Geodis is set to expand its footprints in the Indian market. It is directed towards providing collaborative and flexible, global logistics and supply chain solutions to Indian retailers. Franchise India Media caught up with Rene Bach-Larsen, Managing Director-India, Geodis, to get an insight on how the company is customising its strategy as per the Indian requirements.
Franchise India Media (FIM): First off, tell us about Geodis in terms of its positioning, services offered etc. Do you also serve small retailers?
Rene Bach-Larsen (RBL): Geodis has established itself as a global logistics provider with the ability to manage all parts of its customers’ supply chain. We provide our expertise to both domestic and international retailers to streamline the flow of goods. We also make their supply chain more transparent and easier to manage with reduced cost and better decision-making. We are pleased to serve smaller retailers and we act as partners to medium-sized and large companies.
FIM: How do retailers benefit by hiring your services?
RBL: We have developed the sea-air combined concept, which is faster than sea freight and more cost efficient than air freight. This service is available from Asia to Europe, North America and Latin America. Our value-added service, which involves any value-added handling while the goods are in transit, help our clients just focus on business. Clients benefit from the release of tied-up capital by increasing the warehouse turnover rate, simplifying administration, and turning fixed overheads into floating costs. Such services include customs clearance, quality control, KPI management, warehouse services, pick & pack, labeling and bar coding, consulting and documentation services. In addition, we offer transport and storage insurance.
FIM: What are your expectations from India considering the fact that international standards are very different and not relevant to the Indian market? What kind of service are you planning to give to India?
RBL: The concept of hypermarket is catching up in India. Be it Walmart, Tesco or Carrefour, they are all in the race. There are regulations stopping foreign direct investment in hypermarkets, though a lot has been altered, of late, still hiccups are there. However, joint ventures are allowed and that’s why cash and carry and wholesale formats are operating. But next would be hypermarkets getting a bigger market share. Consumers in India, be it of upper class or lower class, still believe in shopping on a day-to-day basis and this remains a challenge to hypermarkets in changing the buying culture.
FIM: Considering hypermarket is still at a nascent stage in India, do you think differentiated offering will help the hypermarkets grow?
RBL: When the price is same at hypermarkets and mom-n-pop stores consumers will go to either of the two. One thing that hypermarket can bring is innovative shopping experience for customers. Even in China, Korea and Thailand hypermarkets faced the similar challenges as they are facing in India, now. But hypermarkets have grown in these countries by innovating and evolving. What Walmart and Carrefour are planning to do in India is a great idea. Future of cash and carry and mass retailing is very lucrative in India. Unless a retailer understands the pulse of its customers, it cannot get things right.
FIM: Is changing consumers’ mindset a challenge? What other challenges do you think retailers face?
RBL: We have seen how hi-tech and fashion have grown in India. But the challenge for hypermarket is to change consumers’ mentality when it comes to food. Providing fresh food articles is also tough. If the food article gets stale, it’s a loss, so backend operations of retail need to be very strong. Cold-chain services need to be very good. Having hypermarket is not enough; retailers need to delve into consumer psychology so that they can improvise on their services accordingly.
FIM: Flat sizes in Delhi and Mumbai are so small that one cannot adjust a big refrigerator in one’s home that is why people cannot buy in bulk, how can hypermarkets cater to such consumers?
RBL: That is a key challenge, hypermarkets need to have everything for everyone; there should be different products catering to different set of customers. So players into hypermarket should not only concentrate on bulk selling, there should be alternative for one and all. One should understand that it will take some time for Indian retail industry to reach at the same stature as its western counterparts.
FIM: Is US more into practice of hypermarket. What difference do you see between US and India in terms of retail?
RBL: The concept of hypermarket was born in 1960 in France with Carrefour. It was much later that the concept of hypermarket evolved in US, but when it started in US it started with FMCG, later cosmetics, fashion, apparel and other things were included. Most of them didn’t have a warehouse and were supplied with the merchandise every 6 hours.
As a supply chain provider, we need to listen to our customers and we need to understand what they want and it’s no easy job. U.S is half the size of India and here the customer base is divided into four zones and every zone has many important cities with specific requirements.
FIM: How do you compare yourself to Indian logistic providers?
RBL: We have done a bit of recce. We are eco-friendly logistic providers. In India, 99 per cent of total warehouses are not of very high quality. We will maintain our international standard in India, be it in the context of having hi-end warehouses or transportation. We will be treating our Indian employees the way we treat our other employees in other parts of the world. All regulations will be the same.
FIM: Can you elaborate a bit on your employee policies?
RBL: A truck driver who moves goods from warehouse to the retail centre is the least educated than the others in the lot. When we talk about employee welfare policies, then we mean that we will try to safeguard the rights of such people. We need to be pragmatic on the issue of hiring cheap labour; cheap labour definitely increases the profits but they are the most inexperienced ones. But if we want to be competitive we need to hire experienced labour. Secondly, we need to be very sensible and sensitive towards the nature. We cannot just copy solutions from one country and implement it to another, things that we do in South Korea or Australia are different from what we will do here but our core-policies will remain the same. There are some good suppliers in India; they have good understanding of the Indian markets. We cannot function as an international company in India we need to understand the knitty-gritties of the trade.
FIM: Rather than having a third party logistics, big retailers like Future group prefer having their own logistic chain, what is your take on this?
RBL: If Future group has done it, Reliance can do it too; even Hyundai in South-Korea has its own logistics arm. But it is surprising to see; these companies come to us and tell us, “We have done our bit of leveraging now you suggest us solutions.” Internalising logistics do bring benefits to large groups but only if they want the division for international operations. For local markets third party logistics service is a must. Probably, this is the reason that even though they have the in-house logistics team, they still shift back good part to the suppliers.