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    “Our consumption has not taken a serious dent”


    The economy is showing signs of revival, thanks to government’s measures to boost economy, followed by initiatives from the Reserve Bank of India. While the bulls are back on Dalal Street, fears of a deflation also appear to be fading. Most of the Q4 results are also in favour of corporate India, and the list of positive driving forces go on. However, India’s modern retail industry continues to bemoan a moderate slowdown.

    To discuss more about the challenges in the sector, IndiaRetailing trapped Sumit K Lal, a retail expert and director of Ecco Shoes India. As founder director of the Indian subsidiary of the USD 1.1 billion European lifestyle brand Ecco Shoes for the last five years, Lal carries 15 years of experience in providing leadership in highly competitive and dynamic retail scenario. He is also a certified internal assessor for Tata Business Excellence Model, which is based on the Malcolm Baldrige model rendering an ability to look at a business in a holistic perspective. Lal has also written numerous articles on invitation from The Times of India and have authored a book published by Scholastic India. He is currently authoring a book on management fiction entitled “It’s Impossible for the Pig to See the Sky”.

    IndiaRetailing: You have been a part of retail industry for long. What transformations have you noticed during this period?
    Sumit K Lal: The organised retail industry in India is younger than my career, so I have had the opportunity of seeing it grow right in front of me. We are still developing; we are still maturing… but we have a long way to go! If you look at international retailers, they are still miles ahead. But we are getting there and we need to focus more on softer skills. India has always been good at adopting and adapting to technology. It’s in the softer side and the systems where we lag, and I see tremendous potential in companies who can address that niche effectively. We have seen serious efforts of Indian companies over the last decade or so to address the growing retail demands. There have been many initiatives; some of them have come out with successful formats whereas others have perished. If we look at the unsuccessful ones, the one glaring common feature will be the lack of soft skills. For instance, people have experienced situations where a particular vegetable was being sold for Rs 500 per kg and on being questioned the store staff admitted that this was crazy but since the computer said so, it had to be right. Not surprisingly, the vegetable perished and so did the company. Similarly, some consumers bought a 5 litre cooking oil jar at just Rs 80 — because that’s what the computer dictated!

    However, overall, we have seen tremendous growth in terms of retail technologies, visual merchandising techniques, category management, retail shop design and retail training modules. The logstics/supply chain has improved dramatically and is developing into a science now.

    There has been extreme advertising to draw traffic to the retail destinations but not enough has been done to ensure conversions at the store level.
    IR: India’s Retail boom is going the way of the IT bust. Do you agree?
    SKL: If you mean that the IT boom in India matured and the NPAs got thrown out, I completely agree that this is what is happening to retail as well. In fact the laissez-faire/free market theory and the survival of the fittest theory apply here. These days there is just no room for incompetence!

    IR: There is a belief that even had there been no slowdown, the retail industry would be in the exact same situation as it finds itself in today. Your comments.
    SKL: Well, we did ask for it! Mindless expansions, no respect for financial discipline, overestimated top lines and overoptimism coupled with the artificially pumped up real estate market have

    added fuel to the current situation. Honestly, even at the expense of being dubbed as an economics illiterate, I still question the wisdom of assuming that the US mortgage crisis has affected the Indian markets beyond our forex reserves, which for a size of our consuming economy, should have been digested without a burp. We also need to focus on the fact that there has been extreme advertising to draw traffic to the retail destinations but not enough has been done to ensure conversions at the store level in terms of imparting of soft skills.

    IR: What, according to you, went wrong at Subhiksha? Can it emerge from the crisis?
    SKL: Subhiksha is a fundamentally strong concept, but the error is in execution. Financial adventurism coupled with extreme expansion has done them in. India is not as simple as it looks, it’s perhaps the most treacherous market in the world. Predictability is prime!

    It’s beyond Subhiksha to bounce back; they will surely need help from the outside. It could be the Government or it could be other alliances.

    IR: Do you believe that our local kirana retailer will be wiped out by modern players?
    SKL: No way! That is not going to happen ever. Until now we have seen organised players biting the dust. Even if a few of the organised players are successful, I am sure our unorganised brethren will attain some kind of a virtual structure to counter the advances. Work is being done in this direction already! Also, there is enough scope for both formats fitting in and surviving. We do have a healthy consumption!

    IR: In the past few months, concerns have been voiced that after the real estate and auto sectors, the retail sector is the worst hit. Do you share that concern? How is the industry coping with the downtrend?
    SKL: I refuse to believe that people brush their teeth less often or have reduced their diets. Despite all disciplining I firmly believe that our consumption has not taken a serious dent. So it’s not the consumption but the unrealistic ambitions of the organised retail sector that have taken a direct hit. Mom-n-pop stores were always selling and will keep selling. The organised sector will conduct a reality check and they will brace themselves and bounce right back. Like I said, there is enough space for all.