INNOVATION-DRIVING HUMAN RACE

“Scarcity is the father of creativity.”A very apt statement for the Indian economy which is plagued by low sales potential and widening fiscal deficit with the Reserve Bank Governor, Mr. D. Subbarao swearing never to part with the CRR. Amidst all the liquidity problems, retailers in India decided to have an extended spring –summer discount season ending only in first weekend of September. In the luxury space, a 'silent sale' has been on, with brands such as Jimmy Choo, Burberry, inviting their loyal high net worth customers to an irresistible sale, with discounts ranging from 30% to 50%. In Big Bazaar, salespersons scream the rates of various products, during the “Mahabachat sale” period, to create an ambience similar to that of a local mandi.

Innovation drives the retail industry, and is clearly the logic behind differentiated offerings. But the first mover advantage is swept away by copycat brands (Companies are like packs of sheep, if one takes the lead, others soon follow).This is the reason 3M company follows the 15%-30% rule, where each employee can utilise 15% of their paid time to harness their creative capabilities. The other policy is to ensure that 30% revenue is generated by products which came into existence in the last 5 years. Innovation is aimed at identifying the gaps between present offerings and future needs. HUL, as part of its energy sustenance, is pilot testing “Magic”, a shampoo which need not be rinsed, thus reducing usage of water. Marico Ltd. came up with Parachute Advanced Hot Oil, to cater to a women’s need to flock to salons for a steamy head massage. It changed the packaging of Parachute coconut oil from a tin to a plastic pet bottle and then to containers sustainable during all the seasons. The companies swear by the fact that needs have to be created, gaps need to be filled.

Innovation doesn’t always need huge capital investment and long gruelling hours in the R&D wing. Take Bharti Airtel, which outsources all its requirements, IT infrastructure handled by IBM and network infrastructure handled by Nokia Siemens, in turn concentrating on its core activities. Sometimes, understanding the customer’s needs or the SCARCITY, leads to innovation. Mansukhbhai Prajapati, the creator of ‘mitticool’, understood the plight of fellow Bhais and Behns who were subjected to the scorching heat without electricity. So he embarked on the journey of creating a refrigerator made of clay which runs without electricity. Same goes with the Tata Nano. Had Ratan Tata not realised the aspirations of lower middleclass Indian’s to hop from a 2-wheeler to a family size AC 4 wheeler, this concept would never have seen reality.

Consumers dream of luxury. Let’s say an Apple iphone, the sleek, stylish smart phone with an entire ecosystem of applications. But who says it will come with a hefty price. The Samsung is adorned with all tricks for disruptive innovation.

YO! India!

In India, after the monsoons, consumers are the next most unpredictable. They change their choices and preferences faster than the politicians change their statements. They love to start their mornings with stuffed paranthas coupled with a nescafe; wear  Levis jeans with Ganesha imprinted tees, travel by Piaggio autos,Tata buses,  Mitsubishi metros or  race past in Audis to their offices. Call their foreign clients, sell them old Chinese goods and abuse them in Hindi. Take girlfriends out on dates to CCDs and Baristas, but enjoy the monsoons with a sip of cutting five rupees chai from the chaaiwalaas. We go to  high end streets for styling ourselves but purchase from “Sarojni Nagar” or “Chandni Chowk” in Delhi and  “Linking Road” or “Heera Panna Road” in the case of aamchi Mumbai.

                          

In India that’s how retail has been working for so many years. We want everything but we are happy with anything. Our carefree nature makes us a country of 1.2 billion crazy citizens. One can sell anything in India, if he knows the tricks to catch the pulpy hearts of the palpating nation. Baba Ramdev started it by selling free yoga to elders on T.V at 5:00 AM in the morning and now his shop is selling everything from Ayurvedic medicine to Pehlwaan Atta in stores till midnight. He did not do anything wrong. The point is he saw the opportunity and used it well. That is what every innovator or entrepreneur should be doing. Products are the same but they are selling it with a little Indianness leveraging on the customer's emotions.

