<\/p>\n

<\/p>\n

<\/a>\u201cE-tailing is to retail what the steam engine was to horse manure in Victorian England\u201d he said, using an example to demonstrate that Evolution can be both incremental and disruptive. <\/span><\/p>\n

 <\/p>\n

\u201cE-tailing is to retail, what the steam engine was to horse-manure in Victorian England \u2013 revolutionary, not evolutionary\u201d<\/em><\/span>
\nSanjiv Mehta,<\/strong> Chairman, HUL<\/p>\n

In the 1870\u2019s England faced a problem of too much horse manure \u2013 because the main means of transportation was the horse driven carriage. While urban planners were struggling with how to manage \/ dispose manure, James Stevenson invented the steam engine.\u00a0 Within a short span of 20 years, the problem of horse manure disappeared.
\nPace and Evolution<\/strong>
\nIndian Retail is evolving at such a rapid pace that any discourse on its evolution is tinged with an after taste of being dated before its completion\u00a0\u201cHUL has been in India for about 80 years now, and we can safely say that the pace of evolution in recent times means that we have seen more change in the past 10 years than the previous 70 put together!\u201d \u2013 He said.
\nHow and where Indian\u2019s shop<\/strong>
\nShopping is part of life in India \u2013in many cases, it is entertainment.\u00a0Indians undertake a large no. of small trips for food and FMCG \u2013 about one shopping trip per day (27 in the month). The average cash memo size is Rs 137.<\/p>\n

Targeting \u201cmain\u201d shopping trips<\/strong>
\nSpends are concentrated around main shopping – 2\/3rd of spends takes place 1\/3rd of the total trips.\u00a0 For Retailers and FMCG companies alike \u2013 this is the target.\u00a0Most of the \u201ctop up\u201d trips are to smaller kiraanas, the main trip could be to large kiraana or to Modern Trade (MT).
\nUnderstanding the shopping purpose is the key to get the shopper proposition right for a retailer. The next door shopkeeper understands that and hence continues to do well.
\nHe listed 8 change agents and 4 Trends to watch.
\nChange Agent 1: GDP<\/strong>
\nThe story of India and the story of Indian retail are inextricably linked. Contributing 12% of GDP and employing 8% of population \u2013 Retail\u2019s fortunes are tied to the country\u2019s growth.<\/p>\n

Living Standard Measures (LSM) show the existence of a ballooning \u201cupper middle class\u201d \u2013 with a propensity for consuming premium brands.
\nSanjiv Mehta,<\/strong> Chairman, HUL<\/p>\n

Change Agent 2: LSM<\/strong>
\nLSM refers to Living Standard Measure \u2013 a robust measure as compared to the traditional SEC (Socio-Economic Class).
\nWith economic growth, the LSM composition of Indian households shifted from the usual pyramid to a diamond. A large number of consumers moved into the LSM 5+ Category, creating brand and category opportunities.
\nWhile LSM 5+ has moved from 25% of the urban population to 57% in 2004-9, LSM 8+ has moved 4.5% to 11.5% of the population.
\nIn absolute terms the LSM 8+ HH have tripled in five years with CAGR of 25% against a CAGR of 21% for LSM 5-7 and overall 3.4% for the total urban households.
\nThis means that in by 2013 LSM 8+ would have become 25% of the urban population, implying a rapidly ballooning upper middle class amenable to consume more.
\nChange Agent 3: Non Food & Grocery Spends<\/strong>
\nAs people get affluent the spending shifts from Food & Grocery, which constituted 70% share of shopper wallet more towards the space of health, beauty, consumer electronics and entertainment .
\nThis also explains the rapid growth in channels like Chemist and \u201cFancy Stores\u201d, which were earlier specialist channels dealing in limited FMCG products. Now they stock 35% more FMCG category and SKUs than they were doing about 5 years back<\/p>\n

Change Agent 4: Urbanization<\/strong>
\nSome facts:
\n1.\u00a0\u00a0\u00a0 India has 42 cities with population of more than a million \u2013 expected to reach 68 cities by 2030.
\n2.\u00a0\u00a0\u00a0 6 mega cities with populations of 10 million or more, 13 cities with more than 4 million residents.
\nUrbanization will be accompanied by a 3 to 7 fold increase in total GDP and a 4 to 8 fold increase in urban GDP in every state by 2030.
\nMcKinsey global institute (MGI) projects that the population of India\u2019s cities will increase from 340 million in 2008 to 590 million by 2030\u2014 we will witness over the next 20 years an urban transformation the scale and speed of which has not happened anywhere in the world except in China.
\nAlso 20 cr rural Indians who live in the proximity of the India\u2019s 70 largest cities would benefit from spread of urbanization and have an estimated 10 to 20% higher monthly incomes than the rural average.
\nThe windfall capital gains due to land price hike would add to the wealth here. Access to urban centers and high media penetration would lead to consumption behaviors that are \u201curban\u201d in nature.
\nChange agent 5: Infrastructure (or the lack thereof!)<\/strong>
\nUrbanization will be accompanied by increasing stress on infrastructure, there by reducing<\/strong> mobility within the urban agglomerates and retaining relevance for channels of accessibility.
\nCost of doing business in base metros would go up due to infrastructure bottlenecks and the tier 2 and 3 towns presents a key opportunity in terms of higher growths.<\/p>\n

