Sep 21, 2017

Changing Business Scenario in India Retail & Opportunities

As a professional, I am working closely on the ground of Retail since 1999 in bits & pieces, but after 2012 it becomes my core business interest, based on my ground-level working I must say that Retail is not easy to understand because it needs detail working. However, lots of changes are happening as regards to new developments, adaptions and modifications.

I was among the team when we first time introduced  Pulses in 1 kg packaging in the brand name " Mother India" in the year 1999 in Delhi, a visionary brand of Sharp Menthol.  Later on, branding was done in the name of " Sharp". Now this brand has a billion-dollar valuation. 

During 2014, E-commerce like Big Basket and Grofers got Funding and started catering groceries to end consumers. When I first time introduced my Omnichannel program with Flipkart during 2012, it was a different thought that coming era is about to go for hyper-local facilitation and retailers whether they are from physical formats or E-comm they all need last-mile connectivity.

My concept “Pragati” came with innovation that it can be done by opening new stores. This idea was discussed with Mr Sachin Bansal in 2012, but things were before time so that time, no one could digest that Kiranawala can be the partner for last-mile connectivity. Idea was to bring all such new stores under one uniform name and providing them various benefits and connecting them to end consumers there they will facilitate as a last-mile delivery points for Flipkart. but unfortunately I was talking on all these before time and  my this proposal was declined. However, my confidence was still firm that Retail is changing, omnichannel presence shall be the need of the hours. 

The year 2015 shall be dedicated to Indian Retail, where companies from all over the world shall have an eagle eye to capture the vast market. Many more investments companies in the form of an angel, seeds, VCs, and Private Equity shall have a more diverse portfolio, and they will be mushrooming very soon in India. 

We are talking about Indian Retail which is 600 Billion Dollar in size of which 60% is grocery retail covering 12 million Mom & Pop Stores. The buzz we generally heard is about organised trade which is just 10% of total Grocery retail means 88% is still open to exploring because it is still unorganised. 

We know about Amazon, Flipkart, Bigbasket, Grofers, and much more b2c commerce website & App but they are just below 3% of total Retail, so where we are standing, we are in India where Retail has ample opportunity.

Indian Retail providing employment to 6 Million people directly and contributing 10% to Indian GDP. Do you think writing on such a blissful market is so easy, Experts are guarding all such information with full proof?

I had heard news and whispering during 2012 when big-name retailers came into existence, that time they were used to say we will open our more stores in this area and in that area, the market will be ours, and all these small-2 Kirana stores will vanish but after 2014, at a sudden air took different directions. They started chanting Kirana retail has future and no one can finish them, complete them, now they are there to empower them. Some is coming with the POS system and saying we are enabling them, no doubt using digital applications will help them to pace with modern time, it is good. All of a sudden, yes, it happens when the market is significant.

China is brilliant, and they know that Indian is a big market. People need a solution, no matter that is durable or not but temporarily there should be a solution, so they started infusing money through many doors.

They invested billions of Dollar in the Indian Start-up Ecosystem.  I will not mention the name here, but they are now valued in billions and far big Unicorn in India. 

It is not a fault of China or countries like China, and all have rights to seek their business interest. There is nothing wrong.  

What is wrong & what being right this is a visionary measurement for Govt because it is in their preview to grant permission to someone in India and invest in their ecosystem.  Let us have a look at India’s retail scenario, and the journey starts right from 2012, 

The PM unveils start-up India program- Narendra Modi during 2014, Mudra loan scheme and many more schemes were introduced to support new start-ups, but very few could take benefits out of it. No doubt such initiative has brought a revolution in Indian Retail and IT sector immediately after the year 2014, Companies like OYO, Flipkart who were struggling to get funds, start getting VC funds in millions.

Uber India, Ola rides came into the picture with substantial investments, they brought Asset light model concept in business. 

