India Retail Forum 2017
Conferences and takeaways; IMAGES Retail Awards to top retailers
India’s economic outlook over the next decade offers a promising period of faster growth, acquisition of new capabilities and the creation of more diverse and optimal tools of production. Bustling with energy and ideas, the country’s young and aspiring populace and its growing bulge of digitally savvy middle class is impatient for growth and change. India’s retail industry, which is amongst the fastest growing retail markets globally, is actively scouring for growth potential and new opportunities. Higher disposable income and an increase in consumer spending, an expanding base of mobile users and e-commerce penetration, positive regulatory environment and a burgeoning middle class present the retail sector in India with tremendous potential for growth and for tapping new opportunities.
Even as the future appears rosy, there are many challenges along the way that could derail the sector’s onward trajectory on the path of growth and profits. To secure its future and surmount the challenges, the industry needs to focus on building better capabilities, develop appropriate skills and cultivate a winning mindset to create new solutions that will keep the retail sector on the path of sustainable growth.
With this backdrop, the eminent panelists at the inaugural session of India Retail Forum that concluded in Mumbai recently set out to discuss and deliberate on the opportunities and challenges that await the retail sector in India and how the industry can plan for the future to achieve the growth trajectory that its various stakeholders so aspire.
Participants in the thought-provoking and candid discussion were Govind Shrikhande, Chairman, IRF’17 and CCA and MD, Shoppers Stop; Krish Iyer, President & CEO, Walmart India, IRF Chairman 2016; Harriet Green, OBE, IBM General Manager of Watson Customer Engagement, Watson Internet of Things and Education; Arvind Varchaswi, Managing Director, Sriveda Sattva Private Limited; Philip Auld, MD, Tata Trent; and Shashwat Goenka, Retail Sector head, RP-SG Group. The panel discussion was moderated by B.S. Nagesh, Founder, TRRAIN.
When countries experience growth at 7%8%, changes are inevitable. All are profoundly impacted – people and society at large, economy, culture, consumers – by the fast growth and its implications, which lead to major shifts in the wake. There are implications for development of skills and infrastructure, innovation in product and format along with the need for building adequate and new capabilities. Harriet Green, OBE, IBM General Manager of Watson Customer Engagement, Watson Internet of Things and Education, summed up the scenario for India by emphasizing the need for a concerted and coordinated effort by all major stakeholders in order to catalyze an innovation culture. Drawing from her wide international exposure and business experience in India, she stressed on the greater need for governance, education, private enterprise, money and capital to come together so as to bring about sustainable growth and for achieving the desired outcomes. “There are implications for development of skills, which has always been an India strength; implications for infrastructure as we look at the internet of things and how it rolls outs and the implications for some of these ground-breaking technologies, which are all very exciting possibilities for the market,” she said.
But while India’s economy is in pole position and on the cusp of unlocking new frontiers, there is still a long way to go achieve sustainable growth of 7-8%. To maintain this growth trajectory, building capabilities is a strategic imperative. It’s not just about capital. A nation’s physical connectivity — its network of transportation and logistics infrastructure — forms the backbone of its economy. Robust physical connectivity improves productivity, creates employment opportunities and lowers logistics costs. Though India has created new airports, metro rail networks, highways, and roads in the past ten years, much work remains for the country to improve its global competitiveness in terms of physical connectivity. The crisis of capability plaguing India was brought to the fore at an event of Maharashtra government, which focused on infrastructure development. The state government candidly admitted to the dearth of quality contractors for developing and building roads and ports, railways etc. Despite the dilution in standards and specifications, enough contractors aren’t still available, lamented the officials.
