‘Indian retail is still too ambiguous for most international players’

Mark Ashman spent seven years working in India’s retail sector, first as the head of Marks and Spencer’s Indian operations and then as the CEO of K Raheja Corp’s HyperCITY, which he left in June at the end of his contract. He spoke to BusinessLine shortly after his return to the UK. Below are excerpts from the interview:

Was your plan always to leave HyperCITY at the end of the contract?

When I joined HyperCITY in September 2010, the brief was to get the business profitable — and if we weren’t absolutely profitable, to get the business into shape so that it would soon be.

And, secondly, to look at the potential for getting funding perhaps from an international retailer.

In terms of profitability, I was happy to step out when the contract ended feeling that the model was right and was very close to hitting profitability.

If you look at the Q1 figures there is a distinct change from 12 months ago. On the second part of it, given the lack of change in government policy, the opportunity for bringing in foreign investment was certainly looking unlikely at the time I was there.

What are the main challenges facing the organised retail sector in India today?

The apparel retail business — both domestic and international — has a proven model. But for multi-brand and food retailers it is quite a challenge.

The main challenge is the availability of good retail space and getting that space at the right rental cost.

There is still a scarcity that pushes prices up — and sometimes mall developers have too high expectation of rentals, so you reach a stalemate.

In the early days, retailers were signing up because they thought they’d trade through it, they thought the pace of consumers coming to modern retail would happen at a higher pace.

For hypermarkets, the challenge has been a lack of good space, and also taking up too much space.

In the early years, we adopted the Western model, but in reality the customers don’t come and the big 100,000 square foot boxes don’t work….25,000 sq ft retail spaces provide a nice profitable model and retail space that works for the consumer.

What is holding back international players?

There is certainly a huge amount of ambiguity — if I asked three people what a government policy or regulation really means I would get three different answers, but ultimately you do get an answer.

What is really holding back the international players is the lack of clarity from the government that they are embracing organised retail as a sector. It has been too opaque — the whole FDI debate was probably happening in my first year in India and in my final year it was still very opaque.

The situation where you can come in but in some States you still have to step through hurdles.

This is just too ambiguous for the majority of international players.

India keeps bubbling up as an attractive market but when you start to think about it practically it gets too hard, and there are other markets that are attractive and easier to get into.

It’s a shame because I think a vibrant, growing retail sector is good for the economy as a whole…the consumer will benefit and the sector will benefit as the infrastructure behind them follows.

Has the new government injected new confidence?

I had felt there was going to be an energy to it, and logic applied, and real pace to getting things done.

Unfortunately, it still looks as opaque to retailers as ever. I have not seen any initial signals from the government that this is going to change soon.

While working with the teams at M&S and HyperCITY, I’ve had some of my best experiences I’ve had in 30 years of working, and it was a hard decision to move out.

One driver for stepping out of India was from my personal career point of view — the business growth was not necessarily there.

I have nothing currently, though I may use my experience in Indian retail to help others or take an assignment elsewhere. It’s early days yet, though my gut tells me that one day I will be back in India.

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