The lead story today in the business daily I subscribe to is about Reliance Industries' retail venture, Reliance Retail. One of India's largest listed conglomerate companies that is synonymous with petroleum refining, manufacture of polyester fiber, and mobile telecommunications is now venturing into alien territory: organized retail.
True to style, Relaince Retail will dream and invest big - Rs 250 billion to be exact (approximately USD 5.5 billion) to open a mix of convenience, supermarket, and hypermarket stores, 1,500 in all nationwide. Impressive as it is, it goes to direct attention to the voracious needs of a retail venture, for everything from establishing an efficient supply chain, to investment in technology, and contract with suppliers of perishable, non-perishable, and durable goods.
Tall order? Consider the complexity: One, land is expensive in metropolitan India and so are lease rentals for decent space; two, supplies on the one hand has to contend with numerous fragmented producers where contracts are novel, supplies of uneven quality and pricing variable across the country while on the other hand has to deal with superior pricing power of organized manufacturers; three, technological infrastructure demands are huge, often represent a moving target, and takes time; and, finally, a newly developing sector - organized retail - concomitantly requires patience in building brand equity.
Where is the opportunity for a small entrepreneur in all this? No wonder there is little venture capital chasing entrepreneurs, however brilliant their ideas. The smart money, often from private equity, is on supersize retail from the biggies. Wall-Mart is'nt here in India (as yet), but the next big thing from India's giants is already here. Yet, it would be a mistake for entrepreneurs to write off the opportunity. Successful ventures, after all, is all about creativity in finding niche opportunities and executing to perfection.
In the US, Trader Joe's is a good example. Founded by Joe Coulombo in the 1960s (it had an earlier avatar in the late '50s) in California, TJ's as it is popularly known, is a wacky, nautical-themed, privately-held specialty grocery store that is tiny in comparison to its more cookie cutter peers. Here, the staff wear Hawaiian shirts as uniform, while the store stocks private-label and brand products from obscure producers around the world. It sells gourmet food, organic food, extremely low-priced imported wine, lots of nutraceuticals, and a choice of fresh bread and other stuff from carefully chosen local bakeries. The store has over 200 stores nationwide and is doing nicely, thank you.
What's the secret? A touch of goofiness, very low price, exotic choice that changes constantly, and a fan following that ensures stickiness. The most important, however, is its pickiness in choosing locations - there is great deliberation; and all its stores are present only in upscale white-collar urban or suburban neighborhoods with household incomes averaging USD 75,000. In the process, they have tipped the market in their favor by focusing on niche, restricting the number of stores, letting word-of-mouth do its magic, and giving superior value to its customers. And you thought upscale meant high price? Believe me, the wealthy want it cheap, too.
It does not take 200 stores to duplicate this magic, for retail is considered simply transactional. For the big boys, that is mantra while for the minnow, it can spell huge success. Subhiksha, a no-frills discount retail store in south India, is an example of one concept that has done well and may well be gobbled up by big money, but who cares? Surely not the entrepreneur.
If you have more examples or wish to share your thoughts on this do write in.
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment