Under-capitalised operations and non-availability of proper choice and range of products are the two major reasons why organised retailing in India is making continued losses, Rajan Chhibba, managing director of KSA Technopak, said.
"According to the preliminary findings of KSA's annual Consumer Outlook Survey, consumer spending has increased by 7 per cent (unadjusted for inflation) last year. Thus, it is the lack of choice and range that inflicted the damage," he said.
The survey commissioned by KSA and conducted by IMRB observed consumer spending across 16 categories, two more than last year.
KSA Technopak, an equal joint venture between Kurt Salmon Associates (KSA) and the erstwhile Technopak of India, is a consulting firm in the areas of organised retailing, consumer goods manufacturing and marketing.
Interestingly, the survey had found 'unimaginable shifts' between the sixteen categories. For example, consumption of tea in college canteen by students declined because of increased spending on cell phones by students. Thus, he explained that it was due to the shift in consumer spending among different categories that were construed as fall in consumer spending.
Elaborating further on investment required, Chhibba said a national level roll-out of operations would require three times more investment than a region- specific roll-out, and added to achieve break-even, national level player would take twice the time required by a regional player. As a ballpark figure, he said national level roll-out involving metros would typically require an investment of Rs 240 crore and eight years to reach break-even stage.
Ruling out there can be no pan-India model for retailing, he said that looking at the history of several global retailers -- including many European firms -- was regional during initial period before eventually expanding further.
On the success of organised retailing, Chhibba said: "For every retailer to bridge the gap between the customer expectation and delivery, they have to necessarily re-invent itself every year to survive in the competitive environment. Though, the actual growth is much below the expected growth rate, they had achieved significant success across several regions and sectors".
To illustrate, he said that in Chennai, in a decade prior to entry of organised retailing, as many as 1600 to 2000 outlets of various sizes used to open every year and it had dropped to 600 and 800 outlets every year now.
