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    Guts over Fear

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    Life begins where fear ends; it is a battle between guts over fear and when the gut wins, an epochal journey begins from there. The Indian retail industry is also undergoing a metamorphosis: Following omni-channel pursuit to innovating usage of technology, from reading between the lines to understanding customer demand better through predictive analysis, retailers are following their guts rather than being consumed by the looming fears. The retail industry is on the right track and is surely treading on the ‘road to positivity’. The big conglomerates are spearheading the revolution to spin the game and reach the bottom-line growth. Overall, the industry is going through interesting times.But gazing through the crystal ball, what is the shape of things to come in the ‘tomorrowland’ of retail? In this cover story of our ‘Anniversary issue’, we have coherently compiled the views of dozens of modern retailers about the present-day challenges and futuristic opportunities.

    What happens when a shopper is standing right in your store, checking the price tag, making a visit to the trail room to  check the fit and comes out smiling? The sales associate is confident that the merchandise is going in her shopping basket. But no! Wait! She coolly walks out of the store. No prizes for guessing. Yes. She did like the merchandise but then decided to not buy from the store but may have gone ahead to purchase it online. It is all about deals, you see. Deals. That is exactly what the shopper today is looking for. Retail dynamics are changing. And what does the future hold? We take a look.

    To take an excerpt from a recent media report, declaring its results for the June quarter, (RIL) said it would launch an e-commerce marketplace to take on Flipkart, and Amazon, joining an increasing number of brick-and-mortar retailers going online. Earlier in the year, retailers , a unit of DLF Ltd that retails Mango, Mothercare and Forever21 in India, and Arvind Ltd, which manages brands such as Gap, Arrow, US Polo and Calvin Klein, also announced plans to launch online marketplaces.” The above aptly sets the context of the story. Retail dynamics in India are changing. Suddenly, it is not all about how many stores a retailer is set to open. But now, each retailer is conscious of his growth not just in the offline but online space as well. And when we say, online, instead of being part of the market place model, retailers today are looking at setting up their exclusive web store and give it a 360° presence making their merchandize available through apps as well.

    Take the case of Reliance Fresh. With a healthy footprint across the country, the giant retailer decided to launch their online store to supply fresh veggies and other groceries taking on exclusive portals like, .com, BigBasket.com etc. A point to note that being ‘exclusive’ today is not a key factor to determine your success. What matters rather is how well you decide to reach to your target audience and how tall you can stand in wake of competition. Similar is the case for brands like Hidesign, BIBA, RIOT etc. Apart from having their exclusive online portal, they are merrily available on other market place models as well. This shift defines where Indian retail is moving towards. A peaceful yet dynamic co-existence on the online as well as offline space to reach to their consumers who are as happy shopping online as they are offline.

    Top of Mind

    In our quest to have retailers share their views on the retail dynamics as they see it today, we began with asking them the most basic questions – What comes to your mind when we talk of retail in India. The viewpoints were striking but resonated towards meaning the same thing – that retail in India is at its most exciting phase and destined to scale unprecedented heights provided we keep our ears to the ground and move a step ahead than the consumer.

    Responding with a realistic view, Srinath Ramamurthy,Director, Mahindra Internet Commerce Private Limited (Babyoye) and VP– (Mom &Me) aptly shares the top three things that come to his mind – “Products need to be priced to sell; consumers are aware and brick and click – need to be in both.” L Subhash Chandra, MD – Sangeetha Mobiles sums up his view on retail in India using three words: “Exciting, revolutionising and a roller-coaster ride all the way.”

    Not missing on the growing popularity of online retail but also advocating the rise of offline retail, S Ravi Kant – Executive VP– corporate communication and CEO – watches and accessories division – elaborates: “The Indian retail industry is evolving at a dizzying pace. The online retail industry has evoked tremendous change in both organized and unorganized markets. There is an increasing number of indigenous and international brands competing in both the digital and brick and mortar space, vying for a share of the wallet from an increasingly wider customer base. Online retail has changed customer expectations and behaviors, forcing players in the entire retail industry to reinvent and rewrite their approaches. While online retail seems to be taking over, there will always be a need for brick and mortar retail. The need of the day is for brick and mortar retail to up their game by taking a more customer experience centric approach and providing their customer base with a customized offering across platforms. This can best be achieved by taking the omni-channel route.” Adding further on the popularity of online retail, Sohel Kamdar, Chief Operating Officer – Metro Shoes Ltd. says: “India is expected to become the world’s fastest growing e-commerce market on the back of robust investment activity in the sector and the rapid increase in internet users. India was ranked fifth in 2012 on the global retail development Index, by AT Kearney, highlighting it as one of the key foreign investment destination worldwide.” Narrowing down his view on the footwear category, he elaborates, “According to the Euromonitor Report, Footwear is expected to perform strongly over the forecast period with a constant value CAGR of 7 per cent growth and sales expected to touch ` 860 billion by 2019.”

