Generational divide over retail future

Generational divide over retail future

The young tend to spend more money in modern retail stores than their parents

A long-festering controversy about whether India should allow foreign retailers like Wal-Mart into the country has often been cast as a battle between millions of small shopkeepers and large corporate interests. But in much of the country, including in this eastern city of Patna, the issue often divides Indians as much by age as by their livelihoods.

Those younger than 25, a group that includes about half the country’s 1.2 billion people, appear quite open and eager to try foreign brands and shopping experiences, researchers say. They already while away their afternoons at western-style malls like the year-old P&M mall here, where they try on T-shirts by Benetton, eat pizza from Domino’s and watch movies in a Mexican-owned theatre chain, Cinepolis.

Aakash Singh, 20, a college student who recently came to the mall here one afternoon, summed up his generation’s attitude toward foreign retailers this way: “Absolutely, they should come. The country will benefit.” But many older Indians who came of age in an earlier era of socialist policies say they are not entirely comfortable with the idea of big-box stores and sprawling malls. They worry that foreign companies will siphon profits and business from Indian competitors, forcing millions of family-owned shops to close.

Isahak Sanatan, 34, counts himself among that worried generation even though he has worked for foreign telecommunications companies for most of his career. “Why are we allowing outsiders into this industry?” he asked during a recent visit to the mall with his wife and 3-year-old daughter. “The foreigners will take the profits out of the country.”

So far, the older generation is prevailing. After years of debating the issue, Indian policymakers last month allowed big foreign chains like Wal-Mart and Tesco to set up stores in the country. But, in an acknowledgment of the significant dissent that remains, each of the country’s 29 state governments was granted the ability to forbid foreign-owned outlets in their territories.

Leaders of most Indian states, including Bihar, of which Patna is the capital, have said they will not allow foreign retail outlets to operate within their borders. Companies like Benetton and Domino’s that sell goods under a single brand or through franchisees had already been free to set up stores with Indian partners.

The policy change has touched off a political backlash, with one important regional political party, Trinamool Congress, withdrawing support to the UPA government led by the Congress. Analysts say the opposition from many politicians reflects in part the fact that the median age of Indian ministers is 65, compared with 25 for the general population.

Also, the young have so far been less likely than their parents to vote, so their strength in numbers has not yet compelled policymakers to pay much heed to them. Still, the Manmohan Singh government appears to be counting on their support. Many of those in their 20s or younger were born just before or after the country began introducing free-market policies and opening its economy to greater trade and foreign investment in the early 1990s.

Ingrained in the culture

India’s youth grew up during a time when foreign brands like Coca-Cola, Suzuki and Levi’s became touchstones across the country. Some foreign companies have become ingrained in the fabric of Indian culture. For instance, many Indians now serve Cadbury milk chocolates at religious festivals, along with traditional sweets.

“Now, the consumers are essentially the young generation who are a post-’80s product,” said Shaibal Gupta, member secretary of the Asian Development Research Institute, which is based in Patna. “The people born in the ’60s and ’70s had some idea about the freedom movement,” but the newer generations do not.

Still, retail analysts say change will come slowly to India’s $500 billion retail industry, more than 90 per cent of which is still dominated by small family-owned stores. Young Indians do not yet have as much purchasing power as their parents, for one thing, though because many live with their families they often have disposable income to spend on goods like clothes and cellphones.

Indians aged 16 to 23 already account for a quarter of the spending on clothing and 16 per cent of spending in restaurants in India’s 50 biggest cities, according to Technopak, a research and consulting firm. The young also tend to spend more money in modern retail stores and on foreign brands than their parents, who tend to shop at traditional outlets and buy more Indian products.

“This is a segment that will flourish over the years because there are so many young people,” said Saloni Nangia, president of Technopak. “A lot of people are taking part-time jobs or are working so that gives them a lot more disposable income.”

The growth has been particularly strong in smaller cities like Patna, which has two million people. A recent study by the Boston Consulting Group found that retail sales are growing by about 15 per cent a year in these cities, compared with 12 per cent in bigger cities like Mumbai and New Delhi.

Patna, in particular, is seen as a shining example of a newly resurgent Indian heartland. Bihar, one of India’s poorest states, had long languished under incompetent and corrupt leaders. But over the last seven years, a new administration has brought the state’s crime rate under control, built new roads and improved school enrollment, allowing the economy to recover.

The P&M mall, owned by a prominent Bihari film director and producer, Prakash Jha, is a prime example of the city’s renaissance. Though small at 225,000 sq ft by the standards of most malls in the United States, or even in Mumbai, many city residents say they look at it and the foreign-brand stores in it like Puma and Nike with pride. On any given afternoon, the mall is filled with college students, families and seniors. Many come just to take a ride on the escalators, which are still a novelty.

“In the last five years, India’s retail landscape has changed quite dramatically,” Mohanty said. He cited two reasons: “increase in income in big and small cities, and the second is a lot of real estate development.”

Though Bihar has said no to big foreign retailers that sell multiple brands, Wal-Mart’s top executive in India, Raj Jain, said the company sees a huge market in places like Patna, which he argued were filled with ‘value-conscious’ consumers who would be drawn by the chain’s low prices.

Many in the older generation say while they are not entirely comfortable with the move toward modern stores and foreign brands, they think little can be done to reverse the tide. Kumar’s father, Anant Kumar Sinha, who rarely goes to the mall, says he has seen the changing tastes in his business. Unlike their parents’ generation, most young people are not interested in buying cloth and taking it to a tailor. His sales have been stagnant in recent years as the youth move to off-the-rack clothes from domestic and foreign labels.

“The kids of the poor are also wearing jeans and T-shirts,” he said. “The new generation does not care about the way it was done before.”

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