Bharti Retail: Retail to the Masses

What is the retail market in India? Who are the main players? What are the characteristics of consumers? How will it be transformed in the next decade?

These were the questions that were asked by Sawhny Vinod, the recently appointed head of Bharti Retail. According to the Hindu Business section, "Mr Sawhny will look after the new retail initiatives of Bharti Enterprises including the operations in Hypermarkets, Neighbourhood stores and Super Centres on a pan-India footprint."

Bharti Retail has made a strategic alliance with the world's biggest retailer, Wal-Mart. As described by Mr. Sawhny, Bharti will run the front-end operations of the business which includes three different store formats, Hypermarkets, Super Centres and Neighbourhood Stores. The back-end operations of the business, where Wal-Mart excels such as the supply chain and logistics will be run by Wal-Mart. This arrangement is due to Indian regulatory restrictions not allowing multi-national companies be the front end business.

Mr. Sawny described a formal modern retail "channel" as non-existent in India. The majority of retail is dominated by smaller "mom and pop" stores. The idea of customers coming into a store and picking products did not exist, but the game is changing. Today, 4% of the market is organized, with 96% considered unorganized, consisting of fresh food markets and Kirana stores (mom and pops).

Mr. Sawny predicts the next boom industry in India will be retail. Mr. Sawny cited a projection in which by 2020, India will be the second largest economy in the world. In India, 64% of income goes to private consumption; this consumption will drive GDP and retail growth. He also noted a dramatic shift in social-economic status and demographics that shows that 65% of the Indian population under 35.

Mr. Sawny also discussed the challenges for retailers in India:

*** India is very fragmented, difficult to service and hard to find economies of scale.
*** Supply chain peculiarities in India, with a system with many intermediaries that have no value add. As an example of the effect of intermediaries, he gave an example that for a 1 rupee potato, 8.45 rupees are added to the price due to costs added by intermediaries.
*** Real Estate in Urban areas is very expensive
*** Talent is difficult to attract, many lured toward IT

Throughout the trip, we've about the incredible growth of India's economy and the projected wealth of its population. Wal-Mart will be around to ensure that the beneficiaries of globalization will have a place to spend their money.

..dang nguyen