RAGHU PILLAI ON RETAILING TODAY

As far as India is concerned, retail is a very nascent industry. Its a sunrise industry. Opportunities are huge. The total retail market in India is between of RS 8,00,000 crore and RS 10,00,000 crore. Its an industry which worldwide has proven that it is the largest employer of people. It employs between 8 and 16% of the workforce in most countries. Retail consolidation or organised retailing can and will bring enormous differences to the supply chain in India, which is one of the least evolved and the most inefficient in the world. Supply chain wastage in India, in fruits and vegetables alone, is estimated at RS 50,000 crore, that is the amount of fruits and vegetables which is wasted, (it falls off the truck, goes bad because of unhygienic conditions etc.). If we fix that, we can actually distribute, free fruits and vegetables to every person in this country. Retail consolidation all over the world has upgraded supply chains, has built value in the supply, has almost always brought end-customer-prices down, and created incredible employment opportunities.

If you look at our 84 stores, we employ 3,600 people. That's the total employment we have in under five years. 70% are women. 75% are children of daily wage earners, typically from people who are sewage workers, autorickshaw drivers, mechanics, bus conductors, contract labourers. We have children who are just out of high school. Virtually unemployable before this, today they are absolutely productive citizens. So it will create the type of employment that this country needs. Many of the ones we recruited in the first year, may in the next couple of years, become income tax payers. They will be the first income tax payers in the entire generation of their families. We are not talking about doctors, or software engineers. We are talking about a high school, corporation school-passed girl.

Coming back to your question of what is still required, first of all the Government can recognise retail as an industry. The Government does not recognise this as an industry. Second, the Shop and Establishment Act, which is a state-enabled act, incorporated in 1928, still governs retail in India. It is a completely antiquated and outdated act. So that has to be modified to deal with the changed scene. Third, whatever it can do for infrastructure, in terms of cold chains etc. will always be welcome for retail. Individual State Municipal Corporations should look at retail as something that can uplift the city in terms of low prices, increased business and trade, tax collections and employment generation. And it is local employment generation, that I mean. Chennai stores will be manned by people from Chennai. We don't bring people from Delhi, or Mumbai or wherever.

If you look at tax collections, India is the only country in the world, where the last level of value-added is not taxed. Most of the taxes are stopped when the goods are transferred from the company to the distributor. We don't tax, the whole retailer end. Because you cannot. There are 12 million retailers. You simply cannot go and collect it. If enough retail consolidation takes place, the Government can actually tax the last end, and actually bring the overall rate of tax down. So it is a huge revenue earner for the Government. The first thing they can do is, recognise retail as an industry.

Look at the context. If you say e-business has grown from what it was last year, I will agree. It has gone from RS 1 crore to RS 3 crore. Great! It has grown by 300%. But in the overall context of the size of the market, will it take even a significant share of the market, the answer is 'No'. Look at countries where there is penetration of computers at homes, where access speed and telephone densities are much higher than that of India, its still a miniscule portion of the total market. Shopping at the end of the day is also a social activity.

I don't believe overnight, or even after 15 years, a large number of Indians are going to order their groceries on the computer. Yes, there will be 1%, 2% or 3% which for e-business may be pretty big. But I do not think, in the overall context, it will be much. Both of them will feed on each other, even in e- business the expertise is not setting up the website. I think I can get anybody to do that. The expertise is in fulfilling the orders. So you need to have the expertise in merchandising. And the best guy to do that is me, the retailer.

|