'Indian retail market has the greatest potential'

From a store manager and district grocery supervisor in Jewel Food stores in 1973, he went on to become the vice-president, Business Development and Strategic Planner, in 1978. For Ronald J Floto, group chief executive, The Dairy Farm International, Hong Kong, it has been a hard, but fruitful, climb up.

He started his career in Philips Academy in 1961. He also served as a Captain in the US Army before joining the Harvard Business School. After completing his studies, he joined as a special assistant to the secretary of transportation. After serving as the chairman, CEO and president of Kash n' Karry, he joined the Dairy Farm International as group CEO.

He shared his thoughts on the retail revolution with Shobha Warrier.

What were your expectations when you first agreed to have a joint venture with an Indian company -- the RPG group?

Initially, we were only providing technical assistance to them. But now we have now partnered with the RPG-Spencer's Food World. The Health Glow joint venture, however, has been on since a long time. We didn't have any idea how successful we would be when we began. Of course, we did our homework well.

What did you find out through your study?

Our homework said there was a market there, but difficult to serve. We, nonetheless, felt that it was worth our while trying to capture that mart.

Were you impressed by the so-called huge middle class market?

It is not a middle class market in the classic economic sense; it is more of an upper income market. But it is clear that for retailing to be large, the creation, size and growth of the middle class is very important as has happened in the other countries.

Is there any difference in the attitude of the Indian middle class when compared to that of the one in the other countries? The Chinese, for example?

I don't think there is any difference in the attitude. I think the Indian customer, like every other customer out there, wants quality, reliability and value for money. And, if we deliver those things and if the customer can afford choices, then he will shop with you.

The retail market in China is growing much faster than in India. As someone who does business there, what do you attribute this to?

I think it is principally because China has a government that has placed greater priority on the establishment of retail business, by encouraging FDI to a certain level. They have also provided an opportunity for the Chinese retailers to succeed. I think the same thing will happen here in India, too.

India is the largest producer of fruits and vegetables but a lot go waste because of faulty supply chain. Do we see retailers like you investing to improve the supply chain mechanism?

It is probably the single most-important thing that has to be looked into to make retailing more successful. Supply chain must and can be improved, but -- like Mr Fernandes from McKinsey pointed out -- we alone cannot do anything. It will need the retailers, the government and the suppliers to come together to make it a success.

We, at Food world, in the limits of our ability, are certainly doing some work, but it is a slow work. It is going to take time. It is not a simple matter.

McKinsey's Fernandes also said that the retailer who will invest is going to be the big player in the retail business in a few years to come.

Yes, he might become a big player. It depends on how much he invests. I say 'might' as opposed to 'will'. (Laughs)

You said in your speech that it was a unique experience working in India.

It was unique because we were here at the very, very beginning of the industry. I was speaking from experience. We learnt that many of the things that we take for granted in other countries created a lot of resistance here.

What about corner shops. Big super markets are eating away all the corner shops…and it is happening all over the world. Is it not sad?

Yes, it's an issue. But the employment opportunities created by organised retailers more than compensates whatever difficulties they create. The future doesn't lie in the corner shops.

In corner shops, the service is informal and personal. In a super market it is professional, but formal and impersonal. Is it not?

I think the corner shops can be successful by providing unique services. If I had a corner shop, I would definitely be looking for it…

You would go to a corner shop? But why?

Yes, I would. It is true that the personal contact that you receive from a corner shop is difficult to achieve in large super markets.

Why is it then that corner shops are dying?

Organised retail shops offer choices and value for money and comfortable environment.

E-com is catching up everywhere and by the click of a mouse you can buy anything. Where will retail business be if e-commerce becomes very successful?

I don't think e-commerce is going to be an important factor for everyday goods anywhere in the world, and that includes India. Yes, e-bay now allows all of us to participate in the gigantic backyard sale. That wasn't the case earlier. E-bay might be successful, but an ordinary dot-com grocery-delivery company is not going to be a very important factor.

You said that there are several pitfalls in India, which would make it difficult for the retail business to succeed. How come you still see a bright future for retail business in India.

Yes, I do. But I think it is going to take much longer than many expect. I see a combination of factors that will make the growth difficult, like the income growth, the growth of the middle class and the development of infrastructure. But many retail entrepreneurs will enter the field. Foreign direct investment, too, will follow. But it is going to take time.

Where do you place the Indian retail market in comparison to the markets of other countries?

It is the least developed in terms of organised retail markets that we serve. It also probably has the greatest potential.

SEE ALSO:

'Indian markets ready for retail revolution'

Retail revolution knocks at India's door

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