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Aspirations and Road Map for Emerging Retailers
This document summarizes the findings of a study on the state of independent retailers in Chennai and surrounding areas. It identifies the key challenges they face as business growth slowing while margins shrink, high rent and staff attrition, and increasing competition from e-commerce and organized retailers. Retailers expressed a need for clearer regulations around licensing and operating norms to reduce minor irritants and speed up processes. Overall, the study aimed to understand the on-ground issues facing independent retailers to help address their needs through policy changes.
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Aspirations and Road Map for Emerging Retailers
- 2. Why this study? 6% 40% Sizeof the retail market - 2013 100% = USD 440 bn, Rs 265,000 cr Organized Retail; including e- tailing “Mom & Pop” stores “Organizing” Retailers <20 stores < 20 cr Turnover; Modern practices – billing / inventory • Qualitative • 23 retailers in • Chennai and surrounding markets • Categories: Apparel, Grocery, Food, Restaurant, Fast fashion, Cosmetics, Jewelry
- 3. “State of Play”of Independent Retail Business Growth Profitability Competition People Technology Regulatory Policy Customer experience Space • Growth for most retailers is 15% + y-o- y – last 3 to 5 years. • Margins – Shrinking or Stable. No-one spoke about expanding margins
- 4. Branding is thesingle biggest challenge Business Growth Profitability • Creating a brand in the customer’s mind – single biggest challenge. • Mechanisms: • Franchising • Creating own label • Service • Move up the value chain Competition People Technology Regulatory Policy Customer experience Space
- 5. “Customer's expect a modernapparel store which has invested in frontage and store windows to sell an item worth Rs.500 at Rs.100” – Vimal Rajan, Director, Amigos “Consumer discretionary spend on apparel, footwear is decreasing. Inflation needs to be stable for consumer confidence to return” - Murali Krishnan, MD, Kalyani Associates Grocery retailers: Input cost has increased by more than 50% for the last two years – they were not able to pass on the entire price rise to the consumer.
- 6. Competition: “Re” and“E” Business Growth Profitability Competition People Technology Regulatory Policy Customer experience Space “I realize the power of e-commerce, when I see my staff regularly giving directions to the Flipkart delivery boy”, Arun Kumar, Director, Sri Ramana Silks; Madurai
- 7. Space and Peopleworries Business Growth Profitability Space Technology Regulatory Policy Customer experience People Not only is space cost increasing, the pace is the highest in the smaller towns – Salem, Trichy, Erode, Karur, Thanjavur. Retailers in these cities report that rentals have risen as much as 10 times in the last 10 years. Competition
- 8. People Matters All butone retailer spoke of high attrition – in most cases - above 90% per year. That means that front end staff in any given store changes completely every year. “Attrition is linked to ‘brand power’. Even banks give better loans to staff who work for brands like Levi’s” - Vimal Rajan, Diretor, Amigos
- 9. Technology: Social, butnot sure how to go about e-commerce Technology Regulatory Policy Emerging Retailers are “ Surprisingly Social” Billing / Inventory are automated. Except for grocery / small format supermarkets, all retailers felt that an ecommerce listing would help – but were not always sure how to go about it.
- 10. Regulatory: Accumulative, minor‘irritants’ Regulatory Policy Emerging retailers want clarity and speed on licensing and operating norms. Reactions to FDI are mixed – some believe it will push up space and people costs, others see it as an opportunity to learn from global retailers. Larger retailers among those surveyed see GST as an enabler. About a third of the retailers wanted protection from the predatory pricing of e- tailers.
- 11. Regulatory: Accumulative, minor‘irritants’ Regulatory Policy Need clarity, transparency on: • Licenses for store opening • 365 days permission • Labour registers • Coordination with urban planning (e.g. metro work in Chennai) Emerging retailers want clarity and speed on licensing and operating norms. Reactions to FDI are mixed – some believe it will push up space and people costs, others see it as an opportunity to learn from global retailers. Larger retailers among those surveyed see GST as an enabler. About a third of the retailers wanted protection from the predatory pricing of e- tailers.
- 12. In summary: “Stateof Play” of Independent Retail Business Growth Profitability Space People Competition Regulatory Policy Customer experience Technology Based on your feedback we will look to continue this dialogue with retailers across other markets – Delhi, Bangalore, Mumbai, Surat etc.