Trends for Indian Retail in 2023

 2022 was a return to near normal for Indian retail. That leads to the question as to what 2023 holds for this sector. Trends that would dominate this sector has been detailed in this article published in The Hindu Business Line. Clicnk on this link to read the full article - Trends that will shape Indian retail this year - The Hindu BusinessLine

Indian Retail after the Lock down and Corona Virus scare in 2020

In the mid 1990s when Modern Trade started off in India, everyone started saying that Kirana or small stand alone stores are doomed. After a few years later when online retail started, physical stores were expected to be badly hit. Although there has been some impact with regard to a few categories by online retail on physical stores, it is nowhere as widespread as prophesied. Kirana stores have always marched on stoically. 

Fast forward to 2020 and the Covid-19 scare which has led to lock downs in most countries including India.

Interestingly, the small stores or Kiranas are managing quite well and many shoppers are dependent on these stores for their essentials. Many physical stores are catering to the shopper’s essential purchases. In spite of the lock down situation and home quarantine, online which had a good opportunity especially in the food space is grappling with delivery and stock challenges.

How will shopper behavior be after the Lock down? Which format will be preferred by shoppers? What might happen to the consumption patterns? Will there be a dramatic change after the Corona Virus scare goes away or at least reduces?

Most importantly, what will happen to Indian Retail and its various segments?

All these points have been detailed in this article published in Business Line’s BLoC. Click on this link to read the article and share your comments - What will shopping look like after Covid-19?

Is E-tail retailing or not?

E-Tail is a subset of retail and is largely about purchase of products (goods) online. However, the term e-commerce continues to be used for this segment. Apart from being misleading, this clearly is giving rise to policy approaches which disregards the aspects of a retail business which defines such e-tail operators.

If there is a defined FDI policy with regard to retail in India, there is no need for a separate policy and guidelines for e-tailing.

Yet, policy guidelines pertaining to e-tailing, wrongly described as e-commerce, keeps getting notified. The recent guidelines which came into effect from 1st February 2019, is a case in point.

Some points with regard to the dissonance created by guidelines pertaining to online shopping but defined as e-commerce have been explained in this article published in “The Hindu Business Line”. Click on this link to read the article titled, “The sting in the e-tail”.

The larger issue which is being conveniently ignored is industry status for the Retail Sector in India. Notifying this would not only help to streamline policy with regard to the various constituents of this sector but also enable the sector to growth.

Will this happen?

An Indian & A Retailer’s 20 year old journey

May 9th holds a special place in my heart as it is the day when the first store branded as Foodworld was opened by RPG Retail (now known as Spencer’s Retail). Retail as a sector has been a great teacher and also given a lot to me personally. So this is a day to remember all that and give thanks as also reminisce about the remarkable journey over the past 20 years. The one thing that stands out when I recall the milestones of this journey is that change has always been a constant as also resistance to change has also been a constant.

Success has come to those who embrace change and in some ways anticipate change.

One example of such resistance to change is the back story to my decision to join Foodworld. At the time, all my friends and relatives were shocked and aghast by this and felt that this was a completely stupid and suicidal career move. After all who is going to switch over from the trusted, convenient neighborhood store and shop at supermarkets? For me, this was the challenge; making shoppers switch their buying behavior. Challenges were aplenty and managing this change and many more led to a fundamental shift and today modern trade/ chain stores are approximately 10% of the overall Retail in India. It is still early years and the journey is not over and “Abhi toh picture baki hain” as the dialogue goes in a popular Hindi film.

The journey till date and a snapshot of the changes and challenges that have been milestones have been detailed in an article for ET Retail titled “Disruptions & Consolidations of Indian Retail Sector”. Click Here to read this account of the twenty year Indian Retail journey.

One key thing that stands out as a reason and enabled those in the Indian Retail journey in managing these sweeping changes has been the ability to “Learn, Unlearn and Relearn”. This is a quote by Alvin Toffler and is very pertinent to the context of rapid change. Although this does seem simple enough, it is quite difficult to internalize.

