Service Retail - An Overview

The Indian organized service retail industry can be considered to have grown from having taken its baby steps to having begun to blossom in its youth. Today one of the major verticals of service retail, the wellness and beauty industry has seen the entry of multiple organized players turning an entirely neighborhood business into a battleground for growth and innovation.

Service retail, to be more specific, the business of selling an intangible service directly to a customer at a fixed location has multiple limitations with respect to its perception and scale-ability while at the same time can boast of numerous advantages, the most important being high margins and lower operational costs.

Brand value for service companies has always been a difficult hill to climb as the common customer fails to register the importance of the brand in the value that has been provided.  With results being intangible (beauty is in the eyes of the beholder while health is always judged on one’s sacrifices to attain it) the credit more often than not goes to the client touch point – the stylist or the gym trainer. Imagine the credit for an excellent perfume going not to Brut or Chanel but to the saleswoman who suggested it. Hence brand building remains a huge challenge, affecting both the valuation of companies as well as single location scale-ability. For example, a successful product retailer can easily build a 50,000 sq.ft. mega-store with multiple SKU’s and brands while even the best beauty and wellness retailer is limited to a maximum of a 5000 sq.ft. carpet area.

This disadvantage is offset by large margins, generated by lower product costs and operational expenses. Saving in logistics, inventory, shrinkage etc leads to much lower bottom lines enabling companies to increase the number of outlets much faster. Thus we see the major players growing in numbers exponentially. In the beauty segment, the major players are easily able to open 50 to 60 outlets in every large city (in some cases more than a hundred) as capital investment costs are low and monthly expenses even lower. The franchise model has ensured that lack of capital need not be a hindrance to brand expansion if the business model adds value to the investor.

But being a localized business, no service retailer can realistically have a customer catchment of more than a few kilometers in a city. Thus the threat of competition is high and saturation in a major threat. The huge margins available have led to heavy price wars hitting the top lines while the importance of word of mouth publicity in brand perception has led to no brand being able to leverage its successes in new markets. Intra-city growth has been easy for all players while inter-city expansion is a major roadblock.

Though there are a lot of problems to be ironed out before any brand in any of the service retail verticals can claim to have reached a level of stability, the outlook for the industry remains highly positive with a growing middle class with deeper pockets driving demand and an increasing number of players driving supply. While product retailers increase their dependence on services to differentiate themselves from the competition, service retail in itself will soon hold its own in the Indian retail space.

Why minorities should vote for the BJP

The Ishrat Jahan case may have judicial authenticity but no one can argue that the timing and the blatancy with which the government is pushing it is a purely political move. With elections around the corner, it it time for all parties that cater to minority vote banks to start consolidating them. Such consolidation is easiest done by polarization. With the BJP unwilling to play the Hindutva card openly, the onus has come one the so called secularists to rekindle communal animosities and insecurities so as to retain and collect all those opposed to the BJP-RSS brand of Hindutva. It is high time the grassroot minority voter saw through this.
Any community, be it individually or collectively expects two things from a democratic government, development and empowerment. In other words mental and material upliftment. Now while the majority, in this case the middle class and socially upward classes, mainly Hindus, have had development, they have always found themselves on the short end of empowerment due to the pandering of minorities by decades of pseudo secular governments. At the same time, the minorities have not gained the necessary development and thus get solace from what they feel is empowerment. Their propensity to vote as a block and show their strength in numbers has led to them having major roles in political battles, their chosen leaders holding major political posts and enjoy being pampered during elections.
But their political masters understand that these minority cross sections will only remain a malleable vote bank if they continue to lack development, essentially education and a good standard of living. Because as soon as a person gets educated and is no longer having to commit all his faculties for his day to day existence he begins to think on his own. He gains the confidence to take his decisions based solely on his convictions. He then becomes an individual and not just a herd animal who can be influenced only by generalizing his caste or religion. Thus he ceases being a vote bank. Which politician will want his well cultivated herd to disperse by providing them such development. Any dissatisfaction is papered over by blaming the majority and thus polarizing them even further.
An example of this is the state of Kerala. North Kerala has a dominant Muslim minority while the south has a dominant Christian minority. The Muslims of the north are catered to by openly Muslim political parties like the Muslim League and the Indian National League. They are the beneficiaries of the entire Muslim vote and no government can be formed without the support of one of these parties. Thus Kerala Muslims have always had their leaders in plum ministerial posts with their parties having the power to make or break governments. But this power has not resulted in development. They still remain poorly educated and with lower standards of living than the average. Mistrust and hatred is high and communalism is an ever present danger. Their leaders are served by keeping them alienated from the majority and ensuring that they do not gain the education to question them.  Compare this with the south where the Christians do not have a political identity of their own. By joining the political mainstream they have ensured that to get their votes, politicians have to cater to their individual wants and have thus ensured prosperity and development. They might not have politicians clamoring for their votes or leaders just for them but they have ensured that the fruits of progress have not passed them by. They cannot be separated from the majority today from a political perspective.
Thus we find that it is those who claim to champion the cause of minorities who have the least to gain from their upliftment. From a national perspective the only party that has anything to gain by educating the minorities and bringing them into the national mainstream is the BJP. The BJP with its ideological foundations as an upper caste Hindu entity cannot appeal to the minorities by playing to their vanity or ego. The BJP has in the past tried to polarize the majority vote and make them vote en-bloc too but the middle class is already past that stage of blind following. Their only option is to break the herd and appeal to the individual voter. Their only choice to attain a decisive majority is to break apart or neutralize the minority political blocks. By thus breaking the chains of minority appeasement the BJP can also cater to its core constituency by providing them with more empowerment. Its only when every person votes individually that an ideology accepted by the majority can prosper. This can only be done by giving them development as an alternative to the pseudo secularism that gives them a sense of power but nothing else. Education, opportunities and security should be the priorities that must be valued.
Even though the BJP as a party, being cast from the same mold of vote bank politicians hasn't yet completely realized this path that they should take, there is a change in the wind. A lack of an alternative to gain more vote share has resulted in every BJP state government having to concentrate on development as their only election plank. There is no reason to believe that at the center their policies will be any different. These is no reason to believe they will have an alternative.
All this and more reason for everyone in the minority, who feels left out in the Indian growth story to give the BJP a chance. The alternative is only more of the same. Who is communal and who is secular is a question that has to be answered consciously as per the realities of the day. An individual perspective is the only way forward for a responsible democracy.

