Retail expansion is a compliance game
The compliance reality behind expanding retail presence.
In case you haven’t been watching the news, India has surpassed Japan and taken over the number 4 spot in the list of countries with the highest nominal GDP. With an estimated output of about $4.18tn, it is largely driven by structural reforms undertaken by the Indian government, a robust service sector, and a very strong upsurge in domestic consumption.
At the very core of this upsurge lies India’s retail market. It is the third-largest retail market in the world, despite still being a largely untapped one, which contributes north of 10% and 8% to the country’s GDP and employment, respectively.
If you’ve been paying attention so far, you may have noticed how I wrote “despite still being a largely untapped one”, despite titanic numbers. It is because historically, purchasing power and the subsequent desire to consume were largely centred in the cities, but now, with higher-paying opportunities trickling down to more urban centres, retail infrastructure has expanded beyond metropolitan areas and is actively shaping consumer lifestyle.
Why expansion isn’t simply about finding customers.
Meeting the rise in demands, the seven largest cities in India are expected to, cumulatively, have ~16.6mn sq. ft. of shopping mall space., and that’s exactly where the discussion ends. Retail expansion is conveyed with ambitious undertones. While new markets, new consumers, and new opportunities are great for a chart in a boardroom, the reality has less to do with chasing the consumer but rather, a million different compliance certificates.
Before pulling the trigger and moving into India (if you’re a foreign brand) or if you’re planning a retail rollout beyond the metros and into Tier II/III, you have to understand that compliance is the real game while looking at a country as diverse as India
The reality of a layered compliance landscape
India has a three-tiered federal structure of governance. What does that mean? The central government is the highest legislative authority, and they’re responsible for setting the broader frameworks with national policies. State government is responsible for administering state-specific policy, which is applied to only those within their jurisidiction. The local government (could be a municipality or a panchayat) manages local infrastructure, permissions, clearance, and conditions.
The permissions and clearance for a retail rollout in Delhi is different from opening one in, let’s say, Kozhikode. You’ll have to chase a different authority for getting your working hours, fire and safety, licensing, and signages approved. The above system translates to a logistical and compliance enigma that makes expansion difficult.
Now that’s just two cities in the seventh largest country in the complexity. We’ll let you imagine the complexity of a nation-wide expansion campaign.
The need for reform
With pain comes wisdom. The taxation environment in the country had a similar feel to the compliance system until the GST reforms. The same is expected from the compliance system by those with a big enough platform, as they’re already voicing their opinions for a simplified and centralised licensing system.
But it won’t happen overnight.
The role of an execution partner
For a retail brand, an execution partner shouldn’t just be that firm that ‘builds a store’, but more than that. There should be an expectation of value provision, of handling all the regulatory challenges, and of alignment of all the stakeholders involved.
At D’Art Design, for example, we enjoy the pleasure of having the largest execution network in the country. That expertise of local statutes is sewed into design and execution from the nascent stage.
For example, it could be as simple as understanding the ‘60% Kannada rule’ for a store in Karnataka, or getting the store licensed by the Labor Department if the store is to be inaugurated in Meghalya. This results in low downtime, and sooner break even times.
There are hundreds of challenges, but a right partner will help you weave through all, making your expansion story a success.
Syed Shahnawaz Zaidi is the Global Director - Retail Strategy at D’Art Design, where he leads strategic initiatives that help brands create immersive and performance-driven retail environments.
His vision has shaped the retail experience for some of the most influential Indian brands, like Tata Steel, Berger, Crompton, ZEISS, and many more, in his 18+ years of experience, as well as placing D’Art as the premier choice for retail rollout and execution.
and new opportunities in the retail world.