Extolling the efficiency and competency of Indian retail firms; Professor Piyush Kumar Sinha of IIMA (Indian Institute of Management, Ahmedabad) sheds some light on the discreet aspects of widely expected FDI in organised multi-brand retail in India and its effects on Indian retailers.
In an interview with Rakesh Neelakandan of Commodity Online, he is upbeat on the prospects of Indian retail firms even as he adds, “We have to evolve a lot, not just in terms of hardware but humanware, before we can think of a large scale adoption (of models by Indian retailers).”
Sinha has been the Chairperson of the Centre for Retailing at IIMA and is a faculty in the area of marketing and retailing. He teaches Retailing and Marketing Management to post graduate students and also offers courses on Marketing Management and Consumer Behaviour to the Ph.D. students.
Excerpts:
Commodity Online: What are the possible M&A scenarios that you see once FDI in multi brand retailing is allowed for?
Piyush Kumar Sinha: Retail industry, like many others, has seen consolidation. These are part of an industry phenomenon and retail is no exception. India has a unique distinction of its largest marketcap companies operating in the retail sector. I would not be surprised that many foreign retailers may be worried that they may be bought over by Indian retailers as most of these large Indian retailers are already global in their business operations.
CO: There is the relationship aspect connected with the so-called kirana-stores (mom-and-pop stores) when it comes to customers, that make them virtually invincible. Will it be possible for Wal-Mart to replicate the model? (Starbucks has done that, although in a different arena.) Is a coupling of ideas possible that would work out for India?
PKS: We must understand that small store have not been obliterated and would never be. The reason is simple. Their business model is very different from a large format store. Even a developed country like Japan is full of small stores. It would be difficult for retailers like Wal-Mart to replicate the small store model.
CO: Regarding the not-so-affluent middleclass: They may shy away from the Wal-Mart ambience, given its relative flamboyance. Will firms like Wal-Mart have to tone down their ambience in India?
PKS: There is no need to tone down anything for the fear of customer shying away. Retailers like Hariyali Kisan Stores, Chaupal Sagar and Aadhar have demonstrated this even in the rural areas customers are ready to adopt new levels of service deliveries.
CO: Is there any marked difference in the functioning of India based retail chains when compared to chains like Wal-Mart when it comes to sourcing and other activities?
PKS: Indian retailers are trying to adopt models similar to those practiced by retailers like Wal-Mart and Tesco. Their business is dependent on efficiencies that require attention to details. We have to evolve a lot, not just in terms of hardware but humanware, before we can think of a large scale adoption.
CO: Briefly, what ripple effects (in terms of sourcing, employment...all the way to CSR) do you expect when stores like Wal-Mart enter India by virtue of FDI?
PKS: The effects (are) already being seen. The response of kiranas and improvements of service levels in the industry across towns and segments are indicative of this.Why do we forget that these retailers are already present in the country. The current FDI policy change would only enhance their stake. They have been sourcing since long. The whole area of supply chain (logistics, warehousing, transport, wholesaling) have been open since long. But we have not received the response from foreign investors so far.
CO: Could you please tell us about the technology that is employed in this kind of business? Will the entry of these foreign retail chains help Indian IT industry with orders for customised solutions?
PKS: Indian retailers already using the best-in-class technologies. In some cases, they are ahead of their foreign counterparts.
CO: What are the likely challenges that firms like Walmart would face once they enter India? How could they be tackled? What would be their challenges in real-estate sector and setting up of allied infrastructure?
PKS: Everyone is hoping for the best. But, if you notice, the real estate industry did not have to wait for foreign retailers. Indian retailers themselves have enough money for this purpose.
CO: Given that local knowledge is mandatory for these global chains, how would they gather the same in India? What could be the possible challenges?
PKS: That only a few retailers are truly global in their business proves this point. It requires a huge effort. You may note that in many emerging economies, local retailers are bigger than the MNCs.
CO: Regarding man-power requirement and skill development: Can we expect a Wal-Mart Training Centre?
PKS: Some retailers are already in this process.
CO: How deep do these firms have to engage farmers? How will they reach them, and more importantly, communicate and ultimately convince?
PKS: Please check out if, in other countries, it has been the retailers or some other entities who have agglomerated from the farmers on behalf of retailers.
As published in: http://www.commodityonline.com/news/FDI-in-retail-Prospects-of-Indian-retailers-taking-over-foreign-41820-3-1.html
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