Aditya Birla Retail has grown by five times in the past four years, and wants to grow by another six times in the next four. The company?s MD and CEO, Thomas Varghese, in a conversation with FE?s Darlington Jose Hector, talks about how he plans to make that happen. Chairman of CII for retail as well, Varghese also discusses the issue of FDI in retail, and how it will impact the country?s kirana store tradition. Excerpts:
How do you see Aditya Birla Retail as an entity over a five-year period? Where do you think will it be at the end of this period and what is the road map?
Retail is a very resource intensive business. Also, the payback periods are longer than usual businesses. We started with an inorganic approach and then tried to build an enterprise. Along the journey, we saw the financial meltdown and had to realign the business in context of the changed scenario. We focused on the leaner operations, smart and innovative solutions and calculated growth. Now we are on a journey of balanced growth, in line with our vision. We would like to be one of the top three retailers while maintaining our trajectory of profitability. We have grown by five times in the past four years and we want to grow by another six times in the next four years.
As a CEO what is the biggest challenge you are facing now?
The key challenge is getting the right merchandising strategy and right demand generation. On the structural side is lack of capital, lack of commercially viable real estate, poor infrastructure and complex tax structure. Apart from this, the task of getting in the right people and retaining the right people. Also on the operational side, there is inflating costs and wafer thin margins and shrinkage.
How do you view the FDI in retail move? What are your thoughts around this subject?
Allowing FDI in retail is a very progressive step. This would open up significant opportunities in India for the expansion of organised retail and allow substantial investment in backend infrastructure, like cold chains, warehousing, logistics, and expansion of contract farming and development of small and medium enterprises, which eventually reduce the cost for end consumers.
The key beneficiaries would be the small farmers, small and medium enterprises, and most importantly, Indian consumers. Overall, this step will be a significant contributor to the Indian economy, as it will create employment for youth and help increase in tax collections and reduction of tax slippages.
How do you think the kirana stores will fare after international players come in?
Kirana stores have their own strength and proposition for the Indian?? consumers. They offer convenience, credit and home deliveries. These are strong competitive advantages along with the entrepreneurial nature of kirana store owners. This uniqueness will keep kirana stores relevant in Indian markets even long after international players come in. However, the relevant question is, will kirana stores be able to match the demand which Indian consumers are going to generate. To cater to that demand, we need infrastructure that modern retail provides. The same can be used by kirana store owners to increase their efficiency and deliver value to their customers.
What do you think will trigger the next level of transformation in Indian retail?
The customer in India is ready. There is a huge latent demand; however, the demand is not only of goods, but also of value. We need the infrastructure and right business models to capture that demand. I hope that with infusion of capital in backend and creation of world class stores, we will be able to bridge the gap which the consumers are experiencing. We already have begun the process by creating top notch hypermarkets under the brand name of ?more. Megastore?.