I love my India and so do I love the politicians here. They are the most innocent species whom you can see in parliamentary sessions, not for discussion on the agenda but for fighting with dandas. They went on foreign trips for months to learn their policies and developments but are not likely to implement the same in India as in the case of Retail Reforms.

Last but not the least, “Take my advice for FREE”, we Indians are too obsessed with free goodies that we are ready to buy them at any cost. Like in case of talk time, with a recharge of Rs499, calls to any number are free for a month. . It gives us EXTRA satisfaction.One can fondly remember the bubble gums,bought for the sake of free tattoos.We never really grow up. That is why marketers love us. We Indians focus only on free things.

Let me take a break to find an EXTRA PEN so I can write an EXTRA SHEET on tomorrow’s exam so I get some EXTRA MARKS. 

India needs more such milkmen.

When Dr Verghese Kurien passed away, aged 90, India lost its leading innovator and visionary. One whose vision was able to transform the entire dairy sector, rewarding millions with quality products and all encompassing growth. But the lessons to be learnt from Dr Kurien’s life include more than just the dairy sector. It is an example of how India requires processes customised to our unique demographics and social indices and not custom made solutions peddled by MNCs and unabashed globalisation lobbyists.

The Indian growth story is unique. While opening up of the economy and a young population has led to excellent economic growth, infrastructure and social development remain bottlenecked in political and bureaucratic red tape and corruption. Compared to India, in China infrastructure and social development comes first, and they become the major force driving economic growth. We wait for the demand to arise and then build the infrastructure to satisfy it while in China the infrastructure is already in place to drive the demand. While this makes our economy more stable and sustainable in the long run, it has led to an income divide proportional to income growth.  Today, strictly in numbers, India has more millionaires than most developed countries while at the same time is straddled with more poor than most under developed nations.

This glaring disparity has led to global corporations making a beeline to India to be a part of the bludgeoning upper-middle and upper class market, especially in the metros. The metros and other Tier 1 and some Tier 2 cities have the infrastructure and a growing population to leverage their global practices and brand values. This upper class market is large enough with enough growth for both Indian as well as global players to grow and prosper. Thus it is no wonder that the lower section, without access to the same infrastructure and purchasing power have been neglected. Even in a cosmopolitan city like Mumbai, census data show that more than 40 percent of the population live below an income of Rs 2 lakh per annum. A market segment that will need innovative processes and long term investments to tap into.

 All the large Indian corporations today are multinational players with access to global resources and able to compete with their western counterparts in their respective fields. They have access to funds as well as technologies available all over the world. But they lack the motivation to get their fingers dirty in the muck of the great Indian cattle class. Business considerations do not lend support to innovative ideas and vision in markets that involve huge efforts and low margins. To expect western MNC’s who built their businesses in developed markets to take this step is unrealistic to say the least. Thus we see that out of the box thinking is limited to small entrepreneurs who do not have the capital or other resources to operate on a large scale.

To ensure that advantages of globalisation reach the lower strata, it is imperative that Indian businessmen and entrepreneurs awake to the potential that these sections of society have. Fresh ideas designed and customised to the specific problem areas are required.  The government, even if they do not build the roads, should ensure they do not build the roadblocks to new ideas. Dr Kurien was able to make a success of Amul incorporating the automatic milk bulk vending system re-engineered from a similar process invented originally by Rowe International of USA. Such a synergy of global technology and local customisation is required. India does not lack to brain power or the technological competence to ensure more such success stories. All we lack is the vision and commitment of the great man.

YOU’LL DO IT MY WAY!!!

Not too long ago, to suggest that the Internet had an important role to play in the rarefied world of retail was either an act of misplaced bravery or outright heresy, depending on your point of view. Today, however, all the major players in this sector are falling over themselves in a rush to embrace the online world.

Now, after a stampede to set up transactional e-retail websites, brands, often with the self-consciousness of a child arriving at a new school halfway through the term, are looking to attach themselves to every new online phenomenon, from blogging to tweeting, via YouTube, Facebook and myriad other sites.

The not-so-internet savvy people have, by wholeheartedly embracing the power of today’s technology and combining it with traditional retailing skills, demonstrated that it is possible to provide an online experience that offers a compelling alternative to the traditional location-bound and time-restricted alternative.

