The Hindu Business Line : Kerala awaits big retail

To be successful in Kerala, Reliance Retail has to position itself differently, rather than follow the Wal-Mart model, says T. Abdul Karim Musaliar, Executive Director of TKM Institute of Management, Kollam.

As a veteran businessman and a keen watcher of retail in the State, apart from being a professor of marketing for the last about two decades, Musaliar describes Kerala as a big city because of the absence of any rural-urban divide. "From Thiruvananthapuram right up to Kasargode there is hardly any empty space. All through, you find shops and more shops," he says. "Since money is coming in in a big way, smaller towns are becoming large townships fast. For example, in Karunagappally, a small town near Kollam, the price of a cent of land is around Rs 25 lakh whereas in the city of Kollam it is only around Rs 15 lakh." BrandLine spoke to Musaliar for his views on issues relating to retail revolution and its likely impact on the State.

What is the status of retail in Kerala?

In Kerala, there has been an explosion in retailing in the last few years, thanks to the foreign exchange remittance by expatriates and the high salary earned by the employees of the new economy. However, it was largely an unorganised affair — except for one or two groups like Varkeys at Kochi and Spencer's at Thiruvananthapuram, and the Margin Free Market. Varkeys and Spencer's are, at best, medium-sized convenience stores, and Margin Free Markets are discount stores. These are big hits, and consequently, large stores run by individuals and small groups have begun to appear all over Kerala.

There is little organised retail in Kerala. The Margin Free Market chain is popular for its discounted prices.

The State is essentially a consumer State, which consumes almost 14 per cent of the nation's production. Undoubtedly, the State is all set to welcome large supermarket chains.

What is the volume of retail business?

No authentic data is available. Nevertheless, if we extrapolate the consumption data, we can assume that the current size of the market is close to Rs 2 lakh crore. There are projections that the current size of the gross Indian retail market is around Rs 13.5 lakh crore, and is growing at the rate of 36 per cent.

Do the existing retail players in the State enjoy a steady clientele?

If you mean steady as brand-loyal, I have to say, not much. To have brand loyalty, they have to promote each shop as a brand. To promote as a brand, one must have an identity. For example, Margin Free Markets are seen as shops selling low-priced products. That is good enough. But to have brand loyalty, they must be promoted in such a way that the target market identifies that this shop sells what customers want.

However, a brand cannot be promoted overnight. It takes a lot of time. In Kochi, no one really knows what is the difference between Varkeys and V Mart or any other big store. So, if they do not know the difference, how can they have brand loyalty? When a bigger shop comes up they simply switch.

How good is unorganised retail as a source of employment?

Undoubtedly, a good source. In fact, it is one of the main sources of employment in the unskilled labour sector. An average shop employs 5-10 employees, and these average sized shops are mushrooming all over the state.

Any specific trends among consumers in retail?

In the recent past, there has been a sea change in the buying habit of the Malayalee. Flush with tons of money, he is gobbling up whatever is on sale. Fruit stalls and stores that sell Chinese products are scattered all over the State along with shops that vend TV sets, refrigerators, washing machines, music systems, and furniture. Even the remote locations of the State are crammed with dazzling jewellery and sari shops. Cell phones and mopeds are regular companions of even the fisherfolk. Despite a ban by the government, Pepsi and Coke adorn the facades of even the smallest pan shop. Clearly, the Malayalee is on a buying spree.

Will Wal-Mart or Reliance succeed?

Wal-Mart is the world's biggest supermarket chain. It has over 5,000 stores in the US, and around 2,000 stores outside. Its current revenue is about 2 per cent of the GDP of the US. Because of its sheer size, it can outbid anyone on price. Combined with the ability to efficiently distribute products through a network of stores, it is the cost leader in retailing in the world. It is unthinkable that they are going to fail in Kerala. However, the Marxist-led government's attitude towards them will have a profound influence on their future in Kerala.

Reliance, on the other hand, is a new entrant in retailing. It has hardly any experience in this field. Its Vice-President (HR) in charge of Kerala recently stated that they are going to follow the Wal-Mart business model. For that purpose, it has already appointed 130 specialists from the US. To be successful in retail business, Reliance Retail has to position itself differently - very differently.

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