Extending the Margin of Safety Concept to Brick-and-Mortar Retailing in India (MoSR-b)

Abstract

The Margin of Safety (MoS) concept is predominantly used in Investment, Accounting, Structural Engineering, and Medicine domains of study. Irrespective of the domain of study the MoS concept plays a crucial role in accounting for any uncertainty. We could simply assert that the concept of MoS is relevant and necessary for brick-and-mortar (B&M) retailers in India. In the context of B&M retailing we define MoS as the level of immunity developed by a B&M retailer over unexpected short-term market disruptions such as (a) the shutdown of specific locality forced by political parties or other organizations; (b) entry of new competitors in a catchment; (c) lucrative offers floated by competitors in the catchment, etc., and long-term market disruptions such as (a) lockdown of a locality owing to public health safety measures (for instance, Covid-19 lockdown); (b) shutdown of a locality for civil and infrastructural development works; (c) entry of new retailing formats (for instance, Online stores), etc. In this paper, we have developed a conceptual framework (MoSR-b) that would enable B&M retailers in India to develop a margin of safety to overcome short and long-term market disruptions and uncertainties. In developing the MoSR-b, we have adopted recommendations from existing literature that are known and suitable for Indian retailing in the context of MoS, in addition to identifying (i) new elements capable of developing the MoS, and (ii) borrowing insights from multiple empirical and qualitative studies, field experiments, and evaluation of consumer-level transactions. Instead of limiting the scope of MoS to just a few financial aspects of the business, our MoSR-b framework extends the scope of MoS in becoming the core of achieving business operational efficiencies in addition to providing early indications on the immunity level of a retail organization against short and long-term market disruptions.