FDI in retail: global biggies must brace for the wondrous contingencies that make India
India is unique. Elements of the Space Age on one hand and elements from the Stone Age on the other can be seen on the same road at the same time - 2000 CE and 2000 BCE; a Bentley and a bullock cart; great wealth and unimaginable poverty; both extremes of a spectrum and everything in between, co-existing on the same street at the same time.
That which emerges from the co-existence of both extremes is something unique, something indescribable, and something, that quite often, defies logic.
Take the doctor for instance, in Hindi films, through the 60's, 70's, 80's and even the 90's. He'd be summoned when the young heroine (or a relative in the joint family) would suddenly be given to fainting spells. The doctor would arrive, with a black bag and a stethoscope around his neck, to denote his definite training in modern medicine. He'd sit by the patient with the entire family in attendance, feel her pulse (an old Tibetan/Ayurvedic practice) and declare her pregnant. He'd then inject this already unconscious lady with some unknown drug and declare that she'd be conscious in a couple of hours. How might he describe his conclusions? We don't know; it defies logic.
Or for that matter the issue that astounded the Formula One teams that were in Noida recently. Keeping in sync with the co-existence of polarities, their super luxury hotel was built adjacent to an open drain. Apparently they weren't as stressed about the race as they were by swarms of mosquitoes and the very real possibility of dengue fever! Yet no one came down with it and the race went off fine without event or incident. How? We don't know. IDL.
Nonetheless, this would've been a profoundly unpleasant experience for the visiting team members. That's what India does. It offers a visitor his or her most profound experiences - pleasant or otherwise.
Which is what those large foreign retail companies that are so looking forward to doing business in India should brace themselves for - profound experiences that defy logic!
Why them in particular? Because their model of acquisition will take them straight into the Indian hinterland. They will be dealing with Indian producers/farmers/manufacturers directly (that is of course wherever they don't have cheaper Chinese goods to offer).
The Indian hinterland, as we know, is varied and diverse, a contrast of extremes. That happens often due to the varied geography of the country. India is as diverse as Europe where Portugal is very different from Poland. Similarly, Gujarat (in the west) may have nothing in common with Odisha on the eastern coast. Each state is distinct, with its own language, culture, cuisine, social and work ethics.
So even if the companies in question operate through a JV with an Indian partner, they'd still be on a different wicket than say companies in other sectors such as automobiles. Why? Because they operate on the principle of small margins and large quantities.
Walmart, for instance, concentrates on selling large quantities of products with small profit margins. Selling large quantities helps them negotiate with wholesalers to further bring down the cost of purchase (Did someone say farmers would benefit?).
Selling at smaller margins means that they look towards greater predictability over contingency. Anyone who's been to India will tell you what you need. You need more towards contingency.
Take supply chains for instance. To keep costs down, an efficient supply-delivery system is required. For it to be efficient, you need good, uniform infrastructure - roads in particular. A 2009 Goldman Sachs estimate pointed to a USD 1.7 trillion investment in infrastructure for India to meet its needs by 2020. A large part of this is in roads.
So clearly, we don't have a network of 6 lane highways that would accommodate large pick-up trucks that will be employed to ferry larger quantities of produce to their points of delivery. Instead, smaller trucks in larger numbers would have to be used for the same quantum of produce. That's more labour. That's greater cost.
Ok, so labour is cheaper here. It's also abundant. Abundant on the roads to collect freight at various points - some lawfully, others unlawfully. Especially where inter-state freight systems are not uniform. And so on.
The point is simple. More contingency. Expect the unexpected.
We've done that forever. That's why you take an Indian out of India, transport him to a place where systems are predictable and functional and he flourishes! He or she is so accustomed to battling the odds, unexpected odds, and unforeseen odds, that anything or anyplace that allows him or her to function with lesser effort is a stairway to heaven. No less.
But there's more for foreign companies especially in retail to look out for - conversation. Retail in India, as perhaps in other warmer lands, is also about conversation. In the Delhi summers for instance, it's the heat that often prompts people to take a break and cool off by talking to the retailer as they shop; in winters, it's the warmth of knowing the owner/manager of the local store that keeps them coming back.
Big stores with shelves and shelves of stacked goods, more signage and lesser attendants, better find a way around that. The only place one often finds employees in such stores is behind the rows of cash machines. And that's certainly not the ideal point at which to chat.
So here's wishing this latest group of immigrants some luck. Especially since they've pushed so hard to have access to the Indian market. When you push, you sometimes get pushed back.
We too often rely on luck and fortune to see us through the mesh that this land weaves, intrinsically. It just gets more wondrous, given the political-judicial-executive and social functioning, how this place actually works. We aren't sure; it defies logic. Extremely and variedly.
More about Vandana KohliVandana Kohli is an acclaimed filmmaker, musician and photographer. She has recently researched, produced and directed the award-winning international documentary ‘The Subtext Of Anger’. Vandana has scripted, directed and edited projects for clients that include The National Geographic Channel, The History Channel, Doordarshan, various agencies of the United Nations and the Government of India. You can find out more about her at www.vandanakohli.com.
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