Taking a leaf out of Bollywood, Raghu Pillai, MD and CEO, Home Solutions (Retail) India Ltd, said there were two Indias – India One that belonged to ‘Neal N Nikki’, and India Two, which belonged to ‘Bunty Aur Babli’. The industry needed to look at this ‘Bunty Aur Babli’ India for ‘thermal’ growth, he maintained at the MMA’s Golden Jubilee Convention.
“This India Two is an incredible opportunity for retail. They make up for 70 per cent of this country. The SECs C, D and E in urban India alone represent over 33-million, accounting for 54 per cent of the total households. We need a paradigm shift to view the bottom of the pyramid as a consuming class. They certainly have aspirations,” said Pillai.
He explained the concept of the ‘poverty premium’ being paid by this large segment of people, with the example of those living in the Dharavi slums in Mumbai. He stated that the premium caused by several factors including local monopolies and distribution issues, could be five to 25 times what the rich pay for the same services. Explaining that the ‘real problem lay elsewhere’, he listed several success stories as a result of focus on this huge segment, including the single serve sachet, Arvind Eye Hospital, Project Shakti in India, and Cemex and Electra abroad.
“The fundamental thing is to create the capacity to buy. This segment could be a thermal growth engine for all products and services, not just for retail but for India as a country,” Pillai said.
Underlining that organised retail was not about ‘glitzy and high-street stores’ he explained the importance of leveraging a set of supply chain variables.
On the feasibility for organised retail to move beyond urban India, Pillai said, “There will be a system that is developed. We will have to think out of the box. There are significant challenges, yes, but in several ways, the shopping behavior in rural India is similar to that in many parts of the US. People here, too, tend to travel while making some purchases. In course of time, truly Indian models will emerge. In nine, or 12 or 13 months, but these will emerge.”
Both Arvind Singhal, MD, KSA Technopak, and Pillai expressed the view that FDI in retail should be encouraged. Said Pillai, “In my personal view, I believe it should be encouraged. I am not particularly concerned if the investment comes from India or from abroad. We must put in place conditions to ensure that it is not misused. If you integrate, the opportunity to multiply Indian products abroad is also very high.”
According to Singhal, “Fears over FDI are overblown. We need to look at opening up FDI with reciprocal conditions. Most Indian companies are spending more time lobbying against FDI.”
The speakers shared the view that HR and talent management would be a key issue as the industry expanded, with a present attrition rate of 15-20 per cent. Pillai said that his company would be taking on board 1,400 management trainees in June 2006.
Singhal said that contrary to popular perception, prices for middle class consumers would drop by around 15 per cent across India over the next five years as a result of the retail explosion. Re-emphasising the significance of the ‘India Two’ in conclusion, Raghu Pillai said, “An India without borders surely must be an inclusive India.”