A Retailer's Journey Aspirations & Road Map of Independent Retailer Initial Insights - Part II Market Place Regulatory Irritants Business Continuity

Succession Planning

E-commerce

Customer Loyalty People & Skills

Cost of Space

Competition

The pulse of emerging, independent Retailers: A RAI – GoFrugal Survey

About Retailers Associa on of India Who We Are Retailers Associa on of India (RAI) is the unified voice of Indian retailers. RAI, a not for profit organiza on (registered in India under sec on 25 of Companies Act, 1956), works with all the stakeholders for crea ng the right environment for the growth of the modern retail industry in India. We encourage, develop, facilitate and support retailers to modernize and adopt best prac ces that will delight customers. What We Do RAI is a strong advocate for retailing in India and works with all levels of government and stakeholders. Our charter is to support employment growth and career opportuni es in retail, to promote and sustain retail investments in communi es from coast-to-coast, and to enhance consumer choice and industry compe veness. RAI also provides its members with a full range of services and programs including educa on and training, benchmarking and best prac ces, networking, Policy advocacy, and industry informa on. Thus, RAI is the lead trade associa on represen ng an en re gamut of retailers, from chain store retailers and department stores through to independent emerging retailers, selling a wide selec on of products across ci es, towns, rural and virtual stores. Our Ini a ves RAI provides: 

Advocacy support: We aggregate and represent the “Voice of Industry” to policy makers and the government.

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Networking and Events: We provide regional and na onal events for members to network with each other and with the larger Retail Fraternity.

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Learning & Development: We provide a range of workshops and seminars for members to skill up as they scale up.

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Knowledge & Research: We work with a number of Knowledge Partners to deliver authorita ve, insigh ul industry reports.

About GoFrugal Technologies GoFrugal Technologies specializes in retail, retail distribu on and downstream supply chain management solu ons. GoFrugal solu ons integrate compu ng, Web 2.0, mobile and SMS technologies to provide comprehensive automa on and collabora on among the en re trade and supply chain ecosystem including suppliers, customers, partners, service providers, franchise, franchisor among others. Solu ons can be deployed in small single store to large corporate chains and available as on-demand, on-premise and on-mobile solu ons Technology adop on to Retail, Distribu on and Supply chain businesses since 2004, in the form of complete business automa on solu ons. Headquartered in Chennai, India, our technological footprint has grown to benefit 20,000+ retail and distribu on businesses. GoFrugal business management solu ons are built with deep understanding of customer needs and pain points using the latest so ware architecture models, proven and cost effec ve technologies using the best in class engineering processes. Our Assure Support service with its team of highly skilled service personnel & product consultants ensure we implement industry's best prac ces for business. Vision & Mission- Empower all kinds of trade businesses with effec ve and efficient solu ons that help them- Measure, Manage and increase Profits. Assure - Assure on So ware Quality, Assure on Implementa on & Professional Services and Assure on 24x7 support response

PROLOGUE Retail in India has historically been a market dominated by small 'kiraanas'- the so called “Mom & Pop store”. Organized modern retail has been viewed as the ' p of the ice-burg', contribu ng about 6% of total Retail ac vity. Over the last decade, urbaniza on has created a second, sub-segment – the 'independent modernizing retailer'. These are either family owned or first genera on entrepreneurs who have upgraded and modernized their stores or have entered retail as first- me entrepreneurs. They now form a third, segment, somewhat 'under banked' in terms of visibility – but significant enough for FMCG majors like Hindustan Unilever (HUL) to take no ce. Recent research shows that FMCGs have begun to recognize a segment called the “Large Kiraana” – stores which will “will have to evolve look, feel and ameni es to match Modern Retail experience while adding Value Added Services like Home Delivery, Credit, Loyalty Programs etc. as they fight to retain the monthly Shopping trips and capture a share of the 'top up' shopping trips”. What FMCGs have no ced in the grocery market is equally true of other segments of Retail. From apparel to accessories to jewelry to fast fashion to fast food (QSR) to segments like book stores – the market is seeing a wave of independent retailers – either entrepreneur owned and managed stores or family run businesses. This report captures the current 'state of play of this segment of independent retailers in the Delhi Region. It's the second of a con nuing dialogue with independent retailers to understand their ambi ons, aspira ons, challenges and constraints. It was structured as a series of qualita ve interviews among emerging retailers who are RAI members or customers of our Knowledge partner – GoFrugal Technologies. The first report in this series was released in July 2014, and focused on the Chennai region. We intend to con nue this dialogue in future through our Surat, Bangalore and networking meets in other ci es such as Cochin, Coimbatore, Kolkata etc., and hope that this will create a mechanism to aggregate insights from emerging Retailers. We hope you find this a thought provoking start to an interes ng conversa on.

