Monday, January 19, 2009

Organised Retail

The retail is booming in India. The present share of organized retail is hardly 4% of the GDP and is all set to boom with multiple malls mushrooming everywhere. It is expected that the organized retail will grow at 21% by 2015 where food, grocery and general merchandise being the leading category.

But the big question is that can it give serious competition to the 12 million retail outlets in India.

One of our Profs shared a rather interesting perspective. There is a limit to the extent organized retail can grow. This is because there are many positives of a small mom and pop store. First is the personal touch. In most of the cases, the next door kiryana wala knows you by face and over the period of time knows your choice. He needs no sophisticated IT systems to know this and that you cannot get at a big store – no matter of how much you improve the service delivery levels.

Another noticeable difference is the provision of credit. This derives from the above point only. Almost on each visit to my kiryana dukaan, I can see him giving off stuff without cash and writing in his small booklet about it which he collects at the end of a specific period. Yes, there are credit cards today but what about a daily wage earner. If a person living his life on daily earnings falls ill for a couple of days, he will have nothing to eat for those 2 days if our credit giving neighborhood retailer is not there.

There are scores of positives in favor of large, organized malls. As a consumer there are many schemes and offers whenever I go to a Big Bazaar but again ‘I’ am not India. 77% of Retail market still is in the 5500 towns and 6 lakh villages of India and the figure will be still around 60% in 2025. And as managers we need to know if someone is comfortable going to a big mall for small items or if there is a tendency of ‘impulse purchases’ (large retailers thrive on that) in smaller towns or if people prefer fruits and vegetables in a AC hall or from a cart which comes by every morning. 

*Numbers from a report by Tata Strategic Management Group

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