If modern retailers in India have not made their presence felt, as ‘Retail’s new mantra’ (Aug 27) points out, it is because retailers still haven’t managed to get a handle on their business. In the beginning, the idea was to get big shops, then the model was that the kirana model had to be replicated; at one time the idea was to get large volumes, now the idea is that product differentiation is desirable. Experimenting to find out which model works best is natural in every business and, to that extent, retail is no different.
In fact, it is easier to experiment in retail as the amounts of money involved are far smaller than in other businesses — it is no surprise that Wal-Mart is going about its work in Punjab in a very slow and steady manner because it knows that this is not a business built up in a hurry. But there is a big difference between the retail industry of the last few years and the retail industry of the next few years, and that is the global financial meltdown.
What has kept companies like Pantaloon and others going in the past is the willingness of equity investors to fund them. Now that the financial markets are in a turmoil, it is unlikely that easy money will be available. So, the question that Subramanian raises of the firms being over-leveraged is critical. The stores may have become cheaper to acquire now that rentals and values are down, but do the big retailers have the money to buy/rent them? The revenue-share model is still in its infancy and will probably die once the economy picks up, so it is futile to set too much store by this.
Sanjay Singh, New Delhi