Kumar Rajagopalan CEO, Retailers Associa on of India

Kumar Vembu Founder & CEO, GoFrugal Technologies

001 August 2014

Aspira ons and Roadmap for Emerging Retailers India is a na on of shopkeepers. With 11 shops per 1000 people, shopping is India's “window to the world”. Nowhere-else in the globe will you find such a high density of shops over such a large landmass. China, Brazil and Russia all score lower. We are matched only by Mexico, Peru, Chile, and Iran. Retail in India, grows at 5% above GDP – it grew at 12% during 2002 to 2010. In the last 3 years, it has grown at 10%. The sector is the second largest employer in the country (a er Agriculture) and employs 4.3 crore people. The structure of the Retail market in India reveals three dis nct segments – the large format, na onal player (including e-tailers), the 'mom & pop' Kiraana store and the Independent retailer. While 6% of the USD 440 billion (INR 265,000 cr) Indian retail sector is organized (including ecommerce players) and 40% of retailers are the 'mom and pop' variety, there is a residual, large, 'mid-segment' of Independent retailers. These are single or mul -store retailers, usually in one city, who have adopted aspects of technology

(usually billing and inventory) and are increasingly using e-marketplaces to create visibility and reach. They are also toying with the fringes of social media for customer engagement. Customers are subject to differen al experiences depending on which segment of retailer they are buying from, how nascent or entrenched the retailer is in the community, and the extend of personal / brand connect that the customer feels. This joint paper by the Retailers Associa on of

Independent Retailers – These are retailers who have begun to modernize. They have evolved their look, feel and amenities to match Modern Retail experience while adding Value Added Services like Home Delivery, Credit, Loyalty Programs, and Social Media Presence etc.

 Qualitative  54 Retailers -

23 in Chennai & 31 in Delhi region  Categories:

Apparel, Grocery, Food, Restaurant, Fast fashion, Cosmetics, Jewelry

002 August 2014

India and GoFrugal Technologies explores the current 'state of play' among 31 Independent retailers in Delhi Region. It is part of a con nuing series of interviews aimed at gauging the pulse of this emerging segment. The objec ve of the study is to create a pla orm for ongoing interchange and dialogue with these Independent retailers and to record and track their percep ons about the business environment, key concerns and challenges. The study was carried out as a series of qualitave, structured interviews with retail CEO's and Owners and focused on the following areas: 1. Compe

on

2. Customer experience 3. Space cost 4. People & Skilling 5. Succession Planning and Con nuity within business families 6. Technology 7. Regulatory factors The annexure contains profiles of each retailer surveyed including their view on the overall environment, macro-economics, consumer sen ment, regulatory irritants, and internal aspects such as people, space, merchandising and technology.

Profile of retailers surveyed 31 retailers were interviewed for this module of the study. This is in addi on to the 23 retailers interviews carried out in the Chennai Region. They included retailers across food, grocery retailing including Kiraanas and single store supermarkets, Quick Service Restaurants (QSR), Fine Dining, Designer Furniture, Apparel & accessories, Occasion Wear, Fast Fashion, Footwear and Leather, Jewelry & Cosme cs, Hotel Chains. Point of view – Delhi and Chennai There are three clear differences between Independent retailers in the Delhi and Chennai regions (the la er were surveyed in Part 1 of this report, released in August 2014, available on www.rai.net.in): 1. Brand Management: The Retailer's focus on marke ng and brand building is higher than that in the Chennai market. 2. Space costs and people A ri on are not as much of a concern for the Independent retailer in the Delhi region. 3. E-commerce is seen as a channel opportunity by the Independent retailer in Delhi; whereas it's seen as a threat by the Independent Retailer in Chennai.