    Rajiv Goplakrishnan from BATA talks about the journey of retail over a decade and elaborates on the current phase it stands on today: “The Indian retail industry is currently the most dynamic and fast paced industry with various global brands wishing to enter the market. The Indian Retail has come off age and has gone through a major transformation over the last decade with a noticeable shift towards an organized retailing. Further, with the online medium of retail gaining more and more acceptance, there is a tremendous growth opportunity for retail companies, both domestic and international.”

    A brand which receives not just a celebrity endorsement but patronage as well, Being Human is being seen gradually expanding in tier II and tier III cities and towns as well and all of this has happened just within three years of their launch. This accentuates the spurt of retail across the country and not just beign restricted to the metro cities. Elucidating this, Manish Mandhana, Joint MD, Mandhana Industries Limited and Being Human shares: “The urban face of the Indian retail sector has been steadily evolving over the last decade and rhis has not been just in the metros but in tier II and III cities as well. Itt has emerged as one of the most dynamic and fast paced industries. While the speed and amount of change have been debatable, the indications have been positive. The indicators are: the growth of organized retail (modern retail); evolution of retail consumers; and changes in policy and guidelines.”

    According to FMCG major, CK Ranghanathan, chairman and managing director – : “The Indian retail industry accounts for over 10 percent of the country’s GDP and offers a huge employment opportunity. The country is today emerging as one amongst the largest global destinations in the world for retail.”

    Tapping on to the current situation, Narayan Sabharwal, CEO and Business Head – Simba Toys India Pvt. Ltd. is quick to point out: “In the last 12-18 months the retail industry has been a little sluggish due to slow spending and general economic slowdown, along with policy concerns over approval of multi-brand retail across several states in India. But the clarity on FDI policies, improving demographics, rising disposable income and growth of e-commerce shows the potential of a huge growth in the retail industry in the next two decades.”

    , MD and CEO– Toonz Retail makes a valid observation giving years to the phase retail in India is at the moment when he says, “Indian retail industry is like a teenager right now who is in a discovery mode. We are trying to discover what should be the appropriate business model, what should be the delivery model for the consumers, how we should effectively engage and interact with the consumers etc. We are trying to figure out with these measures that how can the consumers and retailers will be benefitted in the long run.”

    Reaching Out

    For retail in India to grow, it is imperative that retailers across categories take note of the fact that India is not only about Mumbai, Delhi, Bengaluru, Chennai and Kolkata. Beyond these cities, the aspiration that consumers have in small towns and cities is at par with any Mumbaikar or Delhiete. Ranganathan explains: “The retail sector is experiencing exponential growth, with retail development taking place not just in major cities and metros, but also in tier-II and tier-III towns. This is because rural markets, which currently constitute 70 per cent of population, accounts for around 40 per cent of total consumption. This clearly highlights the huge potential in terms of consumptions in the coming years.  On the other hand E Commerce as a retail channel in urban areas has seen phenomenal growth over the last couple of years. This is due to the substantial increase in internet penetration and increasing use of Smart Phones.”

    Adding to the advent of online retail to reach out to the TA, Kant says: “Online retail is already catering to a large section of Middle India and the emerging, digitally savvy millennial demographic. The technological capabilities and use of big data help retailers cater to new markets with a more targeted approach. Retailers will work towards going beyond price and value to offer customers a best in class offering keeping in mind experience, range, convenience and service. The primary focus is for retailers to develop a comprehensive and seamless omni-channel shopping offering which interacts with customers along the entire purchase pathway.  Additionally, retailers will also invest in talent management and supply-chain optimization.”
    Online vs. Offline Explaining in simple words on what making e-commerce grow at such a lightening speed in India, Sabharwal elaborates, “Firstly there is a dearth of good retail space in India and secondly the retail space in India is very expensive. Hence penetration on a large scale becomes a challenge. E-commerce overcomes the infrastructure challenge due to its model of offering a retail space online. This makes the penetration in Tier II and III cities easier. E-commerce also provides detailed information about the product at the click of a mouse, which becomes a challenge at retail outlets. All salesman are not trained when it comes to the wide variety of products in a retail outlet. Hence this also leads to better sales for retailers and manufacturers, making ecommerce a viable option for them to connect with a larger consumer base.”

