Saturday, September 15, 2012

FDI in Retail now a reality. Why get the opinion of high profile ( again a media/PR creation!) interested parties only? I wish media took the opinion of all stake holders and gave a balanced view



Am reposting an article I wrote in 2005...yes 2005! KIndly also read my later post
http://gpsudhakar.blogspot.in/2011/07/kirana-stores-beginning-of-end.html
which is about how we are going to shortly have some wealthy entrepreneurs





Will the entry of Wal-Mart kill the neighborhood Kirana Store?




Prime Minister Manmohan Singh has assured Wal-Mart to allow FDI in retailing very soon, and has also told Wal-Mart about the concerns in India about the likely fate of local retailers and fears about loss of employment opportunities.
There are nearly 200 + urban malls which are under construction, of the 600 planned. Multinational retailers can get an expeditious entry into a large market where the share of organized retailing is galloping. Wal-Mart, Tesco, Carrefour and many others are waiting in the wings for the government of India’s approval of FDI. The Government has however decided to delay the issue, first to please its left partners and to use this as a bargaining point at the next WTO talks. India wants to offer to open its retailing in exchange for something valuable like greater access to international markets. Deliberations, delays will probably be there, the entry of big-box retailers is a surely going to happen – The question is only one about timing.

We are a nation of shopkeepers with more than 5 million shops, 97% of them in the unorganized sector. Thanks to the ubiquitous kirana store, Indians are used to buying their convenience products very close to their homes. Recent Research by a large international research company indicates that ‘convenience’ is a critical shopping decision parameter for Indian consumers.

Retailing has been growing at a hectic pace thanks to continuing urbanization, growing middle class, and macro economic growth. Organized retailing is also making steady growth and is possibly accounting for a major part of the growth of retailing in the last couple of years.

The possible impact of big box retailers is like many things in life: a mixed bag.

Positive impact of big box retailers
The major advantage of the large retailers is that they have access to efficient supply chains, which can reduce prices for customers. Many jobs within the retail industry and with those providing support to organized retailing will be created. Sales associates, people greeters, store managers, back-end positions across the supply chain in purchase, vendor development, accounting, mall maintenance, food technology, support services like Interior designers/decorators, packaging design and supplies are some of the new employment opportunities that have started to emerge and will deluge as soon as the 200+ malls that are under construction are ready and FDI begins to flow in.

The farmer is likely to gain by reductions in wastage, and better realizations for produce. Good farmers might get access to foreign markets too, through these global retailers.

Small and medium enterprises that supply ‘private label’ products to big retailers will find opportunity without the big bucks needed for brand building.

Supply chain efficiencies will benefit society at large. On one hand Mr.Biyani of Pantaloon has been quoted, as saying that one of the mistakes his group made was the investment decision in the cold chain, on the other hand Wal-Mart who are yet to enter India also emphasize their plans of investing in a cold chain. A good cold chain will be very useful, only thing is that someone has to start at harvest stage itself – stuff like pre-coolers and other items closer to the harvest, not just cold transport and cold stores.

According to Wal-Mart, “Wal-Mart’s impact on local business is based on the philosophy of operating globally and giving back locally. Studies show that new businesses spring up near Wal-marts and existing stores flourish as they take advantage of the increased customer flow to and from our stores. ” Kenneth E. Stone, Professor of Economics, Iowa State University; Georgeanne Artz, Extension Program Specialist, Iowa State University, and Albert Myles, Extension Professor, Mississippi State University, in their 10 year study of the impact of Wal-Mart on smaller cities; which probably is the basis for Wal-Marts statement, developed two primary conclusions that are worthy of note.
“The entry of a new super center in a community can have dramatic implications for existing merchants. Two general rules-of-thumb summarize the economic impacts of a new super center on local merchants:
Rule-of-thumb 1: Local merchants that sell merchandise different from the super center or other big box stores tend to fare well and may gain sales as the additional traffic generated by the big stores spills over into their stores.
Rule-of-thumb 2 is not so pleasant: Local merchants that sell the same merchandise as the big stores will probably face a reduction in sales because of the difficulty in competing with major chains.”
Organized retailing will get a shot in the arm with FDI, even as institutions and retail investors have recognized the value of Indian companies those are into organized retailing. Retailing provides an opportunity as another potential business to invest in apart from software and automobiles which currently interest small investors.
Whether consumers will get better prices is a debatable issue and we need to wait for the future to unfold, however consumers can expect greater transparency about products, better replacement/warranty policies, and best of all a much more pleasant environment to shop in. Car parking space, one stop shopping, every day low pricing, appealing product display, wide range of products, what else can the consumer ask for? Too much of a good thing must have a price!