Accelerated by the early twenty first- century economic crisis, changes in consumer attitudes having been identified, and how these were enhancing the appeal of the Internet as the preferred primary point of interaction between the consumer and brand or retailer has been understood, irrespective of the category and price point. Research and practitioners confirmed that these trends were even more apparent among high net-worth audiences for whom discretion and convenience were becoming increasingly important considerations.

The Electronic Retailing Market is an indispensable tool for retailers, vendors, suppliers, and providers who would like to profit from this exciting new medium. It is also a source of valuable, hard-to-find information for current and prospective producers of home shopping programming. 

E-retailing started with the advent of the WORLD WIDE WEB in 1995. Online banking and the opening of online pizza shop by Pizza Hut were the first few ventures. Post 1995, the two e-tailing giants, Amazon.com and e-bay.com, took the industry by storm by bringing a paradigm shift in the US. This became the bread and butter of the “tech savvy” souls. This is when the concept of online shopping kicked off. The novelty of the phenomena provided shopping convenience to the customers by providing an option to shop at home. The attractiveness of this venture has provoked others to jump into the bandwagon. With a lot of other players joining the fray, the customers can now find a good assortment of products at competitive prices. Starting from clothes, groceries, gadgets to movie tickets, gifts, and travel - Anything and everything is just a click away! The lucrative layout of the websites and the offers entice the customers. Retail spending over the internet had already reached 20 billion dollars in 1999 according to business.com.

Sitting at home with nothing to do?? BORING! Feel like shopping without going out? Now shop right from your doorstep! From Amazon to e-bay, makemytrip to irctc, bookmyshow to grooveshark, snapdeal to naaptol, Myntra to Zovi and flipkart to pizzaonline, dominos! This seems to be the latest fad of the couch potatoes!

So what are you waiting for? 

Just flipkart it!

The farmer meets the corporation

The Sunhara Wal-Mart project at Hapur, Uttar Pradesh is a joint collaboration between the Sunhara India project, a non-profit initiative for women empowerment in agriculture and handicrafts, and Wal-Mart, the world’s biggest retailer as part of its CSR activities. Started in August 2011, the two year venture entails training of farmers and direct sourcing of their produce to Wal-Mart stores across northern India. Such projects, a direct concurrence of the Indian common man and an international corporation should be able to give crucial pointers of the impact of foreign players on the Indian grassroots. Now, more than ever, as the issue of FDI in multi-brand retail is at the forefront of political and economic debate.

The town of Hapur and the adjoining farmlands are a major supplier of staple vegetables all over north India. Consisting mainly of small farmers with small to medium landholdings, Hapur has a large population existing solely on agriculture. Sunhara, funded and supplied by Wal-Mart both with technology and manpower, identified small farmers, with landholdings less than one acre and gave them training and instructions on cultivation. In return, the farmers could sell their produce to them at collection centres at rates equal or more than the local markets called mandis. This made it convenient to the farmers as they no longer had to go to the mandi and empowered the women to also take part in selling the produce.

This initiative was not new to the farmers. Indian retailers and food processing companies have been using the same process for decades now. At Hapur itself, the villagers joining the Wal-Mart initiative are familiar with brands like Big Bazaar, Easy Day and Mother Dairy who also have such collection centres. Mother Dairy in fact, has had a presence in Hapur for around twenty years. It is not uncommon for farmers to have undergone training by three or four different companies. Although these initiatives have brought about new techniques and innovations to farming, the farmers are still vary of committing themselves completely to the organised sector for a variety of reasons. 

While local mandis will accept all the produce from the farmer and provide him instant remuneration, the Sunhara initiative will only accept a small amount of his produce. Wal-Mart sources only around one ton of produce a day from all the farmers combined making it difficult for farmers to harvest and transport in such small quantities.  Also remuneration for the sale is delayed by a month or more which can cause a lot of inconvenience to the marginal farmers. The organised players have very strict quality standards resulting in more than half the produce being rejected. To meet these standards, the farmers are forced to harvest before they normally do to cater to their demands. Even then, a farmer still has to go to the mandi to sell a good proportion of his harvest, most of it of the lower grade. A farmer’s wisdom understands that transporting higher quantities of various grades together will result in much less wastage than transporting small quantities of a single grade.