    As being rightly explained by Mandhana: “There is an upheaval going on in many retail organisations as they see growth coming from the web with the growth of the bricks-and-mortar stores. The urgency to adapt to this change comes through Digital Innovation which has changed the way a retail industry functions; It has brought new challenges and opportunities for the Retail Sector such a way that most brands have become even more important than the products or services they represent. The brands are no longer limited to the traditional media. It has evolved tremendously the way it has been operating. Most of the retailers are working toward unifying their operations so that they can serve customers in a consistent way whether they shop in physical stores, on web sites or via mobile devices. Innovative ideas are the main source of income for a large and growing proportion of enterprises worldwide. Innovation has always had a role in this dynamic sector but we are currently in a period when the impact of digital technology is having a particularly significanteffect on the industry.” With an aim to not lose retail sales to online sales, the team at Being Human introduced an in-store engagement called Match, through which a customer can easily browse through the inventory, match-and-create looks, search and discover new styles basis on color, product or SKU, find the product availability in the next nearby store and also share with friends for feedback via email or Whatsapp before making the purchase decision. This has played an important role in enhancing the consumers’ shopping experience and has improved consumer engagement. Sharing an interesting insight on why e-commerce can never really cannibalize on the sales coming from brick and mortar stores, Gopalkrishnan explains: “While e-commerce purely attracts consumers via heavy discounts and promotions, the brick and mortar stores will always have a pull for the customer who wishes to touch, feel and try the product before making an actual purchase. Also with India being one of the fastest growing economies of the world, a lot more global retail brands will enter the Indian market leading to a healthy competition in the future.”

    According to Ramamurthy, in times to come, service will play a significant role in brand recall and loyalty. He adds: “e-commerce will have to move to a profitable model, so physical stores will with design and experience continue to serve consumers.”
    On why and what shall make brick and mortar stores to survive, Pareek shares: “I will go by my own philosophy here—“The essence of a Brick and Mortar store remains in its interior and exterior design.” It is not about spending huge money but about spending it right; every brand or retailer has its own soul in the store design aspect. That must be kept intact.”

    Sabharwal lists down the following points that have led to the growth of  online retail in India –
    Disproportionate investment in the industry has allowed etailers to recruit customers with heavy cost
    With the rapid increase in the smartphone users and internet penetration in India, consumers prefer to shop online for their convenience
    Free home Delivery, deals, discounts and offers have given a boost to this industry
    -Increase in the use of Mobile wallets
    With people using technology to shop, more online retail stores are opening up, making way for more employment
    According to Sabharwal, e-commerce will exist but the modern retail will also co-exist. He adds: “We are a country of traders and shopkeepers. Western countries are the best examples, where e-commerce industry is performing phenomenally well, without killing any brick and mortar store. The stores are also doing equally well. Malls are infact becoming community centers, where families go to spend their weekends with their kids, watch movies and enjoy a tasty meal. More than 50 per cent sales happen over the weekend in the modern retail in India. Hence modern retail and malls are here to stay.”

    Chandra strongly feels that offline retail is here to stay and that this should be reason enough for retailers to not take a backseat when it comes to doing up their stores. As he shares: “Take the US and UK stores who spend quite a lot of money on what they call ‘concept stores and experience centres’. In the West, the online charm is fading away. People prefer to research online and shop offline, because they would like to ‘touch and feel’. Already, we see a similar trend in India. Why else would the number of Sangeetha stores still be growing when online stores are laughing all the way to the bank? Online works only for two things: if the price is cheap and if it’s unavailable at your neighbourhood store. But if these two things are taken care of, why would you shop online when you can shop in your backyard and take home the product the moment you touch it.

