India is changing in almost every aspect. Modernised lifestyles, new buying habits, increasing number of hang out-junctions and more importantly, culture of branded shopping have been pivotal in bringing about a change in the perception of shopping in urban India. Touching an all time high is the population of high earning middle class youth of the country, which has made the country a potential goldmine for retailers and brands from all over the world. In such a situation, it is significantly relevant and alerting to know whether small format retailers are stunned and threatened by the entry of global leaders like Wal-Mart and Carrefour with their large wingspans. Or, are they, on the contrary, more informed and ready to take on new challenges?
Mr Gaurav Marya, President, Franchise India Holdings Ltd, observes, "It is time for the small retailers to go in for new technologies and evolve further. With corporate giants entering the retail arena and offering competition to neighbourhood retailers in terms of better environment, lower prices and better values, it is high time for these retailers themselves to fend off the heat. The image of small retailer is set undergo a sea-change in the next two to three years."
Mom-and-pop stores thrived on the principle of minimum means and maximum satisfaction, offering products and services within their calibre, surviving on lower profit margins without advantages of technological and modern designing applications. At one point of the time, it seemed that retail business had stopped at this juncture only. But present developments of the industry have proved that appearance is not reality. Malls have brought winds of change in the country and have, no doubt, created waves of new activities in the realm of retail. Yet, all these imply, on the part of traditional and small retailers, that there is a lot to know and to do so as to remain successful today.
Small retailers have either to evolve to suit the target audience or the game is over for them at least for some time. Ramjilal, a small kiryana shop owner comments, "We have kept in stock every cheap and best material that we believe the customers will like. Once we make substantial profits, we will renovate our shop, and we know customer since ages, there is no threat to our business, in fact, we will grow and reap a rich harvest with the changing time."
Mr Prashant Mudaliar, GM Retail, Ferns 'N' Petals says, "With the coming of the large format retailers, there will be an impact on low key retailers, stand-alone outlets and local kiryana shops. While it will take sometime for the large format stores to reach a break even period, there could be a consolidation of shops as the number would reduce from say 10 to 12 shops to quite a few, like three to four." Prashant says that he is absolutely sure that kiryana shops will give large format retailers a run for money.
Elaborating on this point, Mr Marya says, "There are certain categories of retailing that a neighbourhood locality can not go without as they involve essentials of an individual's daily life. These categories are groceries, pharmacy, saloon, dry-cleaning, stationery, audio, video, hardware (electrical/electronics), sweets, bakery, gifts or flowers and crockery. The neighbourhood retailers in such categories would retain their own selected area of operation, as they would continue to receive their usual customers. "
It’s time for minting money: organised/unorganised
Let’s leave behind the issue of threats posed by international giant retailers to desi or traditional vendors and see the prospective time instead. International retailers will need time to catch the verve of the Indian consumer. Especially 'use and throw' policy does not work here, as people want durable items at reasonable prices. Again, with Chinese electronic goods rafting on a high tide, they are popular in India because they do offer 'use and throw' items but at lower costs. They have revolutionised the technology market this way.
Large corporate houses aiming to make it big in retail have a primary disadvantage as compared to the small format retailers. Lack of personal touch and customer preferences: likes and dislikes, ease of approach, home delivery and above all, making the customer feel special are some basic factors that provide small retailers an edge over large retailers.
Another important point is that there is a need for organising, to the possible extent, the unorganised stores into organised ones so as to maximise the footfall. Only then, will this sector be able to survive in the vast and competitive Indian retail environment where giants like Wal Mart and others are making their foray.
Wal-Mart saga: around the world in eight dollars
While 'Wal Mart' today sounds synonymous with every foreign retailer who wishes to cater to the Indian clientele (masses), let’s take a sneak peep into Wal Mart's track record till date. Wal Mart has its eagle-like wings spread across countries like Argentina, Brazil, Canada, China, Costa Rica, El Salvador, Guatemala, Honduras, Japan, Mexico et al. All these achievements are based on super efficient supply chain management (SCM), appropriate use of information technology (IT) and a credo 'The company makes more money by driving volumes instead of focusing on margins.' Can an Indian firm like Pantaloon or Reliance attempt this? Presently, the company is forging an alliance with Bharti Enterprises, obviously for exploring retail horizons in India. Mr Sachin Marya, CEO & Publisher, Retailer magazine comments, "While Bharti Enterprises might just prove to be a channel for Wal Mart's Indian entry, the agreement might get transformed into a JV once FDI is relaxed. In my opinion, considering the large and complex format of big retailers like Wal Mart, the business can not be franchised as quoted by the officials. The format is driven by contract laws, easily termed as a consulting or JV project. "
Foreign business intervention has changed the dynamics of the industry. Looking at this intervention as threat could be totally wrong. Mr Kishore Biyani, MD, Pantaloon Retail, comments, "Our strength is that we understand the Indian consumer better than any foreign retailer and we also have the first-mover advantage. We are an Indian company geared to cater to the Indian consumers."
'Golden bird' yet again - India
Comparing India to western countries and casting a glance at the evolution, development and the present state of mall culture in western countries, we find small retailers have their say and are thriving well over there. An observation by CEO, Medicine Shoppe India, Mr Viraj Gandhi, who says, "If you analyse western countries, this perfect neighbourhood culture is very much ingrained as there are certain basic necessities that are convenience-driven rather than price-driven."
Globe trotter Ms Barbara Wold who is also an international speaker, authoress and business strategist, global retail & consumer expert, says, " Independent and small retailers will not be able to match the price the large retailers are able to offer - but it is not about price alone - the small retailers are able to react faster and offer the services customers are willing to pay for." Mr Gaurav Marya 's comment is quite relevant in this context, "I feel, ideally the big companies should join hands with small retailers and offer the right system to make them a part of organised retail. It is here, that franchising comes as the right option, which can help them to upgrade the services and also enhance the customer's buying experience. So, in order to survive any loss brought about by a large retailer's dominance in the area, small retailers would need to innovate, upgrade and add value to their system by converting their businesses into modern formats." A very, very bright future for India lies ahead. With retailers clearly in a jiffy to lure the customer, it’s governance of the people, for the people and by the people at least in business. What a sigh of relief for every shopper!
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