India’s retail sector employs over 46 million of her citizens. A vast majority of them come from middle-income and lower-income salaried classes from across India’s urban, peri-urban and rural heartlands. Their livelihoods and futures are in immediate peril as retail businesses continue to be deeply damaged by the ongoing COVID-19 and economic crisis.
IMAGES Group is working closely with TRRAIN to support the most vulnerable of our human resources, retail’s foot soldiers, through the Retail Panchayat platform. The weekly webinar series is conducted in an unrestrained style with candid, insightful conversations on people, processes, practices, ideas, outlooks and learnings in retail.
The third episode of Retail Panchayat throws up insights on business models, innovation culture, people and products and customer service orientation. It was co-hosted by B S Nagesh, Founder, TRRAIN and Amitabh Taneja, CMD, IMAGES Group.
Difference Between Indian Entrepreneur & Its Global Counterpart
Amitabh Taneja opened the conversation by putting a question to Vineet Gautam, CEO, Bestseller India asking him what is the difference between an Indian entrepreneur who is running Bestseller and its Denmark-based owners, who are now working closely with Indian counterparts.
“There is no difference because Bestseller is a very different organisation. We had a vision of a long-term business that I do not see in most of entrepreneurs in India. Sometimes we forget about the brand to achieve short-term profits/ goals. Prashant Aggarwal – the man who brought Besteseller in India – had a long-term vision and he wanted to create a brand that provides experience which consumers will be able to associate with. From day 1, for us it was not about chasing a topline or bottomline goal. It has been about establishing the brand right and we have the same goal as Anders Holch Povlsen, who owns Bestseller globally,” explained Gautam.
“The real difference is in how we structure and run the organisation. Globally, they would want a professional set-up from day 1 – they will want everything structured. I see with local entrepreneurs that sometimes, we do not look at the structure, we just look at how to scale up the business,” he added.
“Also, the way we think capital is very different to how it is thought of globally. This coupled with the cost of capital is very different in both parts of the world. In India, the cost of capital is very high as compared to the rest of the world. The other thing is growth rate. A 10 percent growth rate for a European company is fantastic but for an Indian entrepreneur 10 percent is almost like growing negatively and the aspirations change very much. The other part which is little bit different is how we build culture within the organisation. Globally, it is person to person driven whereas in India we still look at policies to make the organsiation culture over time and that is a large difference. Another point which is very different is that globally you still think that there is a five-year plan and you want to chase that up and then you put milestones for it whereas for an Indian entrepreneur, the milestones are changing every year,” he explained.
“However, at the end of the day an entrepreneur is an entrepreneur and they will always end up being an entrepreneur. They will always keep looking at the opportunity in the market, the market share that he could take and how to ensure that there is return on the capital. Valuation in India is very important, and we have seen this in five years because raising capital is only possible if your valuation is right and that thought process is not much there globally,” he added.
Taking Gautam’s thoughts further, BS Nagesh said, “In India when you look at growth, we just multiply, we do not look at capabilities before building capacity. We believe that if we have the capability, everything will multiply, and the capacity will come. However, it is important for us to understand that capabilities and resources need to be built before building a capacity. The second thing is that most Indian entrepreneurs do not look at the losses that will happen in 18 months and these need to be added to the initial capital.”
Tracing the History of V-Mart
Taking the dialogue further, Lalit Agarwal, CMD, V-Mart Retail Ltd talked about how he started his company. He said, “My father was in into the suiting and shirting business under the brand name ‘Vishal’ in Kolkata. We shifted to Cuttack in Odisha and slowly and gradually, he handed over the business to my cousin as I was in Mumbai at that time. After some time, I came back and along with my cousin started Vishal Mega Mart in 1999. The first store of Vishal Mega Mart opened in Kolkata and was spread across 10,000 sq. ft. That was a first of its kind store in the affordable segment. Till 2003, when I decided to move out, we had 35 stores. I conceptualised V-Mart in 2003-04.”
“I decided to deal in the affordable fashion segment as a majority of the Indian population wanted this but were forced to buy from smaller markets since they couldn’t afford fashionable clothes. I had lived in Cuttack for 10 years and had closely observed consumer behavior in the market. I understood that consumers here had the ability to buy and shop and I knew that there was a huge opportunity in this segment. Consumers wanted comfort, good ambience and a trustworthy retailer to supply them with a good product. We opened the first store in Ahmedabad. And after the resounding success there, I rolled out in multiple cities,” he explained.
“We are already present in 180 towns and the concept can be rolled out to 500 towns and maybe later can go up to 2,000 towns. India’s per capita income, GDP, youth population is growing and their ability to spend more, their aspiration level and their information levels are also going up. As the market size is increasing, there is a potential for organised retail to get into this space by giving more value and efficiency. It is always about retailers that how do they behave and understand the customer and create value for them,” he added.
