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.
The problem starts with the format and location.
ReplyDeleteIn the rush to expand, location criteria seem to have been given the go by or have been less than scientific. To open multiple stores in a given area , in some cases, was more a strategy of hope than of any significant plan.
The emphasis (or lack of) on service experience is another factor that would play a role in the success or failure of a store and consequently a brand. One aspect of the experience is obviously training and manpower, where a greater degree of effort was required .
The overall question though one would ask , was some of this expansion based on the hope of a better valuation or sellout?
There is a need to Indianise the operations, get closer to the customer expectations in terms of assortment & pricing etc & not to follow something which has worked well in other countries. There has been a lot of artificial pricing, dull & repeated promotions, with nothing new to excite the customers. The large part of the consuming class is still the middle class & the lower segments for whom the retail chains are historical monuments & there has been no effort from the retail industry to really target this class.
ReplyDeleteRightly there is an enormous of amount of training required especially the manpower at the lower levels to create better shopping experiences for the customers.
Thanks @Syamant @ananad
ReplyDeleteThe issue of theft is even more serious in the Indian rural markets. In my talk with an ITC Choupal Sagar manager, he confided that its rather better to knowingly let off the thief (usually women) lest they will bad mouth the store.
ReplyDelete@ Sunny,
ReplyDeleteI still remember in the early 2000 Music World (Bangalore) was one of the first retailers who started putting tags on CDs and other things which they sold and then they had detectors at the exit and in the first few days they caught a huge variety of people , but then people started removing those tags and steal..
Even when they are caught max which is done is politely tell them that they have forgotten to pay and make them pay..
And yes the choupal sagar and women will be even tougher to handle