Opportunities and challenges
So it is the ability for capability building that is at the core and one that will drive higher levels of growth in the country. Krish Iyer, President & CEO, Walmart India and IRF Chairman 2016, recounting his experience said, “Even if we take Walmart as an example and look at the growth numbers, the extent of capability building that we need to do in terms of talent, digital, logistics, agriculture supply chain is quite a task. It requires a huge degree of focus, effort and capital. While capital is not a constraint, the
The key thing is to impress upon the government to recognize retail as an industry. That could be the turning point for the retail sector and for which government support is required. — Govind Shrikhande Chairman, IRF’17 and CCA and MD, Shoppers Stop
talent part is certainly a constraint and one needs to work within that framework. Imagine, for a country like India, what would be the challenge,” he said, pointing to the capability crunch confronting the retail sector. “7-8% growth can be achieved, but it will take a lot in terms of capability building,” he added.
B.S. Nagesh, Founder, TRRAIN, and the moderator for the panel discussion, concurred with the observations of Harriet and Iyer. He emphasized the need for skill development and capacity building and for creating talent pools across the organization. Observing about the role of skill development as an important driver of future growth, he said: “We talk about the population and the demographic dividend and, importantly, how we employ people. We need to build the skills and the confidence of our people so that they can help drive growth and innovation. And if you get the right technology to go along with it and work together, then we can grow the business very well.”
While retailing is one of the pillars of the economy, shortage of skilled manpower is one of the challenges facing organized retailers in India. Retailers face great difficulty in finding skilled manpower and for which they have to pay more in order to retain them. “Building the skills and capabilities is probably what we all are missing out on in most of the retail business. Instead of really building the capability of our people to grow, we are always looking at building capacity by adding up stores. So I think there has to be a balance of both,” said Nagesh.
It is important to note the critical role that the government has to play in supporting the growth of retail. It can do so by creating national platforms and fostering an enabling environment. The central government should adopt a supportive attitude in the form of relaxing the sourcing requirements for foreign companies. Similarly, state governments can help to attract investment capital through the policies they implement. “The key thing for the industry is to impress upon the government to recognize retail as an industry. That could be the turning point for the retail sector in India and for which government support is required,” observed Govind Shrikhande, Chairman, IRF’17 and CCA and MD, Shoppers Stop.
The impact of governmental support has been most felt in the Eastern region of the country, which until recently was considered lacking in initiative. Shashwat Goenka, Retail Sector Head, RP-SG Group, which has presence in the Northeast and south of the country besides the East, said: “We are seeing highest growth in the East and the highest cooperation from governments in those regions. There is a lot that is happening, not just in the major cities of the East but also in the rural areas as well and that is what is leading to higher growth in the East.”
India, with all its challenges, complexities and problems, continues to remain an attractive investment destination and is gaining traction with global brands. It is a hugely contrasting country – while being one of the biggest outsourcing countries in the world responsible for running big plants, the back-end systems of big corporate still struggle to manage the roads during flooding or even to declare results in time for our premier universities. But despite the myriad problems, India has demonstrated the ability to register higher growth.
“If you are passionate about the retail theatre, marketing and making of brands, or are an aspiring designer, or analyst or a supply chain specialist, then there is no better place to be in today than India. The opportunities here are huge. If we look at parts of Europe, then countries there would die for having the kind of growth there is in India. Many of these countries have an exceptional talent pool and they do excellent work but find it elusive to achieve high growth. But here, when the team gets it right, then the upside is absolutely huge. Also, not to forget that the consumer is just as critical. I think his/ her expectation that you deliver the authentic product is just as acute as anywhere else in the developed markets. But if you can do it, then the opportunity is huge,” said Philip Auld, MD, Tata Trent, elaborating on his experience of doing business in India and the growth of the economy. “For anybody who is considering this dynamic market, it’s all about the product. If you have a product and if you can deliver it effectively to the consumer, then there is no better market than the one we are in,” added Auld.
Changing profile of consumers in retail
Consumers today have high aspirations and are increasingly savvy in the choices they make. The value conscious and digitally connected consumer is empowered to demand change. This profile of an increasingly aware, savvy and ambitious consumer has created a strong need to address the cause. And a key implication of this rapid consumer evolution is that Indian retailers should sharply identify the emerging opportunities and customer segments.
