By Raju Moza:Â
With the opening up of the Indian retail to foreign players after FDI, comes a great challenge, of survival. Indigenous brands like V Mart and Future Group have just started to develop their roots and the foreign players are ready to enter the party with their low cost value propositions. While this is good for consumers at large, it has far reaching implications for business owners. I interviewed Mr. Lalit Agarwal, Chairman and Managing Director, V Mart Retail to get his thoughts first-hand on the need for FDI, organized retail and more.
Raju Moza: We keep on talking about the need of foreign players in retail, do we really need them? If so, do we need them for their capital or skill sets or both?
Lalit Agarwal: We need huge amount of infrastructure to develop backend and as you will be aware, being a finance person, the cost of capital is huge in India. The gestation period is high and to recover this high cost capital, one should have a deep pocket. Hence, we need foreign players primarily for the investment than the skill sets they bring.
India has one of the highest retail densities in world, approximately 12 million retail outlets exist but there is a fear that organized retail (modern trade) may wipe them out. What are your thoughts about this?
In the last one decade we have seen that modern trade has not taken much share from the existing market; rather, they have taken a pie from the growing market. The important fact is that modern trade has increased competition due to which Mom and Pop stores are also undergoing major changes.
The biggest problem of organized retail (modern trade) has been pilferage. What do you think are reasons for such high pilferage?
It is a peculiar problem in India, and pilferage exists on various fronts including the customer, employee, vendor, security or logistics partner. First and foremost is the lax legal system, because of which the offender is aware that the company won’t press for legal recourse, since the system is not only complex but time consuming too.
What went wrong with Indian retail industry?
There are multiple factors at play, in some cases sales mix was not right, high rental costs didn’t justify particular unit’s business, and in some cases it was mindless expansion without giving consideration to some minute details.
Was a race for high valuation also one of the reasons, whereby, some entities just wanted to create number of stores, hoping that foreign players will come and buy them out?
It might be, I am not privy to such cases.
It seems the investor outlook is bit negative to retail industry as we speak.
I don’t think so, may be that exuberance is not there, but to say it is negative won’t be the right conclusion. I strongly believe that if you have a good mix of idea and execution, investors will be there.
We would like to know why you don’t want to go the franchisee route.
I don’t think multi brand franchisee will work, for a simple fact, that an Indian entrepreneur, who happens to be a franchisee owner, cannot control greed.
Tell us something about yourself, your background and city of birth?
I am from Calcutta, completed my initial education in the same city. Later on, I moved with my father to Orissa, where, along with education I was helping him in his retail shop.
You were associated with Vishal Retail and then, if our knowledge is correct, things turned sour. What went wrong between you and Mr. Ram Chand Agarwal, owner of Vishal Retail?
Yes, I was a part of Vishal retail. Some times in life, things go awry. It is fine. We are a part of the family and ups and downs in a family are part and parcel of it. Whatever happens, happens for good, if I wouldn’t have exited out of Vishal — V mart would not have been there.
What is the plan to move forward?
Our endeavor is to continue growing at 30% CAGR (compounded annual growth rate), have presence in some cities where we ought to be.
Is there any plan to exit?
What will I do after exiting? I am neither too old nor I am bored of my work. Having said that, I am an open person, I am open to options but as of now there has been no proposal on the table which can make me think.
Are there any plans to go overseas?
No, as of now we are concentrating on the domestic market. That said, if some opportunity arises we will surely look at it.
Any plans for diversification, other than retail?
No, there is huge opportunity in retail and we want to exploit that. Secondly, my way of doing business is getting involved personally, I don’t think I will be able to spare time and energy for any other business as of now.
The aura emanating from you is full of motivation, what motivates you?
Life is beautiful. I like to create value, be it for stakeholders or the ecosystem. The desire to create that value keeps me motivated.
What keeps you occupied besides work?
Though I do collect books but I hardly get time to read. Whenever I get time, I love to spend it with my family.