End of Season! End of Party time?!?

Late 2009 was the time when one could see the slow down of the 2008 Economic slowdown in India. While rest of the world including America, Japan and parts of Europe were down with Recession (read: 2 Quarters of continued negative economic growth), India was seeing its GDP grow at a modest 7%. As Kishore Biyani, CEO Future Group once said in 2008, “Consumers are sitting on the fence, not really knowing when and what to spend”. How true, it was at that time. And then 2010 happened. Growth was the new buzz word and Retailers were back in action. New swanky stores, additional staffing, high-paid executives in the upper echelons and yes, a double digit same store sales growth which was being celebrated by one and all. All izzz well – the song from the movie “3 Idiots” was the most hummed song among the Retail fraternity thereafter for the next 18 months.

Photo Courtesy: Times of India

Consumers who were holding on started buying new houses; furniture and furnishings for their new/old houses; Cars of all sizes – from an upgrade to a sedan to the first four-wheeler in the family; brown goods – LCDs and LEDs saw growth of over 100% for some brands! Refrigerators and Washing machines were flying off the shelves; Smartphones’ sales grew than those of normal phones; shoppers were buying more footwear and clothes, not just to show-off their wealth and happiness but because they could now afford to. Monthly grocery, which is an important metric to measure consumer confidence was growing at a healthy double digit. The confidence in consumer spending allowed Retailers and Brands to invest more and more – on new stores as well as higher targets. Unfortunately, the party seems to have ended abruptly.

(Suggested Reading: New Store Openings)

Lifestyle, India’s premier Department Store Chain was the first to announce EOSS – End of Season Sale last week. This came as a big surprise to the market – consumers aren’t complaining though. Central Malls, part of the Future Group and the largest mall chain in the country announced flash sales over the New Year Weekend, only to end up disappointing itself. Even brands like Levis which wait until Valentines announced “Sale” a day before. Spanish chain Zara, went on sale too, albeit it matches its International calendar where the end of season sale happens around Boxing Day and continues until Christmas. The new season in the West begins from January onwards. Most brands usually run on full price until Feb. 14, assuming shoppers would anyway buy, irrespective of the price-tag to fulfill their own wishes as that of their loved ones. This year seems to be an aberration.

Photo Courtesy: Times of India

“The targets for the current year were ridiculously high; We pleaded the Management not to set such high, unrealistic targets but they were in no mood to listen, thanks to the high voltage sales that have happened over the past 4 seasons” – says the Area Sales Manager of a premium apparel brand, who requested anonymity, saying he was not the official spokesperson. The Unit-Head of one of India’s largest Department store chains quipped that the chain has more stores today in large cities and hence the pie doesn’t seem to be growing rather getting cannibalized. “Instead of increasing the customer base of loyalty members through marketing activities and TV ads, the Management is getting into deep discounting; we had one of the finest customer service staff 4 years ago, but I cannot claim so now; they (the CSAs) are paid 6-7000 bucks and obviously the quality of staff and their service has deteriorated.” This gentleman, whom I’ve known for over seven years now requested I don’t mention his name as he may even lose his job for saying so.

(Suggested Reading: Customer Service by Trial & Error)

“These days, people are walking to our stores, checking out the products and then buying online. 5 years ago, the larger players were threatening our livelihood, but these days, looks like the online players will wipe us out”, quips Ravindra, shop assistant at a leading electronic store in Bangalore. “FDI in Retail is a big threat for us; if the big international players step up their expansion like what I’ve seen in the Gulf over the past 15 years (read: Middle East), then we will all have to shut shop and find an alternative full-time job rather than running these departmental stores”, cries Syed Pasha who settled in East Bangalore 5 years ago after working in Sharjah for 15 years as a low-cost laborer.

