by teamrecNearly 8-10 months back, every so-called “retail expert” was busy writing an obituary of organized retail in India. A South India based retailer was not paying to their vendors and employees; another in Mumbai was finding it difficult to pay money back to their PE participant. Retail organizations run by big and established business houses were also not sending positive signals to the market with rumors of them closing the stores. “Retail experts” were busy issuing advisory to consumers to save their money by not visiting the supermarket stores opened by small or big players.
Nothing was going right at that time. Big institutions, which have been the epitaph of economic progress for decades or nearly a century, were falling like nine pins, prices of commodities had touched the bottom, and still, there was no taker, as nobody was sure, who is going to buy it from them. At least, I had not heard like many others of my age or even people a decade or two older than me about this magnitude of economic slump, leave aside the point of seeing it. There was fear of job loss everywhere and it was not unfounded. Millions have lost their job and the rest lived in fear of losing it.
In this scenario, questions were asked about the survival of different sectors, prominent amongst them was organized retail, which was seen as a signpost of India’s economic progress and strength. Almost all big brands and retail names across the world were knocking on India’s door for entry. Almost all the research reports were projecting India as the best retail destination of the world. Then what went wrong?
Organized Retail journey kick started in India amidst the period where everything was looking good. On the flipside, everything including property was coming at premium, but since funds were easily available albeit at a higher cost, nobody was complaining and the technical chart of revenue and margins on excel spreadsheets were also looking excellent.
Occupancy cost was as high as 10-15% of the store revenue in most of the cases, high manpower cost due to wrong alignment of the team, merchandise offered in one part of the country being applied in another part of country, merchandise mix was not aligned with the requirement of the catchment, which was as small as one kilometer radius of the store in some cases, poor selection of sites in race to open maximum number of stores to get the economy of cost, poor supply chain and IT infrastructure, awfully bad fill rate and no clear cut strategy to pull customers back to the stores except running continuous price off and markdown, were painting a different picture altogether than what was looking earlier on excel spreadsheets. Then also, hardcore retailers were saying that organized retail is not only going to stay but also grow in India……..why?
So many things were going wrong, but the best thing was that, people running the business had understood it very clearly and the economic slump brought them back to their excel spreadsheets and power point presentations once again, to rework their revenue model. In most of the retail organizations, operating at present, manpower has been realigned according to the need of the business and different functional teams have been sensitized about their cost. Occupancy cost has also gone down by 20-25% due to re-negotiations done by retailers with the property owners and moreover, unviable stores have been closed. The cookie – cutter approach has been done away by the retailers for good and they have mostly aligned their assortment on the basis of catchment. Back-end arrangement for supplies have been streamlined, which earlier were a big problem and almost every convenience and supermarket format retailer was struggling to give even 70% of the monthly basket of the consumer and it had reduced them to a top up store with average bill value hovering around Rs.200/-. Now a glance on the shelves of these stores gives an idea that things have improved for better and which is showing in the bill value also. Better supply chain efficiency, investment in IT infrastructure and faster dissemination of relevant information to all the stakeholders has improved the efficiency, while a lot needs to done yet.
All this has been from the retailer’s point of view, but what about consumers?
Due to economic slowdown, many lost their jobs between October,08 to March,09. There was uncertainty in the world market, election was round the corner and predictions were for a hung parliament, stock market was also not showing any sign of regaining investor’s confidence, which had taken a strong beating. Picture is different now, with election results giving thumbs down to regional parties and clear mandate in favour of a stable government, sentiments, which were volatile 4-5 month back, has now stabilized. Employment scenario, which was tempestuous in the beginning of this year has now calmed down. Although new job opportunities, which were coming in thousands a year and half back are not coming but the speed of job loss has almost stopped. Stock market is again buzzing with activity; economy has started showing result of the stimulus given by the government to arrest the slowdown.
Now when I stand in one corner of any of my store in Mumbai, I can easily sense the happiness and the smile back in the consumer’s life. They have just overcome the biggest problem of their life, may be not completely, may be not everybody, but certainly some of them, the fear of job loss, fear of losing roof over their head, fear of pulling their ward out of school and taking them back to a nondescript place from where they have come to big cities like Mumbai to make their career and life. I may not be seeing all the faces in my stores, which I used to see during in last Diwali, but most of them are still coming to our store and buying more and it is reflecting in the business results also, where month on month I am overachieving my budgetary numbers. This is not the case with us only. All organized retailers, who had the attitude to fight back and survive and had the aptitude to rework their business strategy has not only survived but is gaining strength day by day. I can definitely say that we hav e lived our life with our consumers by burning midnight oil to work out strategy according to their requirement and they are showing full confidence in us by coming back to our store every month. They are now able to identify what was promised to them nearly 3 years back; better shopping environment, better product quality and range of products with never seen before prices. Yes, organized retail in India is not only going to survive but grow; consumers have given them Hi5 and organized retailers has taken a note of it.
ABOUT THE AUTHOR
Mr. Mukul Bhartiya is currently working as National Category Manager with Aditya Birla Retail Ltd, looking after pulses category. He has 10+ years of experience in the field of Sales and Marketing in Food FMCG, Food Retail and Commodity Futures.
He is a MBA from Center of Management Education, VAMNICOM, Pune run by Ministry of Agriculture, Government of India.
He has shaped up and established the business of different organization in different geographical locations, i.e., Staples business of ABRL in Mumbai, Staples business of Reliance Retail in Rest of Maharashtra, Commodity Futures business of MCX in Bihar/Jharkhand and Retail & Consumer marketing business of NAFED in all over India. He has also worked on formulating business strategy of agriculture commodity marketing for NAFED for 2 years and designed strategy for procurement and disposal of oilseeds under Price Support Scheme during the period of 2002 to 2005.
He has been given appreciation letter for presentation and review of business activities of NAFED by Estimates Committee of Parliament, which reviews the non-plan expenditure of Government of India.
He has done a project of International Trade Development among cooperatives in India, Iran, Kuwait and Sri Lanka for International Cooperative Alliance. This project was presented in different meetings of ICA at Thailand and China during 2004-05.
He has published an article titled “Edible Oil Market Scenario” in market outlook segment of May-June 2003 issue of Oils & Fats Today.
