Small is beautiful and Big is
By Harish Bijoor
Q: What is the real impact of FDI in retail, and when do we see it all
-Kumar K Rajapalayam, Hyderabad
A: Kumar, this question is as
contemporary as it comes. FDI in retail has just been announced. This is really
a policy intent drawn out and announced as a go-ahead document. Retail in many
ways is a “State” subject, and its implementation will depend a lot on what the
individual states with their individual political agenda will allow or not.
The road-map for retail in India
has however been laid out clearly in this policy announcement. 51% FDI in
Multi-brand retail and a 100% FDI (up from the current 51%) in Single-brand
retail. This move was first conceptualized 16 years ago, hotted up as a point
of debate three years ago, and has today culminated in a decision that simply says
“get going guys”!
I am really impressed at the fact
that the UPA government took courage to sanction a go-ahead through a Cabinet
decision, despite the fact that elections in Uttar Pradesh are round the
corner, and despite the fact that UPA-allies have opposed the move. This is a
bold move. A move that accelerates the process of liberalization that started
trundling on in India 1984 onwards.
This move is good for the farmer
and the consumer. The farmer will hopefully have access to a better supply-chain
mechanism that gets him to channelize his produce of grain and fruit and
vegetables to the big city markets without wastage, and the consumer gets a
better variety, a bigger choice of options to shop at, and hopefully better
prices. The fact is that bigger chains are able to offer cheaper prices,
cheaper by as much as 3-7% over current prices offered by smaller retailers.
Scale counts. While small is beautiful, big is cheaper.
I am equally excited by the
riders put into the policy. One particular point of excitement is the fact that
investments need to be channelized for the benefit of local industry. The fact
that retailers will need to source 30% of their requirements from SME’s, is a
good one. This boosts the sagging SME manufacturing sector. And I hope this
really translates into business for real and existing small scale manufacturing
units rather than new ones created just to fill in the blanks of this policy.
The minimum investment of 100
Million USD is another good move. This ensures businesses with serious
long-term intent entering the space with adequate back-end infrastructural
I do believe this policy
threatens and impinges the 14.6 million small mom and pop retail outlets in
India. This policy for sure brings about a kind of Retail Darwinism in the
country, where only the fittest will survive and the others will fall by the
wayside. This will happen first in the 42 big one million plus population towns
of India. And at a later stage, expect this retail revolution to go deeper into
Small retail intermediaries are
bound to be hit by this decision, as the effort to make the supply chain leaner
results in the small links in the chain snapping to make way for the bigger
links to facilitate cost-efficient deliveries.
Kumar, expect to see the real
fruits of this policy decision to touch our lives three years hence. Retail
investments are low gestation investments in many ways and take time to
fructify and deliver.
Q: With a young Cyrus Mistry anointed to head the Tata group, will the
Tata group look and feel younger in its profile?
-Rahul P Kolihara, Mumbai
A: Rahul, that’s a loaded
question in itself. What makes you think that the Tata Group is “older” in its
profile? Look at the profile of the large number of people who work for Tata
Consultancy Services, and you will be jolted by the young and the aggressively
That apart, if you mean the Tata
Group looks older in profile, and will Cyrus Mistry get it looking younger, I
do believe all this will take time. This sure is a big move. Cyrus Mistry is
likely to be all of 44 when he takes charge of the House of Tatas. That sure is
an infusion of young blood. To put it in perspective, Cyrus Mistry and Rahul
Gandhi are well nigh of the same age bracket. One is attempting to head this
country, and another is anointed to head one of the country’s biggest business
The age of leadership in India is
and has to progressively go downwards in its push. The forties is today the age
of dynamic and alive leadership. Just wait as you see the thirties capture this
slot, later than sooner.
And what does age bring to the
party? A certain degree of dynamism. A certain willingness to take risks. A
certain bravado that will have groups make mistakes and learn, rather than
depend on sure-shot approaches that are really not so sure-shot anymore in any
case. And that again is a paradigm in itself. May or may not be true.
Age is again what you make of it.
If you peep into the House of Tatas you will see that some of the boldest and
bravest decisions were made by people who were not so young after all. RK
Krishna Kumar of the Tatas led the Tetley acquisition brigade when he was not
exactly a sprightly forty. Look around the Tata Sons Board and you have names
that have done it all aggressively thus far, despite the age counter not being
on their side. Age is therefore in many ways a number. Age is also a paradigm.
A paradigm of our making.
The author is a brand-strategy
specialist & CEO, Harish Bijoor Consults Inc.