Photo Courtesy: Times of India

So, is the party over already? The answer is a big NO. Retailers and Brands have to realize that short-term growth is no metric for long-term survival. Nor would E-Commerce players like Indiaplaza.com would take away their share of business. India is a one trillion dollar economy and is fundamentally a strong one, with its ability for self-sustenance. (Sale) Targets are an important part of the business but they are not the only ones to focus on. Most Retailers and EBOs of Brands need to step up customer service. Rather than pay lower and have more staff, they should consider paying higher salaries, mostly linked to sales and have lower staff on the floor who are efficient and effective in their output.

(Suggested Reading: What retailers can learn from the aviation crisis)

The Retail India Story has just begun; Internet Commerce is still under-penetrated at the moment. Retailers can and should take advantage of growing consumerism with better service with fewer stores. As always, Small is Beautiful.

Retail FDI - Letter from the Commerce Minister of India

Last week, the Cabinet of the Indian Government allowed 100% FDI in Single Brand Retail and upto 51% FDI in Multi-Brand Retail - it was indeed a surprise move, given that the Winter session of the Parliament is on and the Ruling UPA is mired under various issues due to which the Upper House and the Lower House have seen continued agitation and adjournments. In the wake of this latest crisis, Union Minister (of India) for Commerce, Mr. Anand Sharma has written a letter to the leaders of all the leading political parties in India, explaining the reasoning behind the government's decision to allow FDI.

Here is the full text of the letter;

As you are aware, the Union Cabinet has taken a decision for liberalization of the Foreign Direct Investment (FDI) policy in Multi-Brand Retail, which holds the potential of transforming rural economy and unlocking the supply chain efficiencies in the agri-business.

The policy has evolved after a process of intense stakeholder consultation which commenced on 6 July 2010, when a discussion paper was floated by our Ministry. Comments from a wide cross section of stakeholders including farmers associations, industry bodies, consumer forums, academics, traders associations, international investors were analysed in depth before the matter was deliberated by the Committee of Secretaries on July 22, 2011.

The matter was finally discussed by the Cabinet on 25th November and a view was taken to allow liberalization in multi brand retail. In doing so, we have consciously adopted a model with a distinct Indian imprint, recognizing the complexity of Indian society and the competing demands of different stakeholders. Over the years, while we may have transformed into a service led economy, yet even today India primarily resides in the villages and an overwhelming majority of people are dependant of agriculture. It is a tribute to our farmers that India is the second largest producer of fruits and vegetables in the world with an annual production of over 200 million tonnes. Yet, in absence of adequate cold chain infrastructure, logistics and transportation, our post-harvest losses remain unacceptably high. A large part of farmers produce perishes and never reaches the market. A complex chain of middlemen have a cascading impact on supply inefficiencies and prices as well. As a result, on the one hand farmers are unable to secure remunerative price for their produce, while consumer ends up paying more than 5 times the price secured by the farmers.

Opening up FDI in multi-brand retail will bring in much needed investments, technologies and efficiencies to unlock the true potential of the agricultural value chain.

The policy mandates minimum investment of $100 million with at least half going towards back end infrastructure including cold chains, refrigerated transportation, and logistics. We have also stipulated mandatory 30% sourcing from small industry, which will encourage local value addition and manufacturing. It will also unfold immense employment opportunities for rural youth and make them stakeholders in the entire agri-business chain from farm to fork.

I felt it my duty to dispel some apprehensions expressed by certain political parties. In formulating this policy we were conscious of the livelihood concerns of millions of small retailers.

Informed studies of global experience has revealed that even in developing economies like China, Brazil, Argentina, Singapore, Indonesia and Thailand, where FDI is permitted upto 100%, local retailers have found innovative ways to co-exist along with organized retail and are integral to the organized retail chain. In Indonesia, even after several years of emergence of supermarkets, 90% of the fresh food and 70% of all food continues to be controlled by traditional retailers.

In any case organized retail through Indian corporate entities is permissible in India and the experience of the last one decade has borne the small retailers have flourished in harmony with the large retail outlets. Even then, we have therefore taken a view that in India we may permit FDI upto 51% equity and roll out the policy only in 53 cities with a population of more than a million. In the rest of the country the existing policy will continue, which will ensure that the small retailers are able to access high quality produce at better price from the wholesale cash and carry point.

