Organized Retail in India Learns it the Hard Way
March 2, 2009
Subhiksha's setback in organized retail highlights some of the critical failures in execution of a growth strategy.
1. Failure to understand and compete with Kirana or 'Mom and Pop' stores. The Kirana stores offer convenience, sophisticated CRM, credit etc. The model for retail stores is to co-exist with a Kirana store, and work out a model, or a 'role in customer's life'
2. Build scale at any cost. Subhikha's case shows how they went about a debt-driven growth and had a very low equity base to support it. Many other organized retail players were guilty of getting into markets without adequate market studies and a business model for their stores (paying unviable real estate rentals, not fixing the supply chain etc.)
3. Inadequate End Customer Understanding . Cutting & pasting a Walmart in India may not work. The Indian consumer is a sophisticated retail customer. We have had a thriving retail culture, and organized retail needs to look at product categories and value proposition for their formats. Pantaloon kicked off the retail story by offering ' Latest Fashion at an affordable price'. But what is the value proposition of say a Westside?
An interesting link by Wharton - Trouble in Store: A Setback for India's Organized Retail Sector
1. Failure to understand and compete with Kirana or 'Mom and Pop' stores. The Kirana stores offer convenience, sophisticated CRM, credit etc. The model for retail stores is to co-exist with a Kirana store, and work out a model, or a 'role in customer's life'
2. Build scale at any cost. Subhikha's case shows how they went about a debt-driven growth and had a very low equity base to support it. Many other organized retail players were guilty of getting into markets without adequate market studies and a business model for their stores (paying unviable real estate rentals, not fixing the supply chain etc.)
3. Inadequate End Customer Understanding . Cutting & pasting a Walmart in India may not work. The Indian consumer is a sophisticated retail customer. We have had a thriving retail culture, and organized retail needs to look at product categories and value proposition for their formats. Pantaloon kicked off the retail story by offering ' Latest Fashion at an affordable price'. But what is the value proposition of say a Westside?
An interesting link by Wharton - Trouble in Store: A Setback for India's Organized Retail Sector
Posted by sarvajeetchandra
