It’s true that every one learn from their mistakes only. Indian Retail biggies have initiated much awaited corrections as well as consolidation in their current business. Though these are first round of changes in their strategies but at least it has started.
1. Indian organized retail players have realized that it’s really tough to compete with cost-efficient and customer-focused kirana stores (mom-n-pop). This is why convenience store formats like Reliance Fresh, More, Spencer’s & Subhiksha are shutting down stores which are not viable and at the same time are going slow with their expansion plans. This is taking place because of the low margins in this business and high real estate costs. Hypercity has also exited this space.
Industry Speak:
“What kind of conveniences can modern retailers now offer with an inevitable high-cost structure? It makes no sense to be in this space” says Andrew Levermore of HyperCity Retail.
“Although we had a lead entry into the space, we knew that the neighbourhood formats will never be viable. Even if consumers have the money why will they spend extra in air-conditioned formats to make daily purchases. The local kiranas are already far too efficient in the space” said Future Group CEO Kishore Biyani.
“The current crop of neighbourhood formats are merely air-conditioned kiranas. It makes no sense to compete with the supremely customer-friendly kiranas, which offer credit and a great service system. The merchandising will have to be different to bring back the consumers,” says Gibson Vedhamani, president of the Retailer’s Association of India.
2. As the Retail bubble burst, every one jumped into it registering their presence everywhere possible. Retailers should learn from what is happening in Ahmadabad. Once it was favorite of all retailers but now stores are shutting there. City malls are experiencing vacant spaces and Big Bazaar recently closed two of its big outlet there. These are result of wrong analysis of Gujrati Consumers who look for functional benefits from the retail experience. The result: closure of ambitious retail projects across the city. Brands like Nike, Tea Centre, Conizza, etc, have already closed shop (ET). According to Retail Analysts these are nothing but sign of consolidation. So, this shows that how Indian Retailers just jumped into the market without proper market research.
3. Bharti Retail seems to have learnt from the mistakes of other and so they have taken strategy of going slow. Compared to Reliance’s one-store-a-day approach, Bharti’s pace has been almost one-store-a-month. It has opened seven stores in six months, as against around 700 stores of Reliance in two years. “We plan to have pan India presence, but are in no hurry to roll out stores everywhere. Our aim is to understand the dynamics of retail and evolve the right model. We are not here to prove anything in a year or two, but looking at 5-10-year period,” says Bharti Retail president and COO Vinod Sawhny to ET.
(Ref: http://economictimes.indiatimes.com )
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Rajeev Damani 
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September 4th, 2008 at 1:34 pm
Reliance one-store- a day format
:D 
September 4th, 2008 at 3:11 pm
India is beginning to make news worldwide. It’s just the right time to think India. There’s a new sense of confidence in Indian business. This confidence arises from the growing success of Indian enterprise in the face of competition in an increasing number of sectors. The India growth story is going stronger than ever. Favourable demographic and psychographic changes relating to India’s consumer class, international exposure, availability of quality retail space, wider availability of products and brand communication are some of the factors that are driving the retail in India. Real estate consultancy Jones Lang Lasalle Meghraj has identified 50 Indian cities that are likely to witness most of the retail action over the next couple of years — both in terms of development of malls and advent of organised retailers. And Jaipur, Lucknow and Kochi find mention among cities poised for “high growth.For more view- realtydigest.blogspot.com
September 4th, 2008 at 4:20 pm
It’s really sad how Indian public has been misinformed about this retail revolution, during the past 4 years or so.
Thanks to my sales/marketing roles, I am fortunate to have been able to study & analyse retail behaviour for quite a while now. Just from that sheer experience (I do not carry the three extra alphabets behind my name, so I am NOT qualified by Industry Standards) it was clear that glam-retail’s or the new format’s self proclaimed success was plain hogwash!
I remember the days, more than a decade back, when one of my otherwise brilliant superior at ITC, was hell bent on his idea that Convenios or Gas Station formats were THE future of Indian retailing.
Fortunately he never made the company invest on his personal dreams. Even in those days, I could never fathom out “why or how” Conevnios could be successful, here!
Unfortunately, too many brilliant (going by their academic records & seamless transition from engineering to B Schools to selling vegetables in a climate-controlled environ) & revered managers DID!
The modern format, as I have commented earlier on a Linkedin fora, started with very commercial purposes, approached however in two very different ways. The first & the time-tested method was by having “sound fundamentals”, strong underpinnings (logistics, branding, pricing etc.) & the very basic intention of “acquiring customers AT A PROFIT”. Not very different from the street corner kirana, but on a different scale altogether.
Many of these start-ups exist today & most of them are making their ends meet without major upheavals. I may mention Subiksha, Trent, Raymonds, Colour Plus, Bajaj Auto etc., here.
These types however forms a minuscule percentage of the total retail scenario.
