Finally on September 20, 2012
Government of India allowed Foreign Direct Investment in multi-brand retail in
India. It’s possible now for global retail majors like Wal-Mart, Tesco & Carrefour
to enter the market which has 300-400 millions strong middle class. Without
going into political economy aspect of the move let’s look at the management
& marketing side of the multi-brand retail in India. Retail & aviation
has many similarities in India particularly. Retail majors need to learn
lessons from India’s aviation industry as both cater to same customer base.
Lessons: Largest of the domestic
corporate giants have burnt their fingers in organized retail in India during more
than decade long period. Top three of them have reported losses. Retail in
India is a fragmented unorganized business evolved alongside the social
structure of communities. India has more cultural diversity than entire Europe as
language, food habits, customs, religions & even Gods change every 50
kilometers in India. Hindustan Lever Limited had attempted to monopolize ice
cream market in India two decades ago by buying out major brands but they could
not fight with local satraps.
Basics: India has population of the size of China living on 1/3 of
the area. Publicity managers of brand India have projected that what makes
India attractive is presence of 300-400 million middle class consumers. Let me
flag this figure right here from marketing perspective. Since Indian society is
highly fragmented & culturally
diverse therefore it’s a challenge to find various ‘consumers profiles’ embedded
in this large population of consumers.
India buys few cars just [1/6 ] as
compared to China. This figure is very significant as majority of Indian people
prefer buy a house before car unlike in rest of the world. India has no problem with congestion as all
metro cities are teeming with people hence retail experience to India may not
be same as routinely described in classical retail plans. On the issue of
buying on credit or cash Indian
consumers are no different than others but majority of Indians don’t have
credit cards.
Entry Strategy: What business model Walmart would use in India is
the billion dollar questions. Will they go for company owned company operate
[COCO] route to begin with or take the franchise route? I believe later route
may be more suitable as it would cut cost of entry & provide for safe
landing for this controversial roll out. If Walmart recruits 25 major
franchises in the beginning it would provide substantial leverage in domestic
market to navigate the social reaction in the first phase.
POS & billing: In my opinion POS strategy would be the waterloo
for Retail in India. Walmart, Tesco & Carrefour would be wise to invent a
new POS strategy as no other country resembles in India in buying behavior. I
would recommend that CXOs of retail giants should invest lots of their time at
airport lounges & Metro railway in Delhi & Kolkata to grasp the behavior
of Indians and ignore Mckinesy consumer reports. It’s impossible to succeed in
retail without strategizing this final moment of truth in retail trade.
India is really a more diverse country than it appears on paper.
Retail industry may have to take Indian Railway route & organize the
operations that could handle the diversity of buyer needs in India. Historically
Indian may have lived under centuries of foreign domination but they have
succeeded at maintaining their lifestyle & culture and this must serve as
guiding principle to any executives involved in this service sector.
No comments:
Post a Comment