Basu Mandal (name changed) is a salesman for one of India’s leading footwear companies. He has worked for them his entire life and is now one of their star performers. Basu started as a shoe cleaner and store-help fifteen years ago when his father passed away and he was forced to work to feed his family. His father worked for the same company as well.

"We are like a family here. There are a lot of problems and the company has made a lot of mistakes. But we are doing better now. But there are challenges." We stand outside the MGF mall in Gurgaon. It is a typical day in the sprawling off-shoot of the nation’s capital. The heat is relentless and the dust swirls around, carried by suffocating blasts of hot air. Across the road another mall looms.

"There are some six functioning malls in Gurgaon. Another nine are being constructed as we speak. You won’t believe this but twenty seven more are in the pipeline. This retail boom is very unsettling for ground level employees like us."

Basu is one of the foot soldiers in the war for the consuming Indian. While media talks about the crores being pumped into the sector and the war that is already afoot between players like Biyani’s Future Group, Ambani’s Reliance retail and Nagesh’s Shoppers’ Stop; it is people like Mandal who are grappling with consumers, trends and footfalls. He is of course excited about the new focus on the sector.

"This is forcing companies like ours to think fresh and get more aggressive" he says as we step into a mall for a bit of lunch. The mall is surprisingly full for a weekday afternoon. There are several browsers and window shoppers and a healthy number of people buying things from the stores. Inside the mall walls and pillars are peppered with international brands and enormous hoardings. Not an inch is spared.

We step into a Ruby Tuesday famished. We have spent all day walking through Basu’s stores as he tells how the stores are managed. Basu orders pasta and I settle for a soup and salad. I ask him what he thinks of Reliance Retail and the thousands of crores the Ambani’s are pumping into the sector. Is it a bubble like dotcom, I ask him.

"I don’t think so. It is not that unfounded. There are genuinely consumers out there who are willing to spend money and buy things. As long as you don’t take them for granted. The opportunity is actually very very big. But no one talks about the costs and risks involved. We go to a mall if we need to shop for something. We don’t shop just because there is a mall in front of my house. Gurgaon has no place for another twenty-seven malls. That is just stupidity. But who knows? With all these call centre guys and girls… There is so much money around…"

Outside an S-class Mercedes rolled in and a gaggle of teenagers streamed out.

The Story

It has become the king of all business clichés. The statistic of choice in any business meeting or CEO conclave: the great Indian retail opportunity. The numbers being thrown about are possibly true but potentially deceptive, merely 3% organized and estimated to be a 300 billion dollar opportunity no one wants to miss the Indian retail story. Media leaps onto any story with gusto. And who is to blame them? Reliance Retail has announced plans of a Rs. 25000 crore investment in the sector. Kishore Biyani’s Future Group is just one step behind with aggressive plans of their own. There is talk of a Birla venture as well. With FDI in retail around the corner the sector is all set for a Battle Royale.

And the carnage has already started in the first battleground: talent. CEO’s have begun to jump ship with news of hunted heads a regular feature of the broadsheets. Old retail outfits like RPG, HLL and Pepsi have all lost key personnel to the invaders. A recent big ticket catch was Biyani signing up Roopa Purushottam from Goldman Sachs. Roopa was one of the authors of the eponymous BRIC report in 1999 that many believe kick-started the emerging markets story.

And the action is not just at the board room level. A sales professional with a leading lubricant company tells us: "We have lost dozens of people in our front-line sales force. Everyone has been grabbed by Reliance or someone else. We just can’t stop them. They’re getting 100 and 150% salary hikes."

With recruitment showing no sign of abating HR managers, and not just those in retail, are gearing up for a tumultuous few months.

The Reality Check

Basu lights a cigarette and puffs contentedly. The pasta and nicotine loosens his tongue considerably. He shifts in his chair to get a ray of sunlight out of his face.

"Walmart has signed up with DLF for something.  It is all madness now. I get calls from Reebok, Nike and all everyday. They want to open stores everywhere… Ludhiana, Ahmedabad, Jaipur… But it is not without risk. Come with me let me show you something."

Two minutes later we are sitting at a Barista sipping coffee. Around us the mall swirls with colour and sound. He shows me a shuttered store next to the cafe. Only the sign outside remains. Sprandi. "Being foreign and flashy is not enough you know. That alone does not sell. Look at Barista for instance. Cafe Coffee Day just got some thirty million dollars in funding last month. But Barista is looking to sell out. There is no sure-fire route to victory. Hamare log bewakuf tho nahi hai…" Right next to the Sprandi store a bookstore is doing brisk business. Chetan Bhagat mug shots line the window.