003 August 2014

Compe

on

The emerging retailer's view on compe on is both very local and very global. Their customers increasingly compare them with organized retailers in the same category – and e-commerce players. “Brand will tell” Retailers in the Delhi region view the process of brand building as the most effec ve way of handling compe on. Almost all the owners interviewed for this study, had clearly defined their brands and built the business around one or two core, brand 'quali es'. Fast fashion retailers like Chunmun (9 stores) who compete with brands like Zara, have posi oned themselves as an aspira onal brand. Similarly Diwan Sahib, posi ons itself as offering a 'perfect' fit, by focusing its bespoke tailoring service as part of the core branding proposi on. Ritu Wear focuses on a brand proposi on of 'the store is the brand'. As a result, all 12 stores, across Delhi, U ar Pradesh and Madhya Pradesh have similar store layouts and the companies uses SOPs to train customer service staff. Similarly, Stanmax's proposi on is “affordable, fun, fashion”, while the Good Food Café (single store QSR) focusses on “Fresh, healthy food”.

E-commerce is an opportunity, not a threat Independent retailers in the Delhi region don't see the e-commerce wave as a threat. This is in stark contrast to the sen ments expressed by their counterparts in the Chennai region. 19 of the 31 retailers interviewed in the Delhi Region had either set up their own ecommerce portals or had listed their brands on a market place. Independent retailers here view the E-commerce wave as providing cheaper access to a na onal footprint. However, most retailers indicated that it has taken them up to 6 months to implement their ecommerce plans – the requirement then is for partners to help with speedy implementa on. Compe

ve intensity is not 'high'

Independent retailers seem upbeat about the market, and as a consequence perceive overall compe ve intensity as 'not being high'. That's not to say, that they don't see compe ve threats, but overall business confidence is s ll rela vely posi ve (helped by the change in market sen ment since May 2014, when the government changed). Most of the retailers spoke about SSS (Same Store Sales) growth as being around 12 to 18% even in the last two years. While growth has fla ened, and consumers have reduced discre onary spend, business outlook is s ll posi ve.

Private Labels One consequence of the focus on brand, and rela vely mature brand management prac ces is that most apparel / footwear / furniture / fast fashion retailers had created private labels. Retailers such as Mirza interna onal (owners of the Red Tape brand), Ritu Wears (Fast Fashion), RMX Joss (Western Women's wear), Stanmax (apparel, footwear, home décor), Stroika (designer furniture) fit into this category.

19 of the 31 Independent Retailers surveyed in the Delhi Region, have e-commerce enabled their business (including payment gateways). E-commerce is clearly viewed as a channel opportunity, not a competitive threat.

004 August 2014

Independent retailers in Delhi see brand creation as the best way to manage competition. Brand position is 'sharp and straightforward' – from the 'The store is the Brand of Ritu Wear' to “24/7 Home Delivery” of the Eat All Nite café.

ble consump on de which ensures that there is enough to go around for organized retailers based in malls and high street independent retailers. Food & Footwear retailers Of all the categories, food and footwear retailers sounded the most pessimis c when it came to compe on. Food (QSR, Fine Dining and Food and Grocery) has been the largest drop in same store sales growth in the last 2 years – and a common refrain was that the consumer was shi ing to 'street' food (i.e. away from QSR) or reducing grocery consump on.

Organized retail is not a threat At the other end of the spectrum, Organized Retailers are not seen as serious compe on, except when it comes to finding space in Malls.

In the case of footwear, the unorganized sector is the main source of compe on – with the result that compe ve intensity in the branded footwear market is high.

The prevailing view is one of a rising, and irrevoca-

Customer Experience Most Independent retailers believe that their 'local relevance' factor is much higher than their organized retail counterparts. Irrespec ve of the size of the retailer – whether one store or 20 – they are constantly thinking about what they can do to differen ate the service experience and provide a 'personal touch' to the customer offering.

We are already working on Personal Shoppers and Bespoke Suit appointments – a one of its first in the country being done by a brand at such a large level Manoj Mehra, Study by Janak

Differen ate where it ma ers Since independent retailers in the Delhi region have realized that branding helps create an 'entry b a r r i e r ' to co m p e o n , t h e fo c u s i s o n differen a ng where it ma ers. This could be in terms of customer service, product or promo on. For example, a small Kiraana in Lucknow, Papoo stores, which has been in opera on since 1963, uses radio adver sements to build recall value. At the other end of the spectrum is Footkra , a premium branded footwear store – it also uses

radio and event based promo ons to differen ate. Study by Janak – a high end, occasion wear retailer is implemen ng the concept of a “Personal Shopper” – to help the customer find or tailor the 'perfect' fit. They have also standardized store design and store associate training. “I need the client to feel the same experience at Delhi outlets as they are going to get at our Punjab outlet”, says Manoj Mehra, CMD, Study by Janak.