We were also mindful of the imperative of ensuring food security for the poorest of the poor and have therefore retained the first right of procurement of food grains to rest with government for the public distribution system.

Concerns have been expressed that the multinational companies will resort to predatory pricing techniques to drive away small retail. You are aware that the Competition Commission has been established by law to ensure that such practices receive great scrutiny and I have specially discussed the matter with the Chairman of Competition Commission to build in regulatory capacities to ensure necessary checks and balances. In any case, you will appreciate that predatory pricing works in markets with high entry barriers, which is not the case in India.

The Indian consumer will undoubtedly gain significantly from this step as they will be afforded much greater choice, better quality and lower prices. In the medium term, even RBI governor feels that this step will have a salutary impact on inflation.

I have had occasion to discuss the matter with a wide cross section of all stakeholders, including farmer association, traders, consumer organizations, industry leaders, economists and there is an overwhelming case for introducing this policy. I am sure that being a political leader of long standing and experience, the benefits of this policy for the Indian citizens will find resonance with you. Policy initiatives taken in larger national interest demand political leadership to rise above partisan politics to create a healthy bipartisan consensus. This has been the strength of Indian democratic traditions.

I look forward to your personal support and understanding in the roll out of this policy for the larger public good.

………………………………………………………………………………

It is anybody’s guess if this letter would make any difference though in the current situation. India has been witnessing a rare camaraderie cutting across  political parties which have taken a united stance against the Government urging it to roll back the decision to allow FDI in Retail, which looks unlikely though. In the given scenario, atleast 25 cities out of the 53 which qualify for the criteria that has been set (above 1 million population) are covered under those states that have not welcomed FDI. India INC however has voiced its opinions, most of which is pro-FDI to say the least. For the next few days, if not a few weeks the entire world (read: Business houses) would be watching how things turn out here.

Watch this space for more!

What Retailers can learn from Kingfisher Airlines

The past few weeks would have been one of the most tumultuous for India’s five star Airline, Kingfisher! The Airline and its promoter Dr. Vijay Mallya were in the news (and continue to be) for all the wrong reasons. The India Media which I personally respect a lot were making some scathing remarks and reports all of a sudden about the airline’s business health although it knew about it for many years now being a public limited company. With a debt exceeding Rs. 7,000 Crores (USD 1.80 Billion), Cash-and-carry of Fuel at airports and a few flights grounded for reconfiguration of seats, the Airline was abused by one and all including those who otherwise held it in high esteem. It was common to see many passengers at airport lounges discussing their wisdom and advising how the Airline should be run and how the promoter and the Management can do better. These were some of those who earlier yearned to be seen in the Kingfisher Lounges at airports! In fact, some subscribed for the Kingfisher-Amex credit card so they would get free and immediate access to these Lounges (obviously not for Kingfisher parties which were for the most elite). And some would go any length to get a Kingfisher calendar (in the same lines of a Pirelli calendar). Serious. No Kidding. Anybody who is somebody had a word of advice for the airline. They should do this; they shouldn’t have done that and so on. Naturally (sic).

I am not an Aviation Expert or one who shares Management Consulting for free. I have my own thoughts about the airline, and those are my views. Running a USD 2 Billion empire and being the second largest liquor company in the world (UB is expected to reach the number one position sometime in 2012), I believe Mr. Mallya and Co. knows their business best despite the unconventional ways of how entrepreneurs run their business (rare to see them plunge in Horse & Car Racing or hosting the most enviable parties at Monaco & Monte Carlo). The airline is going through some turbulence and I am sure they would come out of it sooner than later. Whether someone picks up a stake in the airline or if the Banks bail them out is one thing, but the exemplary five-star service which Kingfisher introduced is something that is worth living for. As eminent scholar Swaminathan Anklesaria Aiyar said in his recent article, “Kingfisher is worth saving!”

