The Hindu Business Line : Retail rat-a-tat

The retail market will be around $415 million by 2015, declared Ireena Vittal, Principal, McKinsey & Co, at the India Fashion Forum 2008. But she cautioned that retail players would have to join hands to work around price uncertainties and discip line the market.

“Excessive short-term promotion can spoil long-term market behaviour,” she said, adding that the ‘sale’ phenomenon will teach shoppers to become bargain hunters. Such a practice will curtail the retailers’ right to increase prices and hurt the industry in the long run.

B. S. Nagesh, Managing Director, Shoppers’ Stop, welcomes Vittal’s suggestion of working in collaboration with other retailers He said, “We are already working with each other, but today the need is to work with brand managers. Six out of 12 months a year, there are sales happening at either Pantaloons, Globus or Shoppers’ Stop, so the footfalls remain high for those periods against the rest of the year.”

Commenting on shopping trends, Vittal pointed out that 38 per cent of Indians shop on special occasions, such as weddings and festivals. While women matter in buying decisions, the men are equally instrumental in deciding where to shop, she said. “Today, rich men are building wardrobes and spending more on fashionable apparel than women. Though the consumer spending on apparel is still lower than on food, it is catching up,” she explained.

Kishore Biyani, Managing Director, Future Group, spun “a capitalist take on socialism,” in the words of Rama Bijapurkar, commentator on market strategy and consumer related issues, when he said that only 11 to 12 per cent of the Indian population was consuming 80 per cent of value-added products and services.

“The middle class is not passing on to the lower classes what it earns and that is the biggest divide curtailing consumerism,” he said. It was the responsibility of modern retailers to build brands, he said. “They should visit Benaras and not the UK to study the Indian consumer. Benaras is the heart of India and has individual streets for lingerie, apparel, and so on,” Citing the example of the telecom industry, Biyani said the mobile phone sector has managed to make phones the fourth essential commodity in India after roti, kapda aur makaan.

Brand building and identity

D. Shivkumar, Vice-President and Managing Director, Nokia India, explained the importance of the notion of identity in brand building. “Triggered by advertising, consumerism is growing fast and products are a huge form of identity for people. Since we have realised that the life-cycle of a phone is 18 months, we kill our product before the customer does it and give him an innovated replacement.”

But it is easier said than done for the apparel industry, said Biyani, as people did not identify themselves with clothes as much as they did with electronic gadgets. However, Shreyas Joshi, President, Raymond Apparel, believes that, “people don’t buy clothes, they buy an identity.”

The CEOs’ conclave, a congregation of around 30 retailers and experts, agreed that India still has a long way to go before the local brands became as successful as the international brands.

Vinay Nadkarni, Chief Executive Officer, Globus, said, “In the current scenario, where only 5 per cent of the total retail market is organised, we need at least five years to grow to the size of successful international brands.”

Many international brands are queuing up to enter the Indian retail scene, including Best Seller, Denmark. Troels Holch Povlsen, Chairman, was excited about the challenges and possibilities presented by the Indian retail market.

He said, “I think the Indian market is very difficult, and therefore, want to enter it.” The company plans to bring its Jack & Jones brand to India and is in talks with a listed company to set shop here.

D. P. S. Kohli, Chairman of homegrown brand Koutons, said, “We are in no hurry to go global because the priority right now is to expand operations in India through the franchisee route. Speed is the essence of business and we cannot afford to go slow on this.”

Innovation

With brands playing an important role in building consumerism, innovation should not be ignored, said experts. On the repositioning of the brand Vimal, Chetan Desai, Vice-President (Marketing and Retail), Reliance Industries , said, “We have given a new look to the Vimal logo, which is more open and will connect more to the youth. To widen the brand reach, we are taking the sub-brands route, with three sub-brands: Vimal Red, White and Black.”

Highlighting the concerns of the retail industry, Vittal said the main issue is not about getting started, but how to make money.

“Today, we are in a scenario where the operating costs are escalating while the basket size is painfully small,” she said.

The purchasing power was concentrated on less than one per cent of land space, mainly malls and hypermarkets, which was the case in China too, some years ago, she said.

The Chinese overcame the problem by differentiating their formats very early on in the cycle of their business.

To counter the supply side problems, the general feeling was of creating one’s own distribution network.

Balvinder Ahluwalia, Koutons Retail, said, “There are a few precautions to be taken to ensure maximum penetration of the market, like your own supply chain management, financial strength and the right kind of merchandise.”

The brainstorming sessions at the India Fashion Forum were supplemented with fashion shows by Triumph International, a lingerie brand, and a fashion retail quiz hosted by quiz master Derek o’ Brien.