Saturday, April 28, 2012

Right workplace

"Workplace is place of worship. We work hard at this place to achieve our goals that we set ourselves to achieve. Some of us are employers while others employees but basic characteristic of a work place remains the same."
If what is stated above is true why do we keep hearing of companies trying to set-up amenities at workplace that prompts the worker to show at work for longer hours? May be they have been preached by some consultants belonging to following school of thought- Keep him stay long and he will be worth nowhere except here :).  We are most productive if we work short and specific. Workplace should have minimal distractions and an environment that lets you focus and work better. If we limit the time spent on aligning with each other we will be complete tasks on time.
Imagine a situation- You work with 100% focus for 8 hrs. Leave office at 6 pm to a gym or a game of squash or tennis or an evening back. You return home by 7:30 pm. Chat with kids. Refresh the lessons learned from your kid's books. Eat with them and then go to sleep at 10:00 pm.
Working long is making us socialize less in real life and over-socialise over facebook, linkedin and orkut. Our employer states, "Focus on end results and I do not care what you do" but rates a colleague of yours higher who spends longer hours at work.

Sunday, April 8, 2012

Failed Economics of retail in India

Offering organized retail as a choice of shopping for extra price-sensitive Indian consumer was never going to be easy. Failing to attract enough footfalls into their stores, the road ahead lies in effective positioning and branding. Will the sector get there?

Few years back all looked upon organized retail as the next big thing in Indian economy. Players like Reliance, ABRL, Shubiksha launched their offerings in supermarket, Specialty and Hypermart formats. Supermarkets were opened next to Kirana shops with size ranging from 4-7k sqft. Hypermarts were opened in city outskirts where the real estate development was just happening ensuring enough parking space and recreational facilities for visitors while Specialty stores were restricted to prime market space. Rentals in a typical Class B city in India would have been INR 90 per sqft per month for Supermarket, INR 45-50 per sqft per month for hypermarts and INR 110 per sqft per month and upwards for Specialty.

Business plans developed had a pay-back period between 15-20 years with EBITDA margins of 7-9%. Merchandize mix was premised to offer 13-15% at gross levels and 7-9% at EBITDA levels. Choice of financing mix was going to be critical to ensure erosion of just 1-1.5% between EBITDA and PBT (Profit Before Tax). Players with deep pockets could have only survived and almost all had plans to bring in a foreign player by 5th to 7th year of operation.

So what went wrong?
a) Rentals increased disproportionately due to boom in realty sector
b) Merchandize mix in earlier days had limited local brands for sale which otherwise had a strong consumer loyalty
c) Overstaffing at stores
d) Supply chain flawed- procurement was centralized.
e) Limited understanding of catchment area
f) High shrinkage especially in case of fruits and vegetables (F&V)- F&V was expected to be footfall driver instead consumers stuck to Kirana store while they shopped F&V from these stores
g) Excessive Competition- multiple players opening stores in the same locality
h) Rapid expansion plans- some players opened more than 1000 stores within a year

Ultimately most of the players failed to make profits at store level. Further, challenges relating to centralized supply chain, merchandize procurement and manpower recruitment and training all impacted the operations. Within first few years of starting, operations went out of control and top management was devoting more time to review the operations and decide on appropriate merchandize for each category of stores than focusing viability of the business plan drawn.

By the time things went out-of-hand for some, they were trapped in high debt while business plan was premised on negative working capital requirement.
Today, visiting a supermarket store in locality is a pain. Billing counters have been reduced significantly. Management of stores has been outsourced to agencies that lack sales ethics and merchandize is complete only for 10-15 days in a month. 
Only FDI in multi-brand sector can provide an exit option of some of the best corporate houses trapped in the web of retail. When is it coming? Some are losing sleep over the issue…