The Iceberg Theory

The Iceberg Theory

As we await results of the 2012 Gujarat polls, I can’t help but gloat.  For several years now, yours truly has postulated these seemingly naïve and preposterous theories vis-à-vis NaMo’s fortunes in Delhi.  Having been ridiculed, even by some well-meaning Internet Hindus, I can’t help but gloat at how these theories are playing out almost exactly as I had predicted.  (Once twitter allows for wider historical search, I’ll look up all my old tweets and publish them as proof)

One such theory is the theory of the ‘Iceberg’:

“NaMo’s support base resembled an Iceberg.  A vast section lay hidden beneath the surface and given the appropriate circumstances, it would begin revealing itself”.

Post 2007 as I surveyed my super liberal friends, I sensed a grudging respect for NaMo.  The counter questions they posed to my hagiographical arguments in favor of NaMo were the typical ELM talking points. “But what about 2002” and “what about democratic institutions”.  As I silenced them with facts and figures, the expressions on their faces and the tone in their voices changed.  It was no longer as sharp and strident.  In fact, there was a frustration writ large on their faces.  A sentiment I could sense but could not identify.  It was almost, like they wanted to support NaMo, but something prevented them from doing it openly.

Was it fear of social ostracism? Did this fear of being branded a ‘communalist’ or a ‘Sanghi’ preclude them from openly expressing their support?

That was the first indication that a vast reservoir of support for NaMo did exist.  A further analysis of  public figures revealed another startling insight.  Very few were willing to go on record to criticize NaMo.  The usual Pinkos were clearly anti-NaMo, but they were greatly outnumbered by the silent fence sitters.

But were these fence sitters, straddling those fences due to fear of being caught up in the political crossfire or were they closet supporters of NaMo, who would, given the right circumstances, jump the fence and publicly advocate the NaMo-for-PM line.  May be I was dreaming but this theory jived with another theory I had first postulated back in 2004 when CONgress came back to power:

Sonia’s CONgress (with its decade long pent up greed) would ruin India once and for all. 

I had no idea how they would accomplish this feat. But having followed CONgress closely since 1984, I had no doubt; their talent at screwing India would, sooner rather than later, manifest itself. 

NaMo’s victory in 2007 and UPA-I’s non-performance convinced me that this this ‘Iceberg’ theory had legs.   All we needed was a catalyst or several successive catalysts.

Results of Gujarat 2012 are that catalyst, that inflection point.  As everyone from Madhu Kishwar, Tavleen Singh, Kiran Muzumdar and others, openly support NaMo, this ‘Iceberg’ theory is coming true.  And it will now feed on itself.  The Network Effect will start kicking in.  As the Oxbridge crowd jumps on the NaMo bandwagon, more and more Indians will start openly supporting NaMo.  Each will use a reason to justify their support (from the economy to corruption to NaMo’s track record to the TINA factor) but support they will.

This exodus will feed another suggestion I made a couple of years back.  That NaMo must start building an army of apostles.  Public figures in every state/city willing to go to the people and explain the Modi Miracle.

As these public figures start supporting NaMo openly, MSM will launch a virulent counter offensive and target them.  Given the changed circumstances (with NaMo within reach of Delhi), these attacks will not only fail to intimidate this growing band of supporters but also turn these public figures into a de facto Army of NaMo apostles.

NaMo has now ceased to be a political leader; he is now a movement, an idea.

 “There is no force more powerful than an idea whose time has come.” - Victor Hugo

In Defense of Balasaheb Thackeray

As tributes flood news wires, Pink Chaddis predictably are getting their….well….Pink Chaddis in a twist. So let us educate them and set the record straight.

But before we get into the details allow me to narrate an amusing personal anecdote. A catholic (needless to say rabidly anti-Sena) friend once scolded me. A muslim neighbor had slaughtered a goat for Bakri id in his building’s backyard, a few feet from my friend’s doorstep. His exact statement was “What the fuck is your Thackeray doing. Why can’t he stop this nonsense”? I stood there dumbfounded. My only response was “When was the last time you or your family voted for Shiv Sena?”

