The Hindu Business Line : Retail opportunity

The many indicators of continued buoyancy in the economy point to the slow and steady emergence of a consumerist society. One report suggests that India tops the list of 30 most attractive emerging markets for mass retailers. Industry experts and interested parties usually tend to talk up the numbers of business potential. Yet, there is strong consensus that the share of the country's organised retail segment has grown dramatically and will continue to do so; some estimate it at 9 per cent of the industry. Whatever the actual numbers, what are the portents for the citizen?

The two most fundamental consumer benefits one expects are: Reliable standards of quality and a reasonable price that reflects the much-quoted scale advantages of large retailers. Both are powerful incentives for any wage-earner or housewife to become loyal customers of the corporate retailer. Their next priorities would be such factors as convenience, range of goods displayed, and service. By the Retailers' Association of India's reckoning, 65 per cent of the organised retail is food followed by apparel. The entry of several international chains will doubtless help accelerate the growth of this enormous market. Many advantages can be cited in favour of this development: Data on retail offtake can be collected more accurately, stocks rotated more effectively, and the overall inventory investment reduced thanks to computerised systems of ordering and record keeping, resulting in a welcome national saving. The government too would find it easier to enforce, collect and account for transaction-based taxes. Mass merchandising is forever focused on the yield per unit of shelf space. Manufacturers and marketers would no doubt tailor their supply and logistics to the rigorous demands of the pull-through system of the retailers. This could also quickly weed out unprofitable products as the ordering discipline would reject the unviable.

In the days before the marketing revolution, the trustworthiness of the high street retailer gave rise to the brand. Produce and grocery items were then best known by the name of the shopkeeper; and his reputation was sought-after by early manufacturers who were small and couldn't afford advertising. By a strange quirk of fate, the balance of bargaining power, which had shifted to the mega brands and major producers over the post-War boom years, is now returning to the shopkeeper and the consumer. One manifestation of this will be store brands for many products, often made by the same factories that make the regular brands.

What is important is for the new entrants, foreign or Indian, not to take the Indian consumer or the corner-store owner for granted. A wise strategy would be to formulate the formats of retailing that are not copies of those in the West, and perhaps even include the smaller stores in some way — through franchising, rather similar to soft-drink makers building a network of bottlers and distributors. Mindless import of methods and structures will only result in avoidable waste.