This video about a cycle which had the handle bar turning the opposite way helps drive home the point as also the challenges in “Learning, Unlearning and relearning”. 

The key barrier to this remains our thinking process, conditioning and the bias that we build up over time. Going forward Indian Retail is bound to become more challenging with varied stake holders, demanding customers and changing operating paradigms. Only those who can “Learn, Unlearn and Relearn” will survive and succeed.

Industry status for Retail in India might now be considered

In June  2014 I had penned “A Retailer’s wish list to Shri Modi” which was published in ET Retail. Within a span of 100 days I got an update about one of the points highlighted in the wish list.

The Deputy Secretary of the Ministry of Consumer affairs, Food and Public Distribution has written to The Secretary, Department of Industrial Policy and Promotion requesting that the proposal of according industry status to retail be discussed and further necessary action to be taken if found to be suitable.

This letter was copied to The Hon'ble Prime Minister of India and myself.

The key highlights of why industry status would be of great help is as follows –

• Would help classify Retail and define different guidelines for the various segments.
• Streamline the licensing and other regulatory systems into a single window.
• Help to enable national platforms like a national registry of products which will make the introduction of computerized billing easier.
• Enable skill and vocational training and employment generation
• Ease of financing as guidelines which are specific to Retail can be notified.

Plus, there are many more game changing implications. I do hope that this Retailer's wish comes true.

I am very impressed and needless to say thrilled to have received this letter copy. Kudos to the Prime Minister and his team for reading and responding to this Retailer.

Click here to read the wish list

A Retailer's wish list to Mr. Modi

In the din created by the argument and debate about FDI in multi brand Retail, several key issues about Indian Retail is falling between the tables. The fact is that the largest constituent of this sector; the 12 to 14 million stand alone stores cannot be ignored in any policy decision.

However, these hardy, smart and extremely resourceful businessmen do not need pseudo protectionism but a whole series of policy initiatives which will empower them to grow and succeed.

Having been a part of the Indian retail story I have put down a list of things which would benefit the various constituents of the Indian Retail sector. The first in this wish list is granting of industry status for Retail and a whole set of policy directives built around the industry status.

Click here to read the complete “Retailer’s wish list to Mr. Modi”.

Indian Retail - Point & Counter Point: Can interesting formats like this be viable?

Soda or carbonated drinks have been around for a long, long time and is often consumed under medical pretext. People tend to drink a carbonated drink to relieve flatulence although the CO2 in the drink does not really do anything to actually help!

During an earlier stint with a leading soft drink brand, I have heard of some weird stories which include patients with fever being prescribed a orange carbonated drink which was very popular in the southern Tamil Nadu markets.

Suffice to say that carbonated drinks have been and will continue to be popular. Although increasingly one does not see the ubiquitous “Goli Soda” which has an interesting looking bottle with a round glass marble inside. This which would seal the bottle’s top due to internal pressure.

During a recent trip to Coimbatore I noticed this interesting outlet named “Planet Soda”. They have this very innovative soda making and dispensing machine as you can see in the picture.

Each cup is sold for Rs. 10,/- and my guess is that the cost of that would be a maximum of Rs. 5/- after including electricity costs. This would give an approximate margin of 50% which is not bad assuming enough volumes are there to convert this into a respectable rupee earning.

So, this is a great idea for an incremental offering for small stand alone shops as also larger stores, with some space to spare.  This might even be a great idea for malls and larger chain stores. Stores can have such machines just outside their billing areas. Any excess or unused space which is customer facing can be used for this and the real estate can be monetized.

When I checked up on the penetration of this idea I found that apart from Planet Soda, which operates in the Coimbatore belt, another company in Ahmedabad - Geleriya Products - is quite active in this space and have a similar offering. As the actual technology involved is relatively simple, it might be just a matter of time before this takes off in a big way, if marketed and promoted well.

CLICK Here to join the discussion and share your views on my page.

Indian Retail – Point & Counterpoint; The gain and pain from MRP

Once again my oft repeated grouse about which I have posted several times crops up again.