005 August 2014

Beer Café is aiming to change the experience of a 'casual drink' – from the traditional, dimly lit, dingy 'watering hole' , to a bright, social place where you can connect, and converse over a beer and some eats.

In the case of the US dollar store (Nanson Group) most of the network of 327 stores is based on a franchisee structure – and the brand and customer experience are driven by the Franchisor's (i.e. US Dollar store's) prac ces. Discre onary spend has 'tapered' off

Another telling fact – out of the 31 retailers, only the kiraanas did not have a logo.

Many of the apparel and food retailers noted that consumers have become conserva ve in spend in the last 18 months. In the case QSR retailers, this resulted in consumers choosing to move towards 'street' food, apparel retailers have commented on the pressure to extend the 'discount sale season'. The food & grocery retailers also commented on the fact that cash memo sizes were not growing as much as in years past.

Loyalty Programs

Customer experience through special skills

A significant number of retailers (apparel, footwear, beer café) had implemented loyalty programs. Mohanlal Sons, a premium occasion wear retailer with 6 stores had a loyalty discount program based on points earned. Red Tape (a footwear brand, from Mirza Interna onal Limited) also has a loyalty program. Ritu Wears “Royalty” program generates 70% of sales. In addi on to the loyalty program, RMX Joss and Stanmax also use in-store events to keep customer engagement high. For occasion wear retailer, Study by Janak, the 3 year old loyalty program generates 40% of topline.

Some of the Independent retailers have used specific, scarce skills to enhance the customer experience. Occasion wear retailer – Mohanlal & Sons – offers bespoke tailoring services. CCDS (Culinary and Cake Decora ng School) offers cake decora ng and baking courses and sells equipment to the amateur chef. They sell to the B2B market (Bakers) and the B2C market.

The fast fashion retailers all commented on the use of product as a key component of customer experience.

Who's brand? Some of the retailers have adopted the franchisee model to help in se ng the benchmark for customer experience. Lasa Mart (3 stores) which is a departmental store format, sells premium brands such as Levi's in addi on to its own label. Similarly, Glad Rags, (4 stores in Chandigarh) is a franchisee for premium apparel brands (FCUK, UCB, CK), but has leveraged off the same to create an 'umbrella' brand experience in the customers mind.

Similarly, Bakers Oven sells to corporates and the NRI gi market by taking interna onal orders for cakes, sweets and flowers. While they have 3 retail stores, customer experience is actually driven by the online and phone ordering channels.

Rahul Singh, CEO, The Beer Café says “We've implemented a 'Pay through mobile' solution so that customers don't have to queue up to pay for their drinks at the Beer Cafe.

006 August 2014

Space: The Final Fron er Space is s ll “High street” Most of the retailers (23/31) had stores in high streets. The table shows the split, by categories:

be high. “I would like to expand into malls – but mall owners prefer interna onal brands to local ones”, says Vidur Mehta, Partner, Baluja Shoe Company. Agrees Sanjay Sahni, MD, RituWear, “In malls, it's difficult to get good quality space with high visibility”. Retailers own Space The older businesses owned their space, and therefore, were somewhat insulated from the impact of rising rentals. Out of the 31 companies surveyed, 15 of them owned their space, and most of these had been in the retail business for more than 20 years. Mall's – the final fron er Independent retailers who were looking to expand into malls have found the compe on for space to

Suresh Dhir, CEO of RMX Joss (6 stores selling women's western wear) is more specific. “Finding good space at malls is a challenge – malls prefer to give ground floor, anchor space to interna onal brands.”

I would like to expand into malls – but mall owners prefer international brands to local ones Vidur Mehta, Partner, Baluja Shoe Company

007 August 2014

People & Skilling Beyond Talent The market stereotype has been that family owned businesses see high loyalty among employees. Independent retailers in Delhi support this proposion. All retailers (bar one, which was a not for profit en ty) had sales based incen ve schemes. 20 of the 31 retailers said that a ri on was not a concern, indicated a ri on levels between 8 to 15%. The retailers who spoke about high levels of a ri on were the QSR and Food categories. Not a ri on but skilling The main concern for Independent retailers was skilling. Where the retailer was looking to differen ate customer experience based on service (as against product), or where there was a high end target customer, this need was felt to be the most acute.

