On the face of it, the proposed model shops and establishments act is a step forward for the growth of the retail industry. The biggest plus is the move to have a uniform policy that will help retailers get the required permissions to set up stores across the country at one go. At present, retailers are required to apply for separate licences for each state and, even city, to open a store.
The draft policy has provisions - such as stores with 10 employees, or more, can remain open 24x7 - that would not only enable consumers to shop and dine till late at night, but would also lead to higher employment in the retail sector. It is also expected to bring in greater gender diversity in the workforce. Women currently comprise just 23 per cent of the retail industry.
According to experts, once the act comes into force, retailers could expect revenue jumps of 6-10 per cent. But the jury is out on whether it makes sense to remain open 24x7. "Retailers will open stores for longer hours only in areas where they feel customers are available," says Retail Association of India CEO, Kumar Rajagopalan. In fact, retailers will have to do a careful cost-benefit analysis before opening stores for longer durations, because operating at night will incur huge costs, such as providing security to employees, transportation and power bills, says Govind Shrikhande, Managing Director, Shoppers Stop, adding that things will not change at least for a year after the act comes into force as retailers will experiment with different models.
"Some retailers would probably try to work longer during weekends. But we might see the first set of experiments happening during the upcoming festival season. That is when retailers will be keeping their shops open for long hours because of the buyer traffic and the tendency of shoppers to buy till late night," says Rajneesh Mahajan, Executive Director of the K. Raheja-owned Inorbit Malls.
But will it boost employment? While a section of industry observers feel there will be a 4-5 per cent addition in the workforce, others are not sure. "Since opening stores 24x7 is still a while away, most retailers will try to manage with the overtime component," says Angshuman Bhattacharya, Managing Director, Alvarez and Marsal. Employee cost will also not be proportional to the number of hours a store is open, says Mahajan of Inorbit, as one may not need the full workforce for operating the store during the last 3-4 hours with a decline in buyer traffic. The bulk of the cost would be diverted towards providing security and infrastructure.
So, while retailers may well be on their way to experiment for the next few months, consumers might also take time to get used to late night shopping. After all, it takes a while for consumption habits to build.