Primarily this involves studying unorganized retail. These include your neighborhood convenience store (popularly called the Kirane-ki-dukan in north India); or the hardware shop at the corner of your street selling everything from bathroom fittings to paints and small construction tools; or the slightly more organized medical store and a host of other small retail businesses in apparel, electronics, food etc.With retail growing in India at a breakneck speed, there are plenty of statistics available on this sector:
- The retail sector in India is worth USD 394 billion and is growing at the rate of 30% annually
- The sector is highly fragmented with 97% of its business being run by the unorganized retailers like the traditional family run stores and corner stores.
- The sector is the largest source of employment after agriculture, and has deep penetration into rural India generating more than 10% of India's GDP
These are huge numbers, by any standard. And the statistics and analysis surely point us in the direction of the rapid growth, modernization and of course innovation that is going to sweep this sector in the near future.
However for the purpose of the next few blog posts, I am going to move away from the statistics and focus my attention on the people who make up this industry.
The obvious entities of this eco-system are the ‘dealer’ the ‘retailer’ the ‘contractor’, the ‘distributor’ the quintessential ‘small-time businessman’ (There are a few women too in family run businesses, but its still a strong hold of the businessmen).
Apart from this there is the ‘government’ with its policies and the ‘company’ that is a critical entity producing the products and a host of entities on the manufacturing end.
It is interesting to note that analysts predict that even by 2013, 84% of retail in India will continue to be unorganized. If innovation is to be applied here, then it becomes critical to understand:
- What will keep the % of unorganized business so high?
- What are the fundamental assumptions behind the terms organized and unorganized, that are locking us ?
- Why will organized retail not be able to create a significant dent in this sector?
- What mindsets hinder or enable innovation within the entities of this sector?
- What are the potential breakthrough sensitive areas – that need innovation?
- Current approach to Innovation – is it based on applying urban ‘American’ concepts of suburban growth to this sector? How limiting are the current mindsets?
- Therefore what could be some new radical directions in innovating this sector?
I will be exploring these areas and more in a few days…. stay tuned.
This post reminded me of Gaurav Sabnis's interesting post on the same topic.
ReplyDeleteHere's the link--> http://gauravsabnis.blogspot.com/2006/11/kirana-will-still-rule.html
Needless to say I quite agree with him. Some 5 years back a shopping mall opened up close to where I live. Right next to it, a small kirana shop was thriving for some years now. I remember feeling very bad for the the guy running the kirana shop. I almost thought he would have to shut his shop now that a up market food mall has come right next to it which also offers free home delivery! You know what? After just 5 years, not only has that kirana guy managed to open another shop some two blocks away (which he has entrusted his kid brother) but the shopping mall had to eventually shut down. Why? Cause the owners could no longer manage to run it all by themselves. Good mangers were hard to come, cheap staff was even more difficult to get! So eventually those people could not longer afford to run the place all by themselves or even with the help of paid staff. Whereas the small kirana guy called his distant cousins from his native village when labor became a problem. Not only cousins, but his wife, mother, father, all were involved in the business.
Another point why these small kirana shops survive is perhaps cause unlike the big food malls they don't follow a strict corporate business model, just go with what works well for them. Perhaps also why they can be so flexible in running their business. You can't find any food mall or super markets like big bazaar open early morning at 6 or late in the night at 10. But You can always bank on the kirana stores when you badly need a loaf of bread!:)
Another reason that I can think of as to why the middle class (or anyone else too for that matter) will prefer the kirana guy/ local shops cause they know that choice is not a good thing always.
1) You invariably end up buying more and unnecessary stuff in malls. In your local store, you give them a list and get done with it. You don't end up buying an extra bottle of fruit juice.
2)When inundated with so many choices, it's quite difficult to make a decision. Your local kirana guy makes things simple for you. he'll just have two brands, one expensive (and supposedly good quality) and one cheap one. You know what you want. Also, lets say a girl like me who has no knowledge about electrical stuff needs to buy a two-way switch. I have no clue what to ask for. I am going to feel like a fish out of pond in the electrical/hardware section in a mall. But I know I can just tell the local hardware guy what my requirement is and he'll tell me everything about what I need and what I should be buying. Things just got simple for me! :)
"
It is interesting to note that analysts predict that even by 2013, 84% of retail in India will continue to be unorganized."--I quite agree!
...good post
ReplyDeleteIn my opinion, Whether it would be really 84% depends on quite a few factors but if I have to state one reason I would say,
1 How much value addition oraganized retail could bring in to people's life over unorganized retail. That value additon is measured in the form of monetary, social, personal gains.
Hi,
ReplyDeleteWhile browsing on retail sector I stumbled upon your blog, The question which you are trying to answer is a million dollar question. While You would might have got your answer as the article is little old .....but I wanted to tell you a story...here it goes.......I went to market to buy some hardware....I also had to a buy a detergent powder pack. ....was searching for a kirana shop .....found some 4 shops in a row...2 were crowded and two almost no customer. As I am always worried about waiting to pay up (this is also a villain for most retaliers, why, how...you would have guessed) i moved to the empty shop, told him what I want, he got it within seconds....at the same time one old person (70-75 yrs) entered and asked for vicks, the man at the counter looked at him...but did not say anything....my ariel was put in the cover....as i dont take extra plastic cover..i told him to remove it. The old person said one more time about vicks....this time the shopkeeper, a 20 something guy, well dressed,,,,replied.....arey de rahe na....kaahe itna ghabraye hue hain....itna hi jaldi hai to thoda aur sabere aate.. (I am giving you no !!, why are u in a haste...if wanted fast... you should have come early) the old man became silent.....I told myself...this is not good...and thought what will happen next....if i was at his postion...i would have replied back.....suddenly the old person looked right....turned back and marched....i finished paying...the vicks was in shopkeeper's hand....the old man was in next shop which was already crowded. The puzzle was solved. I found my reason why this shop was so empty and the next one full. The conviction re-inforced Consumer is superstar....dont hurt his ego....he will punch you on your face. I waited....The old person got his vicks almost 10 minutes later....this shop has made a customer for life and the previous one has lost one for life.
My one line
Sell more if u consider a customer your favourite uncle....and big box retailers today dont consider consumers as their uncles...so they loose out....This is the most important reason in my opinion apart from many more.
I am s student of Retail art...in the sense I studied fashion...produced for Europian consumer....worked for Wal-Mart....and now trying to do an MBA from XLRI.
I shall be interested to know about your project.
All the best
Ranjeet
tarouni@gmail.com
Good Article. Thanks for posting.
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