There are some interesting learning that our Retail Industry could take from the state of affairs of Kingfisher, which I have listed as below;

Scale-Up but at what cost

The airline was founded six years ago and has hence scaled up reasonably well, in fact started flying international since 2009 after acquiring Air Deccan (which was seen as the main reason for buying out). However, some of the routes it was operating were just not profitable. A Few were as per govt. Regulations such as flying to the North East of India, but there were some routes that could have been avoided. I guess this applies to Retailers as well. In a quest to expand their presence some Retailers like those in the F&B business such as cafes, speciality restaurants, etc. enter new cities and towns although they would just not be profitable ever! For Ex., the number of staff who are required to manage an outlet, a region & a territory would just not make sense unless the number of stores are reasonably big.

Being Everything for Everybody

At the India Retail Forum in 2010, Mr. Kishore Biyani of The Future Group made a statement which many of us in the industry vouched for – “A Retailer cannot be everything for everybody!”. Such powerful words. And makes so much sense. This applies a lot especially for Luxury Retailers. One thing that Kingfisher did was to position itself for the fashionable few with all its flamboyance and exclusivity. Later, when it bought out Air Deccan, it created a platform in the low-cost segment with “Kingfisher Red” which was recently scrapped off. In the meanwhile, Kingfisher was offering differential service patterns across its flights – some were served hot food on the house while some had to pay exorbitant prices for cold sandwiches!

Price Matters – Discounts don’t work all the time

In tune with many other airlines offering everyday low fares, Kingfisher was also pricing its fares accordingly. This, I believe was one of the earliest and biggest mistakes the airline did although it had an option not to do so. Many Retailers, to gain easy and quick market share especially Hypermarkets and Supermarkets work aggressively on their pricing and create hundreds of loss-leaders. That way, they attract footfalls in the initial stages although they would never be able to lift prices in future. This is a dangerous strategy that Retailers should keep monitoring constantly. Although it is fine to change the market positioning once in a while, one has to be careful in the long-term.

Competition – Creating a Niche for oneself

Over time, Competition will increase, irrespective of which business one is operating in. For Kingfisher, it was initially the low cost Indian counterparts and over time, International airlines were also competing for market share. This applies to Retailers such as those in the Fashion segment. It is but natural that international brands would enter India eventually, given the potential the 10 million plus affluent households we have which is their main target segment. This should be part of the Strategy and not a knee-jerk reaction.

Managing the Media

Most importantly, Media should be well-managed – always. To say the least, lesser the better. Kingfisher has been the darling of the Media, with all the red short skirts, the sexy parties and those PYTs who are partying. Every move of the airline has been well covered and captured right from the first page, the Page 3 as well as in the last pages of the newspapers (the sports pages, usually). TV Channels have never missed covering its important times, and there is even a channel dedicated to the Good Times! Most Retailers fail to engage the Media well – either they are over exposed or under-exposed. Well, its worth discussing the business priorities and problems from time to time to- and with the media, rather than bringing it all at once. The recent discussions and view points on allowing FDI in Retail is a great example. Many Retailers, who were initially reluctant on the subject have now done a volte-face because they are cash-strapped by agreeing to bring in foreign retailers in to the fray! This stance will affect them sooner than later, with the media as well as their consumers.

Life’s lessons come from various quarters all the while and this time it is in the form of Kingfisher airlines. It is up to us to make good use of wisdom, irrespective where it comes from.

Hypermarkets–The latest poster boy of Modern Retail

The first thought that came to my mind was – “Will this store be THE game changer for this Mall?” Not that it had weak anchors otherwise, but somehow this store, I believe would attract most number of footfalls. Time will prove, and I hope my assessment would be correct in this case too. I am referring to HyperCITY from the K Raheja Group which opened a few weeks back at Royal Meenakshi Mall - Hulimavu, a lesser known suburb in South-East Bangalore which houses one of the largest new-age residential settlements of those who are employed in IT, ITES and the BPO Industries, mainly due to the cost effective availability of housing requirements as well as reasonable accessibility in terms of time and distance to their respective workplaces. A maiden attempt by a group of enterprising entrepreneurs, I would say this is another brilliant model for Neighbourhood malls – self sustained with most aspects of modern retail within its precincts. Other anchors include Cineapolis, the Mexico based multiplex chain with its first cinema in South India, CROMA – the electronics store from Tata Retail (TRENT) and many others.

