Retail: Once in a lifetime opportunity for SMEs
The current retail scenario presents the biggest opportunity for SMEs to create small, smart & niche businesses .
The advent of modern retailing has been primarily driven by few players in the department store (Shoppers’ Stop) big box formats (Pantaloon Retail) and single category chains like (Bata, Titan, etc.). These companies over the years gained market share of 4% with expectations that they along with the new entrants like Reliance, Birla, Bharti will achieve 10% market share by the year 2010.
The media hype due to the entry of new players, coupled with real estate shortage, has created an artificial demand. As a result, real estate prices have shot up artificially. No retailer can make money at the current occupancy rates and low sales per sq ft. Strangely, this also is the biggest opportunity for SMEs to create small, smart & niche businesses which have nimbleness, flexibility and modern thinking.
Growth in consumer spends will create big opportunity for all retailers but more so for the existing small retailers due to their inherent strengths. They have well located properties; deep consumer understanding; high sales & high profits per sq ft due to high density of stocks & very low operating costs, low depreciation & negligible taxes, and personalised service that include free home delivery.
These strengths and the booming Indian economy with the second generation SMEs having education is a Godsend opportunity to create more wealth, establish new models & new methods and give the biggies a run for their money.
I am listing a few ways that I would have looked at if I was operating small retail formats.
If I do not see my next generation coming into the business, and I am in my 40s or 50s and I have only one store, I will opt for the franchise option. With minimum guaranteed return and a share of revenue, I will train myself to run the operations. I call this modern methods combined with traditional values and strengths.
If my small store is in the neighbourhood with very less competition, I will look at upgrading the merchandise (still remaining in the convenience space) so that the unit consumption does not change. I would also invest in a computer with basic software and either train myself or get a part time accountant to enter my stocks.
The future of small retailers will highly depend on ensuring that cash is not locked in inventory and the retailer knows what inventory he has.
I see a big opportunity for entrepreneurs to create a platform of a market place by bringing retailers of similar kind in one locality. Together, they can consolidate by using modern methods, inventory optimisation by sourcing and by stocking in a common way. Create a modern mall out of the existing market place rather than allowing the competition in the mall to take over.
Open a pharmacy with a diabetic clinic or a wellbeing store which sells food, medicine & equipment related to fitness and gives the convenience of a physician attached. Instead of opening electronics store open service centre’s, instead of selling cleaning products sell services also like Laundromat.
Retail success comes from people, product and property. Even if you have enough product available to fill the shelf and get property for free due to the kind of competition, your success will lie in how you create entrepreneurs out of your staff.
It lies in how you challenge your staff, how you create customer empathy within your staff and how you make them wealthy when you are in the process of creating wealth for yourself and also for your shareholders.
My biggest concern will be Government policies & infrastructure development on one side and non- availability of finance for budding entrepreneurs on the other side. The retail industry has to follow the state government rules as most governing rules are state laws.
If there is no national policy or vision for retail at the central level, formed by some sort of consensus, it is very likely that retail will be politicised. And retailers, entrepreneurs and the industry will get squeezed between the policy makers. As a result, tomorrow’s retail will be built on skeletons of very weak foundations. This will lead to unrest within small/traditional retailers, and modern retail formats will not be profitable with half the malls either half empty or fully deserted.
The only solution I see is that all of us and the Government have to think of modernising retail the way airports, banks, infrastructure, roads, etc. are being modernised in the country.
The Indian customer has just begun to consume and is not feeling guilty of his spends; the opportunity areas are many. The scope is immense if the retailer uses modern methods, or an entrepreneur creates new delivery models. Remember, this kind of an opportunity comes only once in a lifetime; 400 billion dollar opportunity is waiting to be tapped!
(BS Nagesh, The author is Customer Care Associate & MD, Shoppers’ Stop Ltd)
The media hype due to the entry of new players, coupled with real estate shortage, has created an artificial demand. As a result, real estate prices have shot up artificially. No retailer can make money at the current occupancy rates and low sales per sq ft. Strangely, this also is the biggest opportunity for SMEs to create small, smart & niche businesses which have nimbleness, flexibility and modern thinking.
