Column : Whats in store

Written by Alokananda Chakraborty | Updated: Aug 15 2009, 02:30am hrs
Strange bedfellows Maybe, but with a sluggish business environment and dwindling margins, big retailers in India are planning to come together to forge a coalition of sorts to share resources. Future Group, Spencers Retail and Reliance Retail are talking of sharing private labels, logistics and warehouses, among other things, on a transactional payment basis. They expect such collaborative initiatives to improve operating margins by 2-3%.

The idea of coopetitionwhen a business cooperates with competitors to grow in cut-throat marketsis really not new. High-tech companiesincluding Microsoft, Netscape, Applehave done it. Closer home, in 2006 when the aviation sector wasnt under the kind of stress that it is today, private airlines were thinking of getting together to share engineering resources, technical manpower and training requirements, to slash costs of operations.

Then there was the much touted grand alliance under the Efficient Consumer Response Framework of 1999 when several big names including Hindustan Unilever, Procter & Gamble, RPG Retail and Pantaloon agreed to work together to make their respective sectors more responsive to consumer demand and remove unnecessary costs from the supply chain. Of course, it didnt take too long for the partners to realise that such a thing was easier said than done. The point is, for such an arrangement to work companies need to clearly define where they are working together, and where they are competing. In other words, where does competition end and coopetition begin

If tech companies vigorously pursue collaboration, they are doing so because of the rapid convergence of many hi-tech industries. But for value retailers, such an arrangement may work against the basic premise on which the competition among them is basedcheaper sourcing that gives them competitive edge .

Granted, the economic slowdown has pooped the party for consumers and retailers alike. But it will take some time before these partners figure out how rivals can compete for market share on the one hand, and cooperate to grow the overall pie on the other.