What is the noise in the retail industry today ?

The India Retail Forum concluded recently in Mumbai with proclamations about the great future of the industry. Most speakers, from newspaper reports, agreed that the next five years are going to be much better than today.

However, the media also flashes stories about various companies cutting costs, restructuring and not able to pay vendors. There are reports of top management moving out and confusion about the pace of the industry.

What is happening?

The truth is that the retailers entered the markets with untrammelled optimism. The metrics were based on models from other countries and the growth curve was expected to replicate that of the South East Asian countries. The real estate market also entered into a frenzy in line with the trends all over the world. The people, already in short supply, switched jobs merrily with multiplying salaries every time. The infrastructure continued to be in a mess. The technology solutions were not in place. The customers did not migrate to higher consumption and evolved formats as fast as expected. The Indian consumer is unique in this – the five thousand years of civilization has its impact and she changes at her own pace, always a little slower than her Asian counterparts in embracing western ways of consumption.

But the fundamentals remain in place. The GDP growth will continue at seven to nine per cent for quite some time. The consumers keep migrating to global ways of shopping. The trust in modern retail is developing. The real estate market has started showing signs of temperance with prices falling by 25%. There is more slide to come. The pool of trained manpower is growing. The support industries around the sector like training, design, equipment are expanding rapidly. And there are a billion people!

So it is good that the sector is going through a much-needed introspection and course correction before the next stage of acceleration.