The store is located on the upper ground floor facing the main entrance and the lower ground floor of the mall with direct access to the basement parking areas – a smart move by the Retailer to encourage shoppers to enter the store directly after they park their vehicles.  However, after finishing their shopping from the Upper ground floor, one would have to pass through the lower floor to access their cars – a bit of walking around the store though, which could be inconvenient during peak shopping hours. The store is well laid out – the lower ground floor offers Grocery and other Home needs while the upper ground floor with all other categories including Electronics, Toys, Apparel, Furniture, even Bicycles and many more. My guess is that the lower ground would remain more crowded – for two reasons; one that it has brilliant view from outside and would naturally attract mall visitors, and two that it houses the core categories which shoppers would come looking to save for – grocery, fruits and vegetables and household items. What I liked the most was the “fresh section” – Maybe it was the first day and hence everything looked very nicely displayed but still, the way the categories were planned was commendable. Also, they are located deep within the store, another smart idea to pull customers inside and thereby making them walk through the store. Meat & Poultry located close by could prove to be a disadvantage if the exhausts and HVAC are not maintained well – an issue that many retailers are trying to grope with.

The store interiors are typical of a Hyper – no false roofing, basic tiles on the floor, tube-lights running through the length and breadth of the store and focus lights on merchandise that’s on offer. While it does reduce the Capex to a large extent, it also showcases the store as being simple and straightforward – a stark contrast to the luxury stores at high-end malls that sometimes stink of grandeur and austerity! After all, hypermarkets should also look what they profess – savings, savings and savings. And HyperCITY is indeed very good at it. On the store launch, Mark Ashman, CEO, HyperCity Retail (India) Ltd, told the media, “HyperCity is committed to fulfilling the aspirations of the local people by providing them a world-class shopping experience. Our customers will enjoy the convenience of international shopping from over 44,000 products at great value under one roof.” And all this over a mere 60,000 sft.!

With their continued focus on convenience, experience, quality and savings, there is something that this Retailer has been doing right. Apart from stacking the right merchandise, I guess its the speed at which they have been growing. Often accused (not in a real sense though) of being slow in terms of store expansion and growth, HyperCITY has got its act right. With only 10 stores across the country, the group has managed to understand the business well – they have opened at interesting catchments across cities to ensure that they are not just in the race to grab market share but also to make money at the store level. With an investment of upto INR 2 Crores per store, the Retailer has been cautious about its overall Operational profitability which seems to be getting better by the day. Specific to this Mall, none other than the Hyper is going to be the the main anchor that would attract thousands of shoppers every month! Those who come to shop would indeed pass through the other Retail stores, Food Courts & Restaurants and m\Movies would complete the entertainment bit as well. This store is not an exception, but Hypers would become the Poster boy of Modern Retail and the Darling of Mall Developers soon.

Best Price - Best in Class!

 

