June 30, 2010

Organized retail has taught hard lessons to our industry majors

Let us admit that the current players in the organized retail in India completely misunderstood the Indian consumer. Consequently most of them have been vanquished already by the market forces & a few are left in the fray with bruised egos and tattered balance sheets.  

Organised retailing in India has been going through several ups & downs beginning with raw enthusiasm followed by paranoia of failures. No wonder India is an amazing country & you must not lower your guards at any moment as there are many mirages luring you into believing them.  I wonder how come the Indian majors & their blue eyed managers failed to see the writing on the wall.  And the truth is that although India needs malls & the infra related to the organized retail but Indians are not ready to change in their buying habits in a hurry.

Organised retail would certainly succeed in India but the business model has to be reinvented. I am pained to clarify my clients & students about the need to understand the Indian consumer before planning to deal with such diverse group of wonderful people. You could use services of sociologists & psychologists to understand this multifaceted group. But there are few characteristics of Indians that are clearly enunciated like our preference for vegetarian food, belief in God, supernatural & fate, various traditions, family orientation, high opinion about our-selves & a competitive nature. Let us focus on the habits of the consumer.

Most businesses thought once they provide large number of products in one place in air conditioning setting then the consumers would come running right? Wrong! Indian consumers have high degree of trust deficit as they do not trust the sellers on price, quality & other parameters. Therefore there is need for repeated regular dialogue with the consumer that is missing with organized retail model. On the other hand western consumers shop in silence. Indian consumer shop more often and in smaller quantities as different from the developed world. Moreover Indian consumer has greater frequency of shopping & the average revenue is very small.

Organised retail can surely find its feet but they have to reinvent their business model & factor in longer gestation period for breaking even.

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