Retail sector-Back end supply chain

Wed, Sep 4, 2013

Biz Arena

Long since I have known business, it was of the form when a vendor used to give free candies and a smile along with the grocery – provided I am staring at the candies, now who says that consumer calling back then was not incentive driven.

Well, that is not the topic of my comments; my take is on “Retail Sector back then and now”. I take you to the era after 1991, when McDonald was unknown to most of the Indians but it existed for half a century in the outside world, when telephone, TV were the commodities of rich, when 1 rupee on the palms of children was meant for 16 orange candies, when Mahabharata and Ramayana had the highest TRP and when Shahrukh was spreading the magic of romance. This was the time when organized retail was in the design phase of its existence in India and unorganized retail was the way of living.Then something hit India which is considered as the best reflection of Indian political fraternity till now, and it was Liberalization, Privatization and Globalization (LPG).

Though the idea struck in 1991, the slow process of opening up the retail sector to FDI started in 1995 when a free trade policy passed by WTO directed India to allow FDI in cash and carry (wholesale) which ultimately got materialized in 1997 and Indian government allowed 100% rights subjected to government’s approval. If we talk about the situation of retail at ground level that time, there was not much change except the expansion of Indian middle class and their purchasing power and a demand for more organized market. Kirana or mom-and-pop stores with limited goods on the shelves and its owners with their family business values were leading the Retail market. Occasional fairs open Kiosks and stalls – also known as Mandis – were the sources for food and grocery during that time. The flavour of western culture was also tasted by some traditional retail chains like Nilgiri and Akbarallyswho made supermarkets on similar lines, which indeed led the foundation of organized retail in India.During the same time, high streets like Linking Road and Fashion Street emerged as the busiest markets of Mumbai.

The choices for a customer were limited which gave birth to a concept called “Everything under one roof”. As time passed, joint families started changing into nuclear families. There too both members started earning which resulted into a new way of lifestyle. Since then growth of mom-and-pop type of stores started diminishing, and organized retail stores came into existence. . Big veterans of the global retail industry in the likes of McDonalds and Dominos stepped in the Indian market with support from the domestic conglomerates. Same period witnessed a revolution of new retail formats like departmental stores, hypermarkets and supermarkets whose popularity grew several folds nationally. Flourishing with an exponential rate, Indian Retail Sector transformed itself continuously to become the most desirable retail destinations in the world. The start of twenty first century brought the retail sector as one of the quickest growing sectors in India. Some of the companies who started their operations that time are renowned names today – Liberty Retail Revolutions, Welspun Retail Ltd, Hypercity Retail (India) Ltd and METRO Cash and Carry India Pvt Ltd.

The rejuvenation of the sector can be attributed to foreign players who publicized the cash and carry format.

The rapidly evolving shopping centres, multi-storey lifestyle malls, giant complexes that offer shopping, food and entertainment concepts in tier I, II and III cities are overwhelming and they are attracting companies to invest in the rapidly growing Indian organized retail space. These companies have too much inclination towards new retail formats like departmental stores, hypermarkets, convenience stores, supermarkets, and they are contributing substantially in the Indian organized retail. Many big business houses like Reliance, Aditya Birla, Tataetchave aligned themselves in this retail market during the last two decades by investing heavily keeping in mind the long term benefits.Some companies have expanded their presence in the booming market through the inorganic route by acquiring existing retail players; for instance, the Aditya Birla Group took over Trinethra supermarkets and Indiabulls acquired Piramyd Retail Ltd.

Now a large chunk of middle class prefer to buy grocery monthly from big bazaar like marts rather than a Mom n Pop store, they prefer to browse the variety of fashion in Lifestyle, Pantaloons etc rather than going to a local garment shop, they prefer to do the whole shopping in a big Mall rather than going to a specific product market. Well, what is so promising about organized retail stores? My opinion, it’s their stress on providing the best customer experience which comprises of an air conditioned building with good maintenance, trained workforce, technologically advanced electronic machines, parking facilities and organized display of products so that customers can browse easily, be satisfied with his selection and save time on top of it. This is nothing but a new way of making shopping a luxurious experience along with the joy and entertainment it brings along for the customer. Fix cost removes the threat of misleading and bargaining is not an option which is a relief for someone who is really bad at it. Certainly times have changed and it goes without saying that we are living in a constantly evolving India with its prevailing retail revolution which might surpass the achievements of IT industry in the near future. Because,

“High expectations are the key to everything”
Sam Walton, Founder of Wal-Mart.

Piyush Sharma
MBA Batch 2013-15

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