Unused to modern, organized retailing, the Indian consumer is still figuring out how to extract value -- beyond lower prices -- from the stores, supermarkets and shopping chains that are popping up everywhere. Meanwhile, retailers face other challenges: Indian consumers shop frequently and are used to travelling short distances to their stores; brand penetration is lower compared to developed-country markets; and interstate goods movement is fraught with taxes, delays and other inefficiencies.
All that means warehouses have to be closer to stores, which in turn have to be closer to their so-called "catchment" areas, where the new retailers have to build store-specific customer loyalties. Training large numbers of employees in such virgin territory, and promoting retailing as a respectable and attractive career path, are other challenges, according to senior executives from Best Buy, Staples and Aditya Birla Retail, who participated on a panel titled, "New Paradigms in Indian Retail," at a recent Harvard Business School conference.
"Indian consumers themselves don't know what they want," said Sumant Sinha, CEO of Aditya Birla Retail, which has rolled out 500 stores across India in the past year and is part of the $24 billion Aditya Birla Group. "They are evolving," he said, especially those in urban settings. "You put a hypermarket in front of them; they've never seen it before. So there's no way they can understand the concept. You really have to go with your gut in India and wait for the reaction."
The Aditya Birla Group began considering a foray into retailing after it was approached by Wal-Mart a couple of years ago, Sinha recalled.
