Page 46 - DMGT550_RETAIL_MANAGEMENT

Unit 3: Types of Retailer

Currently the retail landscape is filled with Supermarket chains with over 1000 outlets all over Notes
the country to increase to around 5000 by the 2005. The success of a couple of Hypermart’s
indicate the evolution of hypermarkets in the country prominent among them are Giant, Metro,
Big Bazaar models. While the average bill value at a supermarket is in the range of ` 300 per bill,
the average bill amount at a Hypermarket is in the range of ` 750-1000, indicating that the model
is in tune with the global models where the average spend is increasing with the shopping
experience.

3.7 Impact of Organized Retail

Organized retailing is spreading and making its presence felt in different parts of the country.
The trend in grocery retailing, however, has been slightly different with a growth concentration
in the South. Though there were traditional family owned retail chains in South India such as
Nilgiri’s as early as 1905, the retail revolution happened with the RPG group starting the
Foodworld chain of food retail outlets in South India with focus on Chennai, Hyderabad and
Bangalore markets, preliminarily. The experiment has reaped rich dividends and the group is
now foraying into other territories as well. Owing to the success of Foodworld model of RPG
group, several new models such as Trinethra, Subhiksha, Margin Free and others have made
their foray into this sector albeit at regional levels. Today the food retail sector in India is about
rupees ten lakh crores (USD 200 billions) of which the organised food retail segment is about 1
per cent and increasing at a pace of over 20% y-o-y.
To be successful in food retailing in India essentially means to draw away shoppers from, the
roadside hawkers and kirana stores to supermarkets. This transition can be achieved to some
extent through pricing, so the success of a food retailer depends on how best he understands and
squeezes his supply chain. The other major factor is that of convenience shopping which the
supermarket has the edge over the traditional kirana stores. On an average a supermarket stocks
up to 5000 SKU’s against few hundreds stocked at an average kirana stores.

Though with excellent potential, India poses a complex situation for a retailer, as this is a
Country where each State is a mini-Country by itself. The demography’s of a region vary quite
distinctly from others. In order to appeal to all classes of the society, retail stores would have to
identify with different lifestyles. Hence we may find more of regional players and it would take
enormously long time before nation wide successful retail chains emerge. This is the main
reason as to why the successful retail chains in the country today operate at regional segments
only and are not aiming at nation wide presence, at least for the time being.
In the organized retail industry, the gestation periods are long, institutional funding is difficult,
and there is none or little Government support. But the belief among top retailer chains in the
country is that the industry will see large investments coming once the current ban on foreign
direct investment is lifted. But that could be two-three years away. Food and grocery retailing is
a tough business in India with margins being very low, and consumers not dissatisfied with
existing shops where they buy. For example, the next-door grocery shopkeeper is smart and
delivers good customer service, though not value.
As of now, while Chennai has about five organised food and grocery retail chains, other big
cities such as Delhi, Bangalore, and Mumbai average only two-three such chains. Almost all
food retail players have been region-specific as far as geographical presence is concerned in the
country. To illustrate with examples, the RPG Group’s FoodWorld, Nilgiris, Margin Free, Giant,
Varkey’s and Subhiksha, all of which are more or less spread in the Southern region; Sabka
Bazaar has a presence only in and around Delhi; names such as Haiko and Radhakrishna Foodland
are Mumbai-centric; while Adani is Ahmedabad-centric. Industry topography in India is such
that spreading presence across cities is a tough call. As pointed out by many experts, organised
food and grocery retailing chains going national requires significant investments. Retailing
within this sector is not just about the front-end, but involves complex supply chain and logistics
issues as well.

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