Steady steps with foreign expertise

The recent news of Reliance Retail hiring Rob Cissell, the former COO of Walmart China as the chief executive officer and Shawn Gray, VP-Store Operations, Walmart China, as the chief operating officer of the organisations raises a spurt of questions. What has made Reliance Retail again seeking refuge to overseas expertise? Isn’t it the action replay of the hiring scheme of Reliance Retail in 2006-2007? Rewinding to that time will show that the company went on hiring spree with the stalwarts from Best Buy, Walmart or Circuit City Stores recruiting them for the top positions in the different verticals of the company. In the period of 2008-2009, there was exodus of this band of expat CEOs. The reason cited was that they kicked off the business and mentored the next level of executives to take over the rein.  Back to the present time, we see the need is again raising its head. The situation that is troubled by unstabilised retail scenario coupled with the setback from economic slump requires a more firm grip of guidance, which an experienced professional from the US, South Africa or countries of Europe can actually offer. Another reason is India’s emergence as outsourcing hub for the retail business across the globe. This has directed many foreign professionals to see India as a land of career opportunity. Mark Ashman has been working in India since 2007.  This former CEO of Marks & Spencer and the present CEO of Hypercity has acknowledged the allurement of the Indian retail business, although from different angle.  “India is one of the few parts of the world where the opportunity exists in the forms of defining, building and running new retail businesses. Whilst 80 per cent of what works elsewhere in the world applies to the Indian market, it is the 20 per cent, demanded by the diverse Indian consumers, makes it a stimulating place to be,” he comments.

Why in demand?

To keep up with the fast paced retail growth, match up operations with the expanding footprints, retailers need seasoned acumen. Kumar Rajagopalan, CEO, Retailers Association of India explains,” The reason why many companies look for expats for retail in India is because professional retailing is new to India, hence there are not enough senior retail professionals available to run large retail companies. Chain store retail is very well established in other advanced markets for about 30 years and expats have been running large chain stores across the globe. These people bring in the great processes around large store retailing. We do have professionals who have run large FMCG businesses in India, however, the expertise for retail businesses is slightly different since retail sells to end consumers and the ethos to run consumer facing businesses is different than the channel based businesses. The complexities around Chain Store Supply Chain, Information Technology, Space Management, People Management and customer centricity are understood by  the people who have been in the business for some time. That’s why in many cases the expats can bring in great value.”

Ashman too views that where retail shares common management disciplines, such as finance, IT and marketing, experienced professionals are readily available. However, the concern lies in buying, merchandise and store operations, where actually is a shortage of experienced professionals.

Jitu Mehta, Founder Chairman, Valueveda and former President of Spencers Retail opines that expats can help reviving a company which has incurred heavy losses, provided the losses owe their origin in non-scientific way of running retail business. If the losses have been incurred through irreparable causes like long-term high rent agreements for retail outlets, long-term rental commitments for poor locations, high cost infrastructure for supply chain or kickbacks by the owners themselves, expats may not be able to help much. Also, expats can help a lot on the front-end side to reduce losses. Their knowledge of the back-end in the Indian supply chain may not be adequate as compared to their Indian counterparts.  Mehta also defends the experience of the Indian CEOs who, according to him, given a free hand in retail business operation, can excel in their job. “I have seen cases where the selection of the CEO was wrong; where good Indian CEOs were not given the free hand that they needed and where the owners’ own obsessive preoccupation is with building valuation rather than building a good retail business on good fundamentals. It would be more appropriate to generalise that the lack of retail experience at the level of owners was responsible for whatever happened.  Indian CEOs would have an advantage over expat CEOs in terms of local consumer understanding, local culture and the back-end for merchandising,” he exemplifies.

Not everything is smooth sailing

While talking about difficulties in retail sector in India, Ashman tells that knowledge of each market and understanding the consumers’ response to the organised retail format are the two areas that can be pain in the neck. Within a hypermarket this varies across categories.  “The confusion stays in what products will the customers rush to buy and which will take a little longer. The confusion still lingers on when and at what pace will the consumers show an inclination towards an organised format,” he opines.  However, it has to be his experience that actually, which may sound clichés, has made value addition to the retail business. “Retail is detail and the understanding of the detail comes only through experience. Retail is intrinsically a simple business, selling a product for more than you paid for it, but it is the requirement to manage multiple products, sourced from multiple vendors, sold to thousands of customers through multiple store locations and at better value than your competitors  that makes it fun! Experience teaches you what works and what doesn’t and which leavers to pull to get the right results,” Ashman comments.

The problem can be cropped up from the diversity of the Indian culture and consumer preference. “The one thing that expats need to understand and would need help from their Indian counterparts is understanding of the Indian consumers at a market to market level. India is a large country and consumers have a different cultural back ground every 100 kilometers. For many expats, the cultural adjustment to India takes time. Also they come to the country with a short time assignment in their minds. This leads to a serious lack of continuity if there is no shadow CEO of Indian origin to take over when the expat leaves.” The expat CEOs will naturally take some time to understand the culture, customers and the regulatory environment. “Whether the Indian retail can afford to give that time is a function of proper manpower planning and transition plans. One can accelerate this learning process for the expat CEOs by underpinning them with high quality Indian resources,” views Mehta.

Some problems are generic in nature, giving many Indian CEOs too sleepless nights. The experience of Ashman tells him that there needs to be a much better, closer working between developers and retailers to really understand how to build and successfully operate malls in India. “I see the largest gap today is what retailers can genuinely afford to pay, particularly in the initial years, and what a developer can expect to earn. Unprofitable retailers mean empty malls in the future.  Also, the India consumer is developing at a much faster pace than the FMCG sector is. Acknowledging this, they need to speed up the introduction of new products into the market, alongside continuing to improve the availability of products to the organised sector,” he adds.

So, back to the point where we began – the Indian retail needs the help of overseas experience. This is a formative phase of the organised retail in the country which witnesses modelling and re-modelling several times. It is the maturity of organised retail which can only incubate the talents of the Indian origin to fill up the present gaps.