Monday, May 16, 2016

Indian Retailing and Shopping Challenges: Spatial Myopia versus Asset Hyperopia

Indian retailing industry is one of the most important pillars of the Indian economy, together with agriculture, manufacturing and infrastructure. Without retailing, what is produced or value added can never reach consumers. Indian retailing sector is one of the largest in the world, and is estimated at USD 500 billion annually, together with its mainstay of logistics. It is also one of the most unorganized sectors with over 95 percent of the shops being in owner-seller format, and dotted all over the urban and rural urban landscape. Most importantly, it is one of the most valuable employment generators, providing jobs for as many as 40 million Indians. Over the last couple of decades, supermarkets and large format markets and shopping malls have made an increasing presence felt but it is unclear whether they are any more planned and futuristic than the unorganized ones, as this blog post brings out.

What is retailing for sellers is shopping for buyers. Shopping can be classified into two types; the essential daily needs and the lifestyle needs. It can also be classified as planned and impulsive. Availability of appropriate shopping formats is essential for generation of consumer interest and conversion of interest into actual purchase. The shopping and retailing process is so complex that it requires the best of management processes, from supply chain management to customer relationship management, with data analytics thrown in. While retailing is a growth engine for India with more purchasing power being placed in the hands of the burgeoning middle class, with cascade down to the indigent sections too, flux and mortality in the retailing sector are a matter of concern. There is a need for a relevant hybrid model of retailing and shopping in India. This blog post discusses a few issues and proposes a few approaches based on certain examples from the Chennai retailing and shopping space.

Off the mark  

Several years ago, Landmark was the most popular bookstore in Chennai. Its first and most favoured store in Nungambakkam, a downtown shopping district was truly a landmark. Landmark no longer is a store there. Landmark’s other two outlets in Spencer’s Plaza and City Centre have also disappeared. Many would attribute Landmark’s disappearance to the emergence of online reading habits on one hand and the departure of original promoters and indifference of the new investors on the other hand. Part of the truth is that Landmark’s decline also corresponded with the decline of the host-malls. Many book lovers of Chennai feel sad about the disappearance of Landmark. Yet, a new bookstore called Starmark (of Emami Group), established in Chennai’s premier and now popular shopping multiplex, Express Avenue has become quite a favoured place for book lovers. This seems to be a case of brand ceding importance to location.

Viveks had, for decades, a flourishing retail business in whitegoods and electronic goods in Chennai, located strategically in important traffic intersections. Once famous for its store expansion and thronging crowds for New Year sales, Viveks seems to be scaling down its operations due to lower customer visits. Tata Group has its Croma chain of electronics stores in all major cities. Of all the stores in Chennai, it appears that the one located in Nungambakkam has the least footfalls. In contrast, Croma stores in Mumbai airport seem to have the highest footfalls. Landmark, Viveks, Croma and such other brands continue to be well known with high recall. Some of them are also well located. The declining consumer interest is, therefore, more than a matter of ordinary concern.  These trends are not company or retailer specific but are symptomatic of an emerging urban shopping crisis.

Urban constraints

Surprising it may seem, Indian cities are not planned for an expansive retailing and comfortable shopping experience. Indian cities and towns are essentially mixed use districts with residential, office and commercial entities located jowl to jowl. The concept, as in America, of segregated shopping districts, residential communities and business districts does not simply exist in Indian cities. The shopping districts in USA provide for huge parking areas that can cater to parking of several hundred cars. In contrast, old age shopping pioneers like Viveks have practically no parking space while the newer ones like Reliance, Croma and Girias have very limited parking space just for a few cars. Shops located in shopping complexes such as Express Avenue and Phoenix Shopping Mall have general parking space of the respective malls but it is all paid parking space. In other words, most standalone city retail shopping places are designed only for walk-in shoppers while in respect of newer shopping malls even window shopping would cost something!

