IRF 2008: Opportunities galore in the Indian retail segment

The India Retail Forum 2008 (IRF 2008) is being held at The Renaissance, Powai, Mumbai, over three days; yesterday was the first day. The aim of the forum is to be the global platform for retailers across the globe and to discuss the future of the retail industry.

The IRF round table discussed the topic, ‘Where is the Opportunity?’, and was presented by Cushman & Wakefield.

Bijou Kurien, president and chief executive officer, Reliance Lifestyle Holdings, was the anchor for the session. The panellists included Govind Shrikhande, executive director and chief executive officer, Shoppers Stop; Mark Ashman, CEO, Marks and Spencer India; Ambreesh Murty, country manager, eBay India; Thomas Varghese, chief executive, Aditya Birla Retail; Roshini Bakshi, country head, Walt Disney; Sonica Malhotra, executive director, MBD Group; Soumitra Ghatak, CEO, My Dollarstore; Asif Adil, managing director, Diageo India; Arvind Chaudhary, CEO, Aadhar Retail; and Sanjay Dutt, deputy managing director, India, Cushman & Wakefield. Doug Hargrove, chief marketing officer, UK, Torex, and Sandeep Kataria, global brand director, home care, UK, Unilever, were the session observers.

Dutt said more developers would come forward, especially developers who were developing only one retail space and not various malls across cities. He said the first premise these developers have is to de-risk financially.

Bijou Kurien then turned to Thomas Varghese and said that one of the largest categories in Indian retail consumption is the food and groceries category. He also said that every single retailer has a food and groceries section in a mall. In such a situation, does he see the traditional grocery store going obsolete?

Varghese answered that the format of having a food and groceries section could be very successful. He added, “It is just a question of execution, a question of getting the business model right, a question of creating an organisation that supports the business model.”

He added that we have a rapidly expanding set of consumers who need items such as food and beverages on a daily basis. Developers must keep this in mind and get the business model right. He supported his statement with an example: If a developer opens a place and pays a high rent, there will be no profits and the business will not be successful. Developers should focus on reflecting the needs of the consumer.

Varghese said developers need to understand that each consumer is different. Again, a consumer in South India is different from a consumer in North India. He said it was a question of getting everything together, not just multiplying mindlessly without considering the supply chain costs. He ended by saying that there was place for both modern retailers and traditional grocery stores to coexist.

Kurien then questioned Varghese about how a small grocery store owner had lower investment and higher returns because of low rents and fewer employees. He said this was a profitable business model, so how are the big retailers trying to make their model successful?

Varghese said he did not see a lot of difference in the two models. Modern retailers may be paying 6-7 per cent more due to increased rent or more employees. However, the main thing is to intensify the merchandise and ensure that the costs are kept low.

He added that it was a very innovative possibility if consumer interests are kept in mind. Consumers can avail of services such as home delivery, credit and customer relationship. He said it’s all about building the convenience store into a community destination.

Kurien then turned to Mark Ashman and asked him whether mono brands were better than multiretail stores which stock various brands, and whether there was any difference in the way consumers shop at these stores.

Ashman admitted that he was the new kid on the block as Marks and Spencer has entered the Indian market only recently, but the chain has been present in the UK for 120 years. He said that Marks and Spencer’s history is to offer consumers value, and according to it, value meant price, time and quality.

Based on this theory, he admitted that M&S would never be the cheapest brand in the market, but the brand’s USP is that it is able to control the products it sells right from production point to selling point. He said that because of this, consumers trust its products and it has a long term association with suppliers in the UK. The brand wants to build a similar trust factor with its suppliers in the Indian market.

Kurien questioned Walt Disney’s Roshini Bakshi about retail formats for young adults and how Indian retailers are learning from international retailers specifically about this sector.

Bakshi started out by clarifying that by young adults, Indian retailers generally assume that one is talking about kids. They will not consider a young working executive as a young adult. She said that a young adult of 20 years was probably 10 years old when Shoppers Stop made a foray into the Indian market. Due to his exposure, he can now be recognised as a global Indian because he is aware of the various brands and products, but has not lost his Indian roots.

Bakshi said the young Indian is becoming price conscious and knows exactly what he wants. She added that Disney caters specifically to the 0-14 years’ age group, but this bracket is rapidly expanding. She proved this point by offering statistical data about how the sales of Narnia 2 exceeded the earlier Narnia film’s sales by 300 per cent. She said the data shows that people are ready to pay for quality entertainment.

Kurien then asked Soumitra Ghatak about how retailers are downgrading due to the inflation in India and how this is affecting the sector in which he operates.

Ghatak said that the Dollar Store in India is different from international Dollar Stores because the international Dollar Stores focus on the product, while the Indian stores focus on low pricing. He added, “Such stores give consumers a feel good environment as they can interact with various brands they have not seen or heard about before.”

Kurien’s next question was industry specific. He asked Asif Adil about the liquor industry and how this sector was not a traditional part of the retail sector. He also asked him how he planned to tackle duty free shops as they offer liquor at cheaper rates.

Adil replied that there was expansion potential in the current market scenario and Diageo was making sure of the right high mile connection with the consumer. To maintain the right connect between the product and the consumer, it has started Johnny Walker stores, which are duty free shops.

He said, “We want to bring out the liquor from the back room to the front room.” On a lighter note, he said he believes in the Indian saying, “Hum peete hain jeene ke liye aur jeete hain peene ke liye.” He added that the current government allows it to retail spirits in malls and a few malls are already retailing spirits; others will follow suit soon.

Kurien then raised a question about the size of the online retail business in India.

Murty acknowledged that online retail is increasing in size and said that this was because of its ease of use, safety and trust, and also because of the value the customer gets in terms of price and convenience.

Kurien asked him about specific sectors that are growing online. Murty answered quickly that travel as a sector is expanding online. Categories such as technology, where fixed priced products such as mobile phones or camera are available, are also growing. He said sales of a number of unbranded products, such as jewellery, are also growing.

Kurien asked him whether the online business model was cheaper. Murty said it was a little cheaper, but online retail had a larger number of buyers. While a mall may be present in 80 cities, eBay has buyers and sellers from 600 cities. He said both retail formats coexist and it was not a question of either this or that.

Kurien seemed satisfied with the answer and asked Chaudhary about his company’s position in the market – was there still a format available for positioning food and beverages at the top end of the market?

Chaudhary replied that the positioning would differ in urban and rural markets. He explained that brands become generic over time, witness detergents being referred to as Surf. He said that there is a huge scope for supply chain management in India.

Hargrove summarised the session and commented that there were huge changes happening in the retail market and developers needed to keep in mind certain points: Be clear about the operating model, clear execution of the model and keep the customer at the centre of the business model.

He also said that spend amounts are increasing in this sector. He finally shared some data and said that a number of retailers feel that most of their revenue will come from online sales in the coming 12 months.