    Turing to the Crystal Ball – 10 years from Now

    Pepe Jeans has been one of the most early entrant of an international brand coming to Indian shores. Backed by years of experience of operating in the Indian market, according to from Pepe Jeans  the top top 3-5 things that will shape modern retail 10 years from now include – “Advantaged business model, Supply chain evolution and Omni channel management.”
    According to Kant 10 years from now, the top things that will shape modern retail in India include: “The new age customer: millennials who are digitally savvy, demanding and fickle minded. The emergence of Middle India: evolving mindsets and increasing incomes. Social Media: revolutionizing the consumer market through engagement and awareness. Big data analytics: providing customers with a more targeted approach.” Things that would matter according to Mandhana include – better infrastructure, in store implementation of innovative technology and the push through social and digital media. Reiterating this is Rohit Pareek from Sohum Shoppe: “The digital world will be a big player in the Industry. And by digital it is not only e-commerce to talk about but the revolution that could be seen in brick and mortar stores. I vividly foresee interactive digital content storming inside physical stores and thus shaping the entire visual experience to a new vista. We have had start-ups seen as such- digital trial rooms, social media integration and in-store virtual shopping windows; there are many more revolutionary ideas that the world has come up with and those will be a thing to watch out for!”

    Siddharth Bindra of the BIBA fame minces no words in saying that apart from the regular things like the growth of eComemrce and new cities, the two other factors that would have an important impact on Indian retail include the Government taxation like GST etc and economic growth of the Indian economy. To the existing list, according to Kapil Pathare from Maxwell, the entry of supermarkets, hypermarts and discounted stores shall have a significant impact 10 years from now.

    Adding some humour is Kamdar: “With technology being as disruptive as it is today, the crystal ball is fairly cloudy.” He adds: “The emerging trends seem to be experiential shopping. This however, is not a new concept. We have always maintained that service is paramount when selling. We sell service, shoes are just the medium. Customer expectations of service, however are changing. With time becoming a paucity, how quickly and conveniently a customer can access new trends is now key. Omnichannel integration will be a key aspect of this.”

    Making a valid point, he further says: “The need of the hour is to grant industry status to the retail sector for further impetus to its development. The status will also help in providing fiscal incentives and ensure availability of organized financing. A comprehensive legislation is required to eliminate multiple licensing and to liberalize the labor laws.”
    Elaborating on what shall shape the operation of super / hypermarkets 10 years from now, Shashwat Goenka – Sector Head – Spencer’s Retail Ltd. shares –
    Insights into customer needs and wants through predictive analytics
    Shopper convenience will be paramount
    Omnichannel experience – shoppers will demand the ability to purchase at any moment in the day, making it important for retailers to provide a seamless omnichannel experience to shoppers at every possible touchpoint
    Farm to fork strategy, made possible by improved logistics and infrastructure
    Technology will become the core of modern retail
    Consumers will become “value” seekers, as opposed to using price as the focal determinant of purchase
    Challenges and Roadblocks

    Hitting on to the price war between online and offline retail, Mandhana points out that the challenges that the Indian retail is facing is the stiff competition from the e-commerce. The heavy discounts that are available through the e-commerce platforms are difficult to match up to through our basic brick and mortar formats. He adds: “Also another one major challenge faced is the perfect space in the leading malls in India. To add to that is the high rentals of these stores which make it difficult for the brands to make higher profits.”

    Not shying away from accepting that modern retail in India is yet to successfully spread itself across the country, he shares: “The penetration of organized retail in India is quite low even in comparison to other emerging markets. The average retail outlet in India is very small in terms of area, number of employees, and number of stock keeping units (SKUs) stocked. Thus, in conclusion, a large part of the market is still to be explored. Growth is inevitable but the pace is slow. There is serious regional disparity in the growth of organized retail.”

    Without beating round the bush and hitting the nail right on the target while elucidating on the challenges being faced by the industry, Kamdar shares: “The inherent issues of Indian retail haven’t really gone anywhere. The majority of the manufacturing sector is still unorganized. This in turn is causing a chronic issue of fewer young people wanting to enter this sector. The logistics cost of serving the nation is exorbitant due to poor infrastructure and lack of visibility on goods in transit.  While there is still localization of tastes according to region, this is somewhat mitigated but westernization of apparel choices in the younger generation. Escalating real estate prices and rentals in large cities due to increase in demand is also one of the major challenges that most of the retail chain is facing.”

