Dr Kumar was in the country recently for his periodic interface and trainingsession with the retail-chains of RPG group - Foodworld, Health & Glow andMusic World. In an exclusive interview with Padmaja Shastri, Dr Kumar talkedabout various issues on retailing in India. Excerpts:

Despite liberalisation in the consumer goods industry, organised retailindustry has only two per cent share of the retail market in India, whilee-tailing is yet to take off.

What future do you see in retailing and e-tailing in India?
The future of organised retailing in India is very promising, especiallysupermarket-chains, `pick-up and drop-off' convenience stores at petrolbunks like video rental, dry-cleaning and ATM banking-all these are expectedto mushroom all over the country. It will grow to at least 5 per cent of themarket by 2005. However, e-tailing is not yet commercially viable in thecountry. The Asian customer, especially in India and China, has justdiscovered shopping and considers it "fun", rather than a "chore or aproblem" as it is perceived in the West. On the flipside, delivery costs andlabour in India is much lower. But, we have a different set of challengeshere, including very low penetration of Internet and credit cards. So, B2Cmay be just five per cent of the total retailing in the country.

What is the ideal retail model you would suggest for India?
Supermarkets will be very successful in India, while convenience stores like`Subhiksha' in Chennai are already giving the corner kiranawalas a run fortheir money. Also, there is a lot of opportunity for speciality stores. Youdo not need too many of these stores to break-even; however, there's notmuch scope of expansion in this category.

Despite accounting for over 10 per cent of the GDP at $180 billion sales,retail is not recognised as an economic driver by the government. What arethe other roadblocks in the development of organised retailing in India?Lack of good real estate, very expensive working capital and little retailcompetence are the main problem areas. When retail grows from a `mom and popshop' to a corporate entity of around 100 stores, the challenges aredifferent and require professional training and a change in attitude. Mostbusiness schools in India do not even have retail specialisation, whilemanagement graduates do not consider `retail' as an exciting and glamorouscareer option. Also, there are no national standards in the Indian retailmarket - something highly automised like bar-coding is different fromretailer to retailer. So, the challenges are to keep prices competitive,improve service levels like faster check-out, more selection with lessinventory and getting scale quickly. You need to go to 100-200 stores tobreak-even and start making profits.You have written extensively about theretailer-manufacturer relationship.

Do you think a change is necessary in the attitude of the manufacturersin India?
Overseas, especially the West, the manufacturers' attitude has undergone asea-change in the last 20 years. However, in India the manufacturers havehad a history of arrogant attitude towards retailers and don't consider themimportant. They need to change their business processes as well as attitudeto work closely with the retailers for joint promotions, etc. Also,manufacturers should realise that `fill rate' (the percentage of productsdelivered correctly out of those ordered by the retailer) is as important asbuilding brands. And retailers should stop being complacent-60 per cent ofthe retailers in India accept whatever they are given without protesting.

Most online grocery stores in the west, including Netgrocer.com,Tescodirect.com and Webvan.com are either very expensive or are notscalable.

What can the Indian e-tailers learn from these models?
Nobody in the world has found a workable model for grocery e-tailing yet.It's best for Indian grocery e-tailers to wait for them to perfect a modeland then adapt it to Indian conditions, unless they want to burn theirfingers experimenting.With Internet, the `search cost' for the customer hascome down and he is better informed.

How can retailers help customers buy in the changed scenario, especiallyif their prices are higher?
If a retailer charges more, he should have a very good reason for that-be itbetter service, better ambience or more help etc. Otherwise, he is on hisway out.

What type of products can be e-tailed and what cannot be sold on the Net?E-tailing will work better for digital products like airline tickets,banking services, stock quotes, while physical products like clothes, shoes,televisions where `touch-and-feel' factor is involved will be difficult tosell online. So will be things where delivery time is critical like freshvegetables/fruits/flowers etc. E-tailing can be made viable by selling `lowvolume and high price' products like PCs online.

How can one build brand loyalty on the Net?
It is important to create stickiness of content and switching costs for theonline customer-personalise home page, make personal portfolios and tell thecustomer that if you buy somewhere else, we cannot make recommendations toyou like Amazon.com does.