GRDI 2010: What India makes of it
The annual AT Kearny GRDI report ranks the 30 top retail destinations across the globe based on its growth, risks and markets. The ones mentioned are a few of several other parameters. India slips to third spot after emerging as a leader last year. Shuttling back to the top spot is China going all out to grow its confidence to the world retailers. And a surprise entry at second rank is Kuwait.
India today is considered as a mature market where there has been significant growth and now can only has to sustain its growth. Although there are tough challenges that lays ahead, retail in itself is undergoing a consolidation process of its own. If the economic downturn brought some sense into the retailers, there is still a lot of sensibility that has to grow in. Having deep pockets isn’t just enough to give you the biggest pie share. Consumers are now used to the buffet of services which the retailer had once used to lure them in the race to grow and now, they are setting up standards of their own. Global standard on sustainability and greening is just piping in more standards. The new taxing systems to be induced will make life difficult even for private labels. The real estate bubble finally went bust and the rentals gave some respite but still don’t deliver on quality space even today. The retailers in my opinion should keep it tight, close and integrated and stop experimenting with formats.
The most preferred way of entry for retailers and consolidation according to the report will be the Tier 2 and 3 cities where the whole focus has now shifted. The mad expansion in the metros is now over; it’s the time for the other tiers that prefer the Hero Honda to the Harley, to get flooded. The retailers propose to tap the bludgeoning middle class population, but they mustn’t forget that they will still be the stricter price and quality conscious customers. I have seen V Marts, Vishal’s and Big Bizaar’s close and cut down floors in these towns. Seasonality of shopping marked by occasions and festivals will be the key to the survival here and so, the franchising model looks as promising which will kick in the go-getters of these towns.
A major challenge to the retailers is the ongoing debate on foreign direct investments, which doesn’t seem to end anytime soon. The Indian Government still bears the fear of compromising their locals’. They fail to understand that high flying brands won’t be much effect but to allow investor groups to retail firms which can make a significant improvement in the Tier 2 & 3’s. That’s what is going to keep the GDP a flyer. Has it ever considered Wall Mart, Carrefour or Tesco to partner in absolving the misery of food grains rotting in the godowns and allow them use their masterful supply chain accomplishments? Not to forget the jobs it would create. A quick look at the FDI index will allow you to measure that access to new markets and building capacity is on priority list of all investors.
Green everything, is the new mantra. I just wonder what future it holds to JV’s, acquisitions, mergers and investments hold as the carbon credit values go under revision. Under strict EU norms and the UN (CDM) the Europeans will reach out to countries which will minimize their carbon taxations. What happens to India as a destination with the entire infrastructure lying haywire? Is a Green Supply chain even remotely possible?
Now, is the time for our domestic retail conglomerates to let go and share some of individual resources and build upon a collectively strong unit, one which is capable of rebounds.