Beating the blues

 

 

Kishore Biyani, MD, Pantaloon Retail India Ltd. said in 2006, "In another five to six years, there’s going to be great and radically progressive changes in the format of retailing, which is going to change consumer’s definition of shopping." Actually, innovation in Indian retail has been continuously witnessing innovation in formats ever since it got the 'organised' push. And even in the slowdown, which has compelled The Retailers Association of India to slash its outlook to 12-15% (from 30% earlier) growth; there are a host of new ideas buzzing around, and some of them have actually seen the light of day.

India has already witnessed the transition from traditional tea and coffee stalls to organised chains like Barista Lavazza, Costa, Passion; and from local beauty parlours to health and beauty centres like VLCC, Kaya, et al. However, influenced by western culture and with increasing aspirations of the Indian middle class, a host of other transitions can be observed too. From dhobhis to hi-tech dry cleaning and laundry chains, from car repairing workshops to multi-brand automobile service and sales networks, from local transporters to organised logistics services; the world of retailing is in constant flux.

Take, for instance, Wardrobe, a hi-tech dry cleaning and laundry chain started with an initial investment of Rs.150 crore, which has 40 fully functional outlets. According to ACNielsen, the estimated market size of the laundry market is Rs.3,000-3,500 crore, with daily demand pegged to increase by 20-25% annually. Given the market requirements, the dry-cleaning chain offers centralised pick and drop centres for garments and highlights the usage of ‘Reverse Osmosis’ water systems to clean garments. "Irrespective of slowdown period, people of certain profile and at certain occasions continue to wear certain type of garments and the desire to look good does not get reduced. Thus the demand for quality fabric care remains unaffected," says Dr. A. Srivastava, Executive Director, Diamond Fabcare Pvt. Ltd. (owners of the brand Wardrobe). Similarly, Jagdish Khattar, former MD, Maruti Suzuki, too has come out with an innovative business model, which envisages an independent multi-brand automobile service and sales network called ‘Carnation,’ which provides car repairing services, body shop solutions, et al and maximizes the ownership experience. Om Logistics, a third party logistics company has also joined the bandwagon and deals in offering state-of-the-art value added solutions in multi-modal logistics to Indian corporates and multinationals with a single window integrated logistics service for all elements of the supply chain. It’s a one-stop solution for all logistics requirements for companies. But is slowdown a good time to venture into such formats? Actually yes. Firstly, investment required to give shape to a business model during a slowdown is less compared to that required during the boom time. "In recession, established players hold back their expansion plans and cut down on their advertising and marketing budgets, which, according to me, is not the correct strategy. This gives a good opportunity to new players..." says a Mumbai-based marketing analyst. Venture capitalists, who are wary of funding big players, actually find investing into innovative and robust business models with guaranteed returns as a better proposition. Furthermore, as Srivastava opines, "Any business model takes time to mature and it is very important during that time that non-serious players do not enter as copy cats and spoil the image... This period in itself is entry barrier for new players."

However, slowdown is not the only reason why such players have emerged. The changing demographics of the urban Indian middle class and its ability to spend have provided a conducive environment for such players. Chains such as Barista Lavazza and Café Coffee Day would not have done so well, had it not been for the urban Indian willing to shell out those extra bucks for a cup of tea or coffee. Today, it has become a part of the lifestyle of people in the cities to hang around such coffee chains and the trend has already trickled down to small towns and cities. Similarly, the health and beauty care segment is also a fast growing category with over 50% growth rate. This clearly reflects changing preferences of the customers.

The emergence of varied formats of retailing has induced an increased level of confidence in the Indian consumer, who is no more wary of entering into a retail store. "Organised retailing offers better service and after-sales services to the customers, which traditional outfits don''''t. Hence, innovative retailing formats will help drive the growth of retail," says a retail analyst.

However, it will be challenging for these players to sustain once the financial turmoil settles. Big retailers are currently struggling with the slowdown, but their roll back should be considered to be temporary. Huge cash reserves, efficient operations systems, robust back-end and skilled man-power are very important for any sort of expansion, and the large players will be able to command these resources easily when times improve. If these big retailers then jump into the bandwagon and turn into direct competitors, these new formats will find themselves quite ''''innovatively'''' tested.