The Hindu Business Line : Retailing space costs may ease

The growth story of organised retail this year — after the 2005 and 2006 story of organised retail as the easy ticket to success — was the beginning of the reality check.

The difficulties in execution; the sheer complexity of managing a large-store network; the high cost structures and the thin margins of error; the FDI-soon hope receding and with that the hope of a fast buck by selling to a waiting foreign retailer; and the opposition to perceived efforts of organised retail to decimate the unorganised retail — all contributed to the reality check.

As also the learning that for all the talk of extracting supply chain efficiencies the costs of doing that were not insubstantial and players with smaller footprints would really burn themselves with high costs.

All this led to getting existing players to a realistic level on expectations of rollouts and business and also slowing down the rash of announcements of new entrants — in effect, one is seeing the setting-in of consolidation in its early stages.

On milestones for Subhiksha

It was a big year; our 10th year in business. During the year we became the first retailer in India to reach the 1,000-store landmark. We also became leaders in the mobile phone retailing market. It is also a year when we started building on the technology platform to plan for even more scale and size. The biggest milestone has been that we are now a pan-India retailer except for the lack of presence in the East, which also should get covered soon.

On the expectations for the retailing industry in 2008

None of us expect any progress on the FDI front. With the phased elimination of CST getting into the second year in 2008, most of retailing will take another look at the logistics model.

Space cost has been a serious constraining factor for most in retail — with increased retailing space due to come up and some consolidation in the industry there is hope that space costs could ease up.

On the consumer side, the demand drivers are expected to be buoyant and with retailers all vying for a share, consumers would have the last laugh.

On a wishlist for the industry

I think from a macro perspective we are happy with the way the economy is growing and as such the wishlist is more regulatory — simplifying the operating processes and the multitude of regulators and licenses.

Also, the piece on freer direct farm buying by amendments to the APMC Act would be greatly welcome as that could aid efficiencies.