For retailers such as Lasa mart and Glad Rags – their franchisee arrangements provide training. Gladrags sells brands such as CK, FCUK and UCB – all of which regularly train the sales people. Similarly, for retailers like US Dollar store – all franchisees are supported by the master Franchisor – in this case US Dollar store – with training and skilling assistance.

75% of Independent retailers in the Delhi Region did not see attrition as a problem. But, finding ways to skill (reskill) employees can be a barrier to scale.

Skills constrain scale For Study by Janak (an occasion wear retailer with 6 stores, who sells Fashion Couture), the cost of training people was seen as the main barrier to future growth. “Our brand stands for specialized and personalized service; we cannot afford to have new faces every me the customer comes to the store. The store associates we hire should have an apt mix of so skills as well as technical knowledge of the garment which is difficult to get now a days. We tried an experiment of hiring people from luxury retail backgrounds but there was a mismatch as these people didn't have technical skills that a client looks at, once they are selec ng the garment so we have to invest in that training. Thus overall it's a rac ng the right talent that is a barrier to growth”. Leveraging franchisee brands

008 August 2014

Con nuity and Succession Planning Independent retailers represent a spectrum – from family owned and operated, to modernizing (where they adopt technology and standardize process). Growth and scale bring pressure to infuse skills, and the independent retailers respond by hiring professionals at a middle management level. It's when the market pressure to expand runs into the barrier of family par cipa on that each retailer decides to either separate ownership from control or limit growth. At this cross roads, some retailers are also experimen ng with franchising as a way out – a department store chain and a footwear chain are looking to expand by franchising the brand. Appe te for entrepreneurship About two-thirds of the retailers were family run businesses, with the others being first genera on entrepreneurs. Most of the first genera on entrepreneurs have between 10 and 20 years of vintage in running businesses. “We are family” Almost all the family owned businesses had family members or extended family members ac vely involved in running the business. There was also clarity about succession – either in terms of gennext or a member of the extended family. From the comments made during the survey, it was clear that the family member was and would con nue to be “First among Equals” – strategic and financial direc on would be driven by the family and not the professionals. Scale brings 'professionalism' Among the independent retailers, scale (e.g. beyond the first few stores) has created the need to induct professionals. Retailers like Una hotels (28 hotels across 4 formats) and Ritu Wear have

Family members are, and will continue to be “First among Equals” when it comes to strategic direction. professionals in a variety of roles – ranging from CEO's to the head of func on. For retailers like “Beer Café”, the promoter ac vely runs the business – but has raised professional PE (Private Equity) money to fund the business. This has created the need for enhanced oversight and formal mechanisms of governance. At the other end of the spectrum, the owners of Kiraana chains admi ed that they would not expand beyond a certain number of stores, because they did not have enough family members to manage each of the stores. These stores are a clear representa on of the transi on from family owned business to 'emerging or modernizing' to professionalized en es. While technology has helped to dilute the 1:1 rela onship between family members and number of stores, it has not and probably will not remove the natural 'ceiling' for professionals within the regions family owned independent retailers. Only one of the retailers (Beer Café) men oned previously spoke about an ESOP or partnership structure for professionals.

The Kiraana owners admitted that they could not expand beyond 3 or 4 stores, as there were no family members to handle the store.

009 August 2014

Technology Technology, is seen as an 'enabler' - most of the retailers have automated POS systems, and have integrated back end systems. Technology is about cost-benefit; cloud solu ons are preferred. The biggest challenge is the need for objec ve guidance on when to adopt and invest in new technologies. The figure below shows the number of retailers who had automated various core func ons. (N = 31).

Core process automa on 17 of the 31 retailer had fully automated inventory management. This is in contrast to the level of automa on seen in the Chennai Region – where the point at which the retailer chose to automate was further down the growth path. E-commerce Unlike their counterparts in the Chennai region, 19 of the 31 Independent Retailers surveyed in the Delhi Region, have e-commerce enabled their business (including payment gateways). E-commerce is clearly viewed as a channel opportunity, not a compe ve threat. Of these 19 retailers, a majority (52%) has payment gateway integra on – in other words, the websites were fully enabled for e-commerce.

