Thursday, October 4, 2012

What’s with the Cowboy hat?

An obsession to follow the big ticket retailers of the West and a booming Indian middle class was suicidal for most Indian retailers in the initial years of organised retail. Overexpansion and poor inventory management, coupled with a slowdown, brought them to their knees faster than expected

If all the big ticket retailers in India have one thing in common, it’s surely the lack of knowledge about the rationalisation of capital expenditure. Before the slowdown, none of the retailers paid heed to the concept of store rationalisation, which includes working capital management and cost optimisation. In fact, from 2005 to 2007, retail was considered to be the most promising sector with a growth of 20% and 37% respectively for the year 2006 and 2007 (according to a KPMG Report).

Riding the crest of were senior Ambani’s titanic retail plans with Reliance Fresh. Having the huge financial base of Reliance Industries as back up, the retail top brass never realized the importance of store rationalization or reducing inventory costs. Where working capital crunch was not a problem, the political parties did the needful. Oppositions came from West Bengal, Tamil Nadu, Jharkhand and Uttar Pradesh with allegations that Reliance is trying to connect with the consumers directly and closing the business of other channel members. Reliance developed a Wal-Mart kind of image for itself, without factoring in the alienation it was causing the other players.


Source : IIPM Editorial, 2012.
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