Monday, December 25, 2006

Who’s Affected, who’s Not?

I have been trying to evaluate the affect of the onslaught of organized retail on the shopkeepers of our region. The shopkeepers in India can be broadly classified the following categories…

1. Aware and wary of the Retail Onslaught
The people in this category are mainly the larger shopkeepers with ambitious growth targets and keep abreast with the latest developments in the industry. They participate in the race for the being a best retailer in any of the many possible classes. They keep in touch with the industry trends and benchmark the industry leaders and try to better them.

2. Aware of the Retail Onslaught and Not Bothered
The people in this category are those who have inherited their shops and clientele. They have always seen a steady flow of customers on their counters and find it hard to imagine that these customers will not come to them. In fact, some of the members of this category go to the extent of believing that the new organized retailers will find it difficult to survive in their traditional market.

3. Heard of it in the News
This is the group of people who regularly read the newspapers and keep up with the latest news on the radio and / or television, but strongly believe that the news does not affect them.

4. Not aware of any such thing
Last but not the least the un-bothered group. Either they are too small to care or do not have the resources / desire. They just do not give a damn to what is happening around them. They live in their own world and are not aware of what is happening in the world around them.

In which category would you classify yourself?

Tuesday, December 12, 2006

Toll of the retail onslaught!

He has already decided he is closing down his shop!

This Sunday I went to meet an old friend who lives in the state capital. The state capital can be categorized as one of the tier two cities of the country. He has his own shop. It is big spacious showroom in the posh locality of the town. He deals consumer durables like television, refrigerator etc. He has the authorized dealership of some of the big companies in the durables sector.

We discussed several topics and one was the changing retail scenario in India. This is a topic that has caught my interest for some time now and I bought it up to get his views on it. But, I certainly was not prepared for what came up in the discussion.

In response to my observations. He told me that one of the big retail players (who is planning a chain of mega stores all across the country) had procured a place across the street, quite near his shop. A big shopping mall would come up there shortly. There has been news in the media that the company had tied up with many companies. There was some discussion about the discounts and incentives that were being planned for the customer. My friend dealt in the products of some of the manufacturers whose names had come up.

"It is a volume game" he said. "I know how the companies are willing to offer discounts and schemes if we can make bulk purchases - the larger the quantity the better deal we get. There is no chance for players like us to compete with a national chain on the volume front.” and went on to add that he was seriously considering about wind-up his business within the next one year.

I was completely taken aback.

Here I was carrying out an academic discussion on my blog (this blog) about adapting and gearing up to the new challenges and my friend was already facing the hard reality of the retail onslaught.

If this is the reaction of a big dealer, whom I have seen enjoying the pampering from his companies, I really wonder, what the smaller players are doing?

Friday, December 8, 2006

Changes Expected in the Retail Sector

The entire retail sector is headed for a major revamp.

The interest shown by the major business houses in this sector and the quantum of size and numbers being planned will change the way things are transacted along the entire supply chain. Nothing will be left unchanged - The players, the commodities, the prices, the policies, the strategies ... nothing.

It is important that all the links of the supply chain – right from the manufacturer to the last mile shopkeeper – understand the affect the new retail mantra will have on their business before it is too late. Even the most “secure” will have to sit up and adapt to sail safely through changing winds of new retail.

Following are some of the changes that I can envisage in the consumer retail sector …
  • Mega deals will be struck at the manufacturing level. The new players, especially those that are coming up with chains and mega mall projects will strike deals for bulk purchases at the corporate headquarters itself.
  • The burden of sales, which is presently on the manufacturer, will be shifted to the retailer in exchange for a larger share in the profits.
  • For an additional share in the profits the retailer may take up the responsibility of distribution of the goods for his chain of outlets at the national, state or city level depending on the number of stores and size of the market.
  • The volumes and the margins of the distributors (the stockists and the undercutters), in the present supply chain, will be compromised.
  • The number of the intermediaries in the supply chain will be reduced.
  • The customer will be offered lucrative merchandizing schemes, incentives and discounts in exchange for his loyalty.
  • The growth in the incomes of the consumers and easy availability of goods supported with the right advertising and pricing strategy will support growth in the size of the consumer market.
  • The local shopkeeper will stand to loose some of his clientele and in turn some of the pampering received from the manufacturer.
  • The manufacturer may end up pampering the new retail giants.

Tuesday, December 5, 2006

Indian Consumer Retail Scenario

Let’s build an insight into the traditional consumer retail scenario in India.

One glimpse at the statistics in consumer retail sector is enough to label India a country of shopkeepers. There are more than 15 million consumer retail outlets – shops in the country.

The consumer retail business in the country is predominantly controlled by these shops that are spread out all across the length and breadth of the country. Most of these (more than 80%) are family-owned and family-oriented business units that cater to the requirements of a small neighborhood or locality. Most often, the household members themselves contribute the labor required to run and manage these shops. Shops engaging more than 5 outside workers could easily be categorized as the big enterprise of the locality.

These shops are, usually, single commodity units and their target client-base is the local population, with very little or no traveling clientele. Although, some enterprising businessmen have been noted to travel to distant cities to procure new variety of goods that would entice their customers, most of these shopkeepers have their wares delivered to their doorsteps.

The manufacturers make elaborate arrangement to ensure an uninterrupted supply of goods. Striving for prominent display positions for their products the manufacturers always try the shopkeeper happy, offering him schemes and incentives along the way. The ever growing competition amongst the manufacturers has ensured that these retailers are a pampered lot.

The fixed clientele ensures the pampering from the supplier and that in turn ensures a secure position for these shopkeepers. The bigger the client base the more they are pampered.

Monday, December 4, 2006

How to survive the retail onslaught?

The face of retailing in India is changing very fast.

Traditionally, the retail market in India has been controlled by the small businesses - shops – that are dotted throughout the country. Every city, town and village of India has family run shops that cater to the requirements of the retail clientele. For ages, these shops have been handed down from father to son, sometimes multiplying into more units, sometimes diversifying into other trades, to accommodate all the sons of the family. They have been the last point of the supply chain.

Now, big corporate houses entering into the retail foray. Suddenly the retail sector has become multi-billion in size and almost every big corporate house of the country wants his share of the retail pie. Everyone is showing serious interest in the huge Indian retail market.

They are in various stages of implementation.

Some have just announced their plans. Some are in the test phase – they are testing their retail business model before spreading throughout the country – whereas some have already setup their retail outlets. Some have tied up with international biggies whereas others are walking alone on this trail. Some will be single commodity units whereas other will deal in multiple commodities. Some plan to produce the goods that they will distribute and sell themselves whereas some will procure directly from the manufacturer or producer and sell to the retail customers throughout the country.

The common thing that each of these new retail ventures is promising is professionally management. Besides brand name some of the other highlights of these ventures will be fine-tuned supply chains, bulk deals and attractive value-for-money offers to the end customer. All this will, certainly, attract the retail customers to their doorsteps.

So, who is affected by all this? The traditional retailer, of course!

Already facing competition from the fellow retailers in the neighborhood, the traditional shopkeeper will really have to get his act together. He will have to change is way of working to survive the competition promised by the big corporate houses.