The other types typically followed the quick-rich path, full of glamour but extremely low on values. Riding on the wave of India’s new found growth-economy (again a collusion between people in power & powerful media), colluded with real-estate, financiers, foreign-funds & greedy industries, to blow the huge retail bubble up.
It’s actually a simple formula & I am sure that millions of average IQed Indians “do” understand the same. Build glamorous retail “brands”, build very expensive enclosures around them (or Malls as commonly known), make powerful statements about the changing Indian aspirations & finally milk the public by making killing IPOs!
Whether the projects were “fundamentally” viable or not, who cared?
Raising money was never a problem!
The stock market boomed, we all cheered & felt very good!
The real-estate boomed & again many of us felt good as properties changed hands & kept returning great profits!
Infrastructure funds & industry celebrated by raising money & rates for steel, cement & the likes! Their investors & employees cheered!
Even our Govt. kept on cheering the “fundamentals” of the great Indian economy!
Now all we have is the US slump to blame!
For how long will the Indian public be mislead?
It’s become a cycle, every cycle riding on new waves (remember the heady days of Harshad mehta?) to rob the unassuming aam-junta!
It’s good to hear that the brilliant managers have now started “realising” that retail, after all, was not such a smart idea! I am sure that these 3 alphabet “loaded” managers will jump ship without much problem, hook on to a “new” ship & set sail in the brilliant manner again.
What happens to millions of Indians who hedges all their savings to train their children for “retail”? Or aviation?
What happens to so many employees who are on the brink of losing their climate-controlled jobs?
Who will justify the huge wastage already made on energy use, pollution, re-routed traffic during constructions?
Its a scam of no small dimension!
It’s as big and mind-blowing as the 70 Rupee popcorns in colourful cardboard glasses!
September 4th, 2008 at 6:51 pm
very true !! I must say ’sen’ has summed up things in a beautiful manner.. Its actually a vicious cycle.. But I have a eager to know that why same thing succeed in US & UK ?? It will be great if you can throw some light on that..
September 4th, 2008 at 7:07 pm
Hi Sen,
I agree with you completely and wholeheartedly. This seems to be a “scam” with idiots like us falling for it. But I feel there is a pot of gold at the rainbows end. The retail business has potential. I see new formats evolving. Garden malls, open roof malls, speciality malls, etc.
The Ambience mall is a great example of resource and enterprise coming together. The competition is intense and prices high. Millions flock there. I guess the pull is the one-in-all concept.
September 5th, 2008 at 9:36 am
This goes out to both Rajeev & Curryzone.
Thanks pals. Feels good to know that there ARE a few like-minded people around
I completely agree with you both on the “existing” opportunities in retail.
It’s NOT over by any standards.
However and THAT IS A BIGGGGGG however, there needs to be a complete “re-focus” on the industry.
Being a very very proud Indian, I do hope the big & brilliant guys heading such ventures “unlearn” their class-room case studies, get their hands real dirty, start “thinking like a consumer” - ASAP.
But that depends on their “mindsets” you see!
My idea is they will simply ditch & open up new chapters on fresh scamster books.
That’s so much easier!
September 8th, 2008 at 12:53 am
Hi, I invested in an upcoming mall in Gurgaon Sector 66 (actually, construction is yet to start). I feel the malls have to come of age and would have loved to tell the builder of the mall where my property is how to go about things. I guess finger crossed things will turn out right to folks like myself. Till then the only thing I can really do is to look at the brighter side of retail and where is could be headed.
September 8th, 2008 at 12:54 am
Sorry for the typos. It is late and I have an early flight to catch.
September 8th, 2008 at 11:03 am
Hi Cz,
Yes, the “malls” as we know them, do need to come of age, badly & quickly!
It’s public knowledge that malls have a major footfall skew during weekends. We also know that the same does NOT proportionally improve “revenues” for most outlets in the mall.
F&B & entertainment, however, is a different ballgame altogether!
Now, isn’t it interesting to note that thousands flock to these classy malls on weekends, enjoy the wonderfully controlled climate, ogle at the global grade wares stacked behind spotless glass walls, picks up fashion cues from the page three-ish people who walk in & out of those glass walls almost in a business-like manner!
The same people then settles down for a dosa or a chaat at the food courts (avoiding the dimly-lit stand-alone lounges with liveried butlers).
Some of them also manage to cross the multiplex lines & quite a lot of them if with children, definitely take a serious look at the entertainment areas.
Therefore, we do have a lot of homework to do, to make the same malls “turn” profitable, as investments.
However, the foremost requirement is to actually “see” whats going around there, “try to understand” why & then get down to some “genuine thinking” & “honest brainstorming”.
If it’s not difficult for people like me, it must be easier for the certified managers in charge of those swanky properties.
September 8th, 2008 at 6:54 pm
You are a dude! Fine analysis.