Negative Impact of Big box retailers

The greatest fear is that small Kirana stores will be out of business soon, putting millions of ‘dukandar’ families in crisis. Remember that many of these families have run shops for generations and might not be trained or prepared for anything different from ‘dukandari’. The fear is well founded. Researches in many communities in USA, and recently in Poland have established that big box retailers do kill many small retailers. Organized retailing also means much lesser people required per unit of sales (efficiency!), which will cost society at large, in terms of unemployment. The study carried out by Kenneth E. Stone also confirms the negative impact on those shops carrying the same merchandise. What does a typical Kirana store carry? Rice, Wheat, Dhal, cooking oil, some local condiments-all well suited for large discount department stores. Some well paying jobs will be created; many small shopkeepers will be affected.

That price will be less is also likely to be a misnomer, especially if one goes by the experience in Food-world and other such chain stores. Usually the big box retailers will have a ‘loss leader’-a popular product at a low price, well advertised to attract shoppers. Everything else will either be on par with small stores or more. People see the prices for the few popular items and assume that all prices are low. In course of time these large retailers will invest in more people, interiors and supply chain so much that they begin to become inefficient, passing on the burden of higher prices to consumers.

Also, whenever ‘private label’ is discussed, it is only as greater margin for the retailer, never as lower prices for the customer.

The Customer gains
Competition will only benefit the customer. While many, including large Indian retailers have confused low prices with greater value, International retailers will hopefully provide better value. We can definitely see better customer service, greater depth of merchandise, more convenient store timings, better packaging, and reduced rejects at these multinational retailers, and at every other retailer big or small who wants to survive.
What to do if you are an independent retailer
It is likely that much of what has happened in other countries in the evolution of retailing will repeat itself in India. Different formats will co-exist. It will be a long time before the handcart vendors of fruits and vegetables will disappear, specialty stores, halwais, and services like dry cleaning will continue to grow. Kirana shops that accept the new reality and reinvent themselves will survive and the inefficient ones have to go.

There are many books on how independent retailers can survive the onslaught of big retail chains. The way is through better customer service, personalized service, unique product assortment by identifying niches in the market (and there must be many considering just the sub-cultures that form a city/town), and most importantly improve efficiency in purchasing and managing inventory professionally.


On Balance

In an interesting study titled ‘The Impact of Wal-Mart on Host Towns and Surrounding Communities in Maine’ by Georgeanne M. Artz, Iowa State University and James C. McConnon, Jr., University of Maine discuss a concept of ‘The net redistribution effect’
“It measures the net effect of Wal-Mart on the sales of the existing retail businesses in the host town. It is calculated by subtracting an estimate of Wal-Mart sales from the change in host town retail sales after Wal-Mart opens. Some businesses may gain sales as a result of Wal-Mart coming town; other businesses may lose sales and some may not be affected at all. If the net redistribution effect is positive, it means that there has been a net gain in retail sales for existing business in the community.” While this is not a concept so relevant to India just now, it is worth looking at it as it might point to the possibility of greater accumulation of retailing towards urban/suburban areas. We can expect that while FDI may impact the Kirana stores, many new retail businesses will surely emerge.

Wal-Mart is known to operate in many formats and considering that Indians seek convenience in shopping more than any other thing, they will probably look at formats that can bring their stores closer to consumers.


According to Harvard Professor Pankaj Ghemawat and Ken A. Mark, in their article titled ‘The Price is Right’ which appeared in The New York Times, Aug 3 rd 2005

“First, Wal-Mart hasn't just sliced up the economic pie in a way that favors one group over another. Rather, it has made the total pie bigger. Consider, for example, the conclusions of the McKinsey Global Institute's study of United States labor productivity growth from 1995 to 2000. Robert Solow, a Nobel laureate in economics and an adviser on the study, noted that the most important factor in the growth of productivity was Wal-Mart. And because the study measured productivity per man-hour rather than per payroll dollar, low hourly wages cannot explain the increase.

Second, most of the value created by the company is actually pocketed by its customers in the form of lower prices. According to one recent academic study, when Wal-Mart enters a market, prices decrease by 8 percent in rural areas and 5 percent in urban areas. With two-thirds of Wal-Mart stores in rural areas, this means that Wal-Mart saves its consumers something like $16 billion a year. And because Wal-Mart's presence forces the store's competitors to charge lower prices as well, this $16 billion figure understates the company's real impact by at least half.

