New Delhi: The downturn may be affecting sales and employee morale across Indian businesses, but Rajan Bharti Mittal is optimistic that Bharti Retail Ltd will clock Rs1,000 crore revenue by the end of fiscal 2011.
As vice-chairman and managing director of Bharti group’s holding company, Bharti Enterprises Ltd, Mittal is spearheading the company’s retail initiative. He says the current slowdown has not impacted Bharti, which is going ahead with plans to invest $2.5 billion (Rs12,425 crore) in the retail venture by 2015. Bharti also has an equal joint venture with Wal-Mart Stores Inc. for a wholesale cash-and-carry business, but the retail stores, branded Easy Day, are owned by Bharti Retail.
In an interview, Mittal talks about the reasons behind the company’s measured approach towards retail, the best retail models in the world and how this business could create more jobs in the country. Edited excerpts.
Unlike your rivals who opened hundreds of retail stores and are now closing some of these, Bharti was very cautious towards retail.
Retail road map: Mittal says Bharti Retail will not move out of Punjab and Haryana until it has a robust back-end in place. Ramesh Pathania / Mint
We didn’t want to go on the so-to-speak gold rush. That was never our intention. We were very clear in our minds that we will do it systematically. We were very clear when we made the announcement (of retail venture) that the first three years—2008, 2009, 2010—would be a huge learning curve for us. It’s not that we are (a) retailer by nature...it’s only that we are partnering with the best retailer (Wal-Mart). We were very clear that we will understand the markets, understand the models, understand the concepts, what works.
This game is not about numbers and, honestly, there are no rivals as the market is so huge and there is enough space for a few players. You are at a stage where organized retail is just 5%. I am not talking about the 95% that needs to be covered. Both (large and small retailers) have to co-exist. I am not talking for India alone—I have been to China, Japan; we have seen European markets, Thailand. Nobody can say the co-existence hasn’t happened.
Retailing is often termed as a difficult and complex business. How has the learning curve been for you?
To be honest, there are two parts to it. One, if I have to apply, let’s say, (what we have learned from) telecom (Bharti Airtel, India’s largest mobile telco is part of the same group) to this. What would you do in telecom? You set up the networks first. You may not have the distribution that is robust, but if your networks are not robust it’s a no go. Similarly, in retail, you need a back-end that is robust. People keep asking why are you not moving out of Punjab and Haryana? Because you need a back-end. In Punjab and Haryana our back-end is decked up—you have a warehouse, distribution centre, and logistics is fixed.
If you see our stores, I think, it tells you a story in terms of the products on the shelves and in terms of the rotation of the products. And you learn out of those things that you need a back-end, which is robust enough. When a customer walks into (a branded store) he expects it to be better stocked than a kirana (neighbourhood) store. A kirana store holds 700-800 stock keeping units (SKUs). We, in a small store, hold 3,000 SKUs. If you are only holding 600 out of 3,000 SKUs, that’s not good.
How complete is your supply chain?
The Punjab distribution centre will handle Punjab, Haryana and up north and, say, if we open stores towards Jammu and Kashmir. Can it serve Delhi? Yes, it can serve Delhi as well, but will it be more optimal to serve Delhi (from this)? The answer is no. Therefore, we will have another distribution centre in Delhi, which will start feeding to the National Capital Region market. I would say it’s work-in-progress
How many stores can your supply chain cater to?
The capacity in that sense is enough. Even in Punjab you can expand. These are all modular units. It depends on how many stores you intend to open. Unlike in the US where you have huge distribution centres…you never do that in India. India is large in sense for rotation basis.
And more complex, too.
Yes, it’s very complex. Taxation (across states, which varies) being one (of the complexities). Logistics (is) another. You don’t have cold chain, you can’t send a produce from one end to other. So people start comparing it with outside world. It should not be done because it has its own way of learning.
You mentioned that you travelled to China, Thailand and other countries. Which country model for retail did you like the most?
Thailand is a fantastic model. If you really see, India is quite akin to Thailand in that sense—traffic, people, income levels. The other model to talk about is China, which has huge growth. Look at the job generation that has been there and look at the industries that have come there. Somebody should be looking at that and saying: “Why are we not doing that in India?”
People talk of employment. Where would you get employment? I see retail as an industry has great opportunity to put employment on a fast-track. I am not talking about the white-collar executive. There is lot of space on the shop-floor for 10th pass (a high school graduate), and if I may use the phrase, 10th fail within that spectrum.