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November 24, 2006
Heading for India Economic Summit
I'm heading for the India Economic Summit in Delhi early next week. They asked me to blog the summit ahead of time, and here's what I came up with. I think a revolution is coming in Indian retail and agriculture.
One of the things I?? looking forward to at the India Economic Summit is finding out more about what?? going on in the retail market. India has an incredibly inefficient retail supply chain now that contributes to the poor performance of its agricultural economy, which, I believe, is actually shrinking. Right now, most retailing is handled by small independent shops, and there are as many as eight layers of middlemen between farmer and consumer. That, and poor logistics, contribute the fact that about 40% of India?? fresh produce rots before it can be sold. Plans by a bunch of the Indian industrial conglomerates could bring a revolution to retailing??nd to agriculture.
Reliance Industries, for instance, earlier this year created a new company, Reliance Retail Ltd., which will sell food, apparel, shoes, home improvement products, electronics, and even farm implements. The company plans on creating a new supply chain around its retail initiative that will cut out middlemen and bring food to market more rapidly. It recently opened 11 stores in Hyderabad and plans to have stores in nearly 800 cities by 2011.
I had a quick conversation on Friday with Mukesh Ambani, chairman of Reliance Industries. He told me: ??ur objective is to make sure the Indian farmer is connected to the urban consumer and ultimately to the global consumer. We??e trying to leapfrog many generations to put in the latest distribution system from the farmer to the consumer.?/p>
Ultimately, Ambani thinks he can do with Indian agriculture what the Indian tech companies have done to the global tech services industry—undercut the market with lower costs and lower prices.
That’s going to be one incredible act to follow. Indian tech exports went from about zero 15 years ago to $25 billion annually today. If Ambani and the other new Indian retail pioneers can do as well, it will do a lot to bridge the huge gap between the country’s sizable middle class and the huge mass of poor people.
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Am pretty convinced that Mr Mukesh Ambani's dream of connecting the Indian farmer to the global customer isnt far fetched!!
The ecosystem is just right now for 'another revolution to happen" with
-Corporates like ITC, Mahindra group, Bharti group helping the farmers become aware of better produce and market practices
-Retail giants assuring better reach and storage facilities
-the supply chain management improving leaps and bounds by leveraging on IT, MIS, and better logistics!
And yes, if all these provided for a better life right in the neighbourhood,why would any rural youth migrate to urban/foreign shores for greener pasture??
(please visit http://joboptions.blogspot.com/2006/11/revolution-in-india-for-jobs-in-retail.html)
Posted by: Achyut at November 26, 2006 10:25 AM
Yes, over-intermediated, inflexible and unresponsive supply chains and their failures in getting fresh produce quickly enough from the rural areas to the urban markets, do result in a big chunk of farm produce rotting before it can be sold. But, the rural communities in India -- an enormous market by any yardstick -- are also very poorly served by the same or other supply chains (here, we should also consider that not all of these consumers are at the bottom of the pyramid, and that they need, and are willing to pay for, more than just tractor spares and fertilizer).
If I am not mistaken, it was ITC that first tried to "kill two birds with one stone," with their plan to build 30,000 kiosks in the rural areas. By using the same trucks that carry manufactured goods to the rural areas to bring fresh produce to the urban markets, they had sought to avoid the costs of empty backhauls.
The urban retailing sector in India is about to explode with the just announced Bharti Airtel-Walmart venture joining Reliance and a host of other new entrants. A more holistic approach based on the first 4 I's (Information, Interactivity, Integration and dis-Intermediation) is perhaps called for, before anyone jumps in with the fifth I (Investment).
Posted by: Two_way_traffic... at November 27, 2006 02:41 AM
To add to this,
Many other retail groups have started in the recent yrs, most prominent among them being the Future Group of Kishore Biyani, with the popular big bazaar, and food bazaar formats.
Reliance has the benefits of great financing and a sound plan for expansion. Plans to launch approx. 8 formats in urban, semi- urban , and tier III cities.
In fact, anything that Reliance indulges in, has a grandeur to it.
The 11 shops you mentioned opened in just 1 week. Small , but wholesome.
And the future is about 3000, and not 800 stores throughtout India.
May be I am wrong, but I read it in a business article.
Posted by: Tirath Muchhala at November 27, 2006 01:24 PM
Posted by: Mukesh Ambani at April 17, 2007 07:39 AM