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News Source DMANEWSDESK
Mumbai,December 13, 2008 :
In the world of Indian retail, Kishore Biyani needs no introduction. In fact, for many, he is the face of the Indian retailer. No surprise then that his keynote address at the National Retail Summit: 2008 organized by the Confederation of Indian Industry (CII) was extremely well received. In his 15-minute speech, Mr. Biyani, very succinctly, set the theme of the summit "Collaborative Retail: The New Engine of Growth".
Mr. Biyani began by saying that the last keynote address he delivered was in the "old world order", with the one he was about to deliver being in the new one. In his opinion, while the former involved competition, the latter is defined by collaboration. Drawing from examples of his own brands, Pantaloons and Big Bazaar, Mr. Biyani outlined the challenges facing Indian retail today, and how co-operation between Indian retailers can help reduce costs. The first head of expenditure he mentioned was marketing, which, according to him eats up as much as 3%-6% of a retailer's revenues. In his opinion, collaborative marketing campaigns would play a big part in reducing this expenditure. Moreover, he wanted the Indian shopper to be encouraged to buy throughout the year, and not only during festive occasions like Diwali. In this context, he mentioned how Big Bazaar had created mini-shopping festivals and sales days targeted at different segments like senior citizens. He expressed hope that the Future Group shopping festival scheduled for February would be a big step in this direction. Mr. Biyani mentioned human resources as the next major expenditure for retailers where collaboration had the scope of drastically reducing costs. As per figures supplied by him, Indian retail is set to employ 1.6 million people more by 2009-2010, and spend Rs. 800 crores on recruitment and training. In his opinion, this provided a huge opportunity for retailers to come together and jointly develop infrastructure for creating a talent pool of prospective employees. He made the excellent suggestion of establishing a National Retail School to train students the nuances of retailing. The third head of expenditure in his speech was the expected one of real estate. According to him, Indian retailers, on average, paid 5% of their annual revenues as rents, whereas the international norm was only 1%. He suggested that retailers collaborate to negotiate rentals and abstain from competitive bidding which helps jack up prices. The fourth item in his list of expenses that could be reduced by collaboration was sourcing. He said that organized retail contributed a sizeable 8% of the revenues of any FMCG industry, and retailers must jointly leverage this contribution to negotiate better deals from suppliers. He also said that sharing of logistics and a horizontal supply chain would enable retailers to achieve economies of scale faster. The final item in Mr. Biyani's list, which required collaborative effort, was advocacy. According to him, modern retail in India was being hampered by several restrictive practices, like discriminatory power rates, service tax on rants, multiple tax regulations, etc. He decried the fact that retail was often viewed as a luxury instead of the necessity it actually is. According to him, even though retail was expected to add $3-5 billion in Indian GDP growth over the next five years, its status as an industry is not widely recognized. He felt that a concerted effort by retailers to voice these concerns to the administration and public would be of immense benefit to the industry at large. In this context, he asked retailers to emulate the example of the IT industry, which has been successful in carving out for itself a hallowed position in the Indian consciousness. On this note, he ended his speech and signed off with the following quote by business strategist and author Evan Rosen in his seminal work "The Culture of Collaboration". "Collaborating with competitors involves yin and yang, two opposing and simultaneously complementary facets of a single phenomenon. This balance can create substantial value, particularly when the collaboration involves common processes that provide no competitive advantage." |
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