Arvind Singhal: Subhiksha and the Indian retail story

An interesting opinion by Arvind. However there are many aspects that bear some thoughts. When the going was good - India shining; Retail Rocking….everyone jumped on the bandwagon - consultants offering India on a platter, companies that had no clue about consumers (having spent a decade or more in the B2B space)started announcing 10/100/1000 stores in 3 years or maybe less; the search for retailers began (in a country where organized retail did not exist beyond the past 5-7 years), so bring in expats (expect them to learn India & deliver in a year) so on and forth.

This actually spawned a industry by itself:

Consulting on entry strategy/liaison/funding, property etc.
Search for people
Training
Realtors, Builders
Furnishing, Merchandising you name it.

We had experts all of a sudden with a bidding war being waged. A lot many employees took advantage of this shifting jobs every couple of months.

In all this euphoria everyone forgot/pretended to/avoided the fact & number game. So the 1st year losses accumulated & with a bit of creativity (maybe accounting/inventory management etc) it carried on to the next year & maybe another year; till the bubble burst from below.

Except for the funding companies; nobody was really in the finance business, so when bottom up everyone started asking for their money, the pyramid started collapsing. And there poor subhiksha was caught!

Whilst trying to understand their plight, the fact also remains that there was the board of directors who obviously met if not monthly, once a quarter; their auditors, bankers, vendors who all knew about this collapse - structured or otherwise. Here probably, everyone thought ‘why spoil a good thing’ someone is bound to take care of it….unfortunately that someone was no one.

And there endeth the first lesson for organized retailers!

I am not an analyst, industry leader or similar, however would like to ask…

How is this different from Satyam?
Even @ average of 5 people per store we are talking about 5000 minimum without a job, salary till may if they are lucky.

Take my word for it: There is going to be a Satyam in every industry to ensure CORRECTION for the rest of the players in that particular industry, which may not be bad at all in the long run.

However expecting people/companies to learn from this is a DREAM:)

Bombay, Bangalore, Delhi, Ahmedabad, Baroda…..high street, shopping centers, malls..et all…There is a discount everywhere for every thing!

And surprisingly Retailers say that Sales are higher by discounts. Whilst this would be obvious, “who can resist a sale?” it also raises a couple of questions ~

Did they have such large margins earlier?
Are they doing this just to ensure cash flow?
Can they afford to continue doing this, given the fact some of the retailers have had sale from Divali onwards?
What is the difference in product on Sale & without it?
Will this price become the benchmark once the discontinue the Sale?
How long is this really going to last?
Does Sale give value to the consumer & volume to the retailer?

Some of these questions do have answers, that are revealing about the strategy adopted.

Discounting is normally related to inventory management as well as the revenue sharing agreement that the retailers strike with the original equipment manufacturers to keep products rolling on a faster rate. The technical term “Velocity”.

Here you have apparels, consumer durables, electronics etc. BUT most of the discounts normally come from  “PRIVATE LABELS”.

For example Big Bazaar with at least 25%+ of its sale coming from private
labels can afford to keep giving deep discounts, for a much longer time.

Private label allows a retailer to make at least 60% of
the cost of the product sold, whilst the rest can be passed off to manufacturers & transporters.

And yes this can be good for both retailers & consumers; however the standardization is the issue here. In an effort to keep squeezing, the first lot in Apparels is US size, whilst the 2nd lot is UK size. The material gets thinner or the buttons, there is a variety of things that can happen, which 80% of the consumers are not concerned about.

However, INDIA which is practically 6-8 different countries in one, the most critical element of discounting which involves planning of geographical & festival sales is still
very much in the evolving stage.

AND this is when the consumer planning to shop shall come into its own!

A difficult question to answer, particularly in India.

Whist it is true that the branded market is growing, with the plethora of brands having been introduced in the last half decade, presumably people are spoilt for choice.

Whilst the jewelers - branded & otherwise are pushing this, there are some basic differences between India & the USA which holds nearly 45% of the world diamond market. Read the rest of this entry »

In Bombay Times September 13th Katrina Kaif the brand ambassador of Nakshatra diamond jewellery says Diamonds are not girl’s best friend anymore.

Way to go lady!!! Read the rest of this entry »

During the recently concluded IIJS in Mumbai the Retail Jeweller held its 4th Awards.An excellent initiative started a couple of years ago, which should turn into a good property for the magazine in years to come. Read the rest of this entry »

April 2005 –

Finally decided to take a plunge into an Industry that is around 70,000 crores (according to various studies & reports). Out of this only 3% is the branded segment, though the industry as a whole is growing at 20% + year on year. Read the rest of this entry »

Buying point-of-sale (POS) software isn’t as simple as it used to be. Though technology is an enabler for many great advances, it has also made the decision-making process much more complex. Retailers must consider their future needs & also anticipate requirements that may be beyond their control.

With the size of the investment in both software and hardware, it is a major decision for retailers in terms of time & money coupled with ROI to choose the right POS. You as a retailer wants to end up with a solution that’s antiquated before it’s even installed! Read the rest of this entry »

1. Also have a Business Plan

Do not rely on instinct to guide your business. A written plan helps you focus on where you wish to go & evaluate the path regularly.

2. Also have a Sales Plan

There’s no serious way to gauge the progress & financial growth of your business, if there is no sales plan to follow. This has to be realistic in terms of where will it come from; how will it come; from whom; how often & how much would be needed annually, quarterly, monthly & finally daily. Read the rest of this entry »