Saturday, March 21, 2015

Organized retail market sector in India-Inefficiency at its peak!

Shopping for daily needs is a chore no family can afford to ignore. From time immemorial buying and selling formed an integral part of human society and the barter system of the old world changed to cash and carry during the 19th and 20th centuries after monetization in the form of coins and notes during the last two hundred years, Modern days cash purchase is disappearing in many countries and credit and debit cards rule the roost. Imagine how cumbersome was the shopping experience in the olden days, compared to what we see to day with an array of super markets and Malls ready to cater to every whim and fancy of the consumer, at least in a few developed countries. The retail space in India is more or less monopolized by the so called unorganized sector shops, estimated to be about 14 million in number, though this figure will have to be taken with a pinch of salt but it is true that they are omnipotent in India in every nook and corner.

With the advent of the policy of encouraging foreign investment in the retail sector Government of India dramatically liberalized its FDI policies a couple of years ago but the response from international giants in this field has been at best lukewarm. Probably the wide spread presence of bit players, with average vending area of just 100 s.ft, in huge number and some of the pre-conditions stipulated for FDI, very few outsiders seem to have sufficient courage to invest in this sector. The domestic retailers in the organized sector with a vending area of over 500 s.ft and registered with sales tax, income tax and regulatory authorities who ventured into this sector more than a decade ago smelling big money are all struggling now, not able to displace the traditional shopping outlets to any significant extent. Not even 5% of the $ 520 billion retail market is in the hands of these large retailers with franchising and chain stores, most of them not able to come out of the red till now. More over their presence is restricted to large metros and small towns with practically no penetration into rural areas. Some how the retail industry appears to be forgetting the reality in India where there are more than 5.5 lakh villages and about 70% of the population eking out a living in these areas. Probably they must have realized the potential logistical nightmare in extending their operations to the rural hinterlands.

Why is that in spite of all the statistics doled out on the retailing potential in the country, organized retailing has not been able to get any significant toehold in this business? There are many reasons, most important one being the gross inefficiency in management of large sized stores as a consequence of which repeat buyers are reluctant to patronize them. Added to this more than two thirds of the buyers/shoppers are teen agers and youngsters with an impatient mind, having no time to waste in a supermarket which does not measure up to their expectations and aspirations. 91 % of them own at least one smart phone with which they can make fast purchases through on-line e-commerce portals. There are one million retailers now shopping on-line through various portals and they seem to be clients shifting their loyalty from super markets to e-commerce sellers. It is amazing that in cities like Bangalore e-traders are collecting orders on-line even for perishable goods like fresh fruits, vegetables, eggs etc and delivering the orders at the door step of the customers within a matter of few hours! Who will prefer going to the supermarkets as they function now with no accountability and sensitivity to consumer's woes when they visit their outlets.

What can these unfortunate investors do to expand their market reach and get out of the present "rut". Many things, most of them being simple and common sensical. These include better designed aisles, posting of aisle attendants to help to assist the consumer, adequate aisle width that will ensure a "collision-free" walk, convenient ferrying carts that move without wobbling, child carrying provisions in the shopping carts, special arrangements for physically challenged category of buyers, adequate toilet facilities, avoiding in-house maintenance and restocking periods to clash with the prescribed shopping times, scientific display arrangements, price tagging without any confusion, multiple billing counters, avoiding "guided buying" tendency where only a particular brand is displayed giving no option to the buyers, avoiding stocking only jumbo packs to the exclusion of small sized packs, product return policy for unsatisfied customers to return the product within a specified period and ultimately making the shopping experience a hassle free and pleasant one. 

Deployment of untrained personnel, cluttered atmosphere, over crowded billing counters, undue delay at the cash counters, unresponsive shopping assistants, suspicious viewing of the customers, absence of separate dedicated billing counters for senior citizens and small buyers with a few items purchased and above all the unhealthy environment of the shopping place are order of the day as far as most supermarkets are concerned. Loyalty programs where ever exist are not at all customer friendly. Discounts offered on many products from time to time are not of a magnitude that will attract consumers to their outlets like a magnet. Many super markets selling fresh fruits and vegetables force the customers to stand in separate queues to weigh and affix price tags and often bulk buyers crowd around such counters giving little respite to regular buyers. Those supermarkets without integration of their operations with farms where fresh produce are raised will not be able to survive for long because of quality problems. 

Under the Indian conditions it is not going to be easy for large buyers to establish as viable players unless some of the drawbacks and inadequacies as cataloged above are addressed with some seriousness. When a consumer walks into a supermarket his biggest expectation is that the materials sold are of superior quality compared to that offered by others. Then comes his desire to get his requirements at a price he considers reasonable. Supermarkets will have to offer attractive discounts to attract repeat buyers. They have a big advantage in that the ambiance, vast strolling space and wide range of products they can offer are some thing their competitors viz the small traders can never counter!  In contrast the legendary "mom and pop" stores have the singular strength in the form of "personalized" service which contributes to establishing some sort of  "kinship" between them. Considering all these imponderable factors, only very efficient super markets can survive in India.


1 comment:

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