributes 6% of Indian population , 14 % of Indian GDP & 60 % of shopping malls.
3. Urban population spends 2.5 times more than rural population.
4. Greater per capita income
5. Increase in disposable income of middle class household

• Growing at a pace of over 10% per annum over last decade
• Falling interest rates.
• Easier consumer credit

6.The Urban Consumer

• Getting exposed to international lifestyle
• Inclined to acquiring assets
• More discerning and demanding than ever
• No longer need-based shopping
• Shopping is a family experience
• Increasing tendency to spend
• Post Liberalization children coming of age
• 100 mn 17-21 year olds. Tend to spend freely.
• Greater levels of education

ECONOMIC STABILITY

• 8% annual growth.( service driven GDP growth)
• FER( foreign exchange reserve)= USB$140
• FDI = USB$8
• 20 % increase in export from last year..
• Private consumption is 68% of GDP( India is the highest nation in terms of private consumption).
• Second most favoured destination after china for FDI.
• Unemployment rate has decreased to 7.8% in 2006 as against 10.3% in 2003.
• 24% decrease in unemployment post liberalization.
• India ranked 1st in the A.T Kearney Global Retail Development Index.
  (Considering the Country risk, Market Attractiveness, Saturation & Time Pressure)

PWC India Retail Report for 2007