What this incident illustrated was a schizophrenic relationship Mumbai’s Pink Chaddis had with the Sena. In private, Sena and its ‘goons’ were “those fucking Ghatis” ruining cosmopolitan BOMbay. But in deep recesses of their collective consciousness, when fear of marauding herds of Mullahs distilled their minds of any semblance of political correctness, they called out in pain to the one man they knew could help them. The one man whose aforementioned Ghatis had the courage (some may say foolishness) to place life and limb on the line to defend that liberal Indian culture called Hinduism.

Balasaheb was ‘Parochial’

No Indian politician can be considered devoid of his/her regional bias. Balasaheb was no exception. This phenomenon can be witnessed across the world. Example: Catalonia in Spain is witnessing a secessionist firestorm thanks to a stagnant economy. Closer to home, the anti-Hindi agitation in Tamil Nadu was supported by every single Tamilian politician cutting across party lines. This agitation had nothing to do with economic drivers. No one can diminish a great language like Tamil. But how easy it was (and still is) to rile up Indians based on regional sentiments.

That however, does not justify the violent methods adopted by Balasaheb first against south Indians and then against other non-Marathis.

Strong regional identities give birth to parochial politics. Why then should we single out Balasaheb. He was doing nothing different.

Balasaheb hurt Hindu ‘Unity’

Those who suggest that Saheb hurt Hindu unity must first acknowledge that the term ‘Hindu Unity’ is itself an oxymoron. India’s enslavement is a direct result of the endemic disunity that has been its bane since before the arrival of Muslim invaders.

Now that we have established Balasaheb as being no different from most other regional leaders vis-à-vis parochial regional politics, here’s why he remains Hindu Hriday Samarat.

1. Sacrifice the Marathi Cause for the larger Hindu Cause

a. When a rising Hindu Backlash presented a strong opportunity to usher in the first Hindu government in Delhi and Mumbai, Balasaheb sacrificed his son-of-the-soil, bread and butter issue in the interest of the larger Hindu Ummah. Has any other politician ever taken such a huge risk. No doubt, he left a flank open for a competitor to stake claim to the Marathi manoos vote bank, but in the interest of the much parroted but seldom practiced Hindu unity Saheb stepped up and embraced the transition.

b. Cynics may argue that the Marathi Manoos plank was a dead horse. In that case Raj Thackeray’s MNS should have been a non-starter. The Marathi manoos plank was and is, alive and Kicking, but Saheb choose Hindutva

2. Balasaheb as Robin hood

a. From combating rising milk prices by raiding Milk vans and distributing the spoils to poor Maharastrian families to helping educate kids from less fortunate, stories of Sena coming to the aid of the embattled common man are now legend. But what surprised even a politically informed person like me was the yeoman’s service rendered by Balasaheb to Kashmiri Pandits. Saheb had no skin in the game. KPs were a small, electorally insignificant community, concentrated in North India, where the Sena had little or no presence. Yet he helped them. He helped them by reserving seats Maharashtra’s educational institutions for Kashmiri Pandits. And THIS man was parochial. THIS man hurt Hindu unity. More importantly, neither he nor his party ever beat their breasts claiming these good deeds. That was the class of the man.

3. Bulwark against rising tide of Islamism

a. The past 5 years have witnessed a rising tide of Islamic aggression across India. From UP to now Hyderabad, a new Khilaphat movement is underway. Events of August 11 were a curtain raiser.

b. For years Balasaheb was the only real threat to these armies of darkness. Without him Hindus would have become a mere statistic

c. It is easy for armchair pundits (me included) to pontificate on the virtues of political correctness. But when the rubber meets the road, when a mullah is threatening to take your daughter (as a Christian Mala Sinha who went to Saheb to save her daughter from Music director Nadeem’s love Jihad) or impose Sharia on a innately liberal Hindu society, there are only two outcomes. Fight or Flight. Saheb and his ‘Ghatis’ stood their ground and fought. In the process they saved us from a Muslim Mumbai/Maharashtra.

Next time an Owaisi or Azam comes knocking on their doors, Hindus and Pink Chaddis will beg for a 1000 more Balasahebs to be reborn.

All-in with NaMo-for-PM

NaMo must go All-in

I have been vacilating between the following 2 scenarios:

1.       Should NaMo not put his face on BJP's 2014 battle for Delhi and throw his hat in the ring only if BJP secures 180-200 seats

OR

2. Go all-in and become BJP's face for Delhi from the get go
 

Increasingly, I’m leaning toward scenario #2 with a few caveats.

