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Retail revolution knocks at India's door

Shobha Warrier in Madras

Is India ready for modern retailing? Is the Indian customer ready? Is modern retailing beneficial to the country?

These are some of the questions asked by Ronald J Floto, the group chief executive of the Dairy Farm International, Hong Kong in his keynote address on Indian Retailing Industry- The winds of Change at the International Convention on, Retail India 2000 - Charting the Course of Retail Revolution in India organised by the CII in Madras.

It was nearly a hundred years ago that the self-service specialised stores came into existence in the developed world, but it was only in the early nineties, after the liberalisation of the Indian economy that the super markets came into the lives of Indians in a big way.

According to Ronald Floto, the growth of the retail market depends largely on the growth of the middle class. When the growing middle class start demanding better value products and variety, retailing will be a success. The customer in India has demands and aspirations but is the country ready to have a retail revolution?

As long as India's infrastructure is not developed, as long as the supply chain is not properly taken care of, the large market that everybody is talking about will not grow, according to the experts who talked at the conference.

"India's middle class may grow, their per capita income may grow, albeit slowly, but what holds key is the growth of the supply chain," Ronald Floto observed.

Dairy Farm International came to India providing technical expertise to the RPG group in the retailing business. "Expertise can be global but retailing is a local business and for that, local growth is essential."

Retail business can only be beneficial to the country and the people, as it is the largest provider of employment locally. But Ronald Floto admitted that the 'winds of change' are blowing only very slowly in India and India's is one of the least developed retail markets in the world.

Michael Fernandes, associate principal, McKinsey and Company Inc who prepared the CII-McKinsey report, 'Retailing in India: The emerging Revolution agreed with Ronald Floto that the major hitches in the development of the retail business in India are the non-development of infrastructure and poor supply chain mechanism.

Out of the 12 million retail outlets in India, only 2 per cent of the market is organised even though there will be a huge market of nearly $ 1 billion in grocery and $ 3-3.5 billion in apparel industry in the next ten years, according to the study.

Share of retail in India is 10 per cent of GDP, while it is 9 per cent in the US, 8 per cent in China and 11 per cent in Poland, but the share of retail in employment is 17 per cent in the US and 12 per cent in China, while it is only 6 per cent in India!

India may be the largest producer of fruits and one of the largest in vegetables but retail business of processed food is less than 30 per cent in India, but it is 50 per cent in China and more than 85 per cent in the US. These statistical studies show what exactly is wrong with India's retail businesses.

Unfortunately, retailing is not considered as a business or industry by the Indian government. It is not even taught in any of the business schools in India. Added to all this is the poor infrastructure and expensive supply chain. Fernandes concluded that unless there is a partnership between the government and the retailer, retail market in India would not grow as fast as everybody wants it to grow. "And the real big player in the retail field will be those who understand the possibilities."

The CII-McKinsey report was released by the Minister of Health and Electricity, government of Tamil Nadu, Arcot Veerasamy. Successful retailers like the Titan, The Shoppers Stop, The Domino Pizza, The Food World Supermarket Ltd, The Bharat Petroleum Corporation Ltd, Vivek Ltd, etc presented papers on their success stories in the course of the day.

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