These kinds of savings to customers far exceed the costs that Wal-Mart supposedly imposes on society by securing subsidies, destroying jobs in competing stores, driving employees toward public welfare systems and creating urban sprawl.”


Most large business groups are in organized retail or planning to get into it. Most have got hold of prime retail properties. My guess is that at least some of them have not got everything right. It will be difficult to run a retail chain like a large corporate managed by paternalistic top management. Professional retailing is all about ‘god is in the details’ philosophy and I hope a few of the Indian retail giants survive. Worst case, the Rahejas, Munjals, Piramals, Biyanis or Tatas may sell their retail businesses for a tidy profit to any of the giants planning to enter India.

Welcome Wal-Mart, India is virgin territory with the largest market you can dream of.

Thursday, April 12, 2012

Distance education - Looks like 'blended' is the success mantra!

At the Edex Conference in Delhi sometime ago http://www.edgex.in/ there were many talks about the technologies for education. Wile I did not attend all the talks, got a feel of the mood.It was mostly a crowd of technology lovers who were keen to apply technology solutions to higher education. My opinion is that more technology can be applied in K12 than in higher education because the very nature of higher education.

It appears to me that the future is in blended delivery rather than only campus or distributed.

Another topic that will grow in import is learning styles and matching technology to learning styles. This is already happening with audio lessons, video rich content and the like which cater to learners who prefer a specific medium.

What struck me was that discussions have not yet started on matching technologies to subjects. For example subjects where a large body of knowledge exists and is relatively slow in adding new stuff may be better using a didactic video lecture as compared to some software which is best learnt through peer to peer counseling. Understanding what is relevant technology to teach/learn a particular subject is yet to start; though it surely will soon as there appear very serious well funded researchers in this area. My retail background gives me these ideas...remember some product categories are well suited for online and others need the touch and feel.

Am hoping my employers will be the first to offer audio lessons that are easily downloadable for the MBA program. It will be a good start!
Do write in and let me know. Your views/inputs can benefit my sparrow brain a lot

Wednesday, April 11, 2012

Management & Engineering education - Capacity first, Quality next - are we at the tipping point?

Having attended the edge conference http://edgeforum.in/edge2011/index.html, I got many ideas from the speakers and some thoughts stirred in my mind too. There has been for sometime an argument that it is important to create capacity for management and engineering education as the gross enrolment ratio is low, students find it difficult to get seats, and most importantly the number of young people and number of people with a variety of skills required in the near future determined by the national skill development mission/corporation
is huge.

The recent Parthenon report on 'Private Universities in India: An investment in national development, discusses among other things that in a sector where brands are critical assets, private universities spend between Rs.50K- 125K
to aquire one student. The good news is that this reduces to Rs.25K in the eighth year.
We get educated to find jobs. Is this peculiar to India? I understand that in many countries higher studies are taken up to enhance knowledge more than anything else. In India where resumes are read,and interviews are held to find ways to reject candidates in view of the number of applicants, any degree/badge can set you up at an advantage!

The present scenario is that many B schools are finding it diffult to find students and the marble/granite lined engineering colleges in South India are running like the fourth week of a flop film. Have we arrived at the tipping point? Does it make sense now to focus on quality education, real placement support and such global quality metrics or can we continue to survive doling out degrees for a cost?

My own guess is that we have reached a potential inflection point and the argument that we must first create capacity is no more valid since plenty of seats are available. Focus on building well rounded or T type human resources is what educational institutions need to concentrate on for the sake of society and hopefully for thier own survival!

As it is, as one speaker said at this conference 'More jobs are being created for Robots than humans'. The addendum I would like to add is that it is far cheaper to hire a human robot than a machine robot! Sadly,We are not creating people with passion or those with critical thinking skills or with creativity... Robots. That is another story that will need to change soon

Thursday, October 27, 2011

Happy Deepavali or Diwali? Dasara or Dussehera?

Last month, what I assumed as a very innocuous request from my wife, to post a picture on her face-book page wishing everyone a Happy Dasara, turned out to be a ugly situation. The reason; how I had spelt Dasara. I spelt it as Dussera!
 In the late eighties, when national campaigns originated mostly from Mumbai and communications was a lot of trouble ( remember Remo Fernandez - 'Ode to Graham Bell), all copy was written in Mumbai. You had a Professor at the Mumbai University Kannada Dept  translating copy into Kannada. Today, with communications being so good and copywriters/translators available so easily in the virtual world, why is it that we still see campaigns that do not consider differences in spelling a national festival across regions? All it takes is a understanding of regional variations in how the festival is spelt in the English alphabet.  A copywriter living in Mumbai for say 20 or 30years with no regular touch with the region is a terrible mistake as the language, even if technically right, just does not connect. What do you think? Does it matter?
The right spelling is 'Deepavali' since that is what means a 'row of lights', the north Indian spelling is a result of 'shortening' the word. In any way you like to hear it.....Happy Deepavali

