Wednesday, December 3, 2008

BOOK REVIEW: India’s Store Wars by Geoff Hiscock


Sudhanva CharEditorial Board – Academic Resources

India’s Store Wars by Geoff Hiscock. Subtitle: Retail Revolution and the Battle for the Next 500 Million Shoppers. Published by John Wiley & Sons (Asia) Pte. Ltd. ISBN 978-0470-82351-4

Many of the accounts of India’s dramatic economic growth after the economic policy liberalization in the early Nineties have been more macroeconomic and very little microeconomic. The book under review portrays how it really is at the firm or the sector level under the current swift scenario. It succeeds in bringing out the dynamics of growth in a micro-segment of the economy, the Retail Trade and Commerce. In this sense, it makes a noteworthy contribution, in the nuts and bolts area of microeconomic development: the Indian retail sector.

Geoff Hiscock’s account of the Indian retail scene is fascinating, and particularly so if you are among those familiar with Indian retail business, jammed chock-a-block with angadis, the mom and pop kirana stores, the bazaars, the dukans, dhabas, mandis, pottikadais, parishes, stalls, and weekly santes, and what have you, selling anything from boiled and salted peanuts to iphones and digital cameras. The book’s keynote is it effectively projects the humble retail store as one of the critical components of the engine of economic growth. It goes beyond that: it actually demonstrates why and how this modest constituent of the free enterprise world is indeed a key building block of economies such as India’s.

The book has twelve chapters. The first examines the ramifications of the Indian retail market size and makes projections into the future such as the share of ‘modern retail’s’ in total spending going up from 3.6% in 2008 to 26% by 2018. The theme of the second Chapter is “What Consumers Want?” discussing the strategic importance of rural retailing for marketing success. The third Chapter deals with key players in the retail area and the new comers are discussed in Chapter 4. The Bharti-Wal-Mart collaboration is the subject matter of Chapter 5. Chapter 6 deals with established business houses such as Tatas and Birlas becoming prominent in the retail area. The next chapter calls for attaining the economies of scale, and preaches the virtues of becoming big with excellent case studies of Nalli, Viveks and Subhiksha. The emergence of the Mall culture is discussed in Chapter 8. Rural retailing is the topic in Chapter 9, Supply-side snarls such as inadequacy of infrastructure in Chapter 10, Talent needs for Retail and their availability in Chapter 11. The last Chapter takes a 3600 perspective of the future of retailing in India. It takes a look at a whole set of problems such as infrastructure inadequacy, corruption, social and political upheavals, and others. What is most interesting is the list of top ten retailers today and a forecast of such top retailers in 2013, some five years from now. According to this forecast Reliance would emerge as the Numero Uno and the Bharati-WalMart collaboration second.

“India’s Store Wars” captures authoritatively the vibrance of the contemporary retail landscape and the vigorousness of the retail wars in India, the new players, the entry of global companies as well as of Indian conglomerates such as the Tatas, Birlas, and Reliance and others. It gives a sense of where the future of retailing as a unit of India’s growing economy is headed. It succeeds in bringing home to the reader the excitement that is Indian retail business. It mirrors the state of the Indian economy itself. If the Indian economy grows at a hurried pace of 8 to 10 percent, the Indian retail business seems to be clocking a hastier pace of expansion such as 12 to 14 percent. But the book does not, alas, discuss what factors validate such rapid growth attracting multinationals and conglomerates into India’s Retail Trade. This is not to deny that it does list the obvious reasons such as the actualities of increasing incomes, demographics and the emergence of the middle class in a substantial way and the increasing brand-consciousness.
The big retail chains of America such as Wal-Mart, K-Mart, Neiman Marcus, Walgreen, JC Penny, Sears Roebuck, Macy’s, Home Depot, Lowe’s and scores of others are globally eminent. The important role of retailing in America’s prosperity is taken for granted. The Retail Sector’s contribution to America’s GDP is about 12 percent or $1.62 Trillion. In comparison India’s retail sales are estimated at $350 billion which is a lot more substantial at about 25 to 30 percent of India’s GDP. In this perspective Wal-Mart’s decision to partner with Sunil Mittal’s Bharti Group is a bold step especially in the context of the unforeseen slow down in India’s retail business. Not surprisingly, as the book mentions, the Wal-Mart-Bharti collaboration is pejoratively termed by existing retailers as “Wal-Mart invasion.” (p.7) Sunil Mittal, the chief of the Bharti Group that is collaborating with Wal-Mart, calls India the “last Shangri-la of retail.”(69) and a “continent of consumers” (p.73)

Expansion of any business, including retail, during a recession is unwarranted. The current global recessionary trends could not have come at a worse time. In the short term there is little justification for optimism. However, over a longer term perspective, the increments in personal incomes and the emergence of a middle class about double the size of America’s population provide ample rationalization for expansion of the retail business. As a matter of fact the book could have shown how vast areas of the monetized economy are not catered to by retailing at all. This is where the question of marketing for the poor pops up. The poor number nothing less than five billion people around the world, reporting annual disposal incomes of less than $1500, and they “…. comprise the bottom of the economic pyramid” as C.K. Prahlad puts it. Concern for this segment of the population would make retailing a more requisite part of the economy.
Marketing for the rich alone is not a sufficient condition for progress and economic expansion. An all inclusive development pattern would include the underprivileged sections too so that they have the wherewithal for self-development and are able pull themselves up by the bootstraps. If we visualize retail business’s virtuous cycle as having, as one of its goals, the delivery of contentment to the poor, it would further buttress the argument for retail expansion. It could also very well fit into a strategy to expand retailing itself. Hiscock’s book refers to some steps in this direction taken by retailers to supply materials and services to the rural sector. It quotes Rupa Purushottaman and others supporting the theory that “urban growth is good for rural India” and this in turn would bring about “…greater integration between rural and urban supply chains.” The second chapter “What consumers want?” has done some justice to this topic.
Yet another lacuna of the book is it pays no heed to the growth of e-commerce which is ubiquitous and which could steal some market share from the brick and mortar retail stores, just as, E-bay, and scores of others have done in America. Current literature on marketing tells that it would be a faux pas to regard online or web retailing as an integral part of the real world supermarket.

The story of foreign collaborations in Indian retailing is well narrated by Hiscock. Many developing countries including China and India follow the classic model of economic growth taken up by Europe and America. Not surprisingly therefore the retail sector is gaining importance in those developing countries too. Wal-Mart is setting up its own first wholesale store in India in 2009 in collaboration with Bharti. On the success of this model of retailing depends dozens of new collaborations of the same kind.

It is arguable that because the developing economies are not organized, their dependence on the retail business to reach goods and services to nooks and corners of their far-flung economies is a good deal more than in the developed countries. They provide a vital service to the economy which otherwise would be crippled especially considering the generally poor infrastructure in developing countries necessitating additional efforts by the retail distribution business to make essentials and other goods available.

For the same reason, India’s retail business so far was a sheltered business, protected from the Wal-Marts and Dollar Generals of the world. In view of the desire to make up for time lost in the four decades after India’s independence, foreign investment is now being permitted in such sheltered sectors. This has been done in the hope that growth in GDP gets as close to the double-digit target aspired for.

Hiscock’s India’s Store Wars is well produced, easy to read and has a comprehensive chapter-wise endnotes and a separate bibliography at the end. Anyone wanting to update oneself about India’s retail business cannot disregard it.