Given the govt’s attitude, big retail chains are bound to Fail’

Retailing in India is still in the prehistoric era. The world over — including in countries like Thailand, Indonesia, Malaysia and Middle-East — it is an organised industry. Here, we have millions of small unorganised outlets without a vision. This includes paanwallahs that stock a lot more than just paan and cigarettes. This form of retailing is unique to the world.From the consumer’spoint of view, there is little choice. The service offered is limited and there is no means of redressal. Manufacturers, on the other hand, have no mechanism to monitor retailing of their products. That’s why we see products being sold even after their expiry dates.

Even in the case of MNCs like United Colors of Benetton, there is vast difference in size of their retail outlets and the quality of service offered, within a city and between cities. Moreover, one cannot get a Benetton T-shirt purchased at outlet A, exchanged for another one at outlet B.

The government’s attitude has distorted things further. Firstly, foreign retailers can’t set up shop in India. Secondly, since maximum investment required to set up a retail outlet in India is in real estate, raising funds becomes extremely difficult. For the government has barred development banks from giving loans to real estate. If a loan is sought for setting up a supermarket, it does not even get appraised. So these structurally inhibiting factors willhave to be removed first.

Manufacturers spend bulks of their energies in distribution, rather than in efficient supply. And ultimately, no value gets added. This in turn inhibits product innovation. Many companies get daunted by the idea of innovating new products in India. In most countries, innovative ideas and products get shelf space. And then market determines whether they deserve that space or not.

Given the government’s attitude towards the sector, it’s practically impossible to run one outlet of Ebony or Big Jo’s and expect to make profits. You need good merchandising, good information technology and efficient supplies. Since the cost of operation of these malls is high, margins get restricted. In our country, these malls can’t charge a premium for superior service. Basically these shopping malls need to spread cost along alarger base to increase profit. Otherwise, they need to have a unique product base.

Retailers must look at outstanding service rather than having a buffet type system of piling stock. One doesn’t need the choice of hundreds of trousers to pick one. Most good stores abroad have four to five apparel brands in limited colours, available in all sizes. Here, even though there will be several brands, all sizes may not be available.

Indian retailers have not forayed into merchandising management and planning. Talent is not coming into retailing because there are no career options since retail organisations are not growing. Where can working in one store in Connaught Place take you?

KSA Technopak sees an opportunity to pull retailing out of prehistoric era. We want retailing to be given an industry status. This would not only lend it credibility, but play catalyst. The Indian government has always encouraged only thesmall-scale sector. A large retail outlet will create many more jobs. Moreover, in larger organisations, capital is utilised more efficiently. By guarding some jobs, the government is preventing the creation of jobs.

The government must realise the potential of this sector, especially with reference to employment creation. Then the sector must be opened to foreign direct investment. Since this is a virgin market, many global stores may well get tempted to come with their own technology on a wholly-owned basis.

The changes are very limited. At the most, there is recognition of the fact that something needs to be done about the problems plaguing this sector. For instance, shrinkages or thefts by employees. But on the whole, the retailer still has no clout and can’t tell the manufacturer to innovate or to improve quality.

A lot of consolidation is takingplace. Retail stores are moving across borders and bigger suppliers are ruling the roost. There has been a shake out all around the world. Countries are moving towards floor-ready merchandising where the suppliers do all the work — put the price points on the product and directly ship it. The concept of automatic replenishment is taking place. Every store has some pre-set minimum level. And when a store reaches that level, a signal is sent out to the supplier who provides more stock immediately. A great deal of retail-specific software has been created the world over.

And then internet shopping is gathering pace which is already a US $ 15 billion industry. Here, India has the advantage of picking up the best technology.