Here are the reasons:

a)      If we go with scenario #1, BJP may still risk muslim consolidation but not benefit from a counter Hindu-consolidation and end up losing the election.  In this scenario if BJP wins less than 170 seats, NaMo will be blamed and that blame will be used to curtail any future attempts.  Much as his 2009 LS campaign results are held against him - though he was just a campaigner and not the PM candidate - so will results of 2014 be used to hold him back.

b)      NaMo as PM Candidate needs time to percolate to a wider voter base.  Currently urban and semi-urban cities and towns have heard and imbibed the Modi-Miracle but rural populations may have remained relatively untouched.  NaMo-for-PM will need to reach these voters to help create a critical mass of voters to reach the magic figure of 200 seats

c)       NaMo-for-PM will turn into a war cry on both sides of the political divide.  Sangh’s strong ground game will allow BJP to harness this consolidation far better than CONgress or other secular parties

d)      There is a danger of pseudo secular parties joining forces:  Laloo-SP-CONgress-JDU alliance would seem unsurmountable.  But such a consolidation will work in NaMo’s favor.  Corruption will come to be equated with pseudosecularism with NaMo as the sole torch bearer of clean, efficient, politics of development.

Time will reveal efficacy of the best strategy.  For now NaMo-for-PM appears to be the best bet. 

Sangh and Nitin Gadkari

The Sangh’s Point-of-View

 

Over the past few months a persistent hum has developed across social and mainstream media.  The basic theme revolves around how the Sangh wants NitinG as President because he belongs to their ethnic stock i.e. Maharastrian Brahmin.

To understand why this line of thinking is flawed we need to examine the not-so-distant history that has shaped the Sangh’s impulses.

Dial back to the late 90s and early 2000s.  BJP had securely ensconced itself in the corridors of power.  Not only in Delhi but also several state capitals.  A truly non-CONgress political entity has begun the process of creating a permanent space for itself in the opposition ranks.

There is no disputing that Sangh and its sister organizations played a central role in bringing this long cherished dream to fruition.  Thousands of Swayam Sevaks sacrificed their lives in the service of their motherland to turn a once fringe political party with merely 2 seats on the throne of Delhi.

Not since Maharaja Rana Pratap had a truly Hindu outfit ruled Delhi.  This was an epochal achievement.

Back in 2004 on a trip back home just prior to the LS elections, I happened to speak to a lifelong sympathizer of the Sangh.  She was in a foul mood vis-à-vis ABV’s NDA government.  The discussion was initiated by me regarding the growing corruption within ranks of the BJP and how it was touching the Sangh.

Her response:  “So why shouldn’t the poor sangh cadres make a little money.  Aren’t they the ones who have installed these jokers in power?  Why these Johnnies-come-lately, alone enjoy the spoils of power”.  The response shocked me.  That such thinking was being articulated was a new phenomenon.

Upon digging further, the true picture emerged.  As had happened with the CONgress, post-independence (with families and relatives of some freedom fighters making a small fortune thanks to their proximity to power), so were some BJP leaders filling their coffers with their families prospering beyond imagination.

The Mahajans and Anant Kumars were climbing on shoulders of ordinary Sangh workers to acquire all the trappings of power.  From plush writing instruments to designer wear to all expenses paid junkets to exotic, unheard of tourist destinations, the stories were becoming legend.

Why should real workers suffer when these good-for-nothing leaders were violating every Hindutva tenet to destroy the core value system that made BJP – the party with a difference.

Note:  On a side note, one reason why NaMo is so liked and admired by the Sangh cadre is because he fulfills every promise the RJB revolution had promised without compromising on any core principles.

Post 2009, RSS came to a simple conclusion:  D4 in active collusion with the Dynasty had destroyed BJP’s chances.  Only a puppet as BJP president would do the trick.  And who better than one of their own.  A karyakarta they knew inside out.  A karyakarta who would never violate any order from Nagpur.

In conclusion, it is not NitinG’s ethnicity that has catapulted him to the President’s chair, but his perceived MMS like quality of being compliant and obedient.

Clearly this experiment has failed.  The Sangh needs to focus on much larger goals.  And there are many.  Cleaning up the Ganga, creating a parallel education and health care system across India which would rival systems run by religions of peace and harmony.

