By V Pattabhi Ram and Mithun D’Souza
Loud music beating the ear drum, air conditioners running on full throttle, a mixture of perfumes – of flowers, of hot cookies, kolkatta chaat and chocolate – in the air; super fast escalators and speedy glass elevators. Well, Wafers, China and Muskan had stumbled on to the latest hangout in Chennai. A monolithic two hundred thousand square foot of architecture built in the heart of the metropolis. Not to forget the hundreds of cars that it could contain at one time. Nobody really knew about how much this massive project cost except Wafers. Wafers’ CA firm was the consultant to the corporation that promoted the venture. Being on ‘Team Retail’ gave Wafers a ground level understanding of the nuts and bolts of the retailing industry. A perfect opportunity was on hand for her to flaunt her practical knowledge before China and Muskan.
China strolled with his mouth literally in his heart, his eyes wide open, almost popping out. For an IIT alumni that was surprising; for these nerds hardly had an expression to wear on their face except that of someone playing stud poker. The sheer number of outlets of all brands under the sun which he could think of was the reason for his wonderment. Nike, Adidas, Reebok, Allen Solly, Van Heusen, Coffee Day, Barista, Lee, Sony, Panasonic, Jockey, Cookie man, Big Bazaar, KFC, Lifestyle ……. Phew.
“I have never ever seen so many shops in one place” announced Muskan, thus breaking the ice from the visual feast the threesome were enjoying. “Why not?” replied Wafers, a rare sense of authority in her tone. “India has nearly 12 million retail outlets. An important avenue for self employment it has been for decades” she added. “They do not call India the nation of shopkeepers for nothing” added China. “Hey China, that was what Adam Smith said of England, not of India” zipped Wafers eager to showcase her knowledge of economics.” China retorted, “That was ages ago. This is the new age.” Wafers was on song. She said, “However, most of the businesses in India are family run, thus making the sector highly fragmented. Notwithstanding, we have the largest density of retail in the world”. “Agreed” said Muskan, her face full of discontent, “but is your nation of shopkeepers seated in one giant size building, with world class infrastructure, controlled climate, where shoppers can pick up anything from a pin to an elephant in one shopping spree?”
“You see Muskan” broke in Wafers “that is the magic of organized retailing. These are professionally managed stores with trained staff having focus on consumer comfort, style and speed. The supply chain is revolutionized with centralized sourcing and there is tremendous emphasis on quality control. “With the advent of organized retail, traditional forms of distribution will never be the same. Historically, weekly markets, village fairs and melas have been in the forefront of the distribution network. The next stage comprised of convenience stores, mom & pop stores, kiranas and department stores which encompass most of the retail stores in the country today. Nonetheless, today the scene is fast changing”.
“Entertainment centers is what they have now turned out to be” chipped in China. Obviously, true. The threesome were leisurely walking past the shops peering through the glass panes of the visibly decorated brand outlets sipping a can of coke having no agenda whatsoever.
“We are just in the infancy stage of retail in our country” said China. “I read somewhere that we are yet to catch up on branded outlets, shopping malls, hyper markets and online retail in a big way” he added. “True” said Wafers shaking her head. “That is because of the 51% restriction on foreign direct investment. MNCs could use only the franchise route or single brand retailing or wholesale cash-and-carry operations, or have distribution centers supplying Indian retailers or undertake production in India.” China and Muskan understood that this was why organized retailing did not jet propel like a rocket as any economist would have sworn.
But that would not be for long. Wafers was telling them that FDI restrictions on retail are likely to go.
Muskan’s mother was already buying all her groceries and clothing from these retail giants. Mother would be ecstatic about the freebies, offers and discounts she received on her shopping experience. Infact, it had been ages since she had even visited her neighborhood department store. In China there is a saying “A man without a smile should not open a shop”. Muskan’s neighborhood grocer was not smiling anymore. This was a cause of concern to her.
“Wafers,” Muskan exclaimed, “With organized retailers on a rampage, what is to become of the millions of unorganized retailers? What will be their fate? Will they ever have any takers?” Wafers replied, “Tough prediction to make. Organized retail may kill mom and pop stores. There is no reason why large business houses may not end up dominating even monopolizing the market. There could be increased trade deficits in the short term. The impact will certainly be felt. The degree of the same may vary based on place, consumer demographics and urbanization”. China, true to being an IITian, forever loved huge businesses, the technology that they used and the systems they ran. “But what do you say about the tremendous benefits which organized retail offers?” he asked. “Certainly, there will be phenomenal benefits. Transformation of the supply chain will lead to reduction of wastage particularly in the agricultural sector. Productivity gains will be seen in the SME manufacturing segment. Retail will provide thousands of jobs both at the higher end and lower end. Massive cost reductions will be passed on to the consumer as is the case in organized retail. Even the coffers of the government will be better of with better collection of value added tax and income tax”.
She would have gone on and on and on but for the fact that little Muskan was looking tired, both physically and mentally. After all, they had completed two marathon rounds of walk around the center. And Wafers had bombarded them with one ton full of knowledge. It was time to walk into the multiplex to watch Dhoom 2.