After 2016 we have seen companies like Zomato, Food Panda, Ube Eat etc. came with high Technology, specially Zomato made food delivery the best option to bring home ready to eat food in 30 minutes, food from Consumer’s favourite restaurant made it a positive disruptor.

I love their Application, and on the tech platform, it was made, very smooth and accurate GPS, bringing it closer to Consumer's heart. All such changes are making Retail a different viewer. 

Also have seen Byju’s Application which is a unicorn in education provider application, big funded… 

Same way Delhivary a logistic 3 PL provider also got ample Funding and doing great in this segment. More than 100 start-ups are now valued above US 150 billion

All unicorn startups are either founded during 2014 or afterward. 

After visiting a few modern stores, we are thinking of customer preferences, behaviour and talking about the ambience but still, 90% population of India is buying from nearby Kirana Shops.
Era of standalone stores: Luring or lucrative to people from a different line of business. Recent year development made people open Standalone supermarket in cities, even in the rural areas by people who either got retirement from Govt services, people from Real Estate and Gem’s & Jewellery business quickly adapted this business, all such supermarket has either 1000 sq feet or more in size, and they are investing Rs. 20 lakh to 1 Cr.

Too many people to open such stores. But they have their problems, and many got shut down in its six months or 1-year timeline, I would say infant stage.

I could smell the storm in 2013, later on when Grofers started their B2C marketplace in grocery through hyperlocal association with local Kiranawala.

They started operation in Jaipur in 2014, I have seen how their delivery man was wondering about collecting products from one store to another, bringing back to a hub store and then matching to complete the order for delivering it to customer. 

There is no issue with the model, but, no one understands how it will work. Not a single Kiranawala has symmetry /uniformity in the product category, assortments so how one retailer can fulfil the order consumer placed with Grofer’s Application. Is it possible to spend 1 hour to complete an order which a delivery guy has to collect from 3 to 4 retail stores?

How it would be a sustainable model, and if this model is sustainable, then how it will be operated at a low cost. There was lots of question in mind that time, and one was particular that why and on what Softbank made criteria investment because for me this bank has some high class of analytical, ground realities, Sustainability and more than that scalability, but I was totally in the blank on all such questions. 

I asked Albinder to forget about hyperlocal deliveries at the current level of status of Kiranawala and you, i.e. Grofers need to set up own DC and should opt inventory model.  So, you can see there is nothing special or serious if we talk about funding scenario, one can get fund even model is not sustainable in the current situation maybe it happened before time, but the different mindset has different thought process. 

During this period, Cash and Carry came with more aggression, Metro & Walmart started opening new megastores in other cities and were talking to capture 20% share of the Indian grocery market. However, Walmart has that appetite, but no one understands Kirana Retailers that at what side this camel will sit at what time. So they just started a prediction that things will be in their forte.

More focus was given by Metro to streamline the B2B supply chain to Kirana stores. However, things were not going as it was presumed or expected because Kirana retailer was enjoying Credit facility from distributors, so they only opted for products having reasonable pricing or promotions.

Moto of cash & carry was to sell them their private label, but again the question was how to crack the credit market sentiments, later on, maybe they will have some factoring solution or channel funding systems with microfinance companies of they will go for some special arrangements with their banks of in 2013 it was not possible.  

On the other hand, organise Retail is taking shape and expanding from city to city. A new world, however really it is not new, but in terms of organising Retail, this is a trendy word – Private Label products. FMCG companies tried to build up a separate vertical in the name of Modern trade to facilitate supply chain to retail stores like Spencer, Subhiksha, 6teen, Reliance Fresh, More, Easyday, Nilgiri, Vishal, big apple, Big Bazar and many more, it happened after emerging Retail in cities, and FMCG companies start getting excellent visibility in the name of Modern trade.

But they were not lean to sacrifice their portion of margin to MT trade more than it was required for them to fetch their substantial cost. So, a new way was built by them that if they have to sustain with such an asset-heavy setup so there they need to introduce their products in various categories.

