Saturday, July 12, 2008

Unprecedented and huge

And the stakes in this retail game are unprecedented and huge. It’s not just about Ambani’s Rs.250 billion retail ambitions, it’s also about the $590 billion goldmine to be tapped, as that’s the estimated worth of the retail market by 2012, totalling to over 60% of all private consumption. As of 2007, retail consultancy KSA Technopak estimates organised retail to have 3.5% of the total retail share; and expects the figure to zoom up to 28% by 2017. No wonder from global retail behemoths like Wal-Mart and Carrefour to desi biggies like Mittal and Ambani, everyone is raring to bake his bread in Indian organised retail oven.

Given the stakes, it is clear that the shrewd Ambani will not back off from this business opportunity. So what gives? Refusing to speak on the solution to a “political problem,” Parimal Nathwani, Group President-Corporate Affairs, Reliance Industries Ltd. nevertheless believes that Reliance Retail is “providing higher quality in reasonable price and if somebody else is doing the same, consumers will go to such stores also. So where’s the question of small stores being shut down?” He adds forcefully: “No political party can stop Reliance Retail for long.”

But talking of short term, Mukesh Ambani has only a couple of years to establish his dominance on India’s food & grocery retail before (Bharti) Wal-Mart barges in and upsets their apple cart, quite literally. And given the time frame, Ambani senior must start acting now. A tempting option staring Ambani in the face is to pull away from states that are causing trouble and concentrate on the few that are not, with the hope that in time, seeing the benefits accruing to the rest (thanks to his proposal to revamp the supply chain with investments and latest technology), the dissenting states will fall in line. But clearly it will take some time, a luxury that he does not have, given the impending (Bharti) Wal-Mart foray. Plus, with the way the winds are blowing, giving up in one state, may spark off a cumulative precedent for other states too. The other way out of the present quandary is the legendary Reliance knack of being able to get around policy makers and use its power & pelf in the hallowed parliamentary and bureacracy precincts to make things move in its favour. But that will still not guarantee complete abstinence by protestors.

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Source :
IIPM Editorial, 2008
An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative

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