From the perspective of the company, only a minuscule percentage of its sourcing is done at these collection centres. The bulk is still sourced from the mandis where there is more flexibility and variety. The vegetables have a 2-3 day lead time to reach the retail outlets thus necessitating the purchase of not yet ripened produce. This initiative has not introduced any improvement in transportation and storage facilities.

Other than improvement in techniques and empowerment of women due to the convenience involved, this initiative has done nothing to improve some of the inherent problems of agriculture in India such as huge wastages, fluctuating prices and the financial insecurity of farmers. As a part of a social service initiative, no company, neither an MNC, nor Indian retailers seem to be ready to commit the investment required to bring about any long term change in the distribution system. Only when the scale of such operations are sufficiently high to justify investments in logistics and storage will there be sufficient economies of scale to make it attractive to the common farmer. Until then, factors the inability of even the large companies to ensure timely payment raises questions on the commitment they are willing to show.

Unless there is long term strategy and vision, such initiatives will only become another attempt that gets caught up in the malaises that affect our society today like inefficiency and corruption. This would be unfortunate for all involved, as there is a lot even an MNC can learn from the wisdom of the common man that would be lost.

Government v/s FDI: Who will win the battle??

“Govt notifies 100%FDI in single brand retail”- Economics Times, January 10, 2012.

This day shall be marked in the history of the Indian Retail Industry as the Golden day that promised to bring a swarm of dream luxury brands, which every individual yearns for. It brought a reason for the retailers to smile about with the opportunities bundled with the investment.

Then one fine day IKEA placed the “IDEA” on the back burner and Zara faced a road block. FIPB played a villain shattering the dreams of many “retailers to be”.  Government’s policy tantrums yet again disrupted the incoming beatitude.

                         

A lot has been said and nothing has been done so far. To sum it up, it’s just empty words and a huge outcry. The negative impact of FDI in retail on small retailers has been the major concern while rest everything has been neglected. The future retailers have been out casted from the entire picture. From a student’s perspective, its positive effects have been sidelined as FDI is supposed to bring a throng of job opportunities and a chance to work with the international biggies.

India needs to be investor friendly. It must find a middle ground for this issue. It is disheartening to see the blindfolded attitude of the Govt towards the positive outcomes that could be derived from the successful implementation of FDI in the sector. FIPB has refused to accept the Scandinavian furniture giant IKEA’s plea regarding relaxation of the 30% sourcing norm. China has been exporting to India in huge numbers. These imports have already killed millions of small enterprises across the country, and they don't bring FDI. In such a case IKEA which is making a legal entry into the country is not allowed to do so. FIPB has also rejected the Netherland based ZARA’s proposal to enter India with the brand name “Massimo Dutti” saying that the investment for opening the stores is being made by Zara Holding rather than Inditex, the owner of the brand while according to the FIPP rules the investment has to be made by the owner of the brand.

Multi brand retail chains like Walmart are waiting with their eyes wide open in hope and anticipation. With the approval from 11 states & Union territories, UPA Government still failed to gain the support and cooperation of its own allies.

Undeniably, the government is now seriously considering tweaking the definition of small and medium enterprises (SMEs) for giving a boost to single brand retail in the country. Aiming at bringing in more foreign investments in the country, the government wants to remove hurdles in way of such investments from across the sectors, including single brand retail. As per the present definition, all entities having investment of $1 million in plant and machinery would fall under the ambit of SMEs for the purpose of single brand retail. However, as the sector thrives, SMEs would grow and the $1 million definition would need tweaking.

As far as local retailers are concerned, breaking even has not been a challenge for them despite of the presence of the Indian retail giants like Big Bazaar, Reliance, ABRL etc. It is just a hype created by the government along with the opposition playing a spoilt sport. As for them, making a mountain out of a molehill and chanting a chorus of negativity has become a common phenomenon. But by doing this the Govt is subduing the advantages to be derived from the FDIs in the retail sector like the elimination of/reduction in the intermediaries’ cost, the benefit of which will not only be availed by the farmer but will also be passed down to the end consumer, more employment generation, growth opportunities etc. Also, The Economic Survey has pitched for allowing FDI in multi-brand retail, stating it could help tame food inflation and improve agri-commodity management.

