Wednesday, September 21, 2011

What is the future of Kirana Store or C-store or independent retail in India?

There was this discussion that ensued after a short lecture by three professors from University of Delft, including Prof. Rodney Fitch (of Fitch Design fame, though he does not have anything to do with that company now). It was interesting to note his observations on how organised retail is taking shape in India, is maturing in assortment, presentation and in-store communication. He also presented some pictures of independent retailers in India, fast aligning to the best practices of organised retail. People present were practising designers, innovation strategists, retail consultants and some academicians.

First, Prof. Fitch accepted that the first impression of India is that of ‘chaos’ to an outsider. While a very dynamic business environment and young population hold a lot of promise, the infrastructure gap remains a big deterrent. He was also critical of the government controlling FDI in retail. He said that in the West, whenever governments interfered with the free economy, it had always been counter productive. The big guys would always find their way around if they wish to, but the small enterprises suffer.

While several people spoke on the possibilities, the mood and tone were very defensive. Participants almost took to jingoistic tones that kirana stores or small shop keeper shave survived hundreds of years and would go on for another hundred.
Suggestions like small stores will offer more value-added services, will take on more technology, will have regional language advantage, will have better product mix for higher RoI etc. were tabled. However, I think many of these are likely to be natural responses of <500 sq ft store owners to the large and organised retail. An entrepreneur is equipped with basic ‘fend off’ skills to survive.
However, an interesting point in the discussion would be what will be the inflexion point at which the per square foot earnings of a small store will not match the aspirational living cost of these owners? A cup of tea by the roadside costs Rs 5 today. The same cup of tea, at CafĂ© Coffee Day costs Rs. 75. But I haven’t seen a cup of tea being sold for Rs. 15, 20, 25, 30, 35, 40, 45,50, 55etc. Currently there is a huge range of price points available for expansion for differentiated positioning of the retail business.
Earlier one could only fly full service airlines like JetAirways or a low fare airline like SpiceJet, if one had to look for economy class flying. Today, even SpiceJet has multiple price points and categories within the low-fare category. JetAirways has expanded into Jet Airways Konnect, JetLite, Jet Airways Konnect Premium etc. We need to realise that our economy which is in transition, is yet to reach thepeak of consumerism, which the West is done with. With rising spending in India we have many more greys in retail between to be or not to be questions on independent stores.

I was somewhat disappointed at the overall discussion hovering around the current situation and people not being able to project strong influences that will tweak the trends. Meta-abstracting was missing from the discussion. Formalism that builds models and helps in articulating the complex topics like this were missing from the speaker as well as the audience.
One important point Prof. Fitch made in the end, was about the emergence of small store chains. While he predicted this, we can already see how a Marwari Kirana owner or a sweetmeat owner multiplies his stores in a city. How he sources his manpower from his native village, gives them a semi-hostel like accommodation to keep costs low and slowly anoints one of them as the store manager is a study in itself. Many of these stores have already taken to modern packaging, acceptance of credit cards, glass and steel counters, more interactive ambiences and usage of loyalty programmes.

I have always wondered at the business of the quintessential mochi or the cobbler on Indian streets. To be or not to be? A slight stretch of logic can give the answer...but not on the blogJ.