The start-up itself has been of no surprise to any, with the national and international media on a "Reliance Retail" overdrive since this news first broke in the second half of 2006.
What has certainly surprised some of the industry pundits is that Reliance seems to have got it almost perfectly right from the very first day. To those who know the retail business intricacies better, it is one that takes months, if not years, to streamline and get into some kind of a steady state mode.
In that context, it is truly commendable that Reliance has got off to such a smooth start.
The bottlenecks in India's retail dreams
One of the anticipated fallouts of this would be that the other majors who have been engaged in planning their own entry for some time would now accelerate their launch, and will probably up the ante by committing even more resources than what they may have envisaged some time ago.
At this time, Technopak anticipates that the top 10 players in the modern retail trade are likely to pump in $18-20 billion in five years and generate as much as $50-60 billion in revenue by 2011. This investment will be omnipresent at least in the top 150 cities, though impact would be visible in at least the top 500 if not more.
It is no surprise that the traditional retailers are alarmed and worried if they can survive in the wake of this rapidly advancing overwhelming force.
On the face of it, many have good reasons to be so. There may be initial hiccups for the large players in getting the sourcing and the supply chain to work smoothly but sooner or later, the economies of an efficient supply system will give the modern retailers a distinct edge over the unorganised, small ones.
Relatively large, clean, modern shops will certainly find more favour from the young, upwardly mobile middle class India than the dusty, cramped traditional stores.
Wider/better assortment will indeed be a major enticement for tens of millions of shoppers who are now willing to experiment more by trying new products.
However, it would be tragic if the small retailers resigned too early to their fears and, in the process, almost willingly came in the path of the juggernaut of modern retail. In fact, for most of the millions of small family-owned single-store operators, it is a relatively simple series of action steps that can take them well out of the way of an immediate danger and in the process, actually improve their financial position as well.
First, they have to start by understanding that it is fortunate that it has taken so many years for major Indian business houses and other entrepreneurs to enter retailing. Had some of the large Indian business groups started entering in the 50s and the 60s, the situation could have been very different.
As we all know, that era was beset with licensing and all other kinds of controls that could have potentially given an unfair advantage to those who had the licence to enter the modern retail business. With the so-called Hindu growth rate, the modern trade of those years could have grown only at the cost of the small, independent retailers.
Now, with the economy growing at over 8 per cent per year, and private consumption increasing even faster, even this apparently humungous anticipated investment (and therefore the volume of retail revenue) by the new entrants will not be even 50 per cent of the anticipated jump in the quantum of consumer spending between now and 2011.
Hence, traditional retail does not have to fight a zero-sum game for many years to come.
Secondly, the need for convenience for all segments of Indian consumers is increasing faster than what most in the consumer products industries anticipate. Indians, like any other human being on the planet, have only 24 hours in their day.
The priority for spending this time is actually not in favour of shopping (though the inclination to spend is higher). The traditional stores can very easily leverage this trend to their own advantage and to the very palpable delight of their current customers, who may initially be tempted to check out some of the large, modern stores located some distance away but will generally revert (for product categories other than consumer electronics, durables, furniture and some minor ones) to the neighbourhood ones even if it means paying a small price premium for the same since the trade-off of this price premium will be with an even more premium commodity, i.e. their time.
What should these small retailers do? I hope to take this up in more detail in one of the future contributions to this column. However, some of the most important immediate steps include forming small localised consortiums wherein they can come together to hire store designers and fit-out contractors to modernise and somewhat standardise the physical look at a low cost, take professional help or advice through such cooperative efforts for very elementary assortment planning, shelf space planning, point-of-sale transaction efficiency, category management, and customer loyalty enhancement.
I can only conclude by sharing my belief that currently there are several very interesting variables in India that can enable a highly viable co-existence of the traditional trade with the modern.
In a broader sense, it is no different from how our very heritage, art, culture, and society at large has adapted so admirably to various influences in the last two millenniums.
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