Times of India carried a news item titled “Chilled drinks drain the pocket as shops charge extra for power” and had the following chart which as part of this news report. This clearly shows how shops are selling soft drinks, juices, etc. at prices which are 10% to 25% more than MRP. Needless to say this is illegal and in February 2012 IRTC has been fined Rs. 10 Lakhs by New Delhi District Consumer Disputes Redressal Forum.

 

 

Who benefits from MRP? Or rather the key question is who follows MRP?

Today MRP has become redundant and market dynamics defines pricing at the Retail end. The fact that a majority of shops in India sell many products above MRP and get away with it is ample proof that this legislation is outdated.

The typical counterpoint to this is how consumers are protected against being overcharged because of MRP.

Is that a valid statement? Not at all.
 

As consumers we all pay what the shop keeper asks whether it is below, on par or above the MRP. This is not restricted to only shops and the same reality exists in Hotels, Restaurants, Malls, Airports, etc. The only saving grace is that many of the corporate and larger entities today source products which has “For sale in select trade channels” printed on the product. This enables them to pursue a differential pricing which is invariably above the usual MRP.

Even in the above mentioned article a shop keeper is quoted as saying “I can't possibly charge more because if I do, then customers will walk into the supermarket a few meters away and buy the product there at MRP.”

Sure, IRTC has been fined for charging more than MRP. But, how many others have been penalized for flouting the MRP rule in spite of this being an open secret. Interestingly, the Judiciary seems to have a different perspective about MRP. In 2007 The Delhi High Court passed a judgment that hotels and restaurants can charge more than the MRP. This was justified in the ruling because such places provide ambience and services to their customers. However, this does not apply to shops and retail outlets.

I wonder why?

By this same logic the “cooling charge” is not illegal as it does constitute a “service”. Anyways, the stand alone stores do charge above MRP if possible and also gets away with it. By the same logic, the self service chains also provide service and ambiance and should therefore be exempt from the MRP rule.

So, who is then left to follow this out dated MRP concept? Therefore, if every channel has a reason and logic to charge more than MRP, why have this at all?

Click here to join the discussion on my page

Picture courtesy - Times of India, Chennai edition dated 10th March 2013

Point & Counterpoint: Jugaad is a great competitive advantage

Jugaad; an essentially Indian word which stands for the ability to work out an out of the box solution for problems. The solution may be permanent or not, but it does work as a quick fix and definitely helps makes life easier.

 

Recently when I had been to a newly developing part of Chennai for some classes I saw this very interesting sight; heavy duty electrical cables joined together in an impromptu manner and then capped with cut off pieces of water bottles.

An interesting and amazing Jugaad!

 

Sure, this is not very safe and neither is this long lasting but it provides an interim solution and keeps things working. More importantly it does serve the intended functional purpose.

 

Click here to read a wonderful Retail perspective to Jugaad and join the discussion about whether this will continue to be their core competitive advantage and also be sustainable.

 

Visit and Like my Facebook page, here.

The FDI Decision

Late in the evening on the 24^th, I suddenly got a flurry of SMSes congratulating me about the FDI opening up for multi brand Retail. I was puzzled and also a bit amused. Puzzled because we are used to seeing many such decisions being watered down or even rolled back in the face of a larger issue where FDI regarding Retail might be sacrificed.

Amused, because of the premature celebratory mood. Of course the fact that the government has at least taken a stand now after going back and forth for years now is a cause to celebrate but is there enough in this cabinet decision for such an upbeat mood?

Well, I have my scepticism about this decision.

Firstly, the trend in the past few years has been the domination of coalition pressures on decisions. I will wait to see whether the adjournment of parliament extends to the next week and causes enough furore for any dilution or even roll back of this decision.

Second, this decision has already been announced with a major catch. The trade and commerce minister has gone on record stating that the final ground level implementation will be the state government’s prerogative because trade licenses, especially Shops & Establishment Act comes under their purview. What exactly does this mean? You are welcome to bring in big bucks, set up a corporate office and get a senior team in place. Then, go around to each chief minister to beg & plead to open stores?