Growth in consumer spends will create big opportunity for all retailers but more so for the existing small retailers due to their inherent strengths. They have well located properties; deep consumer understanding; high sales & high profits per sq ft due to high density of stocks & very low operating costs, low depreciation & negligible taxes, and personalised service that include free home delivery.
These strengths and the booming Indian economy with the second generation SMEs having education is a Godsend opportunity to create more wealth, establish new models & new methods and give the biggies a run for their money.
I am listing a few ways that I would have looked at if I was operating small retail formats.
If I do not see my next generation coming into the business, and I am in my 40s or 50s and I have only one store, I will opt for the franchise option. With minimum guaranteed return and a share of revenue, I will train myself to run the operations. I call this modern methods combined with traditional values and strengths.
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If my next generation is joining the business or I am not old enough, I can still look at improving the returns from the current store and open a second store in a new shopping centre. I can leverage the strength of operating a chain on my own or take a franchise or look at a new concept (an exclusive mobile store, stationary store or a store to service electronics, etc.) I call this using modern methods and seeking new opportunities. If my small store is in the neighbourhood with very less competition, I will look at upgrading the merchandise (still remaining in the convenience space) so that the unit consumption does not change. I would also invest in a computer with basic software and either train myself or get a part time accountant to enter my stocks.
The future of small retailers will highly depend on ensuring that cash is not locked in inventory and the retailer knows what inventory he has.
I see a big opportunity for entrepreneurs to create a platform of a market place by bringing retailers of similar kind in one locality. Together, they can consolidate by using modern methods, inventory optimisation by sourcing and by stocking in a common way. Create a modern mall out of the existing market place rather than allowing the competition in the mall to take over.
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I see more opportunity for entrepreneurs in niche and speciality retail than in pure retail in Tier I & II cities. Instead of doing the conventional, do something different. Instead of opening a grocery store, open a chain of stores with customised solutions like ready to eat food, packaged meal solutions, etc. Open a pharmacy with a diabetic clinic or a wellbeing store which sells food, medicine & equipment related to fitness and gives the convenience of a physician attached. Instead of opening electronics store open service centre’s, instead of selling cleaning products sell services also like Laundromat.
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Instead of apparel stores, open a chain of lingerie stores or even a 24*7 apparel convenience stores which sells socks, hand kerchieves, undergarments, ties, belts, etc. all under one roof available on phone & delivered at home. Depending on the economics you may keep branded or unbranded items.Retail success comes from people, product and property. Even if you have enough product available to fill the shelf and get property for free due to the kind of competition, your success will lie in how you create entrepreneurs out of your staff.
It lies in how you challenge your staff, how you create customer empathy within your staff and how you make them wealthy when you are in the process of creating wealth for yourself and also for your shareholders.
My biggest concern will be Government policies & infrastructure development on one side and non- availability of finance for budding entrepreneurs on the other side. The retail industry has to follow the state government rules as most governing rules are state laws.
If there is no national policy or vision for retail at the central level, formed by some sort of consensus, it is very likely that retail will be politicised. And retailers, entrepreneurs and the industry will get squeezed between the policy makers. As a result, tomorrow’s retail will be built on skeletons of very weak foundations. This will lead to unrest within small/traditional retailers, and modern retail formats will not be profitable with half the malls either half empty or fully deserted.
The only solution I see is that all of us and the Government have to think of modernising retail the way airports, banks, infrastructure, roads, etc. are being modernised in the country.
The Indian customer has just begun to consume and is not feeling guilty of his spends; the opportunity areas are many. The scope is immense if the retailer uses modern methods, or an entrepreneur creates new delivery models. Remember, this kind of an opportunity comes only once in a lifetime; 400 billion dollar opportunity is waiting to be tapped!
(BS Nagesh, The author is Customer Care Associate & MD, Shoppers’ Stop Ltd)
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