Basu is spot on. The scramble for retailing rupees is not going to be without its casualties. While there is room for investment almost anywhere there is also little room for the wrong retailing strategy. Piramyd Retail, the Piramal venture, has been struggling of late and the company is trying to split its business into two halves: Department Store and Hypermarket. But this has not prevented the recent entrants from entering the sector with gusto. Mukesh Ambani recently picked up a top-level executive from Air India to run the planned commercial airline that will feed his retail chain.

Basu is skeptical. "True. They have huge plans. My salesmen get scared the moment they hear a Pantaloon or a Shoppers’ Stop is coming up next door. But then we’ve been selling to the Indian consumer for decades. We know our business well. I tell them we need to change and be more dynamic. But we can’t be scared. All those young MBAs and CEOs still don’t know the waters like we do."

The future for retailers is fraught with challenges. Some like Reliance might have the risk appetite to go wrong and correct themselves. For the others it might be a gory ending to a rosy dream.

The Foreign Hand

"These left fellows are idiots" Basu says with a wave of his hand to show disdain. "Foreign retailers are as bad as the Indian ones. Everyone wants to destroy the small retailers. All these shopping centers in Delhi are being demolished at the behest of these mall owners and retailers only. Even we had a store in one of those locations. Perfectly legal. And now we have been told to leave as the authorities have overnight declared that the complex is illegal. All of them bribed by these mall owners to drive shoppers into Gurgaon."

The entrance of foreign retailers is considered by many to be the greatest unknown. How will they come? How much money will they bring? And a key question: Who are the employees we will lose to them?

No one really knows for sure. Least of all the players themselves. People we spoke to in the investing and retailing community had reservations about the plans announced on a daily basis by retailers. Basu agrees with them: "Some of these guys are just making noise to scare away Walmart and Carrefour and all. Unless you talk in ‘thousands of crores’ no one is going to take notice."

Deep Pockets of Prosperity

While Bombay, Delhi and the other metro cities seem to be where the action is one would be mistaken to leave it at that. The semi-urban and rural areas are quickly turning into hotbeds of activity. Says an NRI-return stock investor: "There are some 65 cities in India where retailing is expected to pick up drastically. The real money is to be made in these hidden gems. Places like Mysore, Coimbatore, Cochin, Jaipur. I recently bought a flat at Navsari near Surat and the rates are already hitting Mumbai Suburb levels." Basu adds: "The largest number of Mercedes sales in India happens in Ludhiana. Now I am going to open a flagship store there. Anything less than Rs. 20000 sales per square feet will be a disappointment."

In fact the top four metro cities are estimated to account for only a paltry 10% of total retail consumption. For prospective retailers this means reaching out to the length and breadth of the nation before being assured of returns that justify billions in investment. But that also means developing supply chains that can cater to far-flung population centers and diverse tastes. There is also the issue of dodgy infrastructure that companies will need to grapple with at every turn.

Basu has a thousand anecdotes of how flat-soled leather sandals still sell like hotcakes in the south while dress shoes are all the rage in rural Punjab. A leading retail consultant told us: "Selling in India is a tremendous challenge if you want to go national. It is a market that is several times more diverse in tastes and traditions than a continent like Europe. But you still can’t sell the same thing at different prices in different cities can you?"

Billion Dollar Dreams

Challenges and uncertainties do not seem to be slowing investment. At last count five leading retailers (Tesco, Walmart, Carrefour and others) have lined up around ten billion dollars collectively to be pumped into the Indian retailer sector. While retail could be booming, investment into retail most definitely is.

Which leaves us with a very clichéd question: Who is going to survive the war for Indian retail? The competition is steep, the market is challenging and now, ironically for India, there even seems to be a dearth of people to man the malls and aisles. The Retail Association of India recently announced plans to open a chain of training schools across the country to equip young people to work in chains and stores.

Basu is not too ruffled though. "One way or the other I will survive" he quips. Pointing to his cell phone he says: "I have a copy of my CV stored away in my internal memory always."

[Venkatesan Karandikar is a polymath. He is an authority on many topics of national and international importance and is an excellent Odissi dancer. This does not mean that he cannot sing or write novels or do many other wonderful things. He can. He donates anonymously to several charitable institutions and wishes to reiterate that he was not that guy in the MMS with Karan Johar.]

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