Day: November 26, 2011

My views as well.  Original article follows:

As foreign retail giants gear up to enter the Indian market after Thursday night’s cabinet decision, discussion is already running hot.

Opponents of “big box” retail have focused on the negative effect it may have on small shopkeepers, while supporters point to the benefits of a modern supply chain, which would make many industries, especially agriculture, more efficient, and provide millions of jobs.

But there is a more fundamental question that needs to be answered first: will Indian shoppers take to big box stores? 

Let’s compare the American big-box shopping experience to shopping in urban India:

In the United States, you usually start by getting in your car. You drive, sometimes for 30 minutes or more, and park in a lot the size of several football fields, braving whatever weather there is, to enter a warehouse-sized, climate-controlled cornucopia: everything, from car air fresheners to jogging bras to fresh peaches, under one roof.

In India, in contrast, if you live in one of the urban, upper and middle class neighborhoods that will surely be prime targets for these big box retailers, almost everything you need already comes to you. Twice a day in my South Delhi neighborhood, not one but two vegetable sellers walk the streets with carts. Like the farmers markets that have become so popular in America in recent years, their produce is seasonal, so they don’t always have everything, but what they do have is very fresh.

Besides the vegetable-wallahs, daily “retailers” include the broom guy, the fruit woman, the milk man, the shoe-shine guy and the lady who picks up the ironing. Our neighborhood butcher delivers, as does the chemist, the grocer and the bakery. We call, they come, we pay cash.

To buy appliances, you go to a market nearby, select your television or air conditioner, and it is delivered to your home, also payable with cash on delivery. Nearby Lajpat Nagar and several other markets are great places for clothing, and most shops will tailor-fit clothing after you buy.

Sometimes, there’s not a whole lot of choice – you want butter? You get Amul. You want laundry detergent? You get Tide.

On trips back to United States or Britain, I can often be found, mouth agape, in the condiments aisle of a big box supermarket, trying to choose between 45 varieties of mayonnaise, or scratching my head in front of the pantyhose (What is Cool Comfort shape wear, and do I need it?)

For someone who has lived in India for five years, coming home to the staggering variety available in America’s big stores is a great novelty, at least for the first few days. But, quickly, that novelty wears off, and shopping becomes a chore again.

Will India’s consumers feel the same, particularly when they already have what they need delivered quickly and effortlessly to their doors? After all, Indian-owned department stores like Big Bazaar already exist, but plenty of consumers still shop elsewhere, or choose not to to shop at all, sending their maid to get the groceries and other necessities.

Retailers say that they’re aware that they need to think differently here. “It’s clear that India will require an Indian model,” said Rajan Bharti Mittal, vice chairman of the Bharti Group, which already had 170 retail stores and 15 wholesale stores in partnership with Wal-Mart. “Indian shopping habits are different, our needs are different. Our real estate and location is challenging,” he said.

Big box retailers hoping to gain sizable market share here will need to offer substantially better prices, and think creatively.

To appeal to India’s upper-middle classes, big box retailers may need to think upscale, providing an army of people to carry groceries to cars, and even accompany customers to their homes to assemble their flat-pack furniture.  Like the fancy malls coming up in India’s metropolises, these stores might want to add a room for their customer’s drivers to hang out and have some chai, while their employers are shopping. If you’re going to sell clothes, you need an on-premises tailor.

Yet to appeal to the lower to middle classes, folks who retailers promise will most benefit from the lower prices they’ll offer, retailers will need to think in another direction.

The cabinet decision Thursday confines foreign big box retailers to cities with over 1 million people. Thanks to rising land prices and a recent building boom, these new multi-brand retail outlets are likely to be confined to the outskirts of those cities.

Just 10 people out of every thousand own passenger cars in India, according to World Bank figures, or 1 percent of the population. Motorcycle ownership is much higher, but sky-high fuel costs here are likely to discourage shopping at a retail outlet that is miles away. Yes, here in India you probably can carry a new television on your motorbike, but why would you want to when you can get it delivered?

Retailers may want to think about providing transportation, like Ikea’s free shuttle bus that goes from Port Authority on weekends, but on a regular basis. Or maybe they’ll want to offer rebates to cover the cost of fuel?

That doesn’t factor in the time involved in “one-stop” destination shopping: traveling miles to shop, no matter how good the prices, might not make sense for anyone who is working 12 hours a day to support their family.

Of course, retailers won’t want to even think about making inroads in India without providing food – Swedish meatballs are not recommended, but the big retailer who sets up here without affordable, tasty snacks for its customers is not likely to last long.

Bottom line for big-box retailers: you won’t succeed if you try to airlift a store from Bentonville to Gurgaon.

Vikas Bajaj contributed reporting from Mumbai.