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'Indian markets ready for retail revolution'

Shobha Warrier in Madras

Speakers at the CII conference on the 'Retail Revolution that awaits India' were cautiously upbeat in their comments and observations on the 'huge Indian retail market' -- both urban and rural -- which is in its infancy. While some brand manufacturers talked about exploring the urban market, others have started looking towards the untapped rural market. However, whether it is selling tobacco or refrigerators or detergents, brand manufacturers are unanimous in their observation that not only the urban market, but even the Indian rural market is ready for a retail revolution.

On talking about the challenges and opportunities that the brand manufacturers face in the new retail paradigm, Kurush Grant, divisional executive, tobacco division of the ITC Ltd, observed that India is the only country in the world where price is determined by the manufacturers and not the retailers.

He said that ITC was a success because it had been practising trade marketing in partnership with small retailers for a long time.

Satish Kumar, Henkel SPIC Ltd managing director, admitted that the Indian retail market was slowly evolving from a commodity market into an organised retail industry. But it would take at least a decade for it to evolve from the fragmented industry that it is now, he believed.

The Indian rural market has an annual sale of Rs 35 billion through melas (rural fairs) alone. Big companies are, thus, attracted to the huge market that awaits them in small towns and villages.

Even though India has the highest number of per capita outlets -- 6 per 1,000 population -- it has the lowest retail power. The retail outlets are dominated by grocery in both the urban and rural areas, and this represents 71 per cent of the retail market in the rural areas!

With the satellite revolution entering small towns and villages, the aspirations and desires of a person living in a village or a small town are no different from those of someone who lives in the city. All are exposed to the same brands of televisions, stereos, toothpastes, toilet soaps and detergents, and all want to buy the best. Thus, it is natural that all the manufacturers are vying with each another to conquer this relatively untapped market. Brand awareness is extremely important in such cases.

Satish Kumar foresees a retail revolution by 2005, with southern India leading the organised retail market. "Weaker brands will vanish, and the urban and rural markets will evolve. Metros will grow very fast and, in the rural segment, Punjab may grow faster than Bihar."

Arun Jain, chairman, Polaris Software Ltd, sees the convergence of retail and financial services like insurance and banking through technology in the future. The beneficiary according to him will be the consumer. "I would like to see a retail machine doing all the functions like banking, purchasing, accounting, inventory and merchandising. It is immaterial what that machine is; it can be a PC, it can be a television, it can be anything. I see only two models emerging in the retail scene. One, the Godzilla model where the approach is by acquisition, and the other, the symbiotic model, where we see a consortium approach."

The international perspective on 'The road ahead for India' offered interesting viewpoints. The questions raised were: Is the Indian economy moving along with global economy? Is there an Indian model for retailing? Is India ready for a retail revolution? Is there a conflict between the Indian and western paradigms?

From his experience, Blaise Durand-Reville, director (international affairs), Carrefour, France, said that India could adopt both the small and large formats depending upon the place and situation of the store.

The 52-billion-euro Carrefour is the number one European retail group and it also holds the number two position worldwide registering a profit of 915 million euro. It has 340,000 employees working for it.

"We became successful because we satisfied our customers through different types of stores like super markets, hyper markets, convenience stores, cash-and-carry stores and maxi-discount stores. We also attract our customers by keeping all the major brands in our stores and providing services like insurance, banking, etc. We provide e-commerce services, too."

The size of the retail store matters, but what matters most is customer satisfaction. Downtown, it is difficult to have huge supermarkets.

France took 34 years to gain a share of 19.7 per cent in the hypermarket and 13.8 per cent in the supermarket segments. Italy, on the other hand, took only 16 years to reach that level. That was possible because it had the French model to follow. As the market share of super and hypermarket went up from zero to 33.5 per cent, the share of independent and open-air market slipped from 76.1 per cent to 54.5 per cent.

"It shows that supermarkets can be more successful than traditional stores. Similarly, if we look at Italy's example, it may take less time for India to catch up with the rest of the world. But that will happen only if India follows a model that suits it. Consumer behaviour is same all over the world. There is no difference at all. All of them want good service and value for money," Durand-Reville affirmed.

Durand-Reville observed that the cost of operating e-commerce (20 per cent) service was 12 per cent more than what was required for the other retail outlet (8 per cent). "It will take a long, long time for e-commerce to catch at least 10 per cent of the retail market."

"Power had already moved from the manufacturers to retailers all around the world. With the Internet explosion, information has reached the customers, and soon power will move to the customers too," opined Prof Nirmalya Kumar, professor of retailing and e-commerce, International Institute of Management, Switzerland while speaking on the subject 'Retailing or e-tailing'.

He said that after analysing various on-line shopping methods that are evolving in Europe, it is observed that it might take many years for India to reach anywhere near the developed countries as far as e-tailing is concerned as Internet and credit card penetration are very low in India.

Moreover, it is only recently that big shops have opened in India, and Indians have only begun to enjoy the experience of shopping in huge supermarkets! So, e-tailing may have to wait for some more time, he stated.

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