Logis cs partners needed The gap in the e-commerce space for the retailers is the lack of a logis cs partner, willing to work with an Independent retailer. Pan-na onal logis cs partners – companies like Blue Dart, DHL etc. are geared to the market places, the Independent retailers need regional or even city level logis cs partners, who are willing to look at shipping payment structures which are purely variable. For most retailers, e-commerce traffic is s ll less than 10% of monthly sales –in other words, they cannot afford volume guarantee based pricing structures. For example, Vineet Maheshwari, Proprietor, GameZone says, “We are scou ng for a good logis cs partner for online shopping. Right now we charge a good amount of money for shipping and taxes. We want to reduce this or provide free shipping; we believe it will increase the ecommerce component of our business substanvely”. GameZone sells sports and fitness accessories to corporates, individuals and online. Similarly, Bakers Oven is a premium bakery, which sells cakes, sweets, chocolates and flowers to a customer base which is 80% corporate and ins tuonal orders. They also accept orders online from all over the world – but currently deliver only in Gurgaon. “There are not enough logis cs partners for small retailers”, says Neeraj Bhat, Proprietor,

Vineet Maheshwari, Proprietor, GameZone says, “We are scouting for a good logistics partner for online shopping. We want to provide free shipping to the consumer, we believe it will increase the e-commerce component substantively

010 August 2014

Baker's Oven. Neeraj believes that finding the right partner would help him increase his presence in the overseas NRI gi ing market. US Dollar store which is a franchise based chain of 327 stores has also found the need for a good logis cs partner. Says Gaurav Sahni, MD, US Dollar Nanson Group, “We have automated supply chain including fleet management, now we need a good local logis cs partner for online sales.” Non-tradi onal channels All the QSR / restaurant retailers surveyed have listed on Zomato and similar pla orms. In addi on, they have also listed on directory services such as JustDial. Sports retailers Game Zone, apparel retailers such as New Vijay Cloth Store and grocery retailers such as 156 Grocery Junc on have found the phone to be a useful channel for genera ng regular orders.

Engage using content In addi on to social media, the retailers have also used blogs and success stories – as a tes monial based approach to marke ng. For example – CCDS –Culinary and Cake Decora ng School uses its blog and publishes 'success stories' – tes monials from students who have used its baking courses. The company sells cake making, decora ng and cooking gadgets to amateur chefs. Because retailers are e-commerce enabled, they have also had to either hire or create content wri ng skills – since the product descrip ons on the ecommerce website for every SKU has to include both skills.

In addi on to e-commerce, retailers have also listed on mul ple market places – examples being RMX joss, New Vijay Cloth Store, GameZone & Lasa Mart. Surprisingly Social Independent retailers in the Delhi region are VERY social. They have also been present and visible on the social channels far longer than their Chennai region counterparts. The graphic below shows the strength of the face book communi es of some of the interviewed retailers. A not for profit en ty like St Paul's book store, which sells religious books, has harnessed its face book and social media profile to create visibility. Retailer are also clear that social media IS about visibility. Saurabh Sharma, MD, Stroika (which sells designer furniture) “the website and social media is used to create visibility, it won't create sales for such a high involvement category”.

011 August 2014

Regulatory 'irritants' The current central government's approach to fixing administra ve bo lenecks as a means to enabling growth resonates with Independent Retailers. Retailers overwhelmingly want GST and Industry status for Retail. Reac ons to FDI are mixed.

Need GST – now! 18 of the 31 retailers stated that they were “very favorable” for a quick GST rollout, while another 6 viewed this favorably. Taken together that's 75% of the retailers surveyed. The view was that GST will reduce indirect tax burden and be administra vely simpler. Says Harsh Gupta, Proprietor, Nathu's Sweets, “GST will reduce paperwork, and be administra vely simpler”. Further the food and grocery retailers also felt that GST would reduce the layers in the supply chain for FMCG. “GST will help, streamline the supply chain for FMCG products.” says Shivang Chawla, Proprietor, Papoo Store.

