A typical concern of Indian parents:
A shopkeeper, father of a18-year-old boy, fumes to his wife,
“Your son has scored just 55 per cent in twelfth standard
examination. I wanted him to become a doctor or an engineer
but now the only option left for him is to be a shopkeeper.”
When a child was not good enough and unable to enter into top professional careers, his parents would usually make arrangements and introduce him to family’s business of shop keeping. This was the picture 10 years before. Today, with the entry of international and national biggies into India’s retail industry, even this option seems to have been closed.
Trend of inherited business
If we look at the model around which local neighbourhood shops have been running till today, we realise that many of these shops employ family labour and occupy either rented premises or extensions of homes. So, in this way, the local shopkeeper is never worried about the rent he has to pay. As far as labour is concerned, his entire family is involved into the running of the shop. This is the reason why majority of shopkeepers are not worried about their kids’ career as they know that their kids are already getting on-the-job-training from their family business. Indian shopkeepers have been following such patterns for many years. But many international and national organised-players have today entered the retail sector and this pattern may not work out any longer. The future of many shops seems desolate and gloomy. Retail experts are concerned about the plight of local shopkeepers. However, we cannot simply ignore the fact that entry of big retailers in India’s retail sector will amount to consolidating the sector into fewer but bigger shops.
One shop per 96 individuals
India has often been referred to as a nation of shopkeepers where there is one shop per 96 individuals. The number of shops may be very big but most of them are very small in size. Indian shop industry is dominated by small family-owned stores, which constitute 1.2 crore retail outlets with an average outlet size of 500 to 1,000 sq.ft. Only around three percent of these shops are organised. As per Assocham’s report, the value of organised retail sector in India is expected to cross approximately Rs 88,000 crore ($22 billion) by 2010, a significant increase from its current value of Rs 16,000 crore ($4 billion). The increase in the size of the organised retail sector will also require over 22 crore (220 million) sq. ft of space. At present, the entire retail industry in India is worth around Rs 64,000 crore ($16 billion), of which the organised retail sector accounts for only 25 percent. There may be reasons to cheer up. But it’s not just the retail boom. Around 600 malls are coming up in metros and large cities. Another 1000 malls are being planned for smaller towns where land is available and consumers have increasing incomes. The big selling includes food and grocery items, FMCG, sportswear, eyewear, watches, footwear, tailored clothing, and outerwear.
Should local shopkeepers worry?
All those who feel that big retailers will gulp down the local shopkeeper need to give a second thought. Local shopkeepers have an edge over big retailers. Here’s how.
Local shopkeepers are at walking distance. So, one can go and shop at any convenient time. Then, there is a trust attached to the local shopkeeper whom one has known for so many years. The local shopkeeper can provide a facility for home delivery with ease. He can also provide a credit facility to the consumer as he has known the latter’s family for many years. A strong relationship between Indian shopkeepers and their customers can be attributed to years of trust and service that they have enjoyed together. Looking at these facts, it seems that big retailers cannot lure away in any way a chunk of the middle class big enough to make local shopkeepers go out of business. This is the case of small local shopkeepers who are in the business of selling daily-need products. As for local shopkeepers dealing in apparel, footwear, jewelry, bags and accessories, etc., they seem not to have any apprehension.
Shopkeepers’ opinion
However, most of the local retailers feel that large stores will not affect their business, the reason being the high loyalty of local customers. The personal touch and specialised service such as home delivery would give them an edge over large retailers. They might lose approximately 10 percent of their business in branded products but the business of other items will not be affected, feel most of them. However, Indian shopkeepers have certain concerns such as:
- Incompetence to compete with the likes of Wal-Mart
- Incapable of huge stocks
- Lesser space compared to big stores
- Big stores located near their shops will attract even loyal customers
Mr Surinder Gulati, owner a franchised Raymond store for the past 25 years, seems to be not at all afraid of big retailers. He said, “No, we are not afraid of big retailers. They will not have impact upon our business as we have high consumer loyalty attached to us. Personal-touch and specialised service that we have is an edge that we have over large retailers. Moreover, Raymond itself is a strong brand and no brand in its segment (fabric) is concerned about competition with us.” On the contrary, Mr Subhash Gulati, owner of a departmental store named ‘Empire store’ for the last 50 years, opines, “Yes, we do have a threat from big time retailers, not right now but definitely in the coming time. They will be having larger space where they can display more products. But, larger space will be more expensive, I mean economically. Whether they make money or not is the matter of concern, but that hardly makes any difference for big retailers.” Mr Rajiv Suri, owner of Kewal stores, 50 year-old departmental store, emphasises on the value of providing a personalised treatment to consumers, which he feels big retailers like Reliance or Subhiksha will not be able to provide. Though well-established retailers are not afraid of big players, local kiryanawalas seem to be quite worried. Majority of them opine that their business will come to a stop owing to big players’ entry. As regards solutions, they say that they don’t see any. There is no choice but to stop our business. A local retailer opines, “Yes, we have our old customers. But, this will not work as people go there where they get goods cheaper. Big retailers are selling things at discounts and we cannot afford to do that. They will ultimately take our consumers and we have but to lose.” On the other hand, Mr Suresh, a vegetable vendor, says, “I sell fresh vegetables which I get from my farm and have been doing it for the last six years. I have customers who buy only from me and, by now, I too know their preferred vegetables. I do not see any threat as vegetables available in these big shops are no match for that I bring afresh everyday.”