I have seen a few abroad, I have read a quite a lot but today was the first time I was part of the inauguration of a Hypermarket Store. The sixth Cash & Carry store of Bharti-Walmart, rightfully named “Best Price” opened its doors for customers today at Ludhiana. Spread over 50,000 sft on a single level, the store has almost all categories including Grocery, Fruits and Vegetables, Fresh Meat, Personal Care, Home Needs and Home Care, Electronics and General Merchandise. Café Coffee Day is the only F&B point, right after the cash counters – smart planning by the store designers. This is the third CCD after opening within Best Price stores at Amritsar and Jalandhar. Addressing a small gathering of the Press & Media, Employees, Vendors and Guests, Mr. Rajan Mittal, Vice Chairman of the Bharti Group emphasized the relevance of Organized Retail and such formats in the current Indian scenario. He expressed his pride that the group was able to open at their hometown of Ludhiana where he had lived for over 20 years and thanked well-wishers for their stupendous success. Drawing an example of the telecom industry which was in its nascent stage fifteen years back, and which was fully controlled by the Government through its own bodies, he said that the sector was opened up to private players and today, India has a remarkable tele-density. Similarly, the group is pioneering Organized Retail through two formats, the B2B model (Best Price) and B2C model (Easy Day markets) in association with Wal-Mart, the world’s largest Retailer. He also drew comparisons of how China had opened up Organized Retail, how employment is generated and millions are benefitted. Mr. Raj Jain, President of Bharti-Walmart said that the company intends to expand outside of Punjab in states such as Chhattisgarh, Madhya Pradesh, Rajasthan etc. South India would also be a focus with one out of the three Distribution Centers expected to come up at Bangalore. He explained how small retailers can benefit immensely by becoming members of the Best Price format – registration is simple, just a few documents to be provided and patrons can benefit from the prices offered by the store. To ensure only genuine buyers are using the facility, he said that the membership is renewed annually. Credit Cards are not accepted but Kotak Bank, which is the strategic partner to the Retailer, provides 14 day’s credit to members who are part of its own credit program.

While the discussions on FDI is raging all along, Mr. Mittal expressed that the intellectual debate was over and it is now time to act – to open up the Retail sector and allow 100% investment across various formats. The white paper on allowing FDI was published by the Government and the industry has replied their thoughts and concerns. Currently 100% FDI is allowed only in the B2B model while 50% FDI is allowed in the B2C formats, although foreign companies can invest upto 100% in single-brand Retail. Such investments would allow multinationals to invest in back-end supply chain, only which would fuel front-end business. Bang on.

Well. It is easier said than done but eternal optimists like me who intend to spend our lifetimes in this ever exciting industry believe that this should happen sooner than later, for the larger benefit of the society. If one such store can offer direct and indirect employment to over 200 people, it is not so difficult to gauge the overall employability that the sector can generate. Currently, over a million people are part of Organized Retail in India but this number should increase significantly – by 5 times or more in the next 10 years, if only the Industry is allowed to grow. Specific to the Cash & Carry format, small traders and retailers can benefit immensely, thanks to the EDLP or “Every Day Low Pricing” philosophy (although founded by ASDA) but  implemented aggressively by the Grand Old Man of Modern Retail, Sam Walton – the founder of Wal-Mart. He believed that consumers must benefit everyday with lower prices – the reason was two-fold – one, that customers would not hoard commodities for the future; two, that they would visit the store more often, a smart way of driving repeat footfalls. For a nation that has over 10 million small and medium retail stores, India doesn’t have even 50 Cash & Carry Stores! Metro AG, the German Retailer opened for business in 2001 and operates half-a-dozen stores, while the French Retailer Carrefour commenced in 2010 and is still studying its first store located in the suburbs of Delhi.  The Future Group and Reliance Retail are also carefully monitoring and are expected to launch their own Cash and Carry formats soon. Expect a lot of action in this space. And if you are a professional running your own business, be sure to reap rich benefits from such stores. Long Live, Organized Retail. 

Low Cost: It’s all about perception!

There is a famous saying doing the rounds in recent times: 19^th Century globally was about roadways, 20^th century was about railways and the 21^st century is all about airways. How true!

Mainline media was abuzz over the past weekend about the most recent development in Indian Aviation – Sun Network owner Kalanidhi Maran had purchased a strategic stake in his personal capacity in Spicejet (IATA Code: SG), the second largest low-cost airline in the country by market share. While the deal has been on the table for over 3-4 months, the timing couldn’t have been better. Passenger and Cargo traffic is at an all time high since late – 2008 after the global recession and the US sub-prime crisis. Major airports such as Delhi IGI, Mumbai CSIA and Bengaluru International Airport are squeezed for space and the check-in / security queues during peak hours could take as high as 30 minutes per person. Spicejet, apart from other low-cost airlines such as Indigo, Go Air, etc. have been in operation for around five years, ever since the first low-cost airline in India, Air Deccan was launched. It has carved a niche for itself with its on-time performance and crew service standards just like its main competitor, Indigo. Jet Airways, India’s premier airline and Kingfisher, the only five-star airline in the country, also have their respective low-cost avatars, Jet Konnect and Kingfisher Red respectively, which directly compete in the same price segment.