India needs more such milkmen. Dr Verghese Kurien.

When Dr Verghese Kurien passed away, aged 90, India lost its leading innovator and visionary. One whose vision was able to transform the entire dairy sector, rewarding millions with quality products and all encompassing growth. But the lessons to be learnt from Dr Kurien’s life include more than just the dairy sector. It is an example of how India requires processes customised to our unique demographics and social indices and not custom made solutions peddled by MNCs and unabashed globalisation lobbyists.

  The Indian growth story is unique. While opening up of the economy and a young population has led to excellent economic growth, infrastructure and social development remain bottlenecked in political and bureaucratic red tape and corruption. Compared to India, in China infrastructure and social development comes first, and they become the major force driving economic growth. We wait for the demand to arise and then build the infrastructure to satisfy it while in China the infrastructure is already in place to drive the demand. While this makes our economy more stable and sustainable in the long run, it has led to an income divide proportional to income growth.  Today, strictly in numbers, India has more millionaires than most developed countries while at the same time is straddled with more poor than most under developed nations.

This glaring disparity has led to global corporations making a beeline to India to be a part of the bludgeoning upper-middle and upper class market, especially in the metros. The metros and other Tier 1 and some Tier 2 cities have the infrastructure and a growing population to leverage their global practices and brand values. This upper class market is large enough with enough growth for both Indian as well as global players to grow and prosper. Thus it is no wonder that the lower section, without access to the same infrastructure and purchasing power have been neglected. Even in a cosmopolitan city like Mumbai, census data show that more than 40 percent of the population live below an income of Rs 2 lakh per annum. A market segment that will need innovative processes and long term investments to tap into.

 All the large Indian corporations today are multinational players with access to global resources and able to compete with their western counterparts in their respective fields. They have access to funds as well as technologies available all over the world. But they lack the motivation to get their fingers dirty in the muck of the great Indian cattle class. Business considerations do not lend support to innovative ideas and vision in markets that involve huge efforts and low margins. To expect western MNC’s who built their businesses in developed markets to take this step is unrealistic to say the least. Thus we see that out of the box thinking is limited to small entrepreneurs who do not have the capital or other resources to operate on a large scale.

To ensure that advantages of globalisation reach the lower strata, it is imperative that Indian businessmen and entrepreneurs awake to the potential that these sections of society have. Fresh ideas designed and customised to the specific problem areas are required.  The government, even if they do not build the roads, should ensure they do not build the roadblocks to new ideas. Dr Kurien was able to make a success of Amul incorporating the automatic milk bulk vending system re-engineered from a similar process invented originally by Rowe International of USA. Such a synergy of global technology and local customisation is required. India does not lack to brain power or the technological competence to ensure more such success stories. All we lack is the vision and commitment of the great man.