INDIAN RETAIL - M&As WILL BE THE ONLY WAY HEAD
By Ruma Dubey
The mobile came….PCO’s shut down.
Emails came…..snail mail is non-existent for most of us city dwellers.
Whatsapp came……SMS seems to be struggling to survive.
Mp3 came…..buying music is almost out.
Smartphones with cameras came…..only the professionals seem to be buying ‘cameras’.
And well, internet came……the way we live and work has changed completely.
These few changes over the past few years convey one single message – keep a tab on the emerging new ways of doing the same old things and change, or else get left behind. Nokia, Kodak are all examples of companies which failed because they simply worked on the age-old formula of boosting profit and lowering cost when business faltered but did not pay close attention to how technology had simply changed the way people were doing things.
That’s what we are seeing today in the Indian retail sector. The way we shop today has undergone a complete change. First we had just the neighborhood kirana shop who stocked everything that we needed in our day-to-day life. Their existence came under threat with Malls started mushrooming up at every street corner, literally. Many feared that these kiranas would have to shut shop. Most of them did not; they modernized and became more efficient with home deliveries and smart marketing. But the malls became just an outlet for cool AC air at no cost, soon started crumbling. Many malls closed down and many are in the process of shutting down. And then, great retailers had predicted, “consolidation will happen; it is inevitable.” And that is precisely what we are seeing right now. Malls are collating and collectively getting ready to fight the new change – ecommerce. Yes, malls are under threat thanks to this new change in our buying behavior – buying things online as they come much cheaper, there is free home delivery and one does not have to endure snarling traffic jams, jostling crowds and serpentine queues at billing counters.
Yesterday’s announcement of Future Retail taking over Bharti Retail did not come as a surprise. Both were struggling and it was just a question of who blinks first – Bharti did. So now the merged entity will have 570 stores and a presence in multiple retail formats across 243 cities. A day prior to that, Aditya Birla Nuvo announced some internal consolidation to ‘unlock value’ for its shareholders. It decided to bring all its garment business under one brand - Pantaloons Fashion and Retail India, which it has acquired from the very same Biyani. In fact Aditya Birla Retail had earlier acquired Jubilant Retail’s hypermarket chain in Bangalore. Future group acquired Nilgiris. And there are a few instances of brick-and-mortar retailers buying out some e-commerce competition – Mahindra group bought babyoye.com Godrej’s retail chain, Nature Basket bought and merged into itself, online grocer, ekstop.com. With online grocers and even vegetables and fruits available, we wonder whether the next big consolidation will happen in this grocer space, with Big Bazaar and the likes leading the pack.
Clearly, as we live and thrive in a dynamic world, nothing will ever remain the same. Change is the inevitable facet of our lives, be it personal or work or even on a macro level. So unless companies evolve, make changes to keep pace with the changes, it will fizzle out and die a natural death.
PS: Apple has recently launched its iWatch and it promises to change the way we look at health and wellness. Digitization of health is the new change on the horizon…..unless others watch….well, they could remain in history as just a ‘Kodak’ moment!