In India, retail sector is in dire straits. Dwindling footfalls, low sales, strained profit margins and high rentals is giving many big names of Indian businesses a nightmare.
Though organized retail in India started in early 90’s and it picked up steam in 2000 with the launch of Big Bazar. After 2005, it was in top gear with host of big players making foray in retail business.
Then we have slowdown. Consumers got cautious, controlled the spending and retailers started bleeding. This sector was crying for funds. Some retailers have resort to huge cost cutting exercises, some have renegotiated the rentals, some have shut down some of the stores and shutter are down for Subhiksha, one of the biggest retail chain.
Is this happened because of slowdown? I do not think so. According to me, most of the retailers evolved through four stages in last three years.
Beginning/Next Big Thing: With retail touted as big thing, investment came easily. Most of the stores were fitted with great store infrastructure, spic and span stores, high quality flooring, invested lot of money in making stores a world class shopping destination. I do not see anything wrong with it. To attract customers from local kirana, all this was required.
Product quality matters more in staples, fruits, vegetables, bakery and other loose products which are sourced locally by retailers. Initially, fresh fruits and vegetables were driving footfalls. Quality was good and pricing was competitive. There is not much difference in quality of branded packaged food like Britania biscuits, Nestle chocolates etc. However, retailer needs to be careful about expiry date of products.
When a new store is launched, it used to be full with staff. Courteous and politeness was their strength.
Price was the trickiest one. Everyone wanted to offer cheapest products.
Next gear: Initially there was occasional dust on products especially the slow moving ones, shelves started to get dirty, and dirt on floor was visible especially in food and vegetable section.
As months passed, quality deteriorated and prices dipped. And the trend continued.
As stores gets older, attrition increased and staff was burdened with work. Polite staff turned rude as work related stress increased. SELs started going missing; prices were not updated regularly, expired products were on shelves, long check-out lines at billing counters.
Everybody continued to be cheapest.
Only high point was retailers continue to expand and open new stores at breakneck speed.
Desperation: Slowly dirt and dust became permanent fixture in stores and equipment started giving away.
Fast moving products were not refilled and slow moving products were staring at you always from over filled shelves.
Staff became scarce resource in a store and stores became self-service. Customers did treasure hunt to find out products of their choice.
Being cheapest continued to be single focus of every retailer.
Clueless: Broken shelves were a regular sight and dirty and sloppy floors became an eye sore. All investment on infrastructure went down the drain. Empty shelves were always there to welcome customers. Service – let’s not talk about it. But everybody continued to be cheapest.
So what comes next?
I see few local players’ retailers packing up with their tails in their legs. Some big players will try to sell their businesses to some foreign players (with new Government in place, FDI restriction may go off). Some will try to restructure their business and re-launch it.
In all scenarios, it will be tough for Indian organized retail. Kiranas can breathe easy for sometime, at least.
by rads , on June 3, 2009 9:12 PM
This is the case everywhere, all the hi-fi arrangement and good products is only till the store gets some fame and after that it goes haywire.
by le embrouille blogueur , on June 3, 2009 9:17 PM
I do not think we can generalize on that.There are stores I know of (in Chennai and Kolkata) who have maintained the same standard for the last fifty sixty years. With time they have included "new" services like free delivery for purchase over "x" amount etc.But this is definitely true that the enthusiasm and service quality tends to fizzle out very easily.
by Adesh Sidhu , on June 3, 2009 9:23 PM
@ Rads - I have experienced this in last three days.
@ LEB - These old stores (in Chennai and Kolkatta) have not achieved any scale. They at the most will be 10 -12 stores. But retailers I have talked they have more than 200 stores with almost pan-India presence and they are badly managed and they are gasping for funds badly so that they can infuse some freshness in their business.
by A journey called Life , on June 4, 2009 4:11 AM
very true..when the retail boom was at its peak, i remember how it was so hip to shop at these big stores.. i thght finally things had arrived.. but its sad that they did not remain..
by A journey called Life , on June 4, 2009 4:11 AM
very true..when the retail boom was at its peak, i remember how it was so hip to shop at these big stores.. i thght finally things had arrived.. but its sad that they did not remain..
by Ramesh , on June 5, 2009 6:36 AM
Well observed and written Adesh. The problem with most of these chains is that they never had a profitable model going. In India, the rentals are such that its extremely difficult to make money in retailing. And the kirana round the corner is a great retailer - he may not be sophisticated, but he has a perfect model for the market.
by SiD , on June 6, 2009 12:39 AM
There is a spencers store in Noida, Sec 61, it smells like rat died since the day I first saw it...
the retail sector is also going down like dot com burst and now history will mark, retail bubble burst with show rooms like Big bazaar competing with Isharchand Manikchand Kapdon kii Dukan.