Does this sound practical? In the current context only the Punjab CM has extended support to this decision. Most are silent and obviously some are vocal in their opposition. This has some very troubling implications.

Second are the various riders. Obviously the powers that be have very little clue about Retail and many of these conditions seem very food & grocery Retail specific. For example, take the clause of sourcing a third of products from 'micro and small industries’.  Take Toys as a category which hardly has any noticeable modern trade presence. If an international operator enters the country, 30% of their range has to be from local small scale industries or artisans. Sure, you can include the wooden toys of Srirangapatnam and a few such regional specialities. Will this add up to 30%? I don’t think so.

Does this enable at least the food and grocery formats properly? No. Take the other factor of 50% of  the investment needs to be in the back end. Contrast this with the reality of limitations like the APMC legislation, varied taxation and octroi, etc. What use will this back end be if there are other constraints that stop such chains from sourcing effectively?

What is the logic of limiting these operators to the top 50 odd towns based on population out of close to 8,000 towns in India? In fact this is an oxymoron to the arguments for allowing FDI in terms of employment generation. Should at least a part of these chains be mandated to open in regions which need local impetus? Then there will be overall growth of that region.

So, all I can say is so far so good. At least there is now a decision around which debate can be built and hopefully meaningful improvements to the policy made.

Lastly, there is an urgent need for experienced Indian Retailers to be involved in this and not only as providers as opinions. That would ensure some method to the madness and bring to fore a far more important and pressing matter.

When is Retail going to be accorded an Industry status?

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?

Brand Raghu Pillai

Mr. P K Mohapatra who was associated with Mr. Raghu Pillai has penned a wonderful and very insightful article which delves into the man, mentor, leader and colleague named Raghu PIllai. His comments about Raghu being a hurricane is so very accurate and everyone who has been caught up in the force of that hurricane can testify to the life altering experience of working with him. Please click on the link below to read the full article.

- Brand Raghu Pillai

Some of the more memorable quotes of Raghu are –

When presented with a complicated Excel working he would say “Stop this Excel gymnastics and tell me what it means and what you will do with it”.

• His comment “English jhadna band kaar” (Stop spouting English) has been the guiding light to making crisp and meaningful presentations for many.
• The customer is always right was not mere words and he walked the talk by briefing the cashiers during any store launch to not argue about promotions.
• Lastly his perspective of the larger picture and its components was amply illustrated when he told someone who was discussing compensation; “I don’t think a few thousands here or there will significantly affect the balance sheet of this company”

 Many more such memories fill my mind and will continue to do so…..

My Fascination with Innovative Mobile Delivery Options

Mobile Retail Delivery is as old as Retail itself and hence my fascination with that delivery model with regard to all the innovation that can be tried out out in this space to leverage the same. India already boasts of 12 or 14 million retail outlets depending on which consultant’s report you are referring to. Also, what is not clear is whether this number includes the hawkers AKA mobile retail. Anyways, lets forget this Akbar-and-Birbal method of trying to measure Indian Retail.

Mobile Retail or mobile vending has been there in various forms from ancient times be it the street hawkers, the boat peddlers of Dal Lake, Floating market of Bangkok or more recently the floating supermarket in Kerala. However, one peculiarity barring the floating supermarket is the self limitation that these entrepreneurs impose on themselves as also the fact that the evolving Indian Retail Market seems to completely ignore it’s enormous potential.

Since 2009 I have been lamenting the fact that that this segment represents an enormous potential and had written a detailed article in The Hindu Business Line.

Article about Innovative mobile delivery models

A cartoon in The Hindu

 Ironically, The Hindu published this cartoon a few months later which epitomizes my construct. Till now this was a thought, a concept, something in the air. Today I saw this is in action and want to share this with my readers.

This picture is that of a normal neighbourhood iron man who does laundry and pressing.

Now watch an innovative mobile retailer has done.

- Put a shed and used it to advertise other services

He has done this a few months ago since he and his friends got this idea. He parks the cart in a safe spot during the night and operates from here during the day. I would not be surprised if he started selling various small essential products.

