Retail Dude

Retail Practice of McKinsey & Company recently released their report named `The Great Indian Bazaar: Organised Retail Comes of Age in India’. The report mentioned that organized retail in India will grow from present 5% to 14-18% of total retail market by 2015. It is expected to reach $450 billion. Apart from placing it among top 10 markets in world, it will also create 1.6 million jobs. As per the report, retailers can create a profitable operating model in five ways:

• Integration of real estate in their business model
• Creating and maintaining an effective and scalable Supply Chain
• Increasing Average Basket Size of customers by shaping and influencing their consumption pattern
• Talent Retention
• De-risk Margins

After giving deep thought to all of above points, I realized that there are few more factors which need to be taken care of. Firstly, Promotion Optimization as we see the average retailers these days millions of money in it and are hardly able to determine it’s effectiveness. Secondly, learning from present closures in retail, there is a need of strong Market Research. It costs a lot to open a new store but it’s more costly to maintain an ailing store.

Apart from it report said that retailers need to influence regulation to ensure proper development of retail sector as a whole. It also emphasized that Indian retail cannot grow by ‘cut & paste’ of global formats. India need to come up with formats specific to itself. This is evident from present condition of convenience store format in India.

However this doesn’t mean that unorganized players will go out of business. As per a report by ICRIER, though unorganized players are hit by organized players but still only a portion of them have actually closed because of competition. McKinsey’s report also suggests that 64% of buyers don’t mind paying more for convenience.

- Rajeev Damani

 Email

 Print