Retail's new face: A Reliance Fresh outlet

In may this year, business today ran a survey of the retail industry stating that Rs 54,000 crore could be invested in organised retail. Even six months ago, that seemed like a big number. As it turns out, we were wrong: Just three big groups-comprising Reliance Industries, the Bharti-Wal-Mart combine, and the Aditya Birla Group-have lined up investments in excess of that figure. Then, there are others like the Hero Group that are talking of getting into organised retail. Needless to say, the existing retailers have their own investment plans. That leads to two questions: Why is everyone so interested in organised retail, and is too much money coming into the industry?

Let's start by answering the first question. Conceptually, retail is a strategic industry. It's the point where supply and demand converge. Anyone who controls this point-even in any significant way-can become a decisive force in the economy. The best-known example of this is, of course, Wal-Mart. Although the retailer has just 8 per cent share of the American retail market, it's perhaps the most important entity from the average consumer's point of view. Because of its colossal clout with suppliers, Wal-Mart is able to squeeze better rates for consumer goods and force manufacturers to keep prices down. Suppliers may hate Wal-Mart for it, but the fact is the world's largest retailer has helped keep inflation down in the US.

But the bigger reason why companies are so interested in organised retail is the sheer size of the opportunity. Less than 3 per cent of the retail market is with the organised sector. In categories like food and groceries, the unorganised sector has three-fourths of the market and organised retail penetration is just 1 per cent, according to a recent CII-A.T. Kearney report on the sector. Then, there are several categories-say, home improvement, home furnishings or toys-where organised retail has almost no presence. The fact that so much of retail in India takes place in the unorganised sector answers the question of whether too much money is flowing into organised retail. The answer is, No. When a car manufacturer or a cement manufacturer invests money in his industry, he is creating additional capacity and, therefore, must worry about either taking market share away from an existing player or creating a new segment of consumers. In the case of organised retail, there's no such problem. No fresh demand needs to be created; it already exists. The only challenge is to pull consumers away from kirana stores, or road-side hawkers or neighbourhood markets into cleaner and better laid out shopping environments. Indeed, when an organised retailer goes down, it's not because there was no demand; it's usually because the retailer wasn't efficient enough to give consumers a better value proposition. And that's what India's retailer wannabes need to worry about.

Handle with Care

The recent changes in us nuclear laws will open the nuclear floodgates in the power generation business after more than a quarter of a century. Access to technology and fuel will flow not only from the US, but also from 45 other countries that possess these aspects of the business. But that in itself will not suffice. The Indian government needs to draw up an action plan to regulate this flow. India represents a huge market-power shortages are rampant (around 7 per cent) and the economy is growing at a robust rate of 8 per cent per annum. Exercising market power will mean hard bargaining with equipment and fuel suppliers. Bottom line: Not only must the economics of nuclear power prevail, energy security concerns must also be resolved. Here's why:

One of the main reasons nuclear power is raising its head globally is its low fuel cost compared to alternate fuels like coal and gas. However, given the demand for nuclear power, especially in developed countries, it will only be a matter of time before the gains are neutralised. Uranium prices have already risen several fold over the last few years. Hence, key to a sustainable nuclear power programme is the need to ensure control over fuel as well as equipment supply.

Here, the fear of a replay of the oil story over the last few years looms large. Oil prices have risen three-fold over the last four years. And, the state's record in securing oil acreages abroad to insulate against rising prices, has been dismal. One key reason: The Chinese moved faster and more effectively than the Indians (and continue to do so). Now, in the nuke business, China is adding 10,000 mw of capacity every year, as against India's programme of 6,000 mw in five years. Hence, we need to revisit the capacity addition programme. On the equipment side, the Chinese are evidently developing industrial production capacity, which will reduce capital costs over time-this is possible given the size of their programme. We need to do the same.

Lastly, safety of nuclear plants is best ensured by wider scrutiny. The European experience is noteworthy-most of the nuclear plants in Europe are listed on the bourses and safety-related decommissioning costs are part of the disclosures. Clearly, there are opportunities that need to be converted. Any less, we will not be able to effectively benefit from the power of the atom.

Cricket's Blessing: There is no Alternative

Dismal show: But big money

ESPN-Star (ESS) has bagged the rights to telecast all International Cricket Council (ICC) events between 2008 and 2015. The price: $1.1 billion (Rs 4,950 crore). Of this, the Indian market alone is expected to generate more than $800 million (Rs 3,600 crore) or almost 75 per cent of the total. That India is the engine that drives the world's cricket-related economy is old hat. What isn't is the propensity of the Indian cricket team to plumb new depths with every match. But contrary to speculation, this, apparently, has not affected its market value-or its worth to marketers and viewers. Why?

Quite simply, cricket is benefiting, by default, from the TINA (there is no alternative) factor. Where else can marketers hoping to crack, or stay in, the Indian market go? No other sport even comes close to cricket in popularity and star appeal. If the cricket team's performance has been abysmal, the recent record of other sports is even worse. Almost as if it to prove that there is no such thing as an "absolute" nadir in Indian sports, the Indian hockey team, representatives of the country's "national" game, failed to reach the semi-finals of the Asian Games at Doha, for the first time in the history of the games. And the less said about Indian football the better.

Yes, there have been a few success stories in individual sports-tennis, shooting, long jumping and golf-but these so-called "success stories" are really successful only by India's abysmal standards. Sania Mirza, who, last year, showed some promise of becoming the first Indian woman to enter the top 20 Association of Tennis Professionals (ATP) rankings, only flattered to deceive. And Anju Bobby George, Rajyavardhan Rathore and Jeev Milkha Singh, despite their valiant efforts and outstanding performances, don't really count as stars in any international pecking order.

And this is where cricket scores. It rides on the backs of individuals who can genuinely be world beaters on their day (never mind that such days haven't been much in evidence in recent times). Sachin Tendulkar, Virender Sehwag and Rahul Dravid-and even the younger lot comprising Yuvraj Singh, Irfan Pathan and Mohammad Kaif-all have solid achievements behind them; and marketers must be hoping that they're, collectively, just one match away from regaining their past glory.

But this also presents other sports with a chance. Rather than criticise India Inc. and the lay viewer for worshipping cricket and cricketers to the exclusion of all other sports, they should put their own houses in order and posit themselves as viable alternatives. The poor form of the Indian cricket team has presented them with a window of opportunity. It's now up to them to capitalise on it.