Later on, i.e. after 2014 it was known as “Private Label” this trend was however started in 2005 when Fair price, Subhiksha and few other started selling product in loose or in simple pouch packing but it was just a cost savy in the prospects of Consumer, those were not brand and as a sentiment not possible to replace existing famous consumer brands. Making big money in private label, they have to introduce them as a brand, identical or category wise. 

Revolution came with Big Bazar and Reliance when they started printing packing material in different-2 brand names like Big Bazar introduce Golden Harvest in 4 categories, Karmic in Dry fruits & Tasty Treat, Fresh & in Snacks etc. same way Reliance introduces good life.  

I must say the birth of Private Label happened just after 2014, and now this has emerged a significant market driver in almost all categories. The prominent example is “ Patanjali” who made an empire in a short period—even giving a fierce competition to old giants in many types. 

India’s retail market is so big, and there shall not be any sign saying if we say it the Pacific Ocean. A market which has a depth to touch of USD 1 Trillion controlled by 2020 and by 12 Million Small, medium and large size retailers. Said to have 90% market still unorganised, Online penetration is less than 2% and big retail giants like Future group’s big Bazar, easy day etc., Reliance, More, are talking about their bullion dollar turnover and valuation for just 8-10% of organised retail space. 

Such a significant merger & acquisition was the history for Walmart, and later on, it was the big one mistake, but it has propelled investment energy in the retail ecosystem and investor started pumping money in various start-ups.  I must say the way Sachin & Binny got benefited after selling a big loss-making venture at a dignified exit and given high returns on investments to all old investors, also to employees who were helped with ESOPs.

The year 2015 was the Expansion of Business for them and is doing fantastic. I would say that such disruptions are positive and helping retailers to centralise their maximum sourcing. 

The year 2017 onwards there were few significant disruptions happened and this word ‘disruption’ emerge with some new good change philosophy, new Tech-based start-up like  Shopkirana, Jumbotail in Tier I and II will be more aggressive, and  with perfect Technology, and in rural, there are lots of small b2b aggregators working. One prominent name is also there in the name of “Store King”, All are funded companies and started aggregating Supply Chain for facilitating supplies to Retailers.

During 2015 one Big-name came into picture “ Dmart”, Dhamani’s dream product which has brought a different kind of revolution, one of the first company in Indian Grocery retail which has shown a profit in their financials on real ground, PAT was more than 3%, theory or concept was simple, pay cash to supplier and get more margin on sourcing, Instead of renting stores buy real estate and save rent rather book depreciation in books for the property.  They are in going for an IPO which probably will be in 2018 or 2019

Now, after Jio’s disruption in telecom brought some sense of stress to all retail fertility that Reliance may come with some significant way in Retail, especially all B2C e-comm players are under heavy pressure that what Reliance will do in this ecosystem. 

Still, things are not bright, but I am based on my sixth sense can say that Reliance will come with a click and Collect model for which they need hyper-local points, the possibility is that Reliance will go with Jio name or will find a new name for running an E-Commerce website or App or shall go with Reliance fresh. 

The possibility is that Reliance will work PAN India and shall cover the maximum retail Market. Also, they will go with some hyper-local association with Kirana Retailers. Reliance’s stand for doing something big in Retail is making a chest pain to Amazon, Grofers, Bigbasket, Flipkart, Snapdeal.   

All such things will bring lots of disruption in the retail market, but the field of fight shall remain “Kirana Retail/Grocery Retail” Only. Rest retail segment will have business as usual.  
After all exercise and practical, experience and different kind of burning money game still things, there is no much change in organise trade, the market is expected to grow 20% by 2025, and some are saying by 2030 and online is still a long way to go. 

Above was just a brief about Indian Retail journey, the purpose of giving such glimpse is to understand that how mindset can be changed for new entrepreneurs and how they can think that money is the last “M” for making a business operational.  

Writer : Balwant Singh Rana

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