The stress on urban roads has reflected in the decrease in the number of shopping trips. The opportunity is not just e-tail, it\u2019s also about capturing greater share of wallet in each trip.<\/p>\n

We have noticed that between 2008 and 2012 no. of shopping trips in urban India are consolidating due to high inflation and stress on time in larger metros where daily commute time has gone up by 30%.<\/p>\n

Change Agent 6: Media<\/strong>
\nDue to explosion in digital media channels the marketers now have the opportunity to customize the message for every individual consumer.
\nHowever, it also poses a challenge as it is leading to rapid fragmentation of media channels. In this context both in store as well as E commerce become important as they integrate purchase channel with communication channel.
\nChange Agent 7: Modern Trade<\/strong>
\nIn the last 20 years, Modern Trade is responsible for converting shopping from a transaction to an experience.\u00a0We see the scenario post 2010 as being one of consolidation with 2 or 3 large players and smaller regional focused players.
\nFDI<\/strong>
\nMore than the timing of FDI, it\u2019s about the impact on supply chains across the country.
\nE-tailing<\/strong>
\nE-Tailing will do to the industry in the next 5 years what Modern Trade has done to the traditional trade in the last 15.\u00a0Companies and Channels alike will have to evolve from a selling approach or activation at a sales channel to also doing sales at a predominantly consumer interaction and activation channels
\nBrand Engagement<\/strong>
\nThe consumer\u2019s ability to filter out unwanted brand intrusions is at an all time high with the advent of DVRs and Digital, and will only increase.<\/p>\n

There is enough market play for all channels \u2013 Traditional kiraanas, Large kiraanas, Modern trade and E-tail to grow. But their growth challenges are different.
\nThe kiraanas need to become experiential, e-tail needs to fix supply chain and modern trade needs to find \u201clocal\u201d relevance.<\/p>\n

Brands will have to work hard to engage with consumers where they want, how they want and in store will become one of the most critical channels for active brand interaction and engagement.
\nHence we see category management and joint marketing plans with retailers as an essential means to fire up consumption leading to synergistic same store growths.<\/p>\n

The consumer\u2019s ability to filter out non-relevant brand messages has increased. Brand consciousness has also gone up.\u00a0 These trends make brand management challenging.
\nSanjiv Mehta,<\/strong> Chairman HUL<\/p>\n

Brand consciousness<\/strong>
\nIn the Indian shopper decision hierarchy brands are the main purchase driver. Retailers and marketers need to ensure brand access, otherwise, customers will go elsewhere \u2013 or go online.
\n<\/strong><\/p>\n

Growth & Co-existence<\/strong>
\nThere is enough \u201cPlay\u201d in the market – all channels can grow for at least another 20 years.<\/p>\n

Traditional Retail will have to react \u2013 adopt modern trade\u2019s focus on the \u2018shopping experience\u2019.<\/p>\n

The Small Kiraana will retain relevance through accessibility for \u201cTop Up\u201d Shopping. Its layout will evolve to allow for greater shopper interaction.\u00a0 Experiments such as \u201cMeal for Today\u201d and \u201cTreat for Myself\u201d are preliminary experiments in this direction.
\nThe Large Kiraana will move closer to match the Modern Retail experience by adding Services like Home Delivery, Credit, and Loyalty Programs etc as they fight to cater to \u201cMain Shopping\u201d trips.
\nThe Wholesale will consolidate or fragment based on the local market response to Cash & Carry. Where Wholesalers move to add Value Added Services like Credit, Delivery and increase Assortment, apart from retaining rate competitiveness on predominantly unbranded categories, Wholesale will see a consolidation.
\nWhere Wholesalers retain relevance only through reach and local knowledge, Wholesale could see a further fragmentation.
\nModern trade retailers will also have to constantly keep on redefining themselves as when the newness of the format fades and price comparing becomes the order of the day what is the USP that differentiates two MT retailers operating in the same suburban catchment?<\/p>\n

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