I was doing some reading on retail industry in India and watched a presentation Kishore Biyani (of Future Group / Big Bazar / Pantaloons) made in 2008. He made a comment that got me thinking!
Retail is booming in India, and people are building millions of square feet of properties. But where is the demand? It’s only 25% of customers going to modern retail. So how can retailers create this demand? Will customers reduce spending at classic retail stores and move to malls?
No! Instead of diverting their spending, increase their spending.
To increase spending, reduce savings.
Move people away from saving their money (34% of income is saved as per Biyani). Induce people to spend their money.
If they don’t have money, borrow it to them. Follow Brazilian model where retailers are more like financiers than stores. Let them purchase on credit.
That’s how retail will boom!
I am startled. At the same time, the argument is very logical.
What do you think will happen?
Point taken. Help them increase their spending. First tempt them with great offers & then give them the necessary finance to make those purchases. But let’s not forget that people will be spending even on EMIs only if they are assured of a good income in the future. With people losing jobs and money becoming a crunch for many – even EMI spending may become a challenge.
Besides whatever I am to understand Future money (the financial arm of future group) is not really doing well.
Looking at scenario of Ahemdabad’s Big Bazaar and other venture of Future group – I don’t see any good future for them!
They need to stop selling crappy products!
A spending economy is good for everyone. It gets money flowing and does wonders for business. Just make sure you don’t end up like America 🙂
Government regulations is absolutely necessary in a spending economy. Credit cannot be available to anyone that walks into a bank. This is where the American government failed to regulate wall street and the greed of the few in the financial industry brought the country to one of the worst recessions in our lifetime.
I prefer a spending economy but with a bit of common sense lending. Credit should not be available to those that don’t have a good credit record.
Rather than increasing their spending, first one must work to increase the income. One should not spent more than the income.