This is a reproduction of an essay which I had written for an essay competition in IITK of which no results were ever announced. 😦 What the hell, I can always consider myself to be a winner 🙂 You take a look…..Â
Essay: Sunrise sectors for entrepreneurship – Retail
Organized retail is definitely a sunrise sector in India but to say that it is a sunrise sector for entrepreneurship would be wrong. Entrepreneurship is required in those fields in which an individual can go in with small capital and his expertise and go on to create a company which usually yields returns of the order of 10x or more.
The ‘natural barriers’ to enter into organized retail are so large that it would not be wise for and an entrepreneur to jump into it and think that he will be able to compete with the likes of Reliance, Bharti, Wal-Mart etc. Also, organized retail is something which tests your operational and logistics skill rather than entrepreneurship abilities.
Though organized retail is in practice around the globe for many decades now, it’s only now that it is making an entry into India in a big way. The reasons for this are many. With a booming economy and burgeoning middle class the shopping habits of Indians are changing fast. Malls and multiplexes and making headway into tier II and tier III cities also after mushrooming in the metros. Also the fact that organized retail accounts for only 3% of retail sales in India there’s a huge untapped potential. So much so that every conglomerate wants a piece of the pie.
No wonder that every business house from Birlas to Ambanis is busy chalking out their retail plans. Though it will be too early for them to start counting their chickens as the government policy is still hazy and huge amount of expertise is required to run a pan-India retail network. There is scarce managerial talent in retail business and salaries are already skyrocketing.
The government is still in process of studying the effect of organized retail on ‘mom-n-pop’ stores and the economy as a whole. There is huge pressure on government from foreign multinationals to allow FDI in retail. Of course local giants are keen to put their plans in place before foreign players are allowed to move in. The bleak chances of FDI in retail have forced foreign retail giants to look for local partners. Bharti has joined hands with Wal-Mart after failed talks with UK giant Tesco. Shopper’s stop has inked a deal with UK’s Home Retail group to develop Argos retail stores. Bombay Dyeing has tied up with France’s Auchen.
Local retailers who already have a huge presence in India include Future Group (former Pantaloons), Subhiksha, Shopper’s Stop, RPG group. While Reliance retail, Tata, Bharti and Aditya Birla group are soon to start rolling out their retail plans.
The most bullish of them all is Reliance with plans to invest Rs. 25,000 crore in its retail venture. With Mukesh Ambani in driving seat there’s little doubt that reliance will change how Indians shop. His plans include selling everything from vegetables to cars under one roof and even deploying cargo planes to make sure that you get fruits and vegetables ‘farm-fresh’. Reliance has already opened 50 ‘Reliance Fresh’ stores with the very first in Hyderabad. Reliance plans to launch 1000 stores by this year end. Reliance Retail will launch its hypermarket, supermarket and specialty formats in April-June quarter this year. Reliance and Bharti also have plans to set up Micro Finance Institutions along with their retail chains. While Bharti will also offer telecom services in its retail stores.
As a result of hyper growth plans and rushed hiring, most retail ventures are struggling to keep pace. A massive churn is already taking place in retail space while real estate prices in prime locations are going over the roof. Most retail ventures are going in for mixed strategy when acquiring retail space. Some are just buying the land and then building their stores while others are buying finished commercial space or just renting it.
When there is a huge competition in market it’s always a win-win for consumers. They can expect better services from ‘mom-n-pop’ stores and great bargains at their local mall. After all, it’s all about the customers. To keep the prices low the retailers are doing everything from buying cargo planes to sourcing fruits and vegetables directly from farmers. Also the retail stores promise to give the consumers more choices and a better shopping experience.
With the economy growing at 10%, nobody is complaining about the money being put in behind these retail ventures. Though, initially there will be a few surprises and a few new lessons learnt the long term story looks promising.
Skot's world 