India is one of the most over-populated retail destinations in the world with one outlet for every 100 persons. Around 95 per cent of shopping is from the neighbourhood retailer who offers convenience, credit and personalised service -- so why would consumers switch to modern formats which offer little differentiation in pricing (in the absence of scale or superior logistics) or location (convenience store formats like Subhiksha or Reliance Fresh are proving unviable)?
When there's no major differentiation on offer, a 'push' strategy could help, of the sort DTH did with big subsidies -- in 2008, the industry did 1.5 times what was achieved in five years. But the supply-side dynamics don't quite favour organised retail. While inadequate investments on retail-ancillary and retail-logistics businesses curtail the ability to compete on pricing or product, poor economics of the existing operations and lack of investments in retail infrastructure will put the brakes on future growth plans.
While the industry leader (Pantaloon Retail) is not adequately funded for growth, funded players like Reliance Retail/ Tata and Birla have still to establish adequate scale to be competitive.
Image: Metro cash-and-carry outlet in Kolkata, east India. | Photograph: Parth Sanyal/Reuters
Also read: 4 million jobs will kickstart US economy: Obama
Powered by 
| Live updates on money.rediff.com |
|
Advertisement