Next 24 Months

The Next 24 months.

December 20^th is shaping out to be the second biggest date in history of Independent India.  The widespread fear across India’s political spectrum is that once the smart, industrious Gujarati reelects NaMo as CM with an even bigger mandate, there will be no looking back.

Political momentum does not occur in a vacuum and once acquired there’s no guarantee that it can be sustained.  However, the NaMo juggernaut has been building for several years now.  Like a silent tsunami it threatens the evil edifice that CONgress represents.

December 20^th promises to finally unleash this revolution at an all India level.  Most importantly, it promises to weave together the plethora of Anti-CONgress, anti-Corruption threads into a single impregnable torrent with NaMo as its only, all powerful sootradhar.

Note:  CONgress with help from a pliant media will try to turn a NaMo led campaign into a Anti-Corruption Vs. Anti-communalism contest.  It wont work.  2014 will be fought on a single issue: Corruption.  With development being its natural sidekick.

Let us look at all the primary players and why their chances are best a self-delusion:

1.       Arvind Kejriwal

a.       Great creditials but no real organization to win even a handful of seats

2.       Nitish Kumar

a.       Could aspire to lead the 3^rd front, but if another satrap like Mamta or Maya or Jaya wins a similar pool of seats, BJP may support her to keep him out

3.       Jaya

a.       Anti-incumbency seems to be catching up, but DMK ‘s trouble are fresh in public memory and 35 seats could be a real possibility

b.      BJP infighting may enable her to become the preferred compromise candidate

4.       Maya

a.       Dalit-as-PM will be hard to resist if BJP gets less than 150 seats

b.      Even CONgress may not be averse to outside support as long as she extends the same keep-CBI-at-bay courtesy to the first family

c.    But backlash from non-dalits may hurt her chances.  Given that anti-corruption will be the single most important issue, her track record will hurt her chances
 

5.       Mamta

a.       Mamta is a wild, volatile card.  Fellow politicans detest unpredictable behavior (Ex: BalT, KalyanS).  Despite winning 30 seats, Mamta would be the least acceptable 3^rd front candidate as PM

6.       Sharad Pawar

a.       Even Sena/MNS would find it hard not to support SharadP if he can win 30 seats (a tall order in Maharastra).  Needless to say SharadP would have to part with vast reserves of his wealth to acquire his supporters

b.      Given his former title as the King of Corruption, supporting him would mean certain (short term) political death for the likes of Mamta/Jaya/Naveen.  He cannot win Delhi with support from the Marathi Manoos alone.  Chances are dim.

7.       Mulayam

a.       Mulayam can certainly bank on the Muslim vote, but the spotlight will expose massive degree of corruption his regime has/is perpetrating on UP

b.      A Yadav-as-PM may even help bring support from Laloo in Bihar but this support will be neutralized with other castes aligning against him

8.       Rahul Gandhi

a.       Eh…..case closed

9.       Sonia stooge

a.       A clean, submissive, pliant replacement to ManMohan is hard to find

b.      Intelligence seldom accompanies subservience.  MMS is a league all his own

c.       Dynasty will prefer NaMo as PM instead of risking deploying another Narsimha Rao

That brings us to NaMo

a.       As you have notice all the aspirants listed above are leaders with their own mass basses

b.      2014 would be a clear choice between voters who view corruption as the greatest menace and those viewing ‘communalism’ as the biggest threat to the future of India

c.       In the absence of any major riots in the past 5 years, threat of communalism has begun to recede in minds of the average non-muslim Indian voter

d.      Even the muslim voter will only vote against BJP so as to keep NaMo out, rather than out of any real fear of riots

e.      An agitated polity is looking for the following traits in its leader

                                                               i.      A proven track record of delivering a modicum of development

                                                             ii.      A squeaky clean record on corruption

1.       MMS offered this quality and voters were willing to forgive his passivity but that wont cut it in 2014

2.       Both personal integrity and the will to impose exacting standards of integrity across government bodies will be a fundamental prerequisite

                                                            iii.      Ability to manage inflation

                                                           iv.      Proven ability to fight corruption

                                                             v.      A record of preventing communal conflagration without pandering to vote bank politics

The NaMo Momentum – or shall we call it the NaMomentum, helps explain almost every significant political/media machination of the past 12 – 18 months.  Once the Godhra missile proved to be a damb squib,  NaMomentum was recognized and accepted by all aspirants to Delhi’s throne and has subconsciously taken political center stage.  Though India media will keep denying it and political ‘analysts’ will cite fringe factors to buttress NaMo’s unviability as PM candidate, everyone has accepted that there’s no other alternative. 

