India – The Promised Land for Retailers
Let me first reiterate the numbers that many of you by now would be familiar with.The Indian economy is growing at over 8 per cent every year. By 2010, the country’s GDP (in PPP terms) is expected to rank third, just behind the US and China.
Half of the country’s population is below the age of 25 years and they are just about to join the productive-consuming age group.
Modern retail is poised to grow at over 35 per cent every year for the next few years. India’s peers such as China and Brazil, took 10-15 years to raise the share of their organized retail sectors from 5 per cent to 20% and 38% respectively. Modern retail captures just 6 per cent of India, this figure will hit the 20% level far faster than it has anywhere in the world.
Not surprisingly, India is perceived to be the most attractive retail destination. Few can disagree that India provides the largest consumption market in the world that is still largely untapped. The Indian retail sector has attracted the attention of the country’s largest conglomerate and the world’s largest corporation, along with some of the largest Indian business houses and world’s largest retailers.
Yet, the most fascinating aspect of this market is that it can never be described by numbers alone.
The economic, social and cultural diversity of Indian consumers forces marketers and retailers to view this mass of consumers not as one single market but as a ‘mass of niches.’ The language people speak, the religion they follow, the food they consume, the fabric they wear and the festivals they celebrate changes every few hundred kilometers. Logic and emotion, individual and social, poverty and affluence, capitalism and socialism, life and lifestyle, value and indulgence, and the past and the future simultaneously coexist in India. And all these paradoxes converge to make India what it is.
To the external world, the harmonious coexistence of seeming contradictions in is one of the most confusing aspects of the Indian consumer market. But to us it signifies our country’s openness to change and its ability to add new dimensions without losing old ones. It opens up new and unique opportunities as well as brings forth challenges for marketers and retailers.
Demand-Side Innovation
The Indian market can not be cracked through supply side innovation. It’s often said that retail is a localised business and in India this phrase takes new a meaning. In India, a retailer has to adapt, change and modify its customer interface for every city that it sets shop in and every community that it caters to. The diversity of the country doesn’t allow a retailer to build standardised solutions and formats for the entire population. One has to build one store at a time and focus on demand side innovation at every stage of building and expanding a retail chain in India.
India is not only a culturally diverse market but also an economically diverse market. The latest issue of the Forbes magazine states that there are more Indian billionaires than those in Japan. Yet, at the same time, we have some of the poorest segments of the population in the whole world. And in between these two segments lies a huge and diverse sweet-spot for mass retailers.
Customer segments in India are maturing faster than ever. But, even as some Indians become sophisticated shoppers, ten of millions of less experienced but no less avid consumers are joining the fray every year. A retailer with a single format strategy will not be able to cater to a large set of customers in India and it will not provide the critical customer base required for operating a successful business. While hypermarkets and discount chains will continue to dominate the modern retailing scene in India, multiple formats have to be designed to cater to different aspirations and needs of consumers. The growing middle class is pushing the development of specialty stores. Outlets for home products, fashion, office stationery, health products and consumer electronics are in demand.
In largest cities of the country, modern retailing already has a 15% to 20% share of the pie and that is roughly the size of the existing consuming class in these cities. For modern retail to grow in these cities, retailers will need to bring in new set of consumers into the consuming class. And this poses one of the biggest challenges for retailers in India. We have look at innovative solutions at how to create the capacity to consume among large segments of urban consumers. Whether the existing consuming class can be increased through consumer credit, urban microfinance or appropriate use of technology and front-end innovation has to be explored.
What this essentially means is that in India one has to develop ideas and solutions that are uniquely Indian. To be successful in India, retailers have to blend the best expertise and technology that the world has to offer and synergise these with the demands and expectations of the Indian consumers. At Future Group, we have created a platform for a partnership with a number of Indian and foreign companies. We combine their expertise with our knowledge and understanding of the Indian retailing market. Our foreign joint-venture partners include; Etam from France, Staples from the US, Lee Cooper from the UK, Generali from Italy and CapitaLand from Singapore, among others. Our objective is to develop a collaborative approach towards growth wherein our partners benefit, we benefit and ultimately the Indian consumers benefit.
Kishore Biyani is the Group CEO of Future Group. He has recently authored a book,"It Happened In India"
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