Friday, November 14, 2008


Modern retailing in India was projected to progressively displace the 8 million traders serving the grocery and other household needs of its one plus billion population. The role of foreign capital and technology in such a transformation was hotly being debated without any decision so far. Mean while expecting a bonanza in the form of windfall profits many Indian industry giants have jumped into the band wagon setting up modern retail stores in significant numbers in many metro regions. But the reality is that these so called organized super market out lets have not been able to capture beyond 6% of the retail business from the traditional players in spite of their massive resources and foreign tie ups. The rear guard action by the traditional retailers in protecting their turf seems to be working and there are many such stores adopting modern practices to give stiff competition to the new entrants in terms of quality, presentation and service.

In one of the most startling developments discernible to impartial observers is the tendency on the part of many global large format retailers in rich countries to shrink their size to make their outlets more customer friendly and hold on to their business. A typical large scale retail store in these countries occupies a space as big as a foot ball ground and sells more than 65000 different items, almost every thing a family needs (also does not need!) for its day to day living. The size of such stores at present is 85000 s.ft to more than 200000 s.ft depending on the location though the average size if all are considered is about 47500 s.ft. These large stores were touted as one 'stop' facilities where consumers with families can spend as much as half a day to pick and choose items of their interest, often leading to over buying, resulting in huge business volumes. But realization seems to have dawned on many large retailers that consumers do not have unlimited time at their disposal to devote for purchases in large stores involving walking aisles after aisles and queuing up at the cash counters. This has led to setting up of small stores less than 10000 s.ft in size with emphasis on prepared meals, fresh produce and 'grab & go' drinks to lure time-starved shoppers who can pick up a few items without wandering through the vast aisles as in large super markets. Major players like Safeway, Wal-Marts and others have already set the ball rolling by setting up such smaller versions with distinct brand names.'Marketside' brand of small stores is operated by Wal-Marts which expects to expand its business through such a strategy.

Fortunately in India, high cost of real estate in many metros, has restricted the size of many retailing companies and they can expect to be viable in the long run. Whether it is Food World or Spencers or Nilgiris or Reliance Fresh the store sizes are invariably around 10000 s.ft only and future entrants also may conform to this trend in order to be competitive. Though in countries like USA, Brazil, the Europe, Canada, Australia, organized modern retailing accounts for 70-90% of the market, India is going to take a long time to even reach 20% if the present trend is any indication. 70% of the market is in rural areas where no modern retailer will set foot due to enormous logistical difficulties and the sky rocketing real estate price in urban areas is a built in dampener for large investors in realizing any mega plans. The recent attempt by a Mumbai retailer to attract customers through ATM like kiosks where orders can be punched in for home delivery is a typical sign of desperation on the part of organized retailers
to survive against traditional grocers.

It is no wonder many believe in the maxim that 'small is beautiful' and millions of the so called 'mom & pop' stores are proving that small is not only beautiful but also invincible!


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