The last few quarters have been quite trying for the Indian Retail sector, and though the consumer demand and overall outlook has improved but certain fundamental issues still plague the industry. I will try and list a few of them,
First issue seems to be the one with regard to the right format for the Indian market, experience till now shows that just copying the international formats will not work, like initially the larger formats were thought to be the the best, as it made sense for the retailer in terms of economies of scale and operations, and internationally large size formats were more acceptable, but then does it suit Indian consumers. With the slowdown many of the large formats were closed down , but now they are back in fashion, with Aditya Birla Group starting 6 new hypermarts, and Shopperstop with its Hypercities. Related new link.
And not that the so called "Indian Formats" are succeeding in , failure of subhiksha being the case in point and now the news that Vishal Retail is also in a similar kind of situation, the problem seem similar across both of them, too much of borrowing to expand faster and then.... Hopefully we should be able to save Vishal..
Next is the aspect of trained manpower, initially seen as a sunrise industry it attracted many professionals across various industries, but then with the slowdown and the realities of retail operations hitting hard, many of these people have packed their bags and gone back to their older companies. And the problem manpower is even more acute at the junior levels where people with right skills and training is a huge challenge..
Last issue though might seem a little ticklish to an outsider is the fact that India has topped the ranking in retail theft, the shrinkage put at 3.2 per cent of sales. And in a industry which runs on wafer thin margins this is huge and sufficient to tank many a retailers. More on Indian retail theft link.
Though it might seem that all is negative but along with these challenges the potential is also enormous , which is why it is attracting so many players, and many more waiting for the change in FDI regulations to make an entry.