Back in 1997, when Kishore Biyani — referred to, in the early, heady days of the organised retail boom in India as India’s Sam Walton — started the first Big Bazaar store in Mumbai’s mill district, he faced a problem. Mumbai’s nightmare traffic meant that well-heeled shoppers from South Mumbi or the tonier Western suburbs will not bother to deal with the tiring drive. And shoppers in the store’s immediate catchment area around Parel and Dadar, dominated by thrifty middle-class Maharashtrians, found the ₹100 return-trip cab fare not worth the savings they stood to make through Biyani’s offerings. So, Biyani started offering cab vouchers for those who could show an address proof in the area. And the store boomed.

That was just one of the dozens of innovative techniques — cut price groceries on Wednesdays was another, as was cashing in the periodic onion/potato price surges to drive other business — that Biyani used to inculcate the culture of going to a big box self-service store and do bulk shopping in concentrated bursts instead of running down to the corner store when one ran out of anything. In Bhubaneshwar, the concept of an airconditioned store was so alluring that rickshaw pullers took to coming and taking their afternoon naps in the store foyer till entry tickets were introduced!

A Sam Walton he never was — although Future Retail grew to be India’s biggest retailer before being dethroned by Reliance’s megabuck entry — but Biyani was arguably the most influential shaper of the organised retail story in India.

All that was, of course, before a combination of circumstances ranging from soaring overheads driven by real estate rental costs, and some ill-advised diversifications and expansions fueled by debt, brought the edifice crumbling down, with the Covid lockdown of 2020 proving the final nail in the coffin.

Bloodless coup

The dramatic overnight takeover of hundreds of Big Bazaar stores by Reliance last week — even as a complex slew of cases disputing the scale is pending in various Indian and international courts, and even though the assets themselves are actually mortgaged to the hugely indebted Big Bazaar owner Future Retail’s lenders, who legally enjoy first call on those assets — marks one of the great heists in recent Indian corporate history — and an incongruous finish to Biyani’s run as retail czar.

Last week, Reliance simply moved in to hundreds of Big Bazaar retail stores in key locations. The indebted Future Retail’s leases on these spaces had already been taken over by Reliance and, if media reports are correct, even a bulk of the inventory in these stores had been supplied by Reliance since Future had been defaulting on supplier payments.

In a swift move, Reliance simply served eviction notices to Future Retail for rent defaults and took over these stores overnight. It has reportedly also offered jobs to Big Bazaar employees as well. In that case, Amazon’s more than a year-long legal battle with Future Retail over the latter’s bid to sell out to Reliance Retail for some $3.4 billion will likely take yet another turn. Even if Amazon does manage to win its many legal fights, Reliance has already effected what one may call a bloodless coup.

Back In 2019, Amazon had invested $200 million in Future Coupons, a Future Retail venture. Biyani, struggling under a mountain of debt and troubled diversifications, was desperate for cash and reportedly signed the deal that came with clauses which barred Future from selling retail assets to certain specific entities, which included Reliance. But two years ago, Biyani, hit by catastrophic Covid lockdowns, decided to bail out and sell his assets to Reliance. It is this deal that Amazon is now trying to block through arbitration, arguing that the Reliance deal will nix their chances of acquiring Future Retail in case government rules on foreign ownership of multi-brand retail changes.

But to complicate things, the Competition Commission has held the Amazon-Future Coupons deal in abeyance, while the bankers claim that since their loan agreements predate both the Amazon-Future and the Future-Reliance agreements, they should be allowed to dispose of Future Retail’s assets to the highest bidder, since they are owed some ₹17,000 crore and change!

What will eventually happen to Future Retail will be decided once the complex web of interconnected cases before various courts and tribunals, ranging from the Supreme Court, Delhi High Court, Competition Commission of India, the National Company Law Tribunal, the National Company Law Appellate Tribunal and the Singapore International Arbitration Centre, get finally resolved.

But what is clear is that India’s exploding retail sector, already at $900 billion and set to touch $1.6 trillion by the end of the decade, cannot be micromanaged by government mandarins playing to the tune of their political bosses, who in turn are playing to the political gallery. The industry is now too big to fail, contributing 10 per cent of GDP and 8 per cent of employment, according to CII data.

India is currently the world’s fourth biggest retail market. Rival e-commerce, meanwhile, is also growing at an exponential rate, and is set to grow by 84 per cent by 2024. Reliance Retail alone, with retail revenues of $18.5 billion in 2020, ranks 56th in Deloitte’s Global Powers of Retailing List.

Whimsical turns

Meanwhile, the number of twists and turns and flip-flops and back-tracks in India’s retail policies will make for a Bollywood potboiler. From forcing online multi-brand retailers into becoming platforms overnight to blocking foreign investment in physical retail — allegedly in the interest of kirana stores who are likely to have been harder hit by the 30,000-plus stores operated by purely ‘Indian-owned big box retail’ — India’s retail policy has been marked by whimsical turns.

What India urgently needs is a comprehensive and clear national retail policy, which provides a level-playing field to all players, improves the ease of doing business — retailers have a multiplicity of compliance requirements from local to national level — and allows the industry to raise capital freely, while promoting innovation and nurturing job creation.

We also urgently need a retail regulator. The kind of regulatory governance capture which happened in telecom, for instance, which has reduced the sector from a thriving, competitive industry to a virtual duopoly, must not be allowed to repeat in retail, which is a force multiplier to drive consumption, growth and jobs. At the moment, as the Future-Amazon-Reliance slugfest shows, there are far too many cooks spoiling the broth.

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