GLOBAL LOGISTICS by Joseph O’Reilly
Demand and Strategy Drive India’s Retail Trade
I ndia’s retail industry is enjoying boom times as its economy continues to develop. As the country’s second-largest employer after agriculture, retail is estimated to reach US $590 billion in the next two years, growing at a 13-percent clip between 2007 and 2012. India’s consumer reckoning is largely a result of changing social behavior and market dynamics, as well as freer access to capital. This trend will sustain further growth in the retail and logistics sectors as overseas brands penetrate the country’s expanding middle class and domestic vendors ramp up their own efforts to capture demand.
and incursion, India’s domestic retailers are leveraging this competition and economic pressures to reduce costs and stir their own interests. Leading players such as the Future Group, Aditya Birla Retail, Spencer’s, and Reliance Retail are pooling supply chain resources to streamline back-end costs. The retail- ers have formed a coalition to align sourcing operations and rationalize private labels, logistics, warehouses, and hir- ing details on a transactional payment basis to share markets and cut costs.
Given the lingering impact of a global reces- sion, India’s retailers are hoping to improve operating margins by sharing back-end resources. One tactic is exploring opportunities where they can pig- gyback on peer assets while using their own for others; selling other retailers’ power brands, but not nec- essarily competing store brands; and using alternate sales channels to liq- uidate inventory. Such collaboration marks a watershed change in how Indian companies capitalize on supply chain management to empower the enter- prise. On average, supply chain costs account for 12 to 50 percent across product categories.
Already, the country has become fertile ground for both domestic and foreign business. The gov- ernment currently limits foreign direct investment in the retail trade to single-brand product retail- ers such as Nike, Sony, and Marks & Spencer–all of whom have made their presence felt. Multi-brand sellers, banned from direct investment but allowed to operate in a wholesale capac- ity, are also making an impression. Australia’s Woolworths, for exam- ple, has partnered with Infiniti Retail, owned by Indian industrial conglom- erate Tata Sons. Walmart, too, has had a successful entry with its wholesale cash-and-carry stores. Not to be outdone by foreign dollars
India’s retail environment is thriving as domestic consumerism attracts foreign direct investment and encourages home-grown businesses to embrace collaborative logistics strategies.
September 2009 • Inbound Logistics 21
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