So what’s with a media baron who is the leader in his own right in TV (Sun TV networks), Radio (S FM), DTH (Sun Direct) and many other related businesses got to do with Aviation? His critics slammed saying he lacks experience and exposure in the business to which he replied “CEO needs core competence; Chairman needs foresight”. Well said Mr. Maran. After all, he had purchased an entity which was operating in the low-cost segment. The concept of low-cost and low-fare have been misread in India for some time now. Air Deccan was actually low-cost and low-fare – the airline had minimal usage of resources (human and others) compared with many other scheduled airlines such as Air India and Jet Airways. The in-flight services were minimal and water for drinking was being sold – contrary to an almost Indian way-of-living “Athithi Devo Bhava” (Guests are treated like God). World over, low-cost airlines are the ones who are faring well even during the slowdown. That’s because their business model is like that. Scheduled airlines in India are competing on price but retain many other value-added services, which is what costs them and like how! A quick comparison between various airlines revealed that the fare difference on low-cost and scheduled airlines between Bangalore and Delhi if booked a week in advance is not more than Rs. 800/-. While Spicejet and Indigo offer the ticket at Rs. 5,476, Jetlite at Rs. 5,497/-, Jet Airways at Rs. 5,548/- and Air India at Rs. 6,210/-. 

There is a lot that can be compared between Aviation and Retail. Global experts on Macro-Economics say that for a buoyant economy, Aviation must grow twice the rate of the national GDP. That’s been the case in India since early 2000s, barring a few months of turbulence since mid-2008. The same applies for Retail. Both industries propel consumption and reflect growing consumerism and aspirational affordability; both bring in healthy competition and the uncompetitive are flushed out within a few years; both Industries grow only by scale – larger the number, higher the economies of scale. Both industries are a favourite for international players driving FDI into the country. Both provide direct and indirect employment for thousands of people (although aviation globally is reducing the number of staff per 1,000 pax, this number would continue to remain high in India due to localization issues). And both can work pretty much independently without Government support although policy decisions do affect the functioning of the industries.

Organized Retail has been growing at over 15% CAGR for leading retailers ever since they came into foray during the last decade. The highest growth has been for retailers nicknamed “Hypermarkets” led by Big Bazaar, a Future Group entity that commenced business in the year 2001 at a nondescript VIP Road, east of Calcutta. And the rest, as they say has been not just history, but historical! The group has managed to open over 140 outlets, over half of which were during the past 4 years. Other players in the same business include Hypercity (by the Rahejas), Star Bazaar (by the Tatas), Reliance Hyper, More (by the Birlas), Spar (by the Landmark Group of Dubai), Total (by the Jubilant Group), Easy Day (by the Bhartis) and many other local and regional players. The idea was simple – lease a big box location; project the business as low-cost, sell atleast 100 items at the lowest price possible and communicate the same en-masse. By attracting thousands of shoppers to visit the store, Retailers look to sell their products in large quantities thereby managing better economies of scale. The business would become profitable over a period of time, but only with more number of outlets selling more SKUs.  Not all the items in a Hyper are always low-cost; At the end of it, it’s all about perception – of Low-Cost. Hypers reinforce the fact that the key household items are below the selling price in the local markets; this acts as a bait to attract shoppers to visit the store. Over a period of time, consumers get hooked to the idea of shopping in a relaxed, convenient, hygienic environment where they could also save some money!

So whether it is a Low-cost airline or a Hyper, its all about perception. And there are many who are trying it hard. Only some will succeed. After all, those who do so will have people at the helm with foresight. It surely helps.