Neutral about FDI Reac ons to FDI were mixed. Most of the retailers (18/31) were 'neutral' – i.e. they did not have a clear view. Those who spoke in favor, looked at it from the perspec ve of ge ng access to 'best prac ce' - but deeper probing was

not elicit exactly what this meant for them in prac ce. Industry status for retail A common reac on was that “Retail needs industry status – so that we can find funding easily” – about 50% of the retailers surveyed used similar comments. The other reason for seeking “Industry status” was also that retail is currently a “State Subject” – that means that the licensing and opera ng norms are different in each state. Given the amount of me spent in ge ng clearances, this discourages retailers from expanding out of state.

012 August 2014

Single Window Clearance for store opening This was another common theme and input in the discussions. 4 of the retailers had opened their first store in the last 6 months and all of them spoke about the frustra on and me taken to comply. Says Jahid Amamia, Proprietor, Amamia Hospitality Services Pvt Ltd, “There are mmul ple licenses and clearances for a single store opening (e.g. Company registra on, food registra on, labour registra on, tax registra on). Opening a store takes more than 2months.” Put it online Perhaps in reac on to the government's 'Digital India' movement, a common reac on was also that retailers should be able to file and get permissions online. Tax ra onaliza on Finally, many of the retailers wanted the VAT / Excise duty taxa on structure ra onalized. For footwear retailers, having to deal with mul ple levels of customs and excise du es is administravely taxing. All the Kiraana stores and chains (BPSP retail, Papoo Store, M Budget Mall, 156 grocery junc on) discussed VAT ra onaliza on – either in terms of geographical differences (e.g. Delhi v/s Ghaziabad) or category differences. Restaurant / QSR retailers felt that the high levels of VAT were driving customers away from restaurant dining back to 'street' food, since the combina on of high food infla on and high VAT rates made it expensive for them to use QSRs.

Independent retailers want GST rollout, as the believe that it will streamline administration and reduce indirect tax burden. Half of the retailers surveyed believed that Retail should be given 'industry status' – to enable retailers to access better sources of funding. Reactions to FDI were neutral – most retailers did not see it as impacting their day to day business one way or another. Those who spoke in favor, did so saying that it would provide better understanding of 'best practice' and VAT ra onaliza on could help the tax authori es significantly. There is enough 'pent up' demand, so that lowering tax rates would lead to more tax collec on – not less.” – Similar messages from two differing categories of retailers – Bakers Oven and Beer Café.

A final dimension to this was also the need for the tax structure to reflect changing consumer tastes. “Categories such as 'cake' and beer are perceived as luxuries – the levels of VAT applicable are very high. The reality is that consumer's tastes have changed,

013 August 2014

Appendix

The following retailers took part in this initiative 1. 156 Grocery Junc on

16. Mohanlal Sons

2. Amamia Hospitality Services Pvt Ltd

17. Nathu's Sweets

3. Baker's Oven

19. Pappoo Store

4. Baluja Shoe Co

20. Ritu Wears

5. BPSP Retail

21. RMX Joss

6. Chunmun

22. ST Paul's book store

7. Color Lobby

23. Stanmax

8. Culinary and Cake Decora ng School

24. Stroika

9. Dileep Baid Industries (Anuva)

18. New Vijay Cloth House

25. Study by Janak 26. The Beer Café

10. Diwan Sahib

27. The Gladrags Store

11. Eat All Nite

28. The Good Food Café

12. GameZone

29. UNA Hotels

13. Lasa Mart

30. US Dollar Nanson Group

14. M Budget Mall 15. Mirza Interna onal Ltd (Red Tape)

31. VH Fashions

Summary profiles are enclosed overleaf.

014 August 2014

High Impact Low Impact Medium Impact Neutral Impact

Interviewee: Rahul, Proprietor, 156 Grocery Junction Specialty, Pulses retailer

1 store

Phone ordering, Home Delivery

Lis ng on Just Dial

Expand only to 2 -3 stores

People - Low a ri on

KEY FINDINGS  Profile: Family owned, Single Store, Pulses Retailing. Customers order on phone and the

store provides home delivery. Turnover ~`5 cr. Store size 1000 sq. feet.  High Shrinkage is a challenge. Finding suppliers who can provide consistent quality of

pulses.  Space: Rental premises, off High street. Rentals affordable.  People: Low a ri on- < 10%.