Explaining the per sq. ft. sales in apparel business, BS Nagesh said, “In apparel, per sq. ft. sale is generally between Rs 800-900 sq. ft. depending upon the location but in lots of secondary and tertiary towns, it is behind Rs 1,200-1,500 per sq. ft. per month. Anywhere between Rs 9,000-18,000 be a variation depending upon the kind of assortment one is keeping and anything above Rs 9,000 becomes profitable in this country and especially if the rentals are in the 5-7 percent range. As we go ahead, there would be much larger opportunities in small towns because top 10 towns are any which ways getting saturated. So, value fashion has a great future.”
Adding to this, Agarwal said, “There is a lot of density of population in Tier II and beyond although the average selling and buying price is low and that is what we have to understand. Their understanding of fashion is little different, and we cannot have generic international fashion there. Some differentiation needs to be created. The per sq. ft. sales here can be almost similar to a metro town because there are very few retailers here and so brands like mine can sell more.”
The Journey of Neeru’s
Talking about the journey of his brand Neeru’s, Avnish Kumar, Director, Neeru’s said, “The journey of Harish Kumar, CMD – Neeru’s began in 1971 with tailoring and embroidery of superior and intricate designs in Hyderabad. In 1983, Kumar started manufacturing and wholesale supplying of fabric to over 1,000 retailers across India. Spotting a potential, he was quick to introduce handloom and other natural fabrics. This not only came as a boon to the fabric market, which was till then saturated with man-made fibres, but also gave a respite to weavers from South India helping them generate due economic benefits from their skills of weaving natural fibres. The turning point came in 1991 when he realised that there was a dearth of good ethnic wear brands in the country, specially so when ethnic wear had a strong underlying demand. This is when Neeru’s journey started as a brand.”
“We got into retailing in 1996 and set up our first retail store in Hyderabad which was one of the most luxurious store at that point of time spreading across 5,000 sq. ft. dealing in total ethnic range ranging from suits, sarees, lehengas, kurtis and we kept on opening more stores in Hyderabad and then we realised the value of word ‘brand’. In late 2000s when we set up a couple of stores, our consumers suggested us to build a brand which has pan-India presence. The space was still empty for a regional retailer to have pan-India presence. I joined about a decade back in 2011and learned while doing my masters in London that if you have the passion and capital to do it then why not do it in India. On 12.12.12, we opened one of our flagship stores in Hyderabad spanning across 30,000 sq. ft. which has interiors, facade everything luxurious. We wanted to create a niche and we succeeded,” he added.
“Ethnic is a largely unorganised sector. Beginning from the manufacturing to the ERP set up, we did everything to make it an organised sector. Nobody had heard about ethnic being auto-pilot. When we started we did not expand by the cities but by the streets. We narrowed down the locations to see how we can spread our reach except the malls as ethnic is more high-street driven. At present, we have 40 percent presence in malls and 60 percent at high streets i.e. 22 stores in malls. We have 45 EBOs comprising of 3.5 lakh sq. ft. of retail space and apart from that we are with large format stores like Central, Lifestyle and Reliance for our fast-fashion category comprising of kurtis and casuals. We have 3 flagship stores – 2 Hyderabad and 1 in Mumbai. The price range of the products range from Rs 500 to Rs 5,00,000. We are more of a bridge to luxury brand and not a fast-fashion or a corporate ethnic brand and nor a designer brand. We are right in the middle at the point where consumers can easily afford it” he further added.
Elaborating on the USP of his brand, Kumar said, “We all get camouflaged with the word ethnic. A lot of brands do fast fashion like BIBA, W and Global Desi and the others are hard-core ethnic retailers like us and do sarees, suits, lehengas that consumers require for a festival or a wedding. When you talk about fast fashion, the gross profits that we arrive at, the margins that we have are very well matching to the product but when you talk about sarees, lehengas and suits, that does not have that kind of a margin unless you have a great manufacturing and the product acumen. Getting everything on the same page, the brand needs to have a model right and work on the margins you can work upon. If you have your IP and art and craft right, you will definitely succeed. 60 percent of the store can have standard clothes which are available at all the Neeru’s stores, but the rest 40 percent is tweaked as per the local needs.”
Should Fashion Be Expensive?
Shifting the conversation along, Taneja asked the retailers present to explain why fashion was so expensive considering it was adapted by so many and changed so fast.