The retailer’s cry for FDI and their longing to outshine others still remains unfulfilled. How long the lacklustre attitude of the Govt will last, is not known. But considering the current economic conditions with regards to the impact of the euro zone crisis, falling value of rupee and policy paralysis, one thing is for sure that FDI has become the Holy Grail for the Retail Fraternity. The hunt for which is on!!

What does FDI in multi brand Retail mean to farmers?????

They come, conquer, make you dance to their tunes and take your buck away! It was 64 years back we got our freedom and now when soothsayers point towards the dark skies in times of slowdown foreign money through FDI in multi brand is a scapegoat to revive the economy. But whether its true is hard to tell. The monopolistic buying power of the large retailers would weaken the marginal farmers' position, resulting in lower share of value to them, dictating of the production techniques and output by the larger retailers and destruction of diversity in Indian agriculture. The idea that the farmer will get a better price for his produce if FDI in Retail is allowed is not holistic. The open market does not work on altruism and social service. It negotiates the best for itself so it can corner the most for itself. Farmer suicides are not because they cannot sell, but because they are unable to get remunerative prices for their produce owing to inefficiencies in the value and supply chain, traditional buying and selling techniques in mandis, lack of proper crop management and large number of intermediaries.

Big retailers and food processors alter crop selection to have farmers produce at their discretion and not by will. Corporates would not like to mingle with small and medium farmers because they are at a position of advantage and would strike contracts with a few big farmers thereby making the small ones succumb. FDI in retail would help only those farmers who collaborate with multinationals and accept their conditions, meaning they begin growing only those crops decided upon by their collaborators. In the West corporate retailers control the entire supply chain of food and farmers have no place to sell other than to select corporations. Initially the farmers will be paid as per their demand for their produce by the MNCs. Once the traders are gone, the farmers will be forced to sell at rates dictated to them. Retailers would push the farming community towards growing genetically modified seeds with extensive use of pesticides and chemicals which would impact land fertility intensively.

There is already 100 per cent FDI in the agriculture sector which doesn’t seem to have done any good. There is a vast scope of cold chains to be built and better post harvest techniques to be deployed. If Adani could invest in setting up C.A (Controlled Atmosphere) stores why can’t the so called philanthropists of India Inc. do so? Or are they freezing their money in Switzerland.

The focus should be on revamping the mandis infrastructure and using modern techniques so that the largest chunk of the consumer rupee goes to the farmer and in turn consumers pay lesser price for the commodity they purchase. E-farm is a small start-up which has made use of the best logistic and reverse-logistic practices along with modern sourcing and proper crop forecasting techniques which in turn would help to keep a tab on inflation. Such practices are essential in modernising the agriculture sector.

Corporate don’t source from small farmers but carry out contract farming or approach large farmers. Small and medium farmers till this date approach the traditional system of mandis, retailers and HoReCa source from this channel mostly. The gap between demand and supply today is created by the middlemen by initially paying a higher price when the crop season begins and when the season is at its peak, the middlemen make the excuse of compensating for their losses by reducing the prices and the irony is that consumer is paying the same amount of money. What is threatening is the reduction in the number of options the farmer is left with to sell his/her crop. Foreign retailers would replicate the same practices initially by wiping out the middlemen, then the small retailers and finally the street hawkers. Eventually cartels would be formed by foreign retailers and prices would also be determined by them. Amul, the successful story of India’s dairy farming opposes FDI and Mr. Sodhi GCMMF’s Managing Director says “Farmers get the least returns from the modern trade and the so called efficiency benefits only the large retailers as they constantly drive down the prices” also integration with global retail chains, which operate across the world, will directly expose Indian consumers as well as Indian farmers to any future global turbulence.

*The views expressed in this article are personal and no organization, institution and individual with which the author is associated should be held responsible for this article. The author hails from a farming background and has seen and studied the agriculture/horticulture sector closely.