To consider, the retail scene in the East has changed drastically in the past 10-15 years. A lot of youth who earlier used to migrate to other parts of the country for job opportunities, education and growth are now coming back. Brain drain has given way to brain gain and there is a lot more action, ground energy and buzz in the East. “Consumers, particularly in Southeast Asia, are much exposed to the Western world. Besides being aspirational, they are increasingly demanding. This aspirational need to consume brands that represent higher value and class or even consume more than what they can afford has resulted in a shift towards premiumization in the last six years. As a retailer, there is a big pull factor as opposed to push factor,” said Shashwat Goenka, summing up the situation in the East.
The Indian retail market is very heterogeneous in nature. The dynamics of various segments change with the geography and other cultural factors. The challenge for the retailer is to keep this heterogeneous nature of the target market in mind
There are implications for development of skills, infrastructure, internet of things and implications for some of these ground-breaking technologies... — Harriet Green OBE, IBM General Manager of Watson Customer Engagement, Watson Internet of Things and Education
Building the skills and capabilities is what we all are missing out on in most of the retail business. Instead of really building the capability of our people, we are looking at building capacity by adding up stores. — B.S. Nagesh Founder, TRRAIN
and identify the opportunities in different segments. Nagesh said: “We often look at India as one homogenous entity. But many a times there are huge opportunities that are actually emerging in different segments of India. Where there is a top end segment, there is also a conservative India comprising a very rich segment and willing to spend on very expensive gourmet food, high-end products and absolutely top end offerings and services. You have to identify your opportunities and position your product.”
Thanks to ever-greater access to the internet and mobile connectivity, India has entered the dawn of mobile influence. Improved availability coupled with easy financing schemes has accelerated the smartphone adoption rate in the country. Two decades ago, owning a mobile was a huge talking point, an exception. Today, mobile phones are ubiquitous so much so that retailers use it as a lever to influence, to suggest, to tempt the huge mass of potential consumers with their offerings. Smartphones have made it easier for consumers to compare prices and decide where to shop; they are every retailer’s shop window because they are available in every hand, can be accessed anytime and anywhere and can serve different needs of the consumer throughout the day. It has not just enabled online shopping but increased the experiential value of the same. On the other hand, it has helped retailers to expand their consumer catchment and grow faster, something that the brick-and-mortar store alone could not have been able to achieve. Online retailers have been able to grow by retaining control of the customer experience and proactively supporting what information consumers need at each stage of the shopping process.
The fast rising smartphone penetration, increased adoption by shoppers and improved mobile functionality for retail applications present a huge opportunity to value retailers for speaking directly to the customers. “Mobile phones have democratized access to the very latest trends. People have worked very hard for what they have got and they are very savvy. People are looking for only the authentic products at different price points; the value part is so breathtaking that it is an opportunity. It will be only very few exclusive ones who will be able to command that differential,” said Philip Auld.
From a technology perspective, a need is being felt to think about the elements of data and its security as well as how it can be done. There is a general agreement that India has a very special set of challenges around issues such as building a huge scale, price points, and on data information security notwithstanding the size of the enterprise. Harriet Green had an interesting take about the notion that the future of data, information security, consumers, and retail was driven by the mobile phone or that enterprises simply are reluctant of and don’t wish to share their valuable data with other providers. “As an enterprise, you need to ensure that at the core of your business is the security of the data or the information of your providers because that data is the DNA of your enterprise and it is something not to be sacrificed for any price point,” said Harriet.
Safe handling of consumer information has become all the more important considering that post demonetization, there has been a spike in the number of customers who prefer paying by card. “Before demonetization, credit card business for us was about 55 per cent and 45 per cent was in cash. Post demonetization, when you look at the December-january period, credit card went as high as 90 per cent and as 92 per cent in January. Then it fell down and currently it is back to the 50- 55 per cent in cards. Which means that card payment has come back as strong or even stronger than it earlier was,” noted Govind Shrikhande. Concurring with Shrikhande, Shaswat Goenka said: “I completely agree. We were 50-55 per cent in cards payment before demonetization, which went up to 90-98 per in the December-january period. Today, we are back to 50-55 per cent for payment through cards.”
