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Retail in 2018 – Learning the art of tenuous co-existence

In the year 2018, retail industry has begun its journey towards mature behaviour and tenuous co-existence. This, in my experience, is the most important trend that has emerged from the murky waters of price wars and survival threats, which had plagued the sector over the last few years. To understand how significant this is, let us take a quick trip down the millennia.

Retail industry in India is relatively young in its current avatar, even as Indians have been known to be the finest traders for over three millennia. Indian merchants were the pride of the nation in ancient India, right up to the 19thcentury. The fine skills of negotiation, innovation, customer service, reliable delivery and ingenuity were honed at the altar of foreign lands spanning from Indonesia and Malaysia in far-east right up to the farthest stretches of Africa in the west. What enabled this spread were a highly developed naval capability and the fertile lands of sun-continent that rewarded hard-working farmers with goodies which were vied for globally – spices, cotton, jiggery, muslin, indigo and herbs. No wonder then, even within India, the art of trading and retail was more developed than any other country in the world, resulting in the creation of an ecosystem that spawned the largest number of retail outlets as compared to any other nation.

The last 90 years of British rule almost crippled our industry when the British government took over the reins from the ruthless but business-oriented East India Company. The share of India in global trade came down sharply from a high of 22.5% to merely 2%. The situation did not improve post independence and with a combination of some wrongly placed policies as well as lack of sufficient investments, this share fell to a miserable 0.5%. However, even during these bleak times, what kept India going was the indomitable spirit of its traders, who adapted to the new challenge, shrunk their costs to barely survival levels, but kept at it relentlessly, providing the route to the market – from our farms to the homes of the burgeoning population.

It is this resilience that came in handy when the threat of the global retail majors hit the country. The turnaround of retail into swanky malls, large format grocery outlets and huge department stores was a genuine perceived threat to the small outlets. However, it is the spirit and spunk of the neighborhood retailers that not only enabled them to survive this threat, it motivated them to reinvent themselves with value-added services, improved infrastructure and enhanced technology. This also somehow prepared them for the latest and the biggest challenge of them all – the onslaught of e-commerce portals. This digital tech not only threatened them with the ability to serve customers right in their homes, it also did this at heavily discounted prices.

It is well known that the demise of some of the biggest retailers in USA and UK was caused by digital commerce in recent times. Many went over the cliff and thousands of outlets belonging to dozens of chains were shut overnight once the tipping point was reached. In India however, I am yet to find a single small independent outlet that shut down because of the entry of the large-format retailers or e-commerce discounting. This in the single biggest characteristic of the Indian retail sector – we learn to co-exist beautifully, just like we do as citizens of different faiths in our great country.

In my opinion, the worst is over – the e-commerce price wars have gotten subdued, there is pressure on the large platforms from both, the brands as well as the investors, to cut down the losses caused by reckless discounting. The retailers have survived this pressure and come out stronger. Modern Retail continues its lugubrious growth, but is still growing. Small retailers are tightening their operations and systems. Together they are beginning to create an ecosystem that will give the Indian consumer a true omni-channel experience, but as always in its own unique way that is truly Indian.

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