From NitishK’s adhikar yatra to Sonia’s reshuffle to the targeting of NitinG, every move is being conducted with the looming fear of a NaMo PMship.

NaMo gains nothing by dislodging a NitinG.  Its simply too early.  Infact, having a lame duck BJP president suits him just fine.  Much as the country has come to see him as the lord and savior so to will the Sangh and its proxies within the BJP.  The longer NitinG occupies the seat the better for NaMo.

The same cannot be said about D4.  Their only chance is to install themselves or one of their own as the next BJP President this December.

Clearly this stratgem will not suffice. But they are left with few options.  Much as NitishK is desperately trying to usurp Bihari Asmita so as to capture 30+ seats in Bihar, so too is D4 trying to counter BJP before NaMomentum pushes the throne of Delhi well beyond their reach.

Dream on suckers, NaMomentum is now unsurmountable. 

NaMo does not accomodate others……..and he shouldn’t

One of the biggest reasons given for NaMo’s non-viability as a PM candidate is his inability to work with other parties and even leaders within his own party. 

In an era of coalition politics this character trait somehow makes him a non-starter.

But what is this special trait.  And what does it entail.

UPA2 has revealed a scale of crony-corruption unprecedented in the history of democratic nations. 

This criminal conduct has infected India’s complete body politic, cutting across party lines.  More importantly, as explained here http://inflextionpoint.blogspot.com/2012/02/politics-of-patronage-vs-politics-of.html this is anything but a random, haphazard phenomenon.  It is a highly organized criminal enterprise.

Though CONgress is the master at this game, other parties have caught up.  For instance, BJP’s Delhi leadership will harass and oust a clean CM like Gen. Khanduri who refuses to do ‘accommodate’ their favorite lackeys. Sharad Pawar will buy up every piece of land in Maharastra and accommodate Shiv Sena and RPI leadership by distributing largesse from his ill-gotten spoils of political war.

Parties across UPA and NDA have their hands in the cookie jar. 

Coalition Dharma = You plunder, I plunder, We plunder

NaMo threatens this gravy train.  His 11 year rule represents a reign of terror on the Politics of Patronage in Gujarat.  Most importantly, he has framed policies in such a manner that rules are no longer open to interpretation.  Local and national BJP/Sangh leaders can no longer reinterpret the rule book to benefit their relatives and cronies.  Coalition partners can no longer bank on an ‘accommodation’ to replenish their coffers.

The sole beneficiaries of this clean governance are the people of Gujarat.

It is this intolerance for corruption and the ability to strike at its very roots, which media and coalition partners are euphemistically referring to as NaMo’s inability to follow the coalition dharma.

But NaMo has thus far failed to fully exploit his greatest asset:  His proven ability to bring power back to the people.

He’s perhaps hoping for the Gujarat landslide to speak on his behalf.  But victory alone could prove insufficient in bringing this stellar achievement to the forefront. 

Instead, NaMo needs to go to town to connect the dots.

Sound Policies eliminate room for interpretation, which in turn render local politicians & bureaucrats powerless leading to a dismantling of crony-corruption allowing for Politics of Development to blossom as the primary political issue thus, ensuring services are delivered to the Mango men and Power being handed back to the people = End of Dynastic rule

NaMo should turn coalition dharma on its head and explain to the India that his model is the only solution.  Coalition Dharma = Collective plunder.  NaMo ekla-chalo-re is the only option.

His intolerance of coalition dharma is his greatest asset.  It is time he starts cashing it.

Retail 101

Retail 101:

Based on twitter responses to FDI in Retail, a basic education in Retail seems the need of the hour.

Here we go.

As mentioned in my previous post Big box retail needs key economic drivers in place to run a successful operation and make a profit. 

http://inflextionpoint.blogspot.com/2012/09/fdi-in-retail.html

When a big box Retail store (lets use Walmart as an example) decides to enter a market (geographically speaking) it has to consider several factors:

1.       Market size

2.       Economies of scale

3.       Marketing costs

4.       Supply chain infrastructure

5.       Delivery density

6.       Reliable sourcing

7.       Market sophistication

Lacking the infrastructure, these drivers do not come into play.  Having a large consumer class alone is not enough.

