| It has been a long and steady journey for Shoppers' Stop from a single store in Andheri over 12 years ago. |
| While this retailer has ceded its leadership position to another trailblazing retail enterprise (Pantaloon) in terms of gross revenues, it can rightfully claim the credit for being the catalyst in modernising and professionalising the antediluvian retail sector in India. |
| In times to come, I am confident that Shoppers' Stop will continue to innovate and establish many best practices for the emerging retail industry in India. |
| With all the three major listed retail companies (Trent, Pantaloon, and Shoppers' Stop) doing exceptionally well on the bourses, and giving outstanding returns to their investors, raising capital for new retail business start-ups or scaling up many other existing ones should no longer be a major challenge. |
| However, the good news is actually not limited only to entrepreneurs and investors. In recent weeks, the Centre has been very proactive in taking up the case for a modern, consolidated, and vibrant retail sector. |
| The most encouraging statement came from the finance minister himself on the day of the listing of Shoppers' Stop when he made an extremely forceful and very well-articulated case for inviting and encouraging modern retail businesses including those from overseas, and how a very strong front end (modern retail) can be the driver for achieving extraordinary efficiencies in the creaking, disjointed supply chains especially those related to agriculture and textiles. |
| Since modern retail currently has only a minuscule share of the overall consumer spending in India, the task ahead is gargantuan. |
| Even to achieve just a 20 per cent share of the overall consumer spending through modern retail concepts, the required investment in real estate, shop fit-outs, technology, and logistics alone will exceed over Rs 80,000 crore. |
| Thousands of crores of additional investment will be needed in hiring and training over 1.2 million that would be directly employed at this 20 per cent share level. |
| The indirect beneficiaries (besides the merchandise suppliers) will be a host of other industries and professionals ranging from real estate, architects and interior designers, manufacturers of shop fittings, IT and the BPO industry, recruitment and training enterprises, logistics providers including transport companies, etc. |
| Hence, it is heartening to pick up encouraging signals from the government on their liberal views on encouraging capital formation in the retail industry including by attracting foreign direct investment. |
| Hopefully, the government will come out with a liberal policy framework in the near future, with none of the anachronistic baggage of the past in which more debate was done on limiting investment to mindless milestones such as 26 per cent, 49 per cent, or 74 per cent, rather than focusing on how to maximise achieving investment in various sectors of critical importance to the country. |
| Even if the policy were to allow 100 per cent FDI in retailing, it is quite likely that many of the global retailers may elect to come with a local partner in order to cut short the learning curve of understanding the needs of the Indian consumer, and of understanding and organising the highly complex local supply chains for most consumer products. |
| Hence, the government should not, and does not, have to legislate which entity should hold what quantum of investment. |
| The present environment is the best one can hope for when it comes to planning new start-ups in this sunrise industry. |
| There is buoyancy in consumer spending and the medium-term outlook for the economy as a whole and consumer sentiment in particular looks quite positive. |
| Indian consumers have given an unequivocal thumbs-up to the modern retail formats that have come up to address the real needs of the modern consumer. |
| There is more than a passing interest from international retailers to consider entry into India, and some of them would be open to partnering with capable Indian businesses/entrepreneurs. |
| Capital is available, public as well as private. The government is favourably inclined towards coming out with policies that can support the organised retail industry. |
| Major developments are taking place for easing the shortage of quality real estate, which is vital for the retail industry, and in the next 4-5 years, high-quality affordable space should be easily available across most parts of India (not only limited to the metros and mini-metros). |
| The biggest opportunities, from a business point of view, remain in the food-and-grocery area. With over 40 per cent of consumer spending in India accounted for by this product category, this remains the most enticing one. |
| Not surprisingly, this area will also see a lot of competitive action in the next few years including that from international players. |
| Textile and clothing retailing has already seen the emergence of many modern retail concepts, and hence while there is still an opportunity to have more start-ups, the real untapped opportunity lies in creating modern concepts for retailing consumer durables, electronics, and IT and telecom products. |
| This category has already become the third-biggest area of consumer spending (after food and grocery, and textiles and clothing), and may well become the second-biggest within the next five years. |
| Furniture- and furnishing-based concepts also offer outstanding potential, and entrepreneurs should seriously look at starting new businesses based on this category, which should see exceptional growth over the next 10-15 years. |
| And finally, the good tidings are also there for the hundreds of millions of Indian consumers. A vibrant, competitive, and modern retail sector will undoubtedly lead to overall lower prices, better service, and improved shopping comfort for all consumers. |
| Hopefully, we will see a lot of it in the coming years! arvind@ksa-technopak.com |
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