India’s Retail Revolution

In the past quarter I’ve been spending a lot of time in India working with retailers of all sizes. Some of the biggest names in the private sector are making massive bets in the space, and at the same time smaller chains are looking for ways to establish a stronger relationship with their increasing mobile/digital shopper. I’ve noticed a few key trends, each of which deserves a post or two – so I’ll start out with a summary here and continue this topic as a series.

The 1st big trend I expect to see in the next 2-3 years is the rapid fire growth of the mobile POS. It will happen like nowhere else in the world. I believe it will be along the lines of the mobile revolution, whereby several nations and continents in the developing world skipped the landline. In the same way much of Indian retail will not see the legacy POS and will directly transition to modern cloud based systems. In the past 2 months we’ve been getting several enquiries from Indian retailers who want to increase engagement with their shoppers and drive higher foot falls to the store. This presents a phenomenal opportunity for m-POS vendors and other related services (cloud-based accounting, digital marketing, mobile commerce etc). However, I think the speed of innovation by dominant players in the west will not be enough, and like the mobile revolution we’ll see a slew of Indian product companies come up shortly that will address local needs in a cost-effective manner.

The 2nd key trend is behavioral changes in the middle and lower middle class that will significantly impact consumption. On one of my cab rides I got into an interesting conversation with my driver. He left his village over 15 years ago and came to Mumbai. Initially he was very hesitant to go to any restaurant or store that had even a slight upscale ambience. However over time he walked into some of these places and realized that prices are actually not that different and the experience is orders of magnitude better…in fact shopping for groceries at a store like Big Bazaar is a great weekend outing for the family. Many of his close friends shared the same hesitation, so he took each of them for a shopping trip to show that these places are indeed price-competitive and everybody is welcome. Now all those friends of his also shop at Big Bazaar and eat at the mall once a month. In fact some of them have even started shopping online. This is a major shift and the implication is that billions more will be consumed as a result of the shifting attitudes of the lower middle class.

Third there’s the war amongst the e-commerce giants — FlipKart and Amazon. Both have insanely deep pockets and they are putting the cash to good use, although some of their practices such as forcing merchants to sell below cost are questionable and have resulted in significant lash back from various groups. The big retailers are obviously scared of this new dynamic – the new kid FlipKart rose to a 10X valuation in less than half the time these big boys (e.g. Shoppers Stop) have been around. This war will be very interesting to watch and I’ll continue sharing my observations as we continue to work with players here.

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