Asia Retail Congress in India

Posted on in BrandBlab

Given the daily barrage of global meltdown news in the European press I was intrigued to find out how a major BRIC economy was handling the crisis.The invitation to speak at the Asia Retail Congress provided an opportunity to hear first hand from local retailers, developers and expert observers how the economy and retail sector was being affected by the international credit crunch.

I had just been to Moscow and experienced the difficulties of another BRIC economy coming to terms with the end of an era of exceptional fast track development and seemingly unlimited growth of consumer aspirations.Russia within a few months has been transformed from a buoyant confident economy to a country suffering a downturn being compared to the rouble crash ten years previously.   

Suddenly the fast tack expansions and explosion of retail development across Russia has been stopped overnight. Was India experiencing the same pain and similar potentially slow recovery scenario?  

From the evidence of Mumbai and the Congress I have to report a very different mood and attitude to the new economic world realities. The inevitable common theme running through the conference sessions was the impact of a tougher economic climate on consumer confidence and sales. Certainly all retail sectors were being affected. However, what was clear was belief that India retains some strong positive fundamentals – a large consumer population – 64% of India-produced products are consumed locally, and a growing aspirational middle class.Despite the problems there was still anticipated a GDP growth between 6-7% this year, 65% of the population is under 35 and incomes are rising. After telecomms, retail is India’s biggest business sector and is said to become the world’s largest retail economy by 2012?    

This underlying strength and confidence was in contrast to the bad news from China that week, reporting unemployment and a massive fall in exports.Retailers and developers in India have no illusions as to the slow down in sales and consumer confidence.However, the general view was this end of get-rich-quick development and emphasis on quantity and not quality was ultimately a good thing. Certainly from a consultancy viewpoint, I felt my message of learning from the mistakes of a fellow BRIC economy and investing in clearly viable commercial short and long term differentiation strategies was now highly relevant.    

It’s a pity it has taken a worldwide recession to force a rethink. Talking with retailers and developers in India it is clear everyone is having to think more strategically and better focus investment to meet more stringent demands of all parties – consumers want more for less and real value in terms of experience/price/quality/services/range. Tenants in shopping centres want viable rents and will be more choosy on centres – their location, design and management. 

High mall rents were universally seen as unrealistic and there will be a new era in terms of more tenant friendly leases – there has to be if vacant empty malls are to be avoided. One of the biggest challenges for the so called 10 – 12% ‘organised’ retail in India is the remaining nearly 90% of ‘disorganised’ retail – local ‘mamas-and-papas’ operations. The reality is the strong personal customer connection, convenience and availability of India’s ‘traditional’ retail should be a lesson to ‘modern’ retail practices.Despite the current political barriers to international retailers moving into India, the local major retail group players, like Reliance and Pantaloon, are able to operate contemporary operations based on best western practices.     

Interestingly the ‘new values’ of the west in terms of environmental and ethical practices could enable India to bypass some of the last decade’s investment in highly serviced shopping centre environments and move directly to more ‘clever’ low technology solutions which provide consumers a pleasant experience and tenants a lower cost venue.The outlet centre principle becomes a relevant benchmark – a lower cost development enabling a lower cost tenancy and great value shopping – a win/win/win strategy for all parties – consumer, investor and retailer. In India and in the west, the fully air conditioned high tech western mall could be a costly dinosaur in the future – too expensive and too big to adapt to a new economic climate with new values and expectations.  

In many ways India is déjà vu for me after our Russian experience – a massive retail explosion now having to come to terms with competitive market realities and a tougher economic environment. Watching how both countries handle the current hard lesson in achieving successful retail development will be fascinating and maybe provide some role models for the west.