With the numbers of Pantaloon Retail coming, finally the wheels of the Indian Retail dream seem to be falling apart. The economy might be contributing to this, but the problems are more deep rooted. Same store growth, the benchmark for most organized retail has been stagnant or negative for most retail chains for quite some time now.
The very same reasons that were touted for the success of organized retail seem to be sounding the death knell:
1) One stop shop: High overheads - power, personnel. One needs to provide for a/c in the whole bloody store to keep customers entertained. Look at the number of clueless salesmen in most of the retail stores. You keep training them and they keep leaving. Very little connectivity.
2) Centrally located: The lease rental kills you - this would likely change. How much leeway the contracts leave for such an eventuality can be debated.
3) Sourcing: Central sourcing is not very easy, especially given the high Logistics costs in the country.
4) Strategy: Retail chains make the most money from in-house brands. And most in-house brands across chains are priced in a similar range as other brands or are absolutely inferior in quality. No headway made there.
5) Buying behaviour: Unless someone is shifting to a new place or wants to buy a lot of things together most of the items under sale in a Big Bazaar are just not useful to most customers. Food and groceries fly but every other section mostly has a deserted look to it.
Retail chains have transformed the way we think about buying, but will they ever make money? In an environment where ROE will drive investments, will retail see further investments or are they scheduled to go through a bout of restructuring? A bit of both, managements will get time to figure out what works. Indian consumer is not so easy.