    Talking about challenges that remain exclusive to retail in India, the biggest challenge we face in India is the competition from the existence of a large unorganized retail market, despite the modernization phase. He explains: “Retailers in India face two big challenges – viability and scale. This is something that is easier done online at a very low cost although for categories like watches that is high on gifting and impulse purchase, the role of brick and mortar to create desire physically cannot be overstated.”

    Narrowing down on government policies that are looked upon as hurdles, Sabharwal is of the opinion that the biggest change can be implementation of GST which will make the business seamless for the entire country. The reforms can be in logistics which will ensure cost effective, efficient availability of the products. He shares: “Inefficient supply chain management, lack of retail space, escalating real estate prices, infrastructure and logistics issues are also few areas of concern when it comes to Indian retail sector.”

    Bindra adds: “Local laws and some antiquated laws like the weight and measurement act, continue to be a unique Indian challenge. The low availability of quality real estate and the very high cost of real estate with respect to the consumer spending power will also continue to be challenges.”
    Goenka strikes with a reality that exist in India which is detrimental for growth across any industry saying: “Unlike the West, in India modern retailers cannot use a “one size fits all” philosophy, and therefore one of the key challenges is ensuring localization to the catchment of the store. Some of the other challenges that exist today are lack of adequate skilled manpower, high attrition rates, insufficient infrastructure(eg: cold storage facilities), etc.”
    Remaining Relevant

    To remain relevant with times, BATA, one of the oldest footwear brand in India is in a self-retrospection mode and is working to gear up to existing competition and be at par with serving the new age consumer. According to Gopalkrishnan: “There is a revamp of existing product lines with a focus on contemporary interpretations of existing styles which are younger and more vibrant, in tune with the needs and wants of the consumer. New International Format is being now implemented for all our new stores. The new concept creates an aesthetically designed ambience with an attention to detail on every element at the store. The newly introduced Loyalty Program called the Bata Club helps us read and study every single customer’s buying behavior and thus allowing us to build custom offers for each of our loyalists.  We will soon have a unique catalogue for the BATA. In website. The Bata Mobile App has already been introduced for offering a great experience for the users to book an order via the Click and Collect, Click and Reserve or online order format.  In order to attract more online customers, new partnerships have been created over the course of last year with leading on-line players like Amazon, Myntra, Flipkart, Jabong etc.”
    Wish List

    Kant’s wishlist to the government include – Ease of doing business in retail – Simplify approvals to opening and running stores (labour laws on 365 day working, shops and establishments act etc.), unified tax structure and doing away with road permits, octroi, LBT through GST / other.

    Sabharwal voices his wishlist saying: “NDA has stated policy against FDI in multi-brand retail; however it is important for the government to see the contribution of retail industry in driving overall agenda of creating employment, combating inflation, protecting consumer rights and growth in GDP. The industry is expecting the roadmap for GST with timelines so that organized retailers can do business seamlessly in a tax efficient manner. It is expected that retailers would pass on the tax benefits to consumers and hence will help in keeping the prices low.”

    Dilip Kapur from Hidesign has a short and simple message to the government – “Keep things simple and stay out of business.”
    Elaborating on how well FDI shall boost retail in India, Goenka points out: “A liberalized FDI policy will obviously attract a lot of international brands to enter India, which will prove beneficial to the country and the indigenous brands. They will bring with them back end know-how and investments in supply chain networks will give impetus to indigenous industries as well. Moreover, it will increase competition, which is healthy, and will therefore help in ensuring that Indian retailers constantly innovate and improve themselves to stay competitive and stay relevant to their customer.”
    Road Ahead

    To conclude, Sabharwal turns to his crystal ball to share the road ahead saying: “The teenager will be converted into an adult, the business will be profitability focused. The strategic advantage of price would be replaced with product and customer experience. Product will be the Hero, Consumers will be the main audience and profitability will be the main objective. Innovation would remain focused on product, delivery model, customer experience and customer specific communication, understating his shopping patterns and future needs.”

    And as Chandra predicts, retail some years from now will not be anything less than a sci-fi film where: “Mobile wallets will become a reality, so you will wave your phones at the cash counter and shop for stuff. Brands and services will follow you wherever you go. You are staring at a historical monument and you suddenly get an email or WhatsApp message from a seller nearby offering memorabilia on that monument. Your fingerprints will be your pass codes for mobile banking and mobile wallets.”