In the last year that has had some high-profile retail store openings by large industrial groups, the decibel level of protests seeking to halt the expansion has also gone up. But as India staggers towards a general election and populist measures start to unfold, retailers increasingly may find themselves disadvantaged in some states that may ask them to hold back in a bid to appease small greengrocers and shopowners who feel threatened by organized retail store formats. Bharti Enterprises Pvt. Ltd managing director Rajan Mittal talks about the challenges ahead of his own store opening. Edited excerpts:
How many millions of square feet have you lined up so far?
This is a moving target and we have a plan to go by, and we have a certain target in our mind. I must also say that real estate is a challenge—it is a challenge for retailers, not just us, but for the industry. Prices have gone up from probably the last year and a half to today (and) it’s completely different price points. So, one has to be dynamic—you just can’t say, ‘I need this delivered in 2015 at the price that would be set today’.
Building relationships: Bharti Enterprises managing director Rajan Mittal. (Photo: Sanjay Sharma/ Mint)
Neither will developers allow that to happen, nor should you get into it. When we say we are talking to all those developers, it’s more to build relationships. For the small format, we go directly to the smaller guys. These guys (bigger developers) hardly do smaller ones. And we are not going to open the small ones in malls. Small ones have to be stand-alone, in residential areas mostly. That is very city-led, and not state-led.
So, initially you will start with the grocery format?
It’s not grocery…for us, the small (format) is about 3,000 sq. ft and not 500-700 (sq. ft) kind of thing. These will actually carry hygiene, home stuff, grocery, meat and a variety of goods that probably a home basket can fit in.
So you will carry meat as well?
Depending, again, on which areas you go and which states you go to; we will keep sensitivities in account. Consumer sensitivity is a must for the business we do. So, clearly, there are areas which have meat-eaters and one would put a section where meat will be well-kept, well-managed, away from all other stuff that vegetarians would like to eat.
Are you concentrating on one particular region and how it goes before you spread your wings?
We have always said that when we start rolling out, it will be in the north, and that still is our plan—and as it goes along, we will move to other areas.
Retail protests, increasingly, are starting to become state issues. So, at one level, it doesn’t even matter what the Centre mandates because the Rajasthan government can say we are putting a 4% cess on fruit and vegetables. Someone else will say, ‘not in my state because I want to be populist’.
So, is it one of the bigger challenges you face?
To some extent, it has started in that direction...as states are equally going to negotiate, as they are verbal. And the states have to manage the local needs. Eventually, you cannot deal with any state competing with other states in just one way or the other. Both will happen.
I think states are also competing to get investments and to get companies to come and set up industries. Retailing will also happen eventually...and I think as some states, in that sense, haven’t taken a view will start taking a view. Because, what does it really do? It helps generate employment, it helps linking the farmers, it helps linking the small manufacturers. It’s not just that it is looking at one section of the society, it’s touching everybody. This is an industry just like BPOs (business process outsourcing) where 10th, 10+2 and you have many (chances) of getting a job.
There are four-five players working in tandem in terms of growing this industry. Then we will see the consumers getting benefits on experience, pricing, quality and all that. Employment generation will happen, the farmers will benefit, their cash crops will get rotated. Once you get that kind of scale in the industry, you will start finding the change.
From the pie-chart, from the people we are trying to hire for our stores, there are housewives who have time...but they want to do it in their own vicinities. Flexible timing is what they want—which is great. They want to work in the morning, when the kids are gone. Retired people, you know, who are 50-60, retiring or people retired from the forces. College drop-outs who can’t take their education further. So, there is a great mix of people that we have seen which, really I would say, encouraged us.
To what extent do you feel the noise the state governments are making is just pre-election blather, which will go away once the elections are over and then they will become friendly to retail?
It’s not just retail. You can pick any industry. We have seen in telecom when we started that everybody said, ‘how can a private guy handle this?’ You have seen airports today which are privatized, and you have seen the effect. People’s perception will change; we should not forget it affects the consumers. I think some states will develop, some will give encouragement. I said earlier, our belief is once it’s done...you see the mindset changing.
So, how soon do you see that perception changing in retail?
It’s going to take some time. I am not saying it’s overnight. After all, this is a different kind of industry but, I would say as the roll-outs have started happening now, the larger stores are coming now…give some time to the industry—give or take two years, and we will see dramatic results.
According to some newspaper reports, you said initially you plan to go only to some ‘friendly states’?
I was asked a question, ‘Have you picked up states in north India which are friendly?’ My answer to that was (that) we will go where we have the wherewithal. We have taken the north as a base, as it is a food basket. There are many other things we need to be kind of cautious about. That’s what I said. Eventually, everybody will go around. This is also a city-led business, and not a state-led one.
What kind of approach are you planning? For example, Reliance has been high profile and has invited protests while Aditya Birla is doing it quietly.
Our approach is very simple —we are not here to disturb the ecosystem. I can’t speak for the competition, I can speak for myself. Very clearly, it’s not our intention to displace anybody. There is a consumer in every section of the society, so we must address that section of the society rather than saying that we want to address all and beyond the other end of the table. We don’t want to do that. We are quite clear in our minds (that) it should be inclusive and cater to the need of the household. It should bring the experience, the quality, whatever they need.
How do you propose to do that? You have mentioned that you want to work along with small retailers. Is it through the cash-and-carry model?
That will work through smaller retailers. My front-end can’t work with smaller retailers. I am not a supplier and I am on a secondary basis to them and I take real pride in that sense. Having said that, we took a decision that we will not compete with any of those stores.
But, at the end of the day, your supermarkets will be catering to the same section of society that the small stores do...
Not really. If you go to a 500-700 (sq. ft) store versus 3,000 (sq. ft) store, the kind of stock-keeping units that will be available in a 500-700 (sq. ft) store is really of use to them on a daily basis—you need a carton of milk, you go; you need some vegetables, you go. What are the stock-keeping units they hold? Very minimal. If you go to a 3,000 (sq. ft) store, it will hold a much larger space—a bakery, and it will have a pharmacy, a grocery, hygiene, toiletries, you name it. It’s not the same that we should compete.
You carry a section of what others carry; that is also a must but that’s more a footfall approach.
The Bharti name carries a lot of cache in the country. But do you think having that name on the retail formats at this particular time is a disadvantage—something similar to Reliance Retail say, versus More, for lack of a better example.
(Laughs) We haven’t thought so, to be honest. We are seized of what’s happening around. We will take a call towards April end when we unveil—all possibilities do exist, I must say, as we speak. But, sure enough, we will want to see the whole spectrum around, and see how it is well received; what are the drawbacks and what are the benefits. The pros and cons remain to be seen.