The difference between the earlier iron man and the second person is all about inititive and drive about which I have written in this post as also earlier ones. When will this become a mass movement?

Imagine if a Retail chain were to leverage this enormous potential of mobile Retail! Brand such carts, offer small, high margin and often used SKUs, so on and so forth.

Some food for thought ???

What is weights and measures?

We are a nation of savvy shoppers who bargain hard to get good deals. However, are we smart shoppers? I don't think so.

We do not arm our self with information and knowledge that would help us assert our rights as a consumer and that's why I feel that we are a savvy bunch alright, but not smart shoppers.

Hence the next in the series of smart shoppers is an overview about the law pertaining to weights and measures, as also some inputs on how it helps us become smart shoppers. Click the link below to read on -

What is weights and measures?

Can Retail succeed where politics and diplomacy seems to be stuck?

The North Eastern part of our country has never been the center stage whether it was in terms of politics or commerce. In fact people from the North East have migrated to other parts of India and are slowly becoming a dominant factor in the Retail work force as per a recent media report.

It is in this region that our brotherly neighbor who was till recently our bhai bhai, started playing visa games by issuing a visa on separate pieces of paper under the pretext that the visa is actually an internal travel document and not a visa. In that context, it would do well for anyone who thinks of this as a supportive gesture that, in India, one can travel anywhere without any such “internal travel document”. Anyone can wake up tomorrow and book tickets to go to Leh or Kanya Kumari or Porbandar or Itanagar in Arunachal Pradesh. That’s India and one of the many reasons why I am proud to be an Indian.

Anyways, let’s get back to the topic at hand.

I have been reading about how our friendly neighbor has been insisting that a large portion of the north eastern area is actually not a part of India!!!

A few days ago I read a report in Business Line dated 12/5/10 that retail outlets such as Arrow, Titan, Big Bazaar, etc., are making a beeline for this region. When a few Retailers go, others can’t be far behind.

So, will India do a repeat of the East India Company in reverse? Will Indian Retailers establish such a strong presence and more importantly a consumer base, that our friendly neighbor’s claims are no longer tenable?

I think this is possible and my Retail brethren should prove me right by opening as many stores as possible in the “7 Sister states” as possible to create a vast customer base, who are a part of the larger Indian Customer base.

Last, but not the least is the reality of economic growth that Retail will bring to this region and bind it to India forever. And in that context, the Government of India should encourage any Retailer who is ready to take this step without turning a blind eye to the same.

Jai Hind.

Vagaries of Indian Supply Chain

Sometime ago I had posted a picture of a truck with agri produce being transported on a barge across a river. Yesterday I happened to see this picture of camels transporting water melons. This brings to fore the point I have made in “The INDIAN reTALEs” about Indian Retail and SCM being a unique animal (pun intended w.r.t the camel) and needs to be understood well to be managed.

Imagine trying to apply international best practices like fleet optimization to this herd of camels, you will get the idea!!

Photo Courtesy: The Hindu

What a Birthday present!!

Almost to the day, it has been a year since “An Indian and A Retailer” made its debut. The thoughts of this blog grew into an in-depth, experiential book about Indian Retail, titled “The INDIAN reTALEs”.

All this happened in the space of the past 365 or maybe 366 days!

And on the first birthday of the blog, I hold a physical copy of “The INDIAN reTALEs” and wish a very happy birthday to the blog.

This book has been published by Unicorn Books and is now available for purchase with an online discount of 25% at pustakmahal (dot) com. It would be available at leading book stores over the next couple of weeks.

Please start enquiring at your nearest book store about the book and get your hands on it as soon as possible.

Thanks to everyone who supported, encouraged and motivated me along this journey. Hope you enjoy reading the tales as much as you have this blog.

To be launched soon...

March 20th, 2009 is a memorable day as that is when I started the blog “An Indian and A Retailer”. It was actually started suddenly on a whim and before I knew, it had gained a life and momentum of its own. A whole lot of people saw the blog, wrote to me and commented on the posts. Very soon, it was being quoted by Retail and Strategy consultants during their presentations.

