Saturday, July 2, 2011

Lack of Urban Planning is a bane for Indian Retail

One of the key costs for any retailer is that of real estate. When too many players fight for the same space, obviously the prices go up and very soon reach levels which are unviable for a Retail business. Retailers operate at a 20 odd percentage gross margin compared to say the IT industry which operates at much higher levels. So, the lack of proper zoning laws and enforcement of the same leads to several issues such as –
  • Different businesses with different cost structures competing for the same real estate.
  • Over-crowding and congestion, leading to pollution, etc.
  • Neighborhood penetration of self service modern formats increasingly becoming a challenge.
  • Size having to be compromised and therefore the range. So, in effect over a period of time there is no major competitive advantage over conventional stores.
 And many more such disadvantages and issues.
See the following two pictures which show two separate road names for the same stretch of the street. I am confident that each of these streets would have different valuations and therefore varying financial implications in terms of rentals, etc.

Forget all this. Should the common man have to suffer such confusion?


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