Challenges/Areas of Focus Competition Customer experience Space Cost People Succession Planning Technology Regulatory Factors

 Technology: Automated opera ons – Inventory, Accoun ng, Bar coding and billing.  E-commerce and Social Media not considered relevant for the Target Audience of House-

Wives  Regulatory: Tax Ra onaliza on needed – VAT rates are different between Delhi and

Ghaziabad

Interviewee: Jahid Amamia, Proprietor, Amamia Hospitality Services Single Store, QSR

High Street

Suppliers Quality

Lack of skilled Chefs

SMS Marke ng for Loyalty

High Impact Low Impact Medium Impact Neutral Impact

Tax Ra onaliza on - GST

KEY FINDINGS  Profile: Single Store, High Street, QSR* selling Biryani, Kebabs, Curries and Wraps.

Challenges/Areas of Focus

 Finding Suppliers who can provide consistency of key ingredients such as masalas / spices.

Competition Customer experience Space Cost People Succession Planning Technology Regulatory Factors

Seasonality in flavor of these ingredients directly impacts sales.  People: Lack of qualified chefs. The company has documented its own recipes to help train

new chefs on the job. Other than chefs, a ri on is low.  Space: Finding good high street space with a large catchment is an issue.  SMS based marke ng. Listed on Zomato. Have just set up FB (May 2014).  Regulatory: Mul ple licenses and clearances for a single store opening (e.g. Company

*QSR = Quick Service Restaurant

registra on, food registra on, labour registra on, tax registra on). Opening a store takes more than 2months.  Service tax on food – pushes up prices for consumers. Discre onary spend on food has

decreased, and consumers have shi ed towards street food.

015 August 2014

High Impact Low Impact Medium Impact Neutral Impact

Interviewee: Neeraj Bhat, Proprietor, Baker s Oven 3 Stores, premium bakery

High Street, Family Owned

E-Commerce is 60% of sales

Retail needs industry status

GST will help significantly

Tax ra onaliza on

KEY FINDINGS  Profile: 3 stores, premium bakery, sells cakes, sweets, chocolates and flowers. High street

stores, business is family owned.  80% of customers are corporates / ins tu onal customers. 20% walk ins.  Margin structure driven by private labels.  Central kitchen to stabilize quality.  People: Rela vely low a ri on @ 25%. Personal connect with employees encourages loyalty.

Challenges/Areas of Focus Competition Customer experience Space Cost People Succession Planning Technology Regulatory Factors

 Space: 2 owned, 1 rented property. Not seen as a challenge.  Technology: E-commerce enabled – accepts orders from all over the world for delivery in

NCR. Main challenge to growth is to get a logis cs partner who will be willing to work with a medium sized business and provide delivery capacity all over India.  Inventory, billing, accounts are automated. Future priori es – social media, loyalty scheme.  Regulatory: Tax ra onaliza on is needed – the excise duty structure views cakes /pastries

as a ‘luxury’ good and is out of tune with changing consumer tastes. Addi onally VAT levels at 17.5% are high – the company cannot produce for price points at which retail customers can buy.  Policy: Retail needs industry status – to obtain be er access to funding.

High Impact Low Impact Medium Impact Neutral Impact

Interviewee: Vidur Mehta, Partner, Baluja Shoe Co 16 stores, specialty retail

Footwear &Accessories

High Competition

Low Attrition

Policy Changes to help retail

Future stores in malls

KEY FINDINGS  Profile: Family owned business. 16 stores, specialty retailer, Footwear & accessories (bag,

belts). Highly compe 50 cr.

ve market (Bata , Metro, Mochi, Khadims). Turnover range – `10 to

 Technology: Automated inventory, billing, merchandising. Loyalty program in August

2014. E-commerce enabled, 2% of revenue from online. 10% of range sold online. Social media presence (FB) and listed on marketplaces such as FlipKart.  People: Low a ri on, but training people is a challenge.

Challenges/Areas of Focus Competition Customer experience Space Cost People Succession Planning Technology Regulatory Factors

 Space: Expand into malls – but mall owners prefer interna onal brands to local ones.  Customer: Last 2 years has been cau ous about spending. Expect sen ment to improve

due to poli cal stability.  Regulatory: Retail needs industry status to obtain be er funding, and a single window

clearance for new store opening.  Service Tax: Input credit on rentals should be provided.  GST needed on priority basis – will help small retailers expand regional footprint.

016

August 2014

High Impact Low Impact Medium Impact Neutral Impact

Interviewee: Prashant Kumar, Director, BPSP Retail