Monday, September 12, 2011

Top Ten Sites for Marketing Content in India


Based on my reader views, plan to make a list of top ten sites from India that are useful to students and managers in the area of Marketing. Some of the sites I am considering include

http://brands-india.blogspot.com/
http://drypen.in/
http://www.ramabijapurkar.com/default.htm

http://santoshdesai.com/

http://onqualitativeresearch.blogspot.com/

http://www.samsika.com/

http://harishbijoor.blogspot.com/

http://www.campaignindia.in

http://www.afaqs.com/

http://fmcg-marketing.blogspot.com/

http://marketingpractice.blogspot.com/

http://dranil-marketingmusings.blogspot.com/
http://www.cashcow.in

Please write in giving your ranking or selection for top slots and I will put up the top 10 hopefully on the first day 2012. The list is not exhaustive, you are most welcome to write in about other sites not included in the list ASAP.
What do you think about top te
n sites for marketing content? Based on quality of content, topicality, relevence to young managers and presentation.

Sunday, August 14, 2011

Middle Class Values - Is that another name for Dharma the likely saviour of the world?

Communist countries have not succeeded with the philosophy of sharing ownership and creating a classless society. On the other hand capitalist countries which adopted the central value of the individual have created  capitalist monsters who are so self centred that society will have to pay a very heavy price.

What is needed is for people to acquire the balance between the individual and societal requirements.
Warren Buffet, Narayan Murthy, JRD, all come to mind when you think of a simple life in spite of great wealth.
The other day N R Narayan Murthy was asked during a television interview  as to how he still helps with domestic chores when he has so much wealth. His response was about how he was from a middle class family. 'Middle class' is how one perceives himself/herself  in relation to society and is not really about location on the economic continuum. It is about values. Values of austerity, service, simplicity, living within ones means, family, and such other things. 
10% of the population in the U.S. controls more than 50% of the income generated. The divide between the rich and poor in India is also growing at an alarming rate. The impact of this economic phenomenon is having a great impact on society. I will not be surprised if we have a U.K riots type of situation in urban India in the next decade.
The answer is simple. Stick to the middle class values. Austerity and simplicity are not in the lexicon of urban India, however keeping society's needs and  responding responsibly are values that we can give up only at our own peril. We so easily forget that our children will need to live in a society created by our behaviour.
Dharma = 360 degrees integrated legal system that incorporates the needs of the individuals, family, society, country and environment. "it depends" is not about lack of clarity. It is about the need for circumstances and impact on various stake holders to be considered.

Do write in. I know this post is rambling random thought. Still blogs give us a place to express ourselves. It is like performing in a theatre where only the stage is all lit up. Just hope there is someone in the audience!

Saturday, July 23, 2011

Kirana Stores: The beginning of the end, Promoters of Indian retail companies: A new beginning with cash lined pockets

With the opening of the multi brand retail sector to foreign players being almost certain, Kirana stores will be phased out, thankfully however it might not happen over night. Every country in the world ( including the only 400+ yr old USA) have had a history of Mom & Pop stores. In the developed world more than 90% of retail is controlled by large chain stores and I am certain the same will happen in India, despite all the arguments trying to fool people into believing that Kirana will co-exist with  large retailers.

As a society, letting go of entrepreneurs to be  replaced by servants is really sad.

There might be some advantages of scale being passed on to customers, and surely efficiency in the sector will improve manifold with large foreign players.

To me, more than the opening up organised retail or its impact on Kirana stores, I love the strategy of major retailers of India.

A few years ago when the debate about allowing FDI had started, Indian companies screamed that it was necessary to give some time for Indian retail companies to build brands before foreign companies are allowed entry. Today all large organised retailers are very eager to open up the sector for FDI. The change in stand is not a change of heart but purely a pragmatic decision in the interest of promoters of the Indian retail companies.
Subhiksha, and Vishal are good examples of building the front end with very poor back end that resulted in failure. Had they had the ability to survive till now, and work on Market capitalization ( the Gayathri mantra of organised retail promoters in India) , they might have been picked up by a foreign company like many others are hoping to be today.


