Q You have a wave of disruptions happening in the retail space globally, but in India it is a completely different kettle of fish. Going by the market-cap, going by what a DMart or Trent or Reliance Retail is projecting, India must be the only market where food and grocery and retail businesses are valued as if there is no problem in the world, there is no Amazon in the world, and there is no disruption in the world.
We must remember that the Indian consumer is still evolving. Although our economy has slowed down a bit, we are much-much stronger in terms of growth versus any of the western economies. Our macro-economic criteria still remains strong from the working age population, etc. The stimulant in the economy, in terms of data going dirt cheap, a lot of digital initiatives have been put in place by the government. The UPI has tried to cue the consumer to become much more spend-savvy. The government has spent and launched initiatives around FDI along the Make in India perspective and is allowing single-brand retailers to go online. So, there is a lot of activity happening in this space. As we evolve, I do not think we can be compared exactly with the West. Hence, we will have a different trajectory and a stronger trajectory in the near future.
Q The Indian consumer is evolving where data can be interpreted both ways. Data makes life easy for consumers to use platforms and shop online. You do not have to stand in a queue or go to a crowded mall to do your purchases. The millennials want to buy, consume everything on their smartphones. So, my question to you is, while the Indian consumer continues to consume, keep growing, per capita remains strong, will the Indian millennial skip a generation? Instead of walking to a store, will she just order everything online?
What has also happened in the West, and if you trace the west or China, it is not that everything has moved online or the physical trade has disappeared. It is always going to be an omni-channel world, but all types of trade, mom-and-pop, modern trade and e-commerce will be in equilibrium. We are still at a stage where e-commerce is coming into the country, the penetration is improving. I guess it will continue to improve, but I guess over time all types of channels will remain and the consumer will have the choice to test out, go and examine, go and look at something in physical trade, buy online or go and look at online and by in physical trade. I think everything, all three channels, will remain robust over the next 15 to 20 years in this country.
Q Who do you think is actually going to be the winner in retail over the next decade? We take a slightly longer view, but who do you really see as having the potential to emerge a winner?
I think players that have the consumer at the centre, players that have a strong private label focus, players that have an omni-channel play. When I mean omni-channel, they would have physical stores and an e-commerce play. These players will be much stronger over the next few years compared with those who are only e-commerce players or only modern trade players for sure. So, there are many people in the fray right now. It remains to be seen who will win, but certainly someone who can play all kinds of physical and non-physical modes will be stronger.
Q Everyone is talking about reach: from IndusInd Bank to Reliance – everyone is saying look we got a network, we got a branch, we have got the data, we will open more kirana stores, we will open more connected stores. So I wonder if everybody is trying to do the same thing, and who will be the differentiator? When we speak to Reliance, when we speak to D-Mart, when we speak to the Tatas, the idea to grab an idea to really monetise the data is everyone’s endeavour. But when everybody is doing the same thing, I hope too many cooks will not spoil the broth?
I do not think it will be a case of too many cooks spoiling the broth. The broth will just settle down to the top few, five or six players. It has happened in every industry. When an industry is and when the consumer is changing, you have multiple initiatives being picked up and multiple data needs, but slowly and steadily, larger players seem to be evolving.
There will be acquisition in this space, players may become larger and the top three or four will approximately occupy about 80% of the space. This happens across the world, but we are still in a growing economy. These are very early days to predict who will win, and that is why you see everyone trying to do the same thing. But yes, it will settle down over the period of the next eight to 10 years.
Q Let us think about who possibly would not survive? If we just tilt the question the other way, where do you feel somebody or which of the companies you feel would lag behind in the evolving landscape?
Any company that runs just one channel will struggle over a longer period. So if you are actually hoping to survive because of physical stores over the next 10 years, it is not going to happen. Over time, you would be marginalised and you will land up being No. 10 or No. 12 player. If you are a pure e-comm player, the next few years are going to help you grow, but over time if this is a physical retail player which has a stronger e-commerce play, it would eat into your space. Currently everyone is playing into one kind channel, I think the one who plays different channels will be the winner. The more private labels you have of your own, you would be the winner, you cannot rely on other people’s brands to drive your own firm beyond a point. The more you have private labelled brands, the more would be your margin over time.
Q Which of the categories do you think has been the highest growth potential for this decade? Which category stands out?
If you look at modern trade and e-commerce, it was strongly occupied by electronics, which seemed to be sort of the trend between 2015 to 2020. But apparel, footwear and luxury goods categories are catching up very fast. So I guess the next five to seven years will continue to see a trend of penetration improvement in these categories. The more difficult ones would be food, grocery, perishables, which may take a little bit of time. But that is subject to the kind of cold chain infrastructure and facilities we have in our country which may take a little bit of time to develop.
Q If you have to buy a simple merchandise like tomato ketchup, you go online and you have got 50 brands. More and more brands are getting created, retailers always had this unique advantage that they offered FMCG companies display and shelf space and helped with penetration. If a lot of brands get created on Facebook or Internet with different offerings and more localised menu, where big food companies or big retailers may not come in, what will happen to the uniqueness of brick-and-mortar stores?
The brick-and-mortar stores will have to re-engineer themselves. They will probably have much fewer SKUs than what an e-commerce store would have, but I guess that is how the world is evolving. If you look at the food industry, the number of global brands that you have in food are lesser than those in personal care. That is because of the kind of needs and tastes different parts of the world have. Each and every retailer needs to keep the consumer at the centre, re-engineer itself, see how fast or slow its competition – whether it is mom-and-pop trade or e-commerce – is evolving and then shape its own path. There are retailers which have been very low on private labels, and have slowly gone strong on it because they have found a niche around it. There are very strong examples of that with very high valuations right now. I guess it is about the consumer at the centre, knowing how the competition is evolving and finding a niche for yourself, which actually is strong enough to sustain your business over a longer term.