Observation 4—IT spend is critical to link the organisation, provide
transparency, etc. Retailers have employed large-scale ERP systems or due to cost constraints, have worked with smaller retail solutions providers to develop customised solutions. Most retailers have accounting, logistics, CRM and front-end operations linked real- time so there are no inventory tracking delays, etc. Retailers have also been diligent in ensuring that their backend systems are linked to the ERP systems of vendors who are based overseas, thereby enabling stores in India to locate products in stock in overseas headquarters, place orders, etc.
Observation 5—Sourcing ushers in several macroeconomic benefits for India Sourcing is an integral component of developing efficient supply chain systems. The PricewaterhouseCoopers study titled The Rising Elephant: Benefits of Modern Trade to Indian Economy indicates that India is already an important sourcing base for global retailers, primarily in products like apparel, home textiles, leather goods, gems and jewellery, handicrafts, furniture, watches, etc. Global retailers have already been sourcing from India and their retail presence in the Indian market will enhance exports from India, as they develop and leverage relationships with local suppliers. The extent of sourcing from India will grow manifold when global retailers are allowed to operate in the Indian market. Modern trade creates vital market access for small-scale suppliers and imparts necessary training and investments in improving their productivity and in adopting best practices.
The presence of global retailers in the Indian market will enhance sourcing and exports from India, as retailers develop and leverage relationships with local suppliers. Once the supplier relationship is established and proves to be viable, these retailers can source for their global operations from India.
Observation 6—Closing of underperforming stores is due to several factors Interviews with retailers indicate that retailers are closing stores that are located in unfavourable catchment areas, that are located in malls which are witnessing dwindling footfalls, that do not fit into format portfolios, etc.
Unfavourable store attributes
Underperforming stores that are unprofitable, located in the wrong catchment area, are not populated by enough SEC A, B and C households, are being closed by retailers. While large store networks are important from a scale perspective, stores have to be sustainable and need to contribute to profits.
The end of the “mall’s life”
Some retailers are closing stores that are located in malls which have reached the end of their “mall life.” These malls are located in areas that have not received further development in terms of infrastructure improvement, establishment of residential colonies/apartment buildings, etc. As a result, these malls are likely to be witnessing decreased footfalls and lower conversion rates.
Some global retailers have divided their format portfolio into between five to seven categories. These foreign companies’ Indian entities have analysed the risk profile of each category and structured formats and model that are based on investment levels required, expected revenues/ profit, etc. Economics in India vary to those elsewhere and as such, Indian operators created their own matrices of expected revenues. Since it takes time to generate revenues, processes have been built into the business to help outlets generate revenue. For example, in the event that outlets are struggling, Indian operators maintain teams for each region/zone that are responsible for ensuring that a subset of outlets succeed, perform robustly and are profitable. These teams assess outlets according to a series of parameters and are empowered to spend money up to a certain level to help the outlets improve performance. Some of the parameters include visibility, accessibility, catchment particulars and traffic flow