Catalyst

Six steps to redefining retail rules

V Rajesh | Updated on November 01, 2018 Published on November 01, 2018

Three different constituencies make up Indian retail. Regulation relevant to all is needed

There have been a few sporadic attempts to redefine some important legislation involving retail, such as the “Shops and Establishments Act” and, more recently, the draft e-commerce policy note.

But when it comes to governance, legal framework and policy decisions around retail, the thought process seems to be still mired in the “shop keeper” orientation and the “retail” perspective is completely missed out.

How are the two different? At a fundamental level, both these are involved in the sale of products, which may or may not include value added services to the customers. However, the difference is mainly about the approach to their business.

Shopkeepers tend to leverage their relationship with their customer base and are primarily engaged in buying/selling. They need the leading brands to keep their customers happy and, as such, their elbow room to influence shopping behaviour is limited. In spite of this, the small shopkeeper thrives.

Two factors contribute to their success. First is their local connect and strong relationship with the customers, which ensures that they stock what their customers require. Second is their relatively lower cost structure.

On the other hand is the Retailer. His business approach hinges on aggregating volume and efficient management of the supply chain. The value that is unlocked from these two aspects is used to deliver better store ambience, lower prices, etc. To a large extent, this orientation includes a concentrated effort to influence the shopping behaviour of his customers and might even include efforts to substitute leading brands in the shopper’s basket.

Ironically, online retail (not to be confused with e-commerce) is attracting a higher level of attention in terms of specific policies and governance than the physical retail sector.

In July this year, the government released a draft e-commerce policy note which has already become hotly debated.

The contentious issue is that guidelines pertaining to e-commerce might not always be relevant to e-tailing and vice versa. This is mainly because e-tailing is a subset of e-commerce and has different business dynamics. Even an e-tailing business with a market place model has dynamics that fit a retail perspective than from a pure-play e-commerce business.

Unfortunately, the digital factor is being considered as a unifying factor to club e-tail businesses under e-commerce when it comes to policy and regulations. On the other hand, the regulatory framework that governs the physical retail businesses is still rooted in the concept of shopkeeping and therefore is neither relevant nor apt to the changing contexts here.

So, what is the way out? The answer is quite simple: Indian Retail needs an Industry status, and a cohesive approach with regard to policy-making and governance. Here are some suggestions:

1) Define and classify retail constituents:Various retail constituents can be categorised based on their scope and size of operations.

Similar to manufacturing, retail can have a micro segment that can comprise street hawkers and small stores up to a particular size and level of business — a small and medium-scale grouping that would typically cover those in the urban areas and a large-scale sector that would encompass any retailer who has more than a particular number of stores and generates sales above a level. This segment could also cover online as also online + offline businesses.

Such a move would immediately put at rest all arguments about the small shopkeeper trader being adversely affected.

When such a move is tied in with urban development guidelines, the type of retail businesses that can operate in a particular urban zone can be clearly defined and regulated. For example, the type of retail outlet that can be opened can be defined on the basis of the width of a road, similar to the FSI guideline being used to govern real estate.

2) Create a unified and specific legal framework:What retail needs are clear mandates with regard to taxation, legislation, employee protection, etc, which come with industry status.

More importantly, retailers can access institutional credit more easily as financial entities can be given clear industry/sectoral guidelines with regard to lending. Such a step might enable even the smallest of shop owners to dream of growth and expansion.

An industry status would also help streamline the extent of licences and permissions required to open a store and help move towards a single-window system. Franchising is an important aspect for the growth of retail and there is no single, comprehensive framework to govern this.

A unified legal framework would definitely be encouraging for many international retail brands to consider an India entry with various positive spin-offs in terms of employment, economic growth, etc.

3) Skilling and development: Offering education and skilling pertaining to retail has gained ground over the past few years. The inclusion of retail in the scope of the National Skill Development Corporation (NSDC) and the subsequent role of Retailer’s Association’s Skill Council of India (RASCI) is significant.

However, there is much more that can be done, especially for those working in the smaller shops. Some kind of national-level skilling for this segment of workforce would have a large positive spin-off.

4) Computerised billing:The Government could consider a subsidy scheme to provide the small shopkeeper with a simple device, which could even be a low-cost tablet PC, for billing purposes. The small shopkeeper is quite ready to adopt computerisation and implement a system-based billing mechanism.

This would have several benefits, not the least of which would be an improved flow of information and data and other positive outcomes like better compliance, especially in the GST era.

5) Data and information system: Why not create a national registry of products populated by the manufacturers with details of every product they make? This can be a massive boon not only for retail but also the manufacturing sector.

Retailers can access this database, regardless of their size, and managing the same would be cost-effective because of the scale and volume of usage.

This would ensure that computerised billing can slowly make inroads down to the last sale and this, in turn, will ensure that data with regard to consumption and sales is available at everyone’s finger tips.

6) Social security:The small shopkeeper operates as a sole warrior. He does not have any kind of social security and that is a major drawback in the eyes of the next generation who may not want to take up a family occupation.

A comprehensive national scheme that provides such small shop keepers with medical and life cover at a nominal cost would have a far-reaching impact on these people and their livelihood.

In summary, I can only reiterate the enormous positive benefits that an Industry Status can bring for the retail sector.

It can also address the contentious FDI rules as also the increasing dissonance between online and offline players effectively.

V Rajesh is a Retail & Shopper Behaviour Expert who has authored several best selling books, such asThe INDIAN reTALEs, Out Of Syllabus, BREAK FREE andThe Ultimate Guide to SMART Shopping

Published on November 01, 2018
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