Gautam explained this by saying, “Fashion is not about price, it is about value for money and value for money is different for the different consumers that we are addressing. The biggest challenge in our country is that more you want to go ahead the price becomes a large challenge to address and the product lines have to be changed. The price perception changes, the product perception changes, and you have to have different needs and requirements for consumers and value for money changes. As the brand starts to become more inclusive, the price elasticity has to improve. Fashion cannot be defined. There are trends that people will adapt to, but fashion is personal to everybody’s taste. Brands have to find the journey and define the journey right.”
“It is the responsibility of the brand that if you are showing something to consumers, you also have to match to their pockets and that is value today. Retailers have to identify that gap and we have to cater to that kind of a market,” added Kumar.
Building Passion Within the Organisation
On instilling the same passion within the organisation, Agarwal said, “For an entrepreneur-driven organisation, the entrepreneur’s passion is very difficult to get replicated and at times it gets very difficult for the entrepreneur to build that passion in the professionals and the organisation. My journey was also same as the centre of control was me, but the problem is with retailers and not with retail. Retail has tremendous capabilities and retailers have tremendous potential and it is about how you expand yourself internally in the organisation, how you create a team, processes and technology which can drive all this potentially that is around you.”
“For the last 7 years I am trying to understand and create an organisation. It is very difficult. When you delegate, you allow people to take decisions and when people start taking decisions they cannot immediately match an entrepreneur, their decision-making skills cannot be as good as you have. So there comes the problem and entrepreneur being so agile cannot incur the losses and he steps in and tries to help the professional. It is about how much perseverance that you have in taking those losses, in taking that time where you can allow the professional where he may not a right decision – maybe a diluted or a sub-standard decision according to you – and you have to live with it and you have to allow him to fall down like a child and he has to learn at times by hurting himself. So, this is a journey,” he added.
Resonating the same thoughts, Gautam said, “The entrepreneur first needs to figure out that what he is looking out for in a professional, the boundary needs to be defined and mistakes will be made and if you start jumping around on every mistake then everything is going to come to entrepreneur’s desk. I think you do not need to tell him what to do, I think it is much better that he learns and then you sit down and speak in a way that you can help him taking a better decision next time. The structure needs to be defined very clearly, where does entrepreneur’s powers end and his starts. The three values that we have instilled in our organisation are Own, Dare and Deliver. And yes, people will make mistakes. What we have done in last 10 years is that we have built a team that is maybe more passionate than me and we as entrepreneurs or professionals need to understand that the person I am hiring is a specialist in that and I can never beat him, I can show him a direction, help him take a better decision but we cannot get into everything. We have to find people who are similar to us and understand what we are speaking.
Nagesh concluded the conversation, saying, “As an entrepreneur when you bring in professionals, you also need to be available to the professional as at time he may require some bouncing board. The comparison between professional and entrepreneur is not a right. Entrepreneur is an individual just because he does have an ownership, there are many entrepreneurs who are more professionally qualified. To anybody if you are able to bring the ownership of brand, it works beautifully, one does not have to have the ownership by shares. When you are giving someone responsibility, you are giving him the ability to respond to the situations and if you are giving him the ability to respond to the situations then he himself is accountable. The entrepreneur needs to understand that when his time gets released, the ability for him to do things on larger scale opens up. That is where the big difference happens when you let go.”
IMAGES Retail is working closely with TRRAIN, which has set up a relief fund to offer and provide sustenance support to deserving retail associates and their families over the next three months until the COVID-19 situation settles down and there is some normalcy. TRRAIN will identify retail employees who have no means of income post April-May 2020 and provide them with an income bridge for three months until they are able to seek alternate employment. TRRAIN will also leverage government schemes by connecting the associates to them for short- & long-term relief. In order to ensure transparency towards the money collected by the relief fund (which has already reached up to Rs 2 crore), a five-member independent board has been set up.
The beneficiaries (retail employees) will also be on-boarded onto the TRRAIN Circle mobile app (an app to help and enable a better life for the frontline employees employed in retail & another sector) to have access to over the phone counseling services, additional financial services, and e-learning courses to develop skills & disbursement of financial aid.
Through the Relief Grant, TRRAIN will be offering to the beneficiaries:
– Rs 4,000 per beneficiaries over a period of 3 months
– Enrolment to Government of India’s relief schemes for grants starting from Rs 1,000
Retail Panchayat hopes to benefit over 5,000 families with much-needed financial support in these difficult times. Some of the angel donors towards this good cause are listed here:
Jitendra Joshi, CEO, Ambab – We are working with retail for the past 10 years, so it is our duty to ensure that as a solutions provider, since retail has given so much to us, somehow, we should be able give back to the community in our own way.”
Other angel donors who participated and donated included, Sandeep Kedia, Chairman, Ventota Retail and C.Gopalakrishnan, Founder, N Dairy Farm.