Tying up with big players
Joining hands with big retailers is an option that is available today to small retailers. Whether a small time retailer should go for this option is a decision that demands serious thinking and rethinking. When asked if any big retailer has approached, Mr Surinder Gulati, informs, “Yes, many companies have approached us but we are quite satisfied with the way we are doing despite the need to upgrade from time to time. We have never thought of changing our business as we are doing better than others in the market.” Similarly, Mr Subhash Gulati says, “We have been approached by number of big retailers for franchising in clothing and in grocery or FMCG.” Taking the same stand, Mr Suri says “Yes, big retailers have approached us. Reliance has approached us and then Wal-Mart approached us. But, we do not want to have a tie-up.”
Varying buyer manners
As buying behaviour of Indian consumers is concerned, local retailers have discovered a considerable change. Today’s consumer is more aware and more educated. He knows what to buy from where and at what rates. According to Mr Subhash Gulati, “ Consumer behaviour is more or less same though consumers have become more aware and more educated. Local shopkeepers understand their consumers better, can listen to them and take a quick action, which big retailers might not be able to do.” Mr Suri informs, “The consumer has actually become more aware and more educated and is ready to spend.” The retail scenario is going to change but our social economy is such that this kind of retail cannot be successful in India. Mr Subhash Gulati informs, “We are in the market for more than 50 years. We have a strong consumer base. Indian consumers still want respect and recognition and we feel that big time retailers might not be able to provide very personalised services that we provide. Though they do not have much know-how of locality, they have money with which they can manage everything. These big players even do not mind losses initially as they have public money. None of Reliance retail business is doing well. For instance, their petrol pumps are not doing well. It’s only that they created a hype, due to which people are investing money and they are giving money to small retailers and getting interest from them.”
What’s the solution?
The problem has been identified. But, what is the solution? When asked, retailers had varied opinions as regards how they were going to face this challenge or threats from big retailers. Mr Surinder Gulati, “We are upgrading our stores, updating the range of products and providing training to the staff at regular intervals. As it is a franchised store, the franchisor keeps on upgrading the stores. Though we can upgrade the stores ourselves, the franchisor always has better-researched programs for up-gradation.” Similarly, Mr Subhash Gulati, Empire stores, informs, “We are planning to expand our store from ground floor to first and second floors so as to add more products and create space. This is our own property. So, we can expand here and we cannot think of opening our stores anywhere else as rentals are today very high.” When asked about the need to upgrade the store, Mr Suri agrees and says, “Yes, it is required. Right now, we are on the ground floor but we are planning to expand the store to three levels.” A shopkeeper running a paint shop opines, “There is a threat but that is not going to end our business. As regards solutions, we can upgrade our store and increase the quality of customer service. For example, we can install air conditioners in our store and start providing better customer service.”
Requirements besides up-gradation
There is no point in denying the fact that up-gradation is the need of the hour. However, besides upgrading the store, there are certain other measures to be taken by local retailers. A shopkeeper’s child acquires usually his father’s business skills, which will go waste if his father’s shop is closed due to inability to face new challenges or competitions. Therefore, a shopkeeper needs to educate his son accordingly and make him strong enough to take on new challenges. A shopkeeper should realise the importance of keeping pace with changing times and should try to make his child educated about his business. Today, many educational institutes have started conducting courses in specialised areas of retail such as visual merchandising and injventory control. Knowledge acquired from these courses will help his child in making plans for up-gradation of his shops and business. Other than this, one can introduce various promotional and marketing strategies like maintaining a data of the regular consumers by sending flowers, cakes, cards, bouquets and small gifts on their birthdays and anniversaries. This will help in winning the good will of the consumers. Besides this, a well-groomed staff is equally important. An efficient sales person plays a vital role in the success of a store. A customer interacts more often with the staff at the counters than with the owners. A professional staff with an upgraded facelift can make the cash counters ringing no matter which format the store is based on and which brands the store has. Another tool for making your sales roar, retaining old customers and bringing in new ones is to get customers’ feedback and sincerely work on them. When a customer sees that his/her suggestions are taken seriously, there is hardly any reason why he or she would not want to return to the store.
Future
When asked about future plans Mr Surinder Gulati, says, “We are planning to renovate the store in the coming months with more of display shelves, racks, more movement area for consumers etc. Though the franchisor would provide designers, architects and vendors, the investment would be incurred by us.” Similarly, Mr Subhash Gulati informs, “We have adopted the latest technology for billing and we are planning to renovate the look of the store.” The future of Indian retail industry is bright with unorganised giving way to organised retail. However, as far as the future of Indian retailers is concerned, it all depends on how they update the stores in newer and newer environments.
Inferential overview
From the check we have conducted, it is clear that apprehensions of local shopkeepers have their own reasons, which are all valid. What matter then are the attitudes or actions of shopkeepers in such an apprehensive situation. Though many shopkeepers are confident and ready to take on the new challenge, others have started losing confidence vis-à-vis big retailers of the organised sector. It’s no time to lose heart and confidence, rather it’s a time to go for modification and strengthen their business. Instead of looking at the threat as a problem, they should take it as a chance to improve and empower themselves.
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