While this restriction and bottleneck has not caused any specific migration from physical shopping to digital shopping, the potential for exploiting full shopping potential and enhancing shopping ease is completely compromised. Logically, this restriction should lead to construction of more shopping malls with adequate parking slots and the conversion of standalone shopping spaces into residential or building spaces. Possibly, shops located on roads with high parking space (like those in Pondy Bazar) may be able to still manage but shops in arterial roads with non-stop traffic (example, Anna Salai) or in traffic intersections (like Viveks) have little hope. As several thousand jobs and lives are dependent on continued prosperity of vintage shopping spaces, urban constraints need to be addressed. Radical it may seem, firms like Viveks may gain business if they convert their ground floors into parking lots and move businesses upstairs!

Penny wise, …?  

The Indian urban shopping crisis is symptomatic of lack of ‘design thinking’ in planning and setting up social utilities. When Viveks acquired additional land space in one of the showrooms, it has chosen to use it for product storage and display rather than for parking. One of the leading hospitals has been planned in Chennai with the least possible parking space causing enormous hardships to doctors, hospital staff, patients and caretakers, besides vendors. Even when a new hospital was set up by the same group several years later, lessons of parking insufficiency were not incorporated. The way facilities are planned in India, the premise is simple but not wise: land is considered premium, to be utilized to the last centimetre to create business assets. This is indeed a myopic view of business which does not put people first.    

The purpose of business, depending on its nature, tends to be one or more of the following, illustratively: caring, diagnosing, curing, entertaining, provisioning and educating. People are core and central to all of these activities. Unless people are able to enter the premises comfortably, leave their vehicles securely and circulate purposefully, people would be diffident to enter unless essential. In trying to maximize space for business assets firms are only sub-optimizing their own business potential.  Indian service providers as well as service receivers believe in ‘touch and feel’ physical form of buying and selling. With India set to increase its dependence on personal transportation vehicles, the pressure on parking space is only likely to increase. This characteristic can only be protected by better spatial planning that balances people and assets.   

Shopping districts

Fundamentally, India should come up with its own native concepts of shopping districts where roads are out of bounds for vehicles and are dedicated for pedestrians. Chennai’s Pondy Bazar is an ideal example of a potential shopping district. More such districts are possible with some innovative thinking on creating parallel vehicular ways, having elevated ways, mass parking lots and comfortable connecting paths. This will not only reduce vehicular transportation, congestion and pollution but also provide a clean shopping experience to citizens. In addition, all large format shops should be asked to create free parking spaces at land level and move the business up (both literally and figuratively). New malls and supermarkets should, of course, come with either ample basement parking or supplemental vertical parking.

There must be special arrangements for direct to consumer sales by setting up farmers’ markets and small and medium manufacturers’ markets in major halls, public grounds and stadiums in urban areas. This would enable a significant level of disintermediation and give fillip to niche producers, for example of organic products and handicrafts. As new highways and industrial corridors get constructed, it should be part of the planning agenda to construct integrated mini shopping malls and food courts alongside the highways at critical points. Planned purchase and impulse purchases could be fully exploited with such spatial planning. Taking a more conservative approach on shelf space and planning more circulation and stay space for consumers and their vehicles, retailers can create a win-win for themselves and their customers.

Rural planning

Shopping should not be solely for elite consumer needs in urban areas. Rural areas require significant retailing and shopping emphasis. In fact, rural areas offer considerable potential for creating exchange platforms and shopping districts. As development is sought to be brought to rural doorstep with adoption of villages, it makes sense to allocate certain amount of expenditure to create producer cum marketing yards and retailing cum shopping platforms.  This again would enhance urban-rural connectivity. It is today considered appropriate to create bypasses that skirt villages and towns. This actually is cutting them off from the highway of development. To mitigate the situation, recanalization of highways to the newly proposed yards would be helpful.

One of the many ironies of life is that space is not usually where demand is. Yet, human habitats have grown as much horizontally (moving demand to where space is) as vertically (creating space where demand is). What is applicable for human living is applicable for retailing and shopping too. Any new construction in city should provide for excellent parking avenues. Creation of multi-brand retail stores in outskirts and earmarking a space in all gated communities for shopping malls that meet captive and external needs are some needed measures. A few decades down the road, existing urban areas will connect with the existing rural areas. That should not be through existing unplanned urban chaos, exploiting every square inch of space; rather, it should be through a more scientific expansive spatial planning that puts people first. 

Posted by Dr CB Rao on May 16, 2016    


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