All things considered, Retail is probably the most interesting, diverse and opportunity laden industry in the recent Indian economic history, writes Melroy Pinto.
Ask anyone what retail means to them, and chances are you’ll get different replies from different people. Tweens and teens will associate it with sales on Amazon and Flipkart, investors (of the angel variety) will call it a growing category, the common man understands it as “kharidna” or “bechna” (thank you OLX).
The point is, retail is so much a part of our lives, that we often take it for granted. When I was first asked to write this piece on retail, I was pretty flummoxed by the brief. What was retail? How did it originate? Where is it going? A little research and a few pretty astounding facts later, I can say with some amount of authority, that retail is here to stay, and all things considered is probably the most interesting, diverse and opportunity laden industry in recent Indian economic history.
Back to the beginning: The history of Indian retail
To understand the future of Indian retail, a trip to its origins is mandatory. Indian retail is one of the oldest industries in the world. One the world’s first full-fledged urban civilisations, the Indus Valley civilisation, was by all accounts an economy fuelled by trade, commerce and retail. For aeons, India has been at the epicentre of global trade, first as a supplier of raw materials, then under the British, the largest market for British made goods. While the ‘goras’ virtually outlawed Indian production of any kind, us Indians being the enterprising lot we are, found innovative ways and means to flourish in these oppressive times as well. The presence and prevalence of the great Indian black market, is proof of the resilience of the retail sector in the country. In a nutshell, Indian retail is an industry that is about as old as the agricultural sector and today is emerging as one of the major drivers of growth in the Indian economy.
Retail in post-Independence India:
August 15th, 1947 saw the birth of a new nation, with Pandit Jawaharlal Nehru at the helm of affairs. For a newly independent nation, the problems that we faced were mammoth. So naturally in the first two decades of Independence, retail as an industry, though very much still present, wasn’t the focal point of our economic existence. Getting the country up to speed with the West and tackling the dual problems of unemployment and illiteracy consumed the Nehru government. In 1951, the first of the Russian inspired five year plans took shape and those laid the foundation of Indian industry. This however wasn’t the heyday of
Indian retail. The focus lay on food production, infrastructure development and heavy industry. It wasn’t until the early 1970s when Indian retail truly began to emerge as an ‘industry’ in itself.
From the 70s to the post liberalisation India
The mill lands of erstwhile Bombay, which today houses some of the country’s most iconic high streets, were the progenitors of the modern Indian retail story. After all it was here that the idea of selling in chain retail stores was born, with companies like Bombay Dyeing, Siyaram, Mafatlal and others leading the establishment of chain stores. The retail industry owes the textile trade a debt of gratitude in that respect.
With the establishment of a new format in retail, slowly but surely, manufacturers in other sectors too, began exploring avenues in the space, which until this point in time, was the sole purvey of local kirana stores and mom & pop shops. While the latter still controlled most of India’s then fledgling retail market, a serious attempt and thrust was being attempted by the country’s organised sector. While the progress was still slow, the retail revolution had begun.
Called N-commerce or neighbourhood commerce, this hyper local solution, looks to use existing e-commerce infrastructure to provide niche, daily needs, grocery and handyman services amongst others, direct to customers via their smart phone apps.
One of the main reasons for the slow pace of growth in the retail space was the fact that up until 1991, India was a rather controlled, insular economy, with foreign direct and foreign institutional investment, not of the level it is today. Besides license Raj, one of the remnants of the British rule, was counterproductive to any forays in this space. All this though changed post liberalisation (thank you Dr. Manmohan Singh!). The speed of FDI and FII in the retail space increased, and the curbs that were once imposed on the sector, were eased. The period of the next decade saw one of the strongest surges in the retail sector to date.
Retail in the 21st century: High streets, malls, the age of disruption, big data and e-commerce
At the turn of the century, India as an economy was a far cry from the ‘developing’ (read struggling) one of the first few decades of independence. This was a resurgent, ebullient India, ready to face the world head on, and in many ways, this was mirrored by the emergence of a new, more in-your-face attitude of modern retail. What the textile trade had started with chain stores, suddenly exploded into large format retail stores, high streets and multi-brand malls in virtually every state of this great land.
The emergence of mall culture, coincided with a great interest in the retail sector from foreign institutional investors. In fact many malls, high streets and food based retail concepts today are international partnerships. This major step in the evolution of modern, global retail in India, also coincided with the emergence of the internet as more than just a means of communications. Amongst the first ‘desi’ players in the online retail space was Indiaplaza.com, the now defunct store was targeted at NRIs and for the duration of its operation did pretty well for itself. It wasn’t until Flipkart in 2007 though, that Indian e-tail seriously took off.
Along with the emergence of e-tail, began the age of disruption, in Indian retail. Terms like fire sales, massive discounting and ‘end of season’ became watchwords, which Indian consumers, lapped up, and for the first time in hundreds of years, the customer was well and truly KING! The age of disruption, that was introduced as a strategic tactic, by e-commerce players to acquire customers, soon became the standard industry practise, to retain, and delight customers as well. This disruption was further aided by the use of precise and easily tracked big data, which gave the advantage to the e-commerce stores. Knowing the customers preferences, being able to analyse purchases and predict trends, was big data’s biggest contribution the e-tail disruption.
Suddenly the brick and mortar shops, saw a definite fall in customer traffic, and faced the first major challenge to what had once been their almost exclusive purvey. But as the old adage goes, necessity is the mother of invention, and this challenge, gave rise to a newer solution, where traditional retail powerhouses could finally meet the young Turks on a more level playing field.
The emergence of Omni channel, m-commerce and N-commerce
With the waves of disruption caused by e-retailers, hampering the already frayed traditional retail sector, the need for the hour was for these players to find a ground where they could compete with e-commerce. This came in the form of Omni channel, which simply meant, the extension of a brick and mortar store, into the e-space. Retail titans like Trent, Reliance Retail and Croma, have successfully established themselves as alternatives to the prominent e-commerce shops, levelling the playing field and of course, spoiling the consumers for choice.
A huge contributor to the e-commerce revolution, was the expansion of the mobile infrastructure and the integration of mobile payment gateways. Seen as e-commerce players as the next logical step in their evolution, M-commerce has become a significant driver of revenue. The emergence of app-based shopping, thanks to the spread of Google’s Android OS, has seen players like Flipkart, Myntra and a few others, bet big on this and move to an app-exclusive environment, offering exclusive deals, discounts and a greater value to customers who shop using their smart phone apps.
Where then does this leave the one time Sultans of the retail space, the mom and pop stores, kirana retailers, grocers, handymen services and other daily needs providers? Well, e-commerce, being the all-inclusive, democratic, equal opportunities industry, that it is, has pioneered a solution for these strata as well. Called N-commerce or neighbourhood commerce, this hyper local solution, looks to use existing e-commerce infrastructure to provide niche, daily needs, grocery and handyman services amongst others, direct to customers via their smart phone apps. Grofers, myonsto, Localbaniya, Fixy and several other players have recognised this as the future of retail (hyper-local retail) and seem set to capitalise on this huge latent market.
So that by far was the long and short history of Indian retail. Where we go from here is anyone’s guess. But one thing’s for sure, it has never (and I mean N-E-V-E-R) been a better time to be a consumer.