1.       Market size

a.       A large market helps achieve economies of scale, which in turn allow bulk buying, lowering purchase price on goods

2.       Delivery Density

a.       In addition to market size, big box (multi brand) retailers need delivery density

                                                               i.      A large group of buyers concentrated in a manageable geographical area

                                                             ii.      This density further lowers cost by not only lowering delivery cost but also Marketing cost

3.       Marketing cost

a.       Even small-foot print retailers cannot expand randomly

b.      For instance, smaller fast food chains like Hardees and Backyard Burgers have a regional foot print concentrated in the south and south east.  (Neither of these chains can suddenly start opening locations in California.  The logistics of supplying these stores and marketing within an isolated area would make the operation cost prohibitive.)

c.       For example: If a retail chain (like IKEA) places one store in Atlanta and one in Houston the cost of radio marketing would be wasted.

                                                               i.      Instead if two stores are built at two ends of Atlanta, the saturation strategy allows for much lower marketing costs per dollar of revenue

4.       Economies of scale

a.       Most big box retailers have very thin margins (Grocery stores for instance make less than 4%)

b.      Economies of scale become an imperative to maintain these margins

c.       Though India’s market provides enough consumers, sourcing on a large scale is severely constrained due to a lack of modern supply chain infrastructure

5.       Supply chain infrastructure

a.       A reliable source of branded products are key to any modern day retail store

b.      These products cannot be sourced reliably without a strong and predictable supply chain

c.       An unpredictable supply chain raises cost

                                                               i.      In case of fresh produce an unpredictable supply chain has a direct impact on the bottomline

                                                             ii.      See http://inflextionpoint.blogspot.com/2012/09/fdi-in-retail.html for a further explanation on SCM in retail

Even a cursory analysis of Indian markets reveals that we’re nowhere near the sophistication needed to absorb traditional big box retailers.

Instead what is likely to happen is this:

1.       Increase in prices for commercial real estate

2.       Growth of smaller locations owned and operated by international players which will compete directly with kirana stores

3.       Destroy Kirana stores with no net addition to the job market or lowering costs to the consumer

So how will a Walmart play the Indian market:

1.       Place stores in dense localities right next to traditional stores

a.       Which destroys these stores and takes away their biggest USP – convenience

2.       Use deep pockets to make ‘Loss leaders’ as the core strategy to put local merchants out of business

3.       Make the minimal investment in much needed infrastructure

India should instead, invite major infrastructure players such as Schlumberger, Caterpillar, etc. to help build infrastructure and introduce modern manufacturing and farming practices to the Indian economy.

This is already happening in Gujarat.  Perhaps Gujarat stands on the cusp of creating its own desi Walmarts. 

 

Move over Sam Walton, Satish Patel is here.

 

FDI in Retail

FDI in Retail:

 

Predictably enough the debate over FDI in retail (FIR) has devolved into a Right Vs. Left, Reformist Vs. Socialist, etc. dog fight. 

The arguments presented are inane at best.  Devoid of facts and lacking basic understanding of how a supply chain works and how it feeds a retail network.

Lets make one more thing clear.  Opposition to FDI in Retail does not automatically suggest opposition to FDI in other sectors.

Permit me a small history lesson which would help explain how retail works and why Walmart and others will not bring the Retail utopia to India’s doorstep:

When Sam Walton started Walmart he was well into his 40s.  Having operated two very successful multi-brand retail stores he saw a great opportunity in building a brand to go up against retail behemoths like K-mart, Woolworth (now defunct) and Sears.

America’s post war infrastructure boom was giving birth to the largest, most sophisticated highway network.  Americans were leveraging this road network to move deeper into the suburbs and away from cramped city centers.

More importantly, several factors such as technology, easier availability of credit, cheap gas and a rising aspirational consumerism was giving rising to a gluttonous middle class consumer.

With the keen eye of a master merchant, Sam Walton saw these (concurrently) emerging forces and pulled the trigger.

His genius lay in locating his spacious, well lit stores on the outskirts of smaller towns with easy access to federally funded Highway networks.