I came to know about the widespread popularity of the blog when one such consultant referred to a post during their presentation regarding supply chain. Several members of the audience were my good friends and ex colleagues. Obviously they wasted no time in calling me up and congratulating me.

The blog has been receiving a steady viewership and the walk-in counter is set to cross the 12,000 mark soon. Indicating that on an average 1,000 odd people view my blog every month. 30, persons a day. Not bad for something I started just like that!

My sincere thanks to all those who have steadily viewed and supported the blog.

This support and motivation was voiced to me by several visitors to the blog in the form of a suggestion. Why not write a book. Their contention was that given the depth and detail of Retail information and knowledge available, why not expand on the same and publish a book. It would reach more people and benefit them.

In June 2009, I started acting on this suggestion and worked on putting a book together while contacting publishers. March 2010, this dream effort is ready to see the light of the day. Just ahead of the first anniversary of this blog.

Presenting - “The Indian reTALEs”

The book should be published shortly and for now the cover and an overview can be viewed on @ unicornbooks (dot) com.

Look forward to a similar support to the book. Please do spread the word; Post on your Facebook profiles, Tweet about it, mail your contacts, etc. Please help propagate the news of “The Indian reTALEs”.

A moment of disappointed irritation

The finance minister makes mention of a sector that contributes 8% to the GDP and I expectantly looked at the TV.

Yet again Retail whose size is as big and bigger than some other industries and also contributed approximately 8% to the GDP was left out in the cold.

Starting from simple expectations about offset of service tax to mammoth ones like industry status, the wish list was long. But was ignored.

Sad.

Food Inflation @ 18%. What a joke!!

I received a SMS from my friend Vishy which reads as follows –

“Tur dal rates for one Kg as on 8 pm today (10/2/10) – Nilgiris Rs. 115/-, Spencer’s Rs. 99/-, More Rs. 79.98/-, Fresh – Rs. 88.45, Nadar Kadais – vary between 68 to 85. How can there be so much variation in a KVI like Tur Dal? Do people cross check amongst stores?”

When I spoke to him he was visiting wholesale markets in places like Gulbarga where Tur Dal was being sold for Rs. 38 per kilo. Smaller farmers who sell locally at villages might realize even less at Rs. 32 or so per Kilo. The talk in the wholesale markets was that the prices of Tur Dal had actually come down over the past few weeks. But at the retail end in an urban market, it was soaring!

First is that, this reflects rather poorly on chain stores who are supposed to aggregate volumes and therefore be able to influence the supply chain in order to create value for the consumers. This does not seem to be happening. These chains are at best sourcing from the millers. So, the question is that what or who is driving up the prices? And who is going to bring in changes and advancement of the supply chain if not Retail?

At least Tur Dal can be stored and inventories managed as a buffer to commodity price fluctuations. Now, take the case of a perishable like Tomato. A decade ago the farm gate price used to be Rs. 2 as compared to the Retail price of Rs. 8, while for Potato it used to be Rs.6.5 and Rs. 12. Nowadays, with the retail price being in the range of Rs. 20 odd, do you think there would have been a significant increase in the farm gate prices? Not at all.

Today the price of Hybrid Tomato was Rs. 18 and Potato was Rs. 23 and the sourcing price was only Rs. 3.50 and Rs.9. respectively. Again the point of whether the farmer is benefiting from the increase in prices is there. The Retail price rise is not even proportionately matched by the farm gate price. Today evening, the prices of Tomato and Potato had dropped to Rs. 16 and 11. Does the farmer get such low prices to buffer such huge price variations, by the others?

Why does this happen?

Consumer habit, dependence on the retailers and even some amount of apathy, leads consumers to overlook prices of items purchased from their regular store. Trust drives their habit and the same trust also ensures that they do not check the prices or the bill.

As a consumer, when was the last time you checked the price or the bill of some of these basic items?

P.S. – The Retail prices of tomato and potato have been averaged out across a few stores.