Even if we take Walmart and look at the growth numbers, the extent of capability building that we need to do in terms of talent, digital, logistics, supply chain, is quite a task. — Krish Iyer President & CEO, Walmart India, and IRF Chairman 2016
In India, we have the advantage of a young population. So the future should be about creating many small entrepreneurs and ensuring how they can become feeding systems for bigger enterprises. — Arvind Varchaswi MD Sriveda Sattva Private Limited
An economic boom over a sustained period of time has several positives: it has the impact of lifting a whole mass of people languishing at the bottom of the pyramid and improving lives by raising their per capita income. But the grim reality is that India as country is so underinvested in health, education and infrastructure that the basic needs of the rural poor are unmet. So when growth comes to the bottom of the pyramid, not only is there a rise in the per capita income but also on other fronts such as access to better health facilities, higher savings for rainy days and small investments in property. Also, all this talk of mobile technology and internet of things are largely irrelevant for the rural poor as what they have is a basic instrument used primarily as a means of verbal communication. So upgrading to a smartphone when the benefits of growth percolate to the bottom isn’t a priority for the poor. “The opportunities at the bottom of the pyramid are severely limited but if we talk of the middle there is a big opportunity, which is 300-400 million and may grow up to 600 million. And that opportunity needs to be tapped,” said Krish Iyer, speaking from his experience of extensive travelling in rural and semi-rural areas and meeting a lot of customers and end consumers.
But with the kind of mobile penetration and coverage now prevalent in India, there are always opportunities if you have a problem solving and innovative mindset. Walmart is making the most of this mobile penetration opportunity by helping small retailers go tech savvy, so that connectivity with suppliers or wholesalers is established and auto replenishment is ensured for the retailers, i.e., whatever gets sold can automatically get replenished from the wholesale channel. “I believe the fundamentals in terms of technology adoption need to be put in place. Simple things are what they are looking for at this point in time and bigger things will come in the next ten years or so as far as the majority of population is concerned,” opined Iyer about retail opportunities expanding to include the population at the bottom of the pyramid.
To make the most of this kind of growth, India needs to cultivate entrepreneurs. And it needs to be
If we look at parts of Europe, then countries there would die for having the kind of growth there is in India. But here, when the team gets it right, then the upside is absolutely huge. — Philip Auld MD, Tata Trent
carried out on a scale unprecedented so as to also percolate into smaller towns and districts throughout the country. The approach will help tap into a larger pool of talent available to feed the growth ecosystem and to keep the country on the path of growth. It will also help build new capabilities essential for ongoing innovation of new products, services, and business models that are integral to the making of a vibrant future economy. “In India, we have the advantage of a young population. So the future should be about creating many small entrepreneurs and ensuring how they can become feeding systems for bigger enterprises. I think that’s where even mobile technology could play a huge role. Rather than there being growth only in spurts in certain segments or enterprises, the entire country as a whole can grow together,” said Arvind Varchaswi, Managing Director, Sriveda Sattva Private Limited, emphasizing on the need for inclusive growth and develop solutions to meet India’s challenges. “I think there is a need for a shift in the minds of our rural youth – from a job seeking mindset to an entrepreneurial mindset. There is a need for a lot of encouragement for entrepreneurship. It is something that all of us as retailers should take upon ourselves; that we create growth but not jobless growth but inclusive in nature,” said Shashwat Goenka.
We are seeing highest growth in the East and the highest cooperation from governments in those regions. There is a lot that is happening, not just in the major cities of the East but in the rural areas as well. — Shashwat Goenka Retail Sector Head, RP-SG Group
L to R: Harriet Green OBE, IBM GM, Watson Customer Engagement, Watson Internet of Things and Education
Govind Shrikhande Chairman, IRF’17 and CCA and MD, Shoppers Stop
Krish Iyer President & CEO, Walmart India, and IRF Chairman 2016
Arvind Varchaswi MD, Sriveda Sattva Private Limited
Philip Auld MD, Tata Trent
Shashwat Goenka Retail Sector Head, RP-SG Group