October 7th, 2008 at 8:22 pm
Viable or not, grab the space first and lets think about what to do with it later! In the race what the retailers had in occupying prime locations they have missed on the catchment area and also the demography. If there is a proper planning with all things considered, there is no reason why any chain of store should fail. If someone wants to reap the benifits from day one, they better lookout for some other business. It is a science, an art and involves lots and lots of homework. Becos someone down south, in Coimbatore & Chennai, is running a chain of fruit and veg stores, others cannot cut copy paste it! M&S, Walmart people can develop systems which would be suitable for their own country; one cannot copy them here. Customise, take care of the people who are working, they will take care of the customers and in turn the organisation!
October 19th, 2008 at 8:50 pm
hi sen
even without three letters you have alot to share on ths blog. can contact you n person . are you a delhite? actuaaly i am working on a retail project.
id ginny.1987@gmail.com
October 21st, 2008 at 5:47 pm
A couple of points on the whole issue:
1)Firstly organized retail is going to inevitably grow in India. The main reason being that the current unorganized retail system brings in about 80% additional costs and inefficiences and the only way that is going to reduce is through organized retail.
2) what is wrong is how all the major indian businesses have jumped on the bandwagon based on a kearney report on Indias Retail potential in the hope of making money fast…when even the most organiized international retailers expect to break even only after 5 to 7 years in a new market and spend the first five years building systems and consolidating their back end supply chain and supplier networks.. This is a slow process and I would expect this to be done in india in the next 3 years time for all the retailers who get their priorties and strategies sorted out…the others are going to perish.
3)On the Demand side..the indian organized retail needs to be customised by regions and states as the consumer behaviour and requirements may differ.. Its almost like europe and UK merged together …what works in UK may not necessarily work in germany (and dosent!)…so why should the same strategies be adopted to address consumers in Haryana and Tamil nadu.
4) On the supply side…its a attitudinal change required
Indians simply do not understand the concept of vendor collaboration or partnership.. the basic truth is that only those retailers survive and grow , who enable (and force) their vendors to grow to higher standards , collaborate and share knowledge with them …not the ones who look for the cheapest suppliers to milk them.
5) On the merchandise side… category and sku wise profitability monitoring , reducing the categories and number of products and limiting the suppliers to a maximum of five plus two..should help….hot buying whatever and from all and sundry…
6)Lastly….Indian retail is bound to be different from global retail…
Try comparing Hollywood and Bollywood…
A hollywood movie tells a straight story which may be effective but may not be a success as a model for an Indian Movie….
A Indian movie has a story (sometimes not!)..but what makes it interesting to the Indian consumer is the songs and dances and numerous jokes and side stories and disjointed dialogues..
This is going to be the fate of Indian retail as well…where a straightforward retail business will be morphed into a mall and entertainment culture rather than just providing a retail buying benefit..
The bottomline is that there are only two rules to follow to succeed in India retail.
one- Get your supply chain organized and develop your vendor network organized to deliver quality (low costs are a given in the Retail trade)
two- Know your consumers and their requirements and help them develop a habit/ give them a reason to keep coming back to you .. everytime a customer leaves your store there should be a reason for him to come back.
Ping me if you want to get more insight..
cheerio
Jay
October 23rd, 2008 at 1:30 pm
Hi Jay,
Your comment will be a relieve to retailers. You are very right that the organize retail can succeed if implemented properly. Thats where we need consolidation and corrections in retail.
October 23rd, 2008 at 1:34 pm
The Indian consumer has to learn and change habits before Indian Retail really takes off..
1) Indian Consumers are not in the habit of doing monthly runs to superstores and stock at home.. most of them buy on need basis. The monthly cyclical buying run to a superstore needs to be entrenched in the Indian psyche for retail to grow.
2) Indian are beginning to learn to travel distances to shop ..even for groceries ..so out of town locations for superstores should be easier on them going forward…which means retailers dont really need prime locations in future (especially as the twons themselves will grow and spread in five years time)
3) There is also the fact that Indians still have to get into the culture of accepting tinned and packaged foods compared to home cooking… while this is being accepted in metros the small cities still have to catch on.. which means retail of these categories will suffer in the initial years..
In parallel to consumer behaviour changes …there is also the fact that Vendor and retailer behaviours need to change…
1)Retailers still treat all customers as potential shoplifters..with all bags getting checked at security.
2)Retailers still treat vendors as competitors who need to be pressurised on costs and prices..
3)Retailers are afraid of sharing info and data related to operations with their vendors…
4)Vendors are not really interested in quality and standardization ..or in investing to modernize for the future..
So as we see, systems , infrastructure, property prices..and Managing costs are all very well…but if not supported by attitude changes , behavior changes and new ways of working… Indian retail will find the challenges very hard..
Jay
vijaysharmaa @yahoo.com