(He started in Arkansas, a state which even today would rival some third world countries in its lack of sophistication.  Arkansas’ highways, for instance, are only slightly better than those found in parts of India.)

By locating his stores such, he was able to save on real estate cost.  Moreover, a larger floor space allowed him to carry a wider variety of items, so that buyers could spend the time and gas to make one trip to his store and fulfill all their household needs – from detergent to gardening supplies.

What does a Supply Chain (SC) entail:

1.       Coordinated Multimodal transport – Road, Rail, Air, Water

2.       Cold chain (Temperature controlled trucks, refrigerated warehouses, cold storage vaults, etc.)

3.       Command and Control centers

4.       Warehouses

5.       Supply chain visibility software

6.       Trained personnel to run the systems

7.       Reliable power supply to feed this infrastructure

Few of these key drivers are available in India.  Sam Walton would not have launched Walmart if he was in India today.

To analyze FIR we must juxtapose the aforementioned fundamentals against India’s reality:

1.       Walmart will invest infrastructure

a.       Walmart has never invested in a single highway or power plant or airport.  Not in America and not in China

b.      Walmart or any other big box retailer, will NOT invest in India’s infrastructure.  They will leverage existing infrastructure and find a way to be profitable within the shortest possible ROI horizon.

c.       Walmart’s margins are at 4%.  India’s dilapidated infrastructure will require a massive investment in infrastructure to bring it to world class SC standards

d.      Walmart will not make a profit for decades if it invests the billions needed to build such an infrastructure

e.      Instead Walmart will resort to ‘jugaad’ i.e. squeeze stores into highly dense localities further taxing India’s existing (inefficient and overburdened) distribution networks

2.       Walmart will generate jobs for farmers by improving procurement practice

a.       Over 30% of India’s agricultural produce is wasted due to lack of a cold chain and high speed highway network

b.      This shortcoming is unlikely to be solved by Walmart’s entry.  Walmart will NOT build roads or expensive power infrastructure to sustain a cold chain

c.       Refrigerated trucks are one of the most expensive elements in a supply chain

                                                               i.      The jagged nature of power supply in most parts of India (except Gujarat) precludes use of refrigerated warehouses

                                                             ii.      Which in turn brings into question bulk purchase of fresh vegetables, meat, fish and other produce with a very limited shelf life

                                                            iii.      Possible solution: Source produce from farmers closer to Point of Sale (POS)

                                                           iv.      Which in turn limits the number of farmers who could benefit from introduction of Walmart

3.       Walmart will create jobs in the retail sector

a.       Organized retail will not result in net gain of jobs

b.      Organized retail will cannibalize jobs from mom-and-pop operations

c.       Organized retail may result in net loss in jobs with small store owners having to seek employment with their stores facing almost certain closure

4.       Organized retail will reduce prices

a.       A typical retail location has the following cost drivers

                                                               i.      Rent

                                                             ii.      Cost of goods

                                                            iii.      Transportation

                                                           iv.      Labor

                                                             v.      Power/Utilities/overhead

b.      With the financial wherewithal to buy in bulk (as mentioned earlier this may not apply to fresh produce due to supply chain issues), organized retail will reduce procurement prices but may or may not pass on savings to consumers

                                                               i.      i.e. Walmart will keep the difference as profit – Both Indian farmers and consumers will end up losing

                                                             ii.      Moreover most of the goods are likely to be sourced from China

5.       In a nutshell, Chinese manufacturers will supply the goods, Indians will borrow and consume and Foreigners will keep the profits.

Alternative Strategy:

Hindsight is 20/20.  India can benefit tremendously from mistakes made by Western countries.  Instead of blindly aping America, India needs to leverage

a)      emerging technologies,

b)      new insights in urban planning and

c)       impending resource constraints

to birth a new development paradigm beyond just the Retail sector.

For instance, by imposing a nationwide walk-to-work philosophy (being introduced by NaMo in the GIFT city), India can create dense urban clusters which are environmentally sustainable, reduce cost by offering higher delivery density and in general circumvent the need for big box retailers which are energy hogs and a relic of the 20^th century.

India is virgin territory.  Hope our leaders recognize the opportunity this represents and offers the world a better, ecofriendly business model beyond an updated version of the East India Company.

 

p.s. There so much more to Retail than can be accomodated in one blog post. More (if needed) in a later post.