India Inc. versus Rest of the World

The Great Indian Political Tamasha, the general elections are over and as we await the results and the new political equations to take shape, there is a positive vibe created in the business arena. The stock markets are breaking into new highs every single day and the likelihood of a pro-growth and investment financial policy is building the new hope.

The biggest talk is around a change in the FDI policy and we are still in fear about 100% FDI in retail sector. Retail is a primary sector catering to the billion plus Indians directly and while it might be the most attractive area for FDI, India Inc. has fears that it has the potential to destroy the domestic retail segment.

Honestly, I find this as no threat at all and have complete faith in the enterprising attitude of Indians. Retail in India may get organised, supply chain may get streamlined and middle men may find it difficult. But increases in competition from both national and international players is likely to erode the margins and pass on benefits to the consumers. But will it destroy the mom-pop shops or the local baniya- unlike many I don’t think so.

Organised retail in India has been around for close to 15 years and has had little impact on the so called unorganised retailers. Pantaloons and Future group along with Spencer from the south might be credited with the first noticeable impact in modern retail in India, many others soon entered the arena. Today, along with Big Bazaar, More (Aditya Birla Group), Reliance Super Mart, Star Bazaar (Tata), D-Mart are all selling from groceries to clothing under the same roof. Competition is growing with e-retail has now entered every segment (even groceries).

But this has still not eroded the local baniya, vegetable vendor or clothing store. Yes, there is a change in buying behavior from the urban middle class who have changed to modern retail. But there are some factors which are very intrinsically Indian which have kept the local retailers alive. I sight these as a reason for closure of some of the Big Bazaar outlets and change over to KB’s and the end of Subhiksha retail and Truemart (a now defunct retail chain by Piramal).

So what differentiates Indian compared to the rest of the world in terms of buying behavior? Three simple rules: Indian customer appreciates being treated like a king, shown a variety of products with a recommendation from the sales guy and that opportunity to touch and feel product before they buy.

Let me pick a small example of buying a shirt to illustrate. What consideration goes into picking a shirt? Colour, pattern, design, size and pricing- mostly standard. But what about variety? How often do you leave a store in a mall saying I didn’t like anything and how often does it happen in a local store? Spell a desire for X style in Y colour in a Z size and if not available today, a local store will get it organised in a few hours or a day. If there is time- they would even customise.

The difference lies in the attitude. For a store in a mall or a super market; you are just one customer; for a local retailer, the attitude changes to a feeling of being the customer. The difference in salesmanship from someone in a mall to a Sindhi/Punjabi salesman in Gandhi Market is amazing. I challenge anyone to walk into a store in the market and walk out not having bought something they wanted.

Let us talk groceries now. Most of the local groceries in Mumbai are run by the Kutchi or Marwadi communities. Stories about how these people manage their business and finances are legendary. But apart from being a shrewd business oriented (and not stingy as shown in movies) and community driven set, they are also enterprising beyond imagination. Let me just illustrate how well they function by a live example.

Bhandarkar Road in the prime Deccan area in Pune once had an outlet of Spencers, Trumart and an assortment of local kirana stores. The advent of Marwadi run shops slowly entered the area and simply based on their enterprising attitude and range of products eliminated shops run by local Marathi people (Not a difficult task considering they are known for not so great customer outlook and pride for ‘We have no branches’).

The next they took over the organised market; armed with very simple tools- service hours of 6 am to 11pm and free home delivery in two hours- irrespective of order value. Trumart meanwhile lost the plot under management issues and exited the arena, leaving Spencers to wage a lone battle against the local stores. This too did not last long and today has resulted in a scenario where the entire road has nothing but two Marwadi grocery stores catering to them.

Bottom line; Indians engaged in the retail sector are culturally very strong and enterprising to be subdued by any form of retail invasion from rest of the world. If any, it will only inspire the existing organized retailers into improving their standards and offer better quality, pricing and service to the consumers.