Recent IPO's in the sector have bombed at the retail stock market, more than one take over is begging revaluation/revised due diligence. Come large foreign retailers, Give Indian businessmen super returns for building great market capitalization and maybe dud organizations with some nice real estate potential.
From Sher Shah Suri who initiated Kirana, to India's famed PDS ( ration shops) , Indian retail companies and now global retailers it has been a long journey. Are there other sectors we can start Indian companies with a hope of selling them to global giants at a good price with opening up and timing support from government. Do write in. I am sure many of you think this is a cynical view, to me and hopefully to some of the readers this is a reasonably objective view!

Circa 2007
Biyani doesn't buy all that, arguing that "India is a nation of dukaandars (shopkeepers) and that enough retail talent is available. He also dismisses concerns about distribution and logistics infrastructure with a simple, rhetorical question: "Have you [in the recent past] faced a shortage of anything you wanted to buy?" Biyani scoffs at Wal-Mart's logistics and supply-chain strengths. "Where will they run their Volvo trucks here?" he asks, adding in a lighter vein, "They will probably have to have bullock carts and handcarts in their supply chain." Wal-Mart enters India
Will Wal-Mart succeed in India? Perhaps... but it won't be easy.http://www.freshplaza.com/2007/0213/re_in_wal-mart.html


Circa 2005

India : Retailers not keen on FDI within sector
July 20, 2005

Most of the retailers do not want Foreign Direct Investment (FDI) in the Indian retail sector emerged from the 'Retail 2005' seminar organised by CII in Kolkata last week.

Except for real estate segment, which is eyeing huge foreign (particularly NRI) funds want FDI to boost the industry future.

Clearly speaking out against FDI were Pantaloons Retail Limited managing director, Kishore Biyani and Vice-Chairman of RPG Enterprises Sanjiv Goenka who clearly outlined that there was no need for allowing FDI in the retail sector. 

A three year time frame to study the situation and then take necessary step in the the direction were sought by the opponents of FDI in the sector.

Some organised retailers are mulling to appeal to the Government on this issue. 
http://www.fibre2fashion.com/news/textile-news/newsdetails.aspx?news_id=2868

Circa 2011


Retailers up on FDI clearance report

Reuters Jul 25, 2011, 10.17am IST
Shares of Pantaloon Retail rose nearly 8 percent, after a government panel on Friday recommended opening up India's multi-brand retail sector to foreign direct investment, several dealers said.
"News reports that the Committee of Secretaries has cleared the proposal to allow foreign direct investment (FDI) in multi-brand retail is an unequivocal positive for Pantaloon, in our view," Morgan Stanley said in a note.
http://articles.economictimes.indiatimes.com/2011-07-25/news/29812719_1_multi-brand-retail-sector-pantaloon-foreign-direct-investment


Retail FDI to bring more choices for consumers

TNN Jul 25, 2011, 05.33am IST
According to Thomas Varghese, chairman, CII National Retail Committee and CEO, Aditya Birla Retail, "The move will bring in the required funds from all kinds of foreign investors into modern retail which was till date stymied for funds." Varghese said that once the funds come into India through the FDI route, it will usher in a phase of expansions. Once cleared, the move would offer Indian companies the option of selling a part of their stake to foreign companies enabling them to become debt-free. "For us as a company, the option to sell a stake comes into play in order to make ourselves debt-free. The FDI will throw open opportunities which will enable us to sell a stake and raise funds," said Kishore Biyani, chairman , Future Group, India's largest retailer which operates stores like Big Bazaar and Food Bazaar. "For us, categories like home, electronics will gain immensely if we bring in a partner. The industry has the potential and, with the opening up of the sector, can grow faster," said Biyani, who hoped that closure on the much-awaited policy change was just a step away.
http://articles.timesofindia.indiatimes.com/2011-07-25/india-business/29812247_1_retail-fdi-retail-industry-kishore-biyani

Saturday, June 18, 2011

Neuro Marketing Guru visiting India

Am delighted to have had the opportunity to have interviewed Mr Erik du Plessis, Top Boss at Millward Brown, South Africa. The recent book 'Branded Mind' from a senior researcher who has actually used neuro marketing techniques to draw insights for marketing success is surely worth a read. I hear Mr Erik du Plessis will be in India in the next couple of months to conduct a seminar.
http://www.brandconclave.com/news/brochure-2011.pdf
Am sure it will be a must for all 'qualitative market research professionals' and brand managers who have understood with consumers who have multiple identities, traditional segmentation bases may not be enough. Do have a look at the interview. It is on page 12. All the other articles in this market research supplement are a great read.

http://www.advantagemagazine.co.za/files/2011/04/Market-Research-2011.pdf