Hours of Operation of Indian Retail Firms

Raghavendra Kamath has an article in the Business Standard today on experiments by Indian retailers at running stores for 24 hours a day.

I have often wondered about the costs and benefits of the 24-hour stores that one sees in the US. Two things come to mind. First, the response of demand to extended hours will only show up with a lag, when people reconfigure their lives to exploit the consistent availability of stores at all times of the day or night. This won’t happen immediately.

Second, round the clock operation requires recruitment of multiple shifts of staff. The article (mentioned above) talks about the problems that the retailing firms are having in trying to stretch the existing staff into longer hours. This might even work for a sporadic weekend but it’s not feasible in a sustained way. This is about the relative consumption of labour and capital. Once the store exists, the entire capital cost is paid: for the real estate, the inventory and the technology platform. The decision faced by the firm is whether, on the margin, it makes sense to add more labour cost so as to generate some sales from an additional shift. My first guess would be that if this is efficient in the West — where wages are much higher than in India — then it should surely make sense in India.

If modern Indian professional retailing firms are able to push into extended hours, then this will have two effects. First, this will increase the distance between them and the traditional mom-and-pop which cannot really function for more than 10-12 hours a day. Second, this will increase the employment that they generate.

The overall goods and services that households buy don’t change when retailing formats change. But if one retailing firm moves into extended hours or to 24×7, then it will suck customers who value this convenience away from other firms. Once this starts happening, all or most stores will settle into the equilibrium with extended hours or round-the-clock operation.

Originally published at Ajay Shah’s Blog and reproduced here with the author’s permission.