When it takes a foreign newspaper to highlight an Indian issue, that’s a clear indication that things are not going well. This time around it was the WSJ that reported on the Indian retail revolution is not happening as expected. I’ll admit when I first came to India 3 years back, I thought the retail revolution was gonna be hugh. I believe my quote from back then was…
If you have any concerns whether there really is a retail revolution occuring in India, I suggest you checkout Big Bazaar.
Ouch…so what happened? I think Indian consumers will be Indian no matter where they live, be it India or America. If you take a look at the average Indian living in the US, they are not going into Gucci or Bloomingdale’s to shop they are value shoppers, looking for the best deals. Some of the retail build up has been around so called luxury brands in the Tier 1 metros, which I believe is a HUGH mistake. If you can afford to blow USD 2000 on a hand bag, why not go somewhere like HK or Dubai and shop in style and also turn it into a vacation.
However, talking about Tier 1 markets are sexy and investors love to hear about it. You start talking about cities like Shujalpur in Madhya Pradesh and people kinda scratch their heads. But it’s cities like Shujalpur where ALL the retail action should be taking place.
The best quote from the article came from Thomas Varghese of the Aditya Birla retail unit:
The Indian consumer is a damn tough customer.
Ain’t that the truth!
1 response so far ↓
1 Gautam Kshatriya // Sep 23, 2008 at 1:00 pm
I think that ironically, the reason why Indian retail isn’t doing as well as expected is possibly *because* of the fact that so many people have bought into the ‘Indian retail growth story’ so fast. Commercial real estate prices at shopping malls shot up, forcing retailers to pass on the cost to consumers in an attempt to remain profitable. Too many shopping malls opened up too fast - if you’ve been to Gurgaon off late, you’ll know what I mean. With 4 shopping malls right next to each other, with more or less the same shops, its not hard to see why the crowds are so thin.
While I believe that the retail story is not a fantastical one, I don’t see a boom - everything takes it time. While the market *will* be big, I think the mistake most retailers made was that they believed that this growth would occur overnight.
Gautam Kshatriya
gautam.kshatriya@moneyvidya.com
http://www.moneyvidya.com/blog
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