It was a very safe and reasonable assumption: casual observers will easily notice that just about every other Indian man wears a white shirt. Presumably, the market opportunity for white shirts is big and certainly more so if the shirts are priced cheaply.

That was the reasoning when Big Bazaar, a hypermarket chain owned by Kishore Biyani, a high profile Indian businessman, ordered 100,000 white shirts. Priced cheaply at 149 rupees (US$3.75), the idea, of course, was to “buy it low, stack it high and sell it cheap.”

Yet, Biyani, described as a “rock star” of India’s retail industry and India’s Retail Face of the Year 2004-2007, had a rude shock when these white shirts did not fly off the shelves. There was a mismatch in the lifestyle habits and price range of the intended customers that Biyani and his team did not foresee. “People who wear white shirts can afford them at 499 rupees and above, and do not buy them at a hypermarket. There was a complete mismatch between the product we were offering and the Big Bazaar customer,” recalled Big Bazaar’s CEO Rajan Malhotra.

In the end, Malhotra’s boss, Biyani, told him to just get rid of the mountain of white shirts at a fire-sale price of just 49 rupees apiece, move on, and never mind the losses. Did Biyani remind Malhotra about this episode? “No, he forgot about it in 10 seconds, but he uses the story to tell people that it’s ok to make mistakes, as long as they learn from their mistakes,” Malhotra told Geoff Hiscock, author of the book India’s Store Wars: Retail revolution and the battle for the next 500 million shoppers.

“As an organisation, we still do not understand each section of our population,” noted Biyani. “I am a fallible human being. I’ve made a lot of mistakes – I fall into that category. But we learn by doing.”

500 million consumers

Biyani’s learning experience, and many others more, are described in the book. Hiscock, a veteran journalist, provided a comprehensive survey of the players – old and new, the industry issues – unique and common, that India’s retail market is facing. This is a story of a business opportunity that is mind-boggling in both its market potential and the inherent difficulties the participants face in meeting different consumer demands, culture norms; conforming to a myriad of rules and navigating a sea of obstacles.

Here are the headline numbers: by 2015, some half a billion Indian consumers would have crossed the poverty life, joining the ranks of purchasers of goods and services in significant quantities, just like the rest of the consumers in the world.

Extensive in its range of sources, detailed in the list of market figures quoted and comprehensive in its scope, India’s Store Wars cheers not just the vast opportunities, but also highlights numerous challenges.

Revolution in retail

As the book’s subhead clearly states, the retail industry is also a “revolution” in the making. It wasn’t that long ago when Indian consumers made most of their purchases through the millions of neighbourhood kiranas, or traditional mom-and-pop stores round the corner. There was also a sprinkling of supermarkets – a taken-for-granted presence in many other countries. In recent years, however, hypermarkets have begun making their presence felt in India, and with good reason. With a vast and growing middle class, Indian consumers are demanding a lot more and they can afford to spend even more.

Hiscock, via numerous interviews and extensive use of published sources, paints a broad and lively picture of the characters and companies in the Indian retail market today. With the help of industry consultants like Technopak and Jones Lang LaSalle, the book is a rosy reminder of the industry’s market potential, which is probably more than sufficient to make the most unconvinced reader appreciate the fervour shown by those who have been profiled.

However, retail, as an ecosystem, is not merely a business of the kiranas or the supermarket chain players. At the end of the day, they are, in a sense, merely middlemen who provide avenues for consumers to spend. What was sorely left unexplored in this book are the voices of another major community: the consumer goods manufacturers. It would have been interesting to hear from market giants like Hindustan Unilever and P&G, for example, on how they go about meeting the challenges, stimulating demand, and influencing the tastes and preferences of Indian consumers.

Consumer sentiments were also neglected in the book. The author could have tracked changes in spending patterns of a few families, representing different socio-economic profiles, thus providing important insights into the places at which they shop, the degree of brand consciousness and savvy, as well as other factors that ultimately lead to a purchase.

Missing too, are behind-the-scene intricacies and disputes that one would imagine, is commonplace in a market that commands such high stakes. Perhaps that’s fodder for a follow up title. Nevertheless, the book is not a mere cheerleader of the industry. Plenty of time and effort have been put into describing the challenges and obstacles faced.

Numerous numerical challenges

In the Indian market, the opportunities are in the numbers and so are the challenges -- specifically, the sheer number of people in India, which poses challenges at different levels.

For a start, just within the retail industry, there is a need to find enough trained workers to staff what is described by Reliance Industries’ Mukesh Ambani as the “world’s most employment-intensive industry.” The key thrust of the conglomerate’s ambitious plan to make itself a retail giant is in “talent transformation and development” on a suitably massive scale. “Our plan is to provide training and education opportunities on a distributed learning platform through classroom, e-learning and personalised coaching in a ‘earn while you learn’ framework,” the richest man in India told his company’s Reliance shareholders.

Reliance’s aim: hire half a million young men and women, mainly from underprivileged backgrounds across India, to gain an education and job skills that would bring economic well-being to their families and social transformation to their communities, and of course, to help grow Reliance’s expanding network of retail outlets.

At a higher level, there is a sheer momentum in demographic trends that India will need to tackle. By 2017, the country’s working population would have ballooned to 800 million, up from the 630 million just a decade earlier. More critically, there will 320 million young Indians between 16 and 26 years old who will be demanding jobs. Indian companies cannot merely view this group as consumers; or the “demographic dividend” of a booming populace.

Sunil Mittal, another Indian tycoon, sees the task of creating employment for this 320 million people, where a large proportion is expected not to have had opportunities to receive education, as a “grave challenge”. “If they do not get jobs, they will be knocking on the door of society to demand their share, and if they cannot do it in the right way, they will do it in the wrong way. If we fail in this, India’s huge demographic asset will turn into a liability,” he warned.

Supply chain issues

The industry is also certainly not just about pegging prices attractive enough to entice consumers to pick things off the shelves. Before this can happen, the shelves need to be stocked. Logistics is a key element of this industry that needs a lot, if not more, attention.

How serious is this? Reliance Industries, as one of the biggest Indian conglomerates, is prepared to set up its private cargo airline. No, the company is not diversifying in air logistics, but rather, to serve its network of supermarkets, set up under the brand name, Reliance Fresh, so that fresh produce can hit the shelves in time.

Setting up an airline to serve mere supermarkets may sound a bit extreme to some, but, in India, this plan is certainly not as far-fetched as it seems. When asked to compare India and China, foreign investors are always grumbling about India’s major disadvantage in roads, railways and infrastructure. “Until it is fixed, the economy will pay a high price in lives lost, goods delayed, goods spoilt in transit, poorer returns to farmers, export opportunities gone begging, and extra costs for consumers,” warned Hiscock.

“For the modern retail sector, getting a decent supply chain in place is one of the key imperatives in its expansion. Without a reliable cold chain that starts at the farm, retailers have to cope with high wastages for perishable items and consumers end up paying more,” he added.

To be sure, India’s logistics industry is growing at twice the pace that of the global average of 7.5%. Certainly, more can and should be done. For a start, the issue of multiple, complex layers of bureaucracy – state, local, and central, should be addressed, throwing up a gamut of difficulties like red tape, corruption, theft or even outright banditry, the author wrote.

This led to a rather poignant situation that he also highlighted: while India is one of the world’s largest producers of milk, fruits and vegetables, the country is also one of the world’s biggest food wasters. Between 20% and 40% of the harvested fruits, vegetables and the crops are wasted because of transport and storage problems, lending yet another meaning to the term “Indian Paradox”.

Certainly, the retail industry players are aware of these difficulties. There are many more issues that they have to address in their business plans. For example, rural consumption is expected to boom, but, Biyani, the retailer, is not about to put a Big Bazaar in every Indian town. “The rural areas grow their own food,” he explained at the retail forum. “There is no reason to increase our cost of distribution by attempting to go into class-four towns of less than 100,000 people.” The point is shared by Ireena Vittal, who heads the Indian retail practice at McKinsey & Co, high priests of the management consultancy industry. “The hypermarket format is unsustainable in some areas,” she said at the same India Retail Forum where Biyani expressed his reservations. “Retail is not just customer delight. Innovation matters, but over time, so do scale, cost structures and execution at the store level. So he (Biyani) has to keep improving things and be vigilant.”

Not that the man himself is not aware. To him, the Indian consumption story is ever-changing and that “smart companies” must learn to change along the way. “We want to own the customers’ wallet, wherever he chooses to spend it. We are about capturing consumers. Retail is just one way of acquiring them,” he said.

“